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PROMISSORY NOTE $7,500,000.00                                                                                                                                                       Boston, Massachusetts                                                                                                                                                                                September 6, 2000         FOR VALUE RECEIVED and pursuant to the terms of this Promissory Note (“Note”), the undersigned MT. WAYTE REALTY, LLC (“Maker”) promises to pay to the order of THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.), a Michigan corporation (“Lender”; Lender and all subsequent holders of this Note being sometimes hereinafter referred to as “Holder”) at 200 Bloor Street East, North Tower, 6th Floor, Toronto, Ontario M4W 1E5 Canada, or at such other place as Holder hereof may designate in writing, the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000.00) (the “Loan”), together with interest on the unpaid principal balance of such indebtedness from time to time outstanding, at the rate or rates hereinafter set forth. 1. Security. The payment of the principal balance of this Note and all interest, fees and other amounts which may become payable as provided herein is secured by, inter alia, (a) a first lien Mortgage, Security Agreement and Fixture Filing (the “Mortgage”), of even date herewith, from Maker to Lender, encumbering certain real property (the “Property”) and other property located at 73 Mt. Wayte Avenue, Framingham, MA, 01701, and collectively described as Premises in the Mortgage; (b) an Assignment of Leases, Rents, Income and Profits, of even date herewith, assigning to Lender Maker’s interest in the Leases (as defined therein) and rents relating to the Property; and (c) various other Loan Documents (as “Loan Documents” is defined in the Mortgage). 2. Interest Rate. Until maturity or an Event of Default (as “Event of Default” is defined in the Mortgage), interest shall accrue on the principal balance outstanding from time to time at the rate of 8.96% per annum (“Basic Interest Rate”). Interest under this Note shall be calculated based on a year of three hundred sixty (360) days having twelve (12) thirty (30) day months. 3. Payments Payments of the amounts due under this Note shall be made in good funds to Holder at the address set forth in the first paragraph of this Note, in consecutive monthly installments as follows:      (a) Initial Interest Payment. Interest that will accrue from and after the date hereof and continuing through and including September 10, 2000, shall be paid on September 10, 2000. --------------------------------------------------------------------------------      (b) Monthly Payments. Commencing on October 10, 2000 and continuing on the tenth (10th) day of each and every month thereafter for the next 120 months, monthly payments shall be made to Holder in the amount of $67,287.00.      (c) Repayment on Maturity. On the tenth (10th) day of September, 2010 (the “Maturity Date”), the entire outstanding principal balance hereof, together with accrued but unpaid interest thereon, and all other sums owing to Holder hereunder or under the Loan Documents, shall be due and payable in full, without grace period or notice. 4. Application of Payment. All interest, principal and any other amounts due under this Note shall be payable in lawful money of the United States of America at the place or places stated in the first paragraph of this Note unless Maker is otherwise notified in writing by Holder. All payments received by Holder shall be applied by Holder to payments due hereunder and under the other Loan Documents, in such manner and in such order as Holder may determine in Holder’s sole and absolute discretion whether to payments of interest, principal, escrow payments, costs of collection or otherwise. 5. Late Payment Charges. In the event that any monthly payment has not been received by Lender at the address set forth in the first paragraph of this Note (or at such other place as is designated pursuant to the terms hereof) on the date that such payment is due and payable, in addition to any other permitted charges hereunder, Holder may, at its option, charge a late payment fee (“Late Charges”) which shall be due and owing to Holder in the amount of four percent (4%) of the amount past due; and an additional four percent (4%) shall become due and owing for each and every subsequent month or portion thereof, if any, that such payment remains outstanding; however, if applicable law requires a lesser charge, the Late Charges shall be deemed reduced to the maximum charge allowed by such law. Holder shall have no obligation to accept any payments hereunder not accompanied by all outstanding Late Charges. Notwithstanding anything contained herein or in any other of the Loan Documents, this paragraph is not intended to, and shall not, create any grace period or indulgence by Holder with respect to the punctual payment by Maker of all sums owed Holder, nor shall this paragraph in any way hinder, prevent or delay Holder from exercising any remedy which it may have hereunder or under any Loan Document, or at law or in equity, with respect to Maker’s failure timely to make any payment when due. Maker acknowledges that the Late Charges are not imposed as a charge for the use of money, but rather are imposed to permit Holder to recoup its administrative charges and other costs in dealing with the delinquent payment, and Late Charges shall in no way be deemed an interest charge. Partial payments accepted by Lender shall not be deemed an accord and satisfaction or waiver of any default. 6. Events of Default and Interest Upon Default. From and after an Event of Default, interest shall accrue on the total unpaid principal balance of the indebtedness evidenced hereby at the Basic Interest Rate plus four percent (4%) per annum (the “Default Rate”). -------------------------------------------------------------------------------- 7. Acceleration. Upon the occurrence of an Event of Default, and in addition to any other remedies to which it may be entitled, Holder may, but shall not be required to, declare the total unpaid principal balance of the indebtedness evidenced hereby, together with all accrued but unpaid interest thereon, any applicable prepayment premium and all other sums owing under this Note and the Loan Documents, immediately due and payable. 8. Prepayment.      (a) This Note may be prepaid at any time, in whole, but not in part, and only upon (i) not less than sixty (60) days’ prior written notice to Holder specifying the prepayment date, the effect of which notice shall be to accelerate the applicable maturity date to the earlier specified date for prepayment, and (ii) payment of (1) the outstanding principal amount, (2) all accrued and unpaid interest, (3) all other amounts due hereunder or under the Loan Documents, plus (4) a Prepayment Premium. As used herein, the term “Prepayment Premium” shall mean that amount which is the greater of:           A. the remainder of (x) minus (y) where “(x)” is the present value of all unpaid installments of principal and interest due under the Note from the date specified for prepayment to and including the Maturity Date plus the present value of the outstanding principal balance at the Maturity Date, discounted at the Prevailing Interest Rate (hereafter defined), and “(y)” is the outstanding principal balance under the Note as of the date specified for prepayment; OR           B. 1.0% of the outstanding principal balance under the Note just prior to the prepayment. The term “Prevailing Interest Rate” shall mean (i) the yield to maturity on a United States Treasury Bond or Treasury Note selected by Holder having (1) a maturity date as near as possible to the Maturity Date and (2) an “ask” price during the week prior to the date specified for prepayment as close as possible to par (as published in The Wall Street Journal or similar publication or available from the Federal Reserve Bank of New York as reported on the fourth (4th) business day preceding the date specified for prepayment), less (ii) the Basis Point Adjustment listed below across from the Yield Range containing the rate determined according to clause (i) of this sentence. -------------------------------------------------------------------------------- YIELD RANGE BASIS POINT YIELD RANGE BASIS POINT ADJUSTMENT ----------- ------------ ----------- ---------------------- ADJUSTMENT ---------- 0 - 1.54 .00 14.50 - 14.65 .45 1.55 - 2.80 .01 14.66 - 14.81 .46 2.81 - 3.45 .02 14.82 - 14.97 .47 3.46 - 4.08 .03 14.98 - 15.12 .48 4.09 - 4.63 .04 15.13 - 15.28 .49 4.64 - 5.12 .05 15.29 - 15.43 .50 5.13 - 5.56 .06 15.44 - 15.58 .51 5.57 - 5.98 .07 15.59 - 15.73 .52 5.99 - 6.36 .08 15.74 - 15.88 .53 6.37 - 6.72 .09 15.89 - 16.03 .54 6.73 - 7.07 .10 16.04 - 16.17 .55 7.08 - 7.39 .11 16.18 - 16.31 .56 7.40 - 7.71 .12 16.32 - 16.46 .57 7.72 - 8.01 .13 16.47 - 16.60 .58 8.02 - 8.30 .14 16.61 - 16.74 .59 8.31 - 8.58 .15 16.75 - 16.88 .60 8.59 - 8.85 .16 16.89 - 17.01 .61 8.86 - 9.11 .17 17.02 - 17.15 .62 9.12 - 9.37 .18 17.16 - 17.29 .63 9.38 - 9.62 .19 17.30 - 17.42 .64 9.63 - 9.86 .20 17.43 - 17.55 .65 9.87 - 10.10 .21 17.56 - 17.69 .66 10.11 - 10.33 .22 17.70 - 17.82 .67 10.34 - 10.55 .23 17.83 - 17.95 .68 10.56 - 10.77 .24 17.96 - 18.08 .69 10.78 - 10.99 .25 18.09 - 18.21 .70 11.00 - 11.20 .26 18.22 - 18.33 .71 11.21 - 11.41 .27 18.34 - 18.46 .72 11.42 - 11.62 .28 18.47 - 18.58 .73 11.63 - 11.82 .29 18.59 - 18.71 .74 11.83 - 12.01 .30 18.72 - 18.83 .75 12.02 - 12.21 .31 18.84 - 18.96 .76 12.22 - 12.40 .32 18.97 - 19.08 .77 12.41 - 12.59 .33 19.09 - 19.20 .78 12.60 - 12.77 .34 19.21 - 19.32 .79 12.78 - 12.96 .35 19.33 - 19.44 .80 12.97 - 13.13 .36 19.45 - 19.56 .81 13.14 - 13.31 .37 19.57 - 19.68 .82 13.32 - 13.49 .38 19.69 - 19.80 .83 13.50 - 13.66 .39 19.81 - 19.91 .84 13.67 - 13.83 .40 19.92 - 20.03 .85 13.84 - 14.00 .41 14.01 - 14.17 .42 14.18 - 14.33 .43 14.34 - 14.49 .44 --------------------------------------------------------------------------------      (b) Notwithstanding anything in this Section or in any of the other Loan Documents to the contrary, no Prepayment Premium shall be charged with respect to (i) the proceeds of any insurance policy or condemnation which are applied by Holder to the principal balance of this Note prior to an Event of Default, and any such application of insurance or condemnation proceeds shall be deemed a permitted prepayment without premium hereunder, and (ii) prepayment of this Note prior to an Event of Default as a result of an acceleration of the Loan pursuant to Section 1.02 of the Mortgage.      (c) Maker expressly agrees that upon acceleration of the maturity of this Note as a result of any Event of Default, including without implied limitation any acceleration upon the transfer of any interest in the Property in violation of the terms of any of the Loan Documents relating to the sale, transfer or encumbering of the Property, a tender by Maker or by anyone on behalf of Maker of payment of the amount necessary to satisfy the indebtedness evidenced hereby, but not including payment of the prepayment premium due under this Section 8, made at any time, including without implied limitation prior to or at a foreclosure sale or a sale under a power of sale contained in the Mortgage, shall constitute an evasion of the prepayment terms hereof and shall be deemed to be a voluntary prepayment hereunder. In such event, Maker shall pay with any such prepayment a prepayment premium with any such prepayment equal to the amount which would have been due as a prepayment premium pursuant to this Section 8; provided, however, that the obligation of Maker to pay a prepayment premium under this Section 8 is expressly made subject to Section 9 below. Furthermore, Maker expressly acknowledges that Holder has made the Loan in reliance upon Maker’s creditworthiness and Maker’s agreement to pay in strict accordance with this Note and the other Loan Documents, including without limitation this Section 8. Maker expressly waives the provisions of any present or future statute or law which prohibits or may prohibit the collection of the foregoing prepayment premium in connection with any such acceleration. 9. Limit of Validity. All agreements between the Maker and Holder hereof are expressly limited so that in no contingency or event whatsoever, whether by reason of advancement of the proceeds hereof, acceleration of maturity of the unpaid principal balance hereof, or otherwise, shall the amount paid or agreed to be paid to Holder hereof for the use, forbearance or detention of the money to be advanced hereunder exceed the highest lawful rate permissible under usury laws applicable to Lender, if any. If, from any circumstances whatsoever fulfillment of any provision hereof or of the Loan Documents shall involve transcending the limit of validity prescribed by any law which a court of competent jurisdiction may deem applicable hereto, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and, if from any circumstance Holder hereof shall ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due hereunder and not to the payment of interest. This provision shall control every other provision of all agreements between the Maker and Holder hereof. -------------------------------------------------------------------------------- 10. Participations. Lender reserves the right, from time to time during the term of the Loan, to (A) enter into participation agreements with respect to the Loan or (B) assign, directly or as collateral, all or any portion of the obligations evidenced or secured by this Note and the Loan Documents and any or all of the Lender’s rights therein; and Maker and any endorser, surety or guarantor of this Note shall each cooperate with Lender in connection with the execution of any documents requested by Lender in connection with such participation agreements or the transfer of any such assignments. 11. Waiver of Subrogation. Each Maker hereby unconditionally and irrevocably waives any “claim” (as defined in the United States Bankruptcy Code, Title 11 of the United States Code) he/she/it has or hereafter acquires against any other Maker and further agrees that he/she/it will not at any time assert or exercise against any other Maker, and does hereby waive and release, any right of or claim to subrogation, reimbursement, indemnity, contribution or payment (including any right to proceed upon any collateral) for or with respect to any amounts which such Maker may pay or be obligated to pay to Lender hereunder, under any of the Loan Documents or in any other connection to the Loan. 12. Miscellaneous.      (a) If interest, principal or other sum owing under this Note is not paid when due, whether at maturity or by acceleration, Maker promises to pay all reasonable costs of collection, including but not limited to, reasonable attorneys’ fees plus all expenses incurred by Holder hereof in connection with the protection or realization of the collateral and enforcement of any guaranty on account of such collection, whether or not suit is filed hereon. Such fees shall include, without limitation, costs and reasonable attorneys’ fees incurred in any appeal.      (b) Maker and any endorsers hereof and all others who may become liable for all or any part of this obligation, severally waive presentment for payment, demand and protest and notice of protest, acceleration or dishonor and non-payment of this Note, and expressly consent to any extension of time of payment hereof or of any installment hereof, to the release of any party liable for this obligation, to the release, change or modification of any collateral posted as security for the payment of this Note, and any such extension, modification or release may be made without notice to any of said parties and without in any way affecting or discharging this liability.      (c) No single or partial exercise of any power hereunder shall preclude other or further exercise thereof or the exercise of any other power. Holder hereof shall at all times have the right to proceed against any portions of security held therefor in such order and in such manner as Holder may deem fit, without waiving any rights with respect to any other security. No delay or omission on the part of Holder hereof in exercising any right or remedy hereunder or the acceptance of one or more installments from any person after an Event of Default hereunder or under the Loan Documents shall operate as a waiver of such right or remedy or of any other right or remedy under this Note nor as a waiver of such right or remedy in connection with any future default. --------------------------------------------------------------------------------      (d) If more than one person or entity has executed this Note or becomes obligated under this Note, the obligations and covenants of each such person and/or entity shall be joint and several. The release by Holder of any party liable on this Note shall not operate to release any other party liable hereon.      (e) In the event any one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein; provided, however, Maker agrees to cooperate with Holder to negotiate in good faith to replace any provision so held invalid or unenforceable with a valid provision which is as similar as possible to the invalid or unenforceable provision.      (f) This Note is to be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts; provided, however, that if the conflict or choice of law rules would choose the law of another State, Maker hereby waives such rules and agrees that Massachusetts’ substantive, procedural and constitutional law shall nonetheless govern.      (g) All notices hereunder shall be deemed to have been duly given if delivered in accordance with the provisions set forth in Paragraph 3.07 of the Mortgage; notice provisions contained therein relating to (i) the Mortgagor thereunder shall be applicable to Maker, and (ii) the Mortgagee thereunder shall be applicable to Holder.      (h) This Note may not be waived, changed, modified or discharged orally, except by an agreement in writing signed the party against whom the enforcement of waiver, change, modification or discharge is sought.      (i) The underlined words appearing at the commencement of the paragraphs are included only as a guide to the contents thereof and are not to be considered as controlling, enlarging or restricting the language or meaning of those paragraphs.      (j) As used herein, the terms “Maker” and “Holder” shall be deemed to include their respective heirs, successors, legal representatives and assigns, whether voluntary by action of the parties or involuntary by operation of law.      (k) Maker hereby consents to the nonexclusive personal jurisdiction of the federal and state courts located in Boston, Massachusetts in any and all actions between Maker and Holder arising under or in connection with this Note, the Loan or any of the Loan Documents.      (l) Maker represents, warrants and covenants to Holder that all of the proceeds of this Note will be used for business or commercial purposes and no part of the Loan has been or will be used for personal, family, household or agricultural purposes. --------------------------------------------------------------------------------      (m) ANY AND ALL DEPOSITS OR OTHER SUMS AT ANY TIME CREDITED BY OR DUE TO THE UNDERSIGNED FROM THE LENDER AND ANY CASH, SECURITIES, INSTRUMENTS OR OTHER PROPERTY OF THE UNDERSIGNED IN THE POSSESSION OF THE LENDER, WHETHER FOR SAFEKEEPING OR OTHERWISE (REGARDLESS OF THE REASON THE LENDER HAD RECEIVED THE SAME OR WHETHER THE LENDER HAS CONDITIONALLY RELEASED THE SAME) SHALL AT ALL TIMES CONSTITUTE SECURITY FOR ALL LIABILITIES ARISING OUT OF THE LOAN DOCUMENTS AND FOR ANY AND ALL OBLIGATIONS OF THE UNDERSIGNED TO THE LENDER, AND MAY BE APPLIED OR SET OFF AGAINST SUCH LIABILITIES AND AGAINST THE OBLIGATIONS OF THE UNDERSIGNED TO THE LENDER INCLUDING, WITHOUT LIMITATION, THOSE ARISING HEREUNDER, AT ANY TIME, AFTER AN EVENT OF DEFAULT WHETHER OR NOT OTHER COLLATERAL IS THEN AVAILABLE TO THE LENDER.      (n) FOR AND IN CONSIDERATION OF HOLDER’S ENTERING INTO THE LOAN, EACH MAKER, BEING AN EXPERIENCED PARTICIPANT IN REAL ESTATE VENTURES, AND HAVING CONSULTED WITH COUNSEL OF ITS/HIS/HER CHOOSING, HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING (i) BROUGHT BY MAKER, HOLDER OR ANY OTHER PERSON RELATING TO (a) THE LOAN, (b) THIS NOTE, OR (c) THE LOAN DOCUMENTS, OR (ii) TO WHICH HOLDER IS A PARTY. EACH MAKER HEREBY AGREES THAT THIS NOTE CONSTITUTES A WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY, AND EACH MAKER DOES HEREBY CONSTITUTE AND APPOINT HOLDER ITS/HIS/HER TRUE AND LAWFUL ATTORNEY-IN-FACT, WHICH APPOINTMENT IS COUPLED WITH AN INTEREST, AND EACH MAKER DOES HEREBY AUTHORIZE AND EMPOWER HOLDER, IN THE NAME, PLACE AND STEAD OF EACH MAKER, TO FILE THIS NOTE WITH THE CLERK OR JUDGE OF ANY COURT OF COMPETENT JURISDICTION AS A STATUTORY WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY. EACH MAKER ACKNOWLEDGES THAT ITS WAIVER OF TRIAL BY JURY HAS BEEN MADE KNOWINGLY, INTENTIONALLY AND WILLINGLY BY EACH MAKER, AND ONLY AFTER CONSULTATION WITH SOPHISTICATED LEGAL COUNSEL OF ITS/HIS/HER OWN CHOOSING, AS PART OF A BARGAINED-FOR LOAN TRANSACTION.      (o) Maker agrees to perform and comply with each of the covenants, conditions, provisions and agreements of Maker contained in this Note, the Mortgage and each of the Loan Documents. Maker agrees that the obligation evidenced by this Note shall be payable in accordance with its terms without offset, counterclaim, demand, withholding or deduction.      (p) Maker hereby appoints The Manufacturers Life Insurance Company (U.S.A.) as its agent for the purpose of maintaining a registration book in which the ownership of the Note shall be recorded. This Note may be sold, transferred or assigned only upon notification by the holder to The Manufacturers Life Insurance Company (U.S.A.) at the address indicated herein that a sale, transfer or assignment of the Note has been duly executed by the holder. -------------------------------------------------------------------------------- 13. Limited Recourse. The obligations of and rights against the Maker and the Principal Affiliates (as hereinafter defined) under the Loan Documents shall be satisfied and enforced only against the Property and other collateral provided in connection with the Loan (any and all of which is hereinafter referred to as the “Security”) and no recourse shall be had against the Maker or the Principal Affiliates for money damages or against any other assets of the Maker or the Principal Affiliates. Notwithstanding the foregoing limitation, Lender shall be entitled to commence and maintain an action against the Maker or any Principal Affiliate:       (a) to exercise rights and remedies and/or perfect a lien or security interest against the Security;      (b) to recover for any breach or default of or upon any guarantee, warranty or indemnity (including, without limitation, the environmental indemnity required pursuant to the Section entitled “Environmental Matters” contained in the Mortgage) executed by the Maker or any Principal Affiliate;      (c) to recover an amount equal to the aggregate of the following: i. all rents, issues, profits and/or proceeds from the Property after the occurrence of a default which are applied other than in repayment of the Loan or to reasonable operating costs related to the Property paid to third parties unaffiliated with the Maker or with any Principal Affiliate; ii. all security, advance rental, lease termination or other deposits paid by tenants and any interest accrued or due thereon, which are not, immediately after the occurrence of a default, turned over to the Lender; iii. all insurance proceeds or condemnation awards which are applied other than in repayment of the Loan or restoration of the Security in accordance with the Loan Documents, or in the case of rent loss insurance proceeds only, to reasonable operating costs related to the Property and paid to third parties unaffiliated with the Maker or with any Principal Affiliate; iv. all losses incurred by Lender as a result of the failure to insure the Property as required by the terms of the Loan Documents; -------------------------------------------------------------------------------- v. all losses incurred by Lender as a result of: (1) any illegal, intentional or grossly negligent act or omission which results in the waste of, damage to, or impairment in value of, the Security; (2) fraud or conversion; (3) any false or misleading representation contained in the loan application or the other Loan Documents; vi. all outstanding taxes, assessments or other liens upon or against any of the Security which have not been paid or discharged, plus all penalties, interest, legal fees and other costs paid by Lender to pay or discharge the same, in the case where rents, issues, profits and/or proceeds from the Property were sufficient to pay or discharge the same (or to the extent Lender is not notified in advance to the contrary); vii. the cost incurred by Lender to:                (A) maintain and repair the Property to the standard required by the terms of the Loan Documents if such standard has not been met by the Maker; or                (B) perform the Maker's obligations under any of the Leases;            in each case, where the rents, issues, profits and/or proceeds from the Property were sufficient to satisfy the costs of repair, maintenance and performance (or to the extent Lender is not notified in advance to the contrary); and viii. all costs and expenses incurred by Lender (including, without limitation, reasonable legal fees and costs):                 (A) to enforce the obligations of the Maker or a Principal Affiliate under this Section; and                 (B) to foreclose, obtain appointment of a receiver, sell or take any other proceeding to enforce or collect the Loan, the Loan Documents and/or realize upon the Security, or in connection with any bankruptcy proceeding or application for arrangement or reorganization brought by or against the Maker or any Principal Affiliate, if (1) the Maker or any Principal Affiliate hinders or contests, or causes another to hinder or contest, such proceedings and (2) -------------------------------------------------------------------------------- Lender prevails in such proceedings. This limited recourse provision and the limitations on Lender’s rights hereunder shall be null and void if and to the extent: (1) any part or all of the Security is lost due to forfeiture for any reason; or (2) in the event of a violation of the terms of any of the Loan Documents relating to the sale, transfer or encumbering of the Property, the Maker, or any interest in either, unless consented to in writing by Lender, with the effect in either case that Lender shall have full recourse against any and all assets of the Maker and/or Principal Affiliates without the restrictions or limitations of this limited recourse provision. The term “Principal Affiliates” shall include all general partners and limited partners who have a controlling interest or who act as general partners of the Maker (if the Maker is a partnership), majority or controlling members or partners of the Maker or its general partner (if the Maker or its general partner is a limited liability company or limited liability partnership), and majority or controlling beneficiaries or shareholders of the Maker or corporate general partners of the Maker (if the Maker or its general partner is a trust or corporation). Without limiting the generality of the preceding sentence, the term “Principal Affiliates” shall include Perini Corporation, but not the shareholders of Perini Corporation. [END OF PAGE] -------------------------------------------------------------------------------- EXECUTED as a sealed instrument as of the day and year first above written. MAKER: MT. WAYTE REALTY, LLC By: PERINI CORPORATION, Member /s/ Alan P Gottlieb By: /s/ Susan C. Mellace Witness Name: SUSAN C. MELLACE Title: V.P. AND TREASURER

  -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ] Exhibit 10(a)   STOCK PURCHASE AGREEMENT               This STOCK PURCHASE AGREEMENT, dated as of June 23, 2000, is by and among BERGEN BRUNSWIG MEDICAL CORPORATION, a Delaware corporation having a place of business at 4000 Metropolitan Drive, Orange, California 92868 ("BBMC"), RANSDELL SURGICAL, INC, a Kentucky corporation ("RSI" and, collectively with BBMC, the "Corporations"), DURR FILLAUER MEDICAL, INC., a Delaware corporation (the "Subsidiary Seller"), BERGEN BRUNSWIG CORPORATION, a New Jersey corporation having its principal place of business at 4000 Metropolitan Drive, Orange, California 92868 (the "Parent Seller" and, collectively with the Subsidiary Seller, the "Sellers"), ALLEGIANCE CORPORATION, a Delaware corporation having its principal place of business at 1430 Waukegan Road, McGaw Park, Illinois 60085 (the "Purchaser") and CARDINAL HEALTH, INC., an Ohio corporation having its principal place of business at 5555 Glendon Court, Dublin, Ohio 43016 (the "Parent Purchaser" and, together with the Purchaser, the "Purchasers").   RECITALS               1.      The Parent Seller is the legal and beneficial owner of all of the issued and outstanding capital stock of the Subsidiary Seller and RSI. The Subsidiary Seller is the legal and beneficial owner of all of the issued and outstanding capital stock of BBMC.              2.      The Sellers desire to sell and transfer to the Purchasers, and the Purchasers desire to purchase from the Sellers, all of the outstanding shares of capital stock of the Corporations, all as more specifically provided herein.              3.      The Boards of Directors (or Executive Committees of such Boards of Directors) of the Sellers, the Corporations and the Purchasers have determined that it is in the best interests of the respective corporations to enter into this Agreement.              NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound, the parties hereto agree as follows:   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE I Certain Definitions and Other Matters              Section 1.1      Certain Definitions.      As used in this Agreement, the following terms have the respective meanings set forth below.              "Action" means any administrative, judicial or other legal arbitration, hearing, investigation, litigation, proceeding or suit before any Governmental Authority or arbitrator.              "Affiliate" means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the ability to elect the members of the board of directors or other governing body of a Person and the terms "controlled" and "controlling" have meanings correlative thereto.              "Agreement" means this Stock Purchase Agreement.              "Assignment of Marks" means the assignment of trademarks and service marks, made by the Sellers in favor of BBMC, in the form and substance of the assignment annexed hereto as Appendix 1.8A.              "Assignment of Lease" means the assignment and assumption of the real property lease, made by the Parent Seller in favor of BBMC, in the form and substance of the assignment and assumption agreement set forth in Appendix 1.7A annexed hereto.              "Assignment of Data Center Assets" means the assignment of Data Center assets, subject to the assumption of related liabilities, made by the Parent Seller or one of its Subsidiaries (other than a Consolidated Company) in favor of BBMC, in the form and substance of the assignment and assumption agreement annexed hereto as Appendix 1.8C.              "BBMC Common Stock" means the common stock, par value $0.01 per share, of BBMC.              "Borrowing Rate" means the prime rate as published in The Wall Street Journal from time to time during the period from the Closing Date through the date of payment or refund as determined pursuant to Section 2.5.2.              "Business Day" means a day on which national banks are open for business in New York City.              "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.              "Claims" means any and all claims, demands, Actions, causes of action and legal proceedings.              "Closing Date Customer" means any health care provider which, during the twelve months ending on the last day of the calendar month preceding the calendar month in which the Closing Date occurs, purchased, in the case of an acute care facility, more than $500 per licensed bed, and in all other cases, more than $1,000, in products or supplies from the Consolidated Companies.              "Closing Date Non-Customer" means any health care provider that is not a Closing Date Customer.              "Code" means the Internal Revenue Code of 1986, as amended.              "Competing Business" means the business of selling or distributing Competing Products within the United States and its territories to health care providers, it being understood that neither a consumer, a retail pharmacy or a retail store containing a retail pharmacy is a health care provider; provided, however, that none of the following shall be deemed Competing Business:              (a)      the sale or distribution by any Seller Unit of Competing Products, provided that the sales of Competing Products by such Seller Unit for a given fiscal quarter of such Seller Unit (or, for the fiscal quarter in which the Closing occurs, from the Closing Date through the last day of such quarter) do not exceed the Revenue Limit for such Seller Unit, and in the case of BBDC as the Seller Unit, the sales of Competing Products to any single acute care provider (as distinguished from a buying group or any combination of acute care providers) do not exceed, during such fiscal quarter (or, for the fiscal quarter in which the Closing occurs, during the period from the Closing Date through the last day of such quarter), more than $125 per licensed bed of such provider;                (b)      acquiring any equity or other ownership interest in an entity that sells or distributes Competing Products, provided that either (x)(i) such equity or other ownership interest does not exceed twenty percent (20%) of the total outstanding voting equity of such entity, (ii) such equity or other ownership interest does not give the Parent Seller and its Subsidiaries control over the Board of Directors (or comparable governing body of an entity that is not organized as a corporation) of such entity and (iii) the name of such entity does not include Parent Seller's name or any derivation thereof, or (y) such entity is a Small Entity;                (c)      lending money, extending or advancing credit to, or providing management, consulting or administrative services to, developing, launching or operating, or otherwise assuming control (other than by acquisition of an equity or other ownership interest) of, an entity that sells or distributes Competing Products, provided that (i) such entity is a Small Entity and (ii) if the Parent Seller or its Subsidiaries develops, launches, operates or so assumes control of such an entity, the sales of Competing Products by such entity for a given fiscal quarter of such entity (or, for the fiscal quarter in which the Closing occurs, from the Closing Date through the last day of such quarter) do not exceed 10% of such entity's total dollar sales for such fiscal quarter (or, for the fiscal quarter in which the Closing occurs, for the period from the Closing Date through the last day of such quarter); or                (d)      commencing 60 days after the Closing Date, entering into or participating in a Permitted Joint Program, provided that (x) the Parent Seller and its Subsidiaries do not at any time during the three year period following the Closing Date engage in Selling Efforts directed at Closing Date Customers, (y) during the period from the 60th day after the Closing Date through the 180th day after the Closing Date, the Parent Seller and its Subsidiaries do not participate in a Permitted Joint Program in which any co-venturer in such Permitted Joint Program engages in Selling Efforts directed at Closing Date Customers on behalf of such Permitted Joint Program (it being understood that selling efforts by such co-venturer directed to Closing Date Customers are not precluded by this clause (y) as long as the co-venturer does not market the Permitted Joint Program during the period covered by this clause (y)), and (z) during the period from the 60t h day after the Closing Date through the 90th day after the Closing Date, the Parent Seller and its Subsidiaries do not engage in Selling Efforts directed at any Closing Date Non-Customer unless such Closing Date Non-Customer initiates communications with the Parent Seller or its Subsidiaries regarding the participation by such Closing Date Non-Customer, the Parent Seller or its Subsidiaries in a Permitted Joint Program.              "Competing Products" means medical, surgical or laboratory supplies and products other than supplies and products (a) which contain, are packaged, by a Person other than the Parent Seller or its Subsidiaries, with, or are otherwise customarily sold as a unit with, any pharmaceutical, biological, plasma, blood, injectable, intravenous fluid, intravenous solution, vaccine, medicine, oncology or renal supplies or products, or (b) that are purchased from Purchasers or any of their Subsidiaries.              "Consolidated Companies" means the Corporations and their Subsidiaries.              "Copyright Assignment and Assumption Agreement" means the assignment of copyrights, made by the Sellers in favor of BBMC, and the assumption by BBMC of certain related liabilities, in the form and substance of the assignment and assumption agreement annexed hereto as Appendix 1.8B.              "CPA" means Arthur Andersen & Co.              "Credit Facility" has the meaning ascribed to such term in Section 1 of the Corporations' Disclosure Schedule.              "Due Date" means the due date, including applicable extensions.              "Encumbrances" means security interests, liens, encumbrances, claims, options, charges, rights of first refusal, and restrictions of any kind, including any restrictions on use, voting, transfer, receipt of income or exercise of any other attributes of ownership, but excluding restrictions on the transfer of securities arising pursuant to the Securities Act of 1933, as amended, or pursuant to applicable state securities laws.              "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.              "Escrow Agent" means Wilmington Trust Company or such other Person as shall be approved by the Parent Purchaser and the Parent Seller in the event that Wilmington Trust Company cannot or does not serve as Escrow Agent hereunder.              "Escrow Agreement" means an escrow agreement, among the Sellers, the Purchasers and the Escrow Agent, substantially in the form and substance of the escrow agreement annexed hereto as Appendix 1.1, subject to such changes as the Escrow Agent shall request and the Sellers and Purchasers shall accept on or before the Closing Date, such acceptances not to be unreasonably withheld.              "Estimated Differential" means the Parent Seller's good faith estimate of the difference between the Consolidated Companies' Net Asset Value as of the Closing Date determined in accordance with Section 2.5 and the March 31 Value. It is understood that, if the estimated Consolidated Companies' Net Asset Value as of the Closing Date is greater than the March 31 Value, the Estimated Differential will be a positive number, and, if the estimated Consolidated Companies' Net Asset Value as of the Closing Date is less than the March 31 Value, the Estimated Differential will be a negative number.              "GAAP" means generally accepted accounting principles as in effect in the United States, as applied consistent with the prior practices of the Consolidated Companies and the Parent Seller.              "Governmental Authority" means any national, federal, state, provincial, county, municipal or local government, foreign or domestic, or the government of any political subdivision of any of the foregoing, any multinational organization or body, or any entity, authority, agency, ministry or other similar body exercising executive, legislative, judicial, regulatory, taxing or administrative authority or functions of or pertaining to government, including any authority or other quasi-governmental entity established to perform any of such functions.              "HSR Authority" means the FTC and/or the Antitrust Division.              "Income Tax" means any Tax based upon or measured by income or gain.              "Independent Accountant" means a nationally recognized independent public accounting firm which does not currently audit the Sellers or the Purchasers, or an Affiliate of either, as shall be agreed upon by the Parent Seller and the Parent Purchaser.              "License Agreement" means the non-exclusive license agreement among the Sellers, the Corporations and the Purchasers, providing for the use of certain trade names by the Consolidated Companies, in the form and substance of the license annexed hereto as Appendix 1.9.              "March 31 Value" means $210,568,300.              "Material Adverse Change" means, with respect to a Person, a material adverse change in the business, operations, condition (financial or otherwise), properties, assets, liabilities or results of operations of such Person and its Subsidiaries, taken as a whole.              "Net Asset Value" means the total assets of the Consolidated Companies, as determined in accordance with Section 2.5.4, less the total liabilities of the Consolidated Companies, as determined in accordance with Section 2.5.5; provided, however, that (a) those assets and liabilities associated with the UNITI System to the extent set forth on Appendix 1.5 annexed hereto (the "Transfer UNITI Items") shall be excluded from the calculation of the Net Asset Value, (b) the Transfer Assets shall be deemed to be an asset of the Consolidated Companies, including the leasehold improvements and security deposits relating to the Transfer Lease, and (c) all assets and liabilities associated with consolidated, combined or unitary Taxes, and all assets and liabilities for deferred Taxes established to reflect timing differences between book and Tax income, shall be excluded from the calculation of the Net Asset Value.              "Order" means that certain order of the United States District Court for the District of Columbia, dated July 31, 1998, Civil Nos. 98-595 and 98-596, which, among other things, stated that the Parent Purchaser was prohibited from acquiring assets of the Parent Seller.              "Ordinary Course of Business" means actions that are (a) consistent with the past practices of the designated entity, (b) similar in nature, style and magnitude to actions customarily taken in the ordinary course of the normal day-to-day operations of the designated entity and (c) do not require, and in the past have not received, specific authorization by the board of directors of the designated entity.              "Outside Date" means September 30, 2000, unless either (x) the parties hereto shall not have received by September 30, 2000 all regulatory approvals from all Governmental Authorities necessary to consummate the transactions contemplated by this Agreement, or (y) the Order shall not have been amended to permit the consummation of the transactions contemplated hereby, in which case the "Outside Date" means December 31, 2000.              "Permitted Encumbrances" means (a) liens for Taxes not yet due and payable, (b) Encumbrances that do not interfere with the use or enjoyment of the Consolidated Companies' assets or that are otherwise not material to the Consolidated Companies, (c) Encumbrances arising in the Ordinary Course of Business of the Consolidated Companies and (d) Encumbrances disclosed in Section 1 of the Corporations' Disclosure Schedule.              "Permitted Joint Program" means any agreement or business arrangement with respect to, any joint marketing arrangement, joint venture, strategic marketing alliance, cooperative or group purchasing organization, or any other contractual or partnering arrangement, with any Person that sells or distributes Competing Products, in which Parent Seller and its Subsidiaries (a) sell or distribute supplies and products that are not Competing Products (other than any Competing Products that are sold or distributed by the Seller Units pursuant to clause (a) of the definition of "Competing Business" in this Section 1.1), and (b) do not own or hold an ownership or equity interest exceeding twenty percent (20%) of the aggregate ownership or equity interests in such arrangement, venture, alliance or organization.              "Person" means an individual, partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust or joint venture, or a governmental agency or political subdivision thereof.              "Post-Closing Period" means each taxable period with respect to the Consolidated Companies that begins after the Closing Date and the portion, beginning after the Closing Date, of each Straddle Period.              "Pre-Closing Period" means each taxable period with respect to the Consolidated Companies that ends on or before the Closing Date and the portion, ending on the Closing Date, of each Straddle Period.              "Proprietary Rights" means all of the (a) patents, inventions, discoveries, trademarks, service marks, industrial designs, trade names, trade styles, trade dress, service names, logos, slogans, brand names, brand marks, computer software, copyrights and the like (whether registered with federal, state or other governments of any country or unregistered) and applications, registrations, permits and licenses relating thereto and any reissues, continuations, continuations-in-part and extensions thereof; (b) computer software and licenses related thereto; and (c) processes, methods, information, data, plans, art works, blueprints, specifications, designs, drawings, engineering reports, test reports, material standards, processing standards, performance standards, know-how, formulas, trade secrets, concepts, applications, procedures, marketing and technical data, customer and vendor lists and other confidential information used in or otherwise necessary for the conduct of the Businesses of the Consoli dated Companies.              "Regulated Substances" means pollutants, contaminants, hazardous or toxic substances, compounds or related materials or chemicals, hazardous materials, hazardous waste, flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products (including, but not limited to, waste petroleum and petroleum products) as regulated under any applicable Environmental Law.              "Revenue Limit" means, for each of the following Seller Units, the following percentage of total dollar sales of such Seller Units: (a) the Besse Medical Products division of ASD Specialty Healthcare, Inc. ("BMP") - 10%; (b) ASD Specialty Healthcare, Inc. excluding BMP ("ASD") - 5%; (c) PharMerica, Inc. ("PM") - 5%; (d) Bergen Brunswig Drug Company ("BBDC") - 0.4%; and (e) each New Unit, 10%.              "RSI Common Stock" means the common stock, no par value, of RSI.              "SEC" means the United States Securities and Exchange Commission.              "Seller Unit" shall mean each of (a) BMP, (b) ASD (excluding BMP) and ASD's direct and indirect wholly owned Subsidiaries, (c) PM and its direct and indirect wholly owned Subsidiaries, (d) BBDC and its direct and indirect wholly owned Subsidiaries and (e) any entity (including any Small Entity) established or more than 20% of which is acquired by the Parent Seller or its Subsidiaries after the Closing Date (any such entity referred to in this clause (e), a "New Unit").              "Selling Efforts" means efforts directed at individual health care providers seeking to encourage such providers to participate in a Permitted Joint Program; provided, however, that for purposes of this Agreement, the Parent Seller and its Subsidiaries or any other participant in a Permitted Joint Program shall not be deemed to have engaged in Selling Efforts directed to a particular customer by virtue of any selling efforts directed toward a purchasing group or other affiliated group of which such customer is a member.              "Small Entity" means an entity and its Subsidiaries, if any, which collectively, during the four calendar quarters prior to the calendar quarter in which the Parent Seller or its Subsidiaries first takes an action of the type referred to in clauses (b) or (c) of the definition of "Competing Business" with respect to such entity and its Subsidiaries, did not have sales of Competing Products in excess of (x) ten percent (10%) of such entity's total sales and (y) $10,000,000, measured in terms of gross Competing Products sales dollars.              "Straddle Period" means any taxable period with respect to the Consolidated Companies beginning on or before the Closing Date and ending after the Closing Date.              "Subsidiaries" of any entity means, at any date, any Person (a) the accounts of which would be consolidated with those of the applicable entity in such entity's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date; or (b) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests or more than 50% of the profits or losses of which are, as of such date, owned, controlled or held by the applicable entity or one or more subsidiaries of such entity. The term "Subsidiaries" shall include, with respect to the Consolidated Companies, Pacific Criticare, Inc. ("PCI"), a California corporation.              "Tax" means any of the following, and "Taxes" means all of the following, imposed by or payable to any Governmental Authority: any income, gross receipts, license, payroll, employment, excise, severance, stamp, business, occupation, premium, windfall profits, environmental (including taxes under section 59A of the Code), capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, or value added tax, any alternative or add-on minimum tax, any estimated tax, and any levy, impost, duty, assessment, or withholding, in each case including any interest, penalty, or addition thereto, whether disputed or not.              "Territory" means the United States and its territories.              "Transfer Assets" means the Transfer Real Property, the Transfer Lease, the Transfer Data Center Assets and the Transfer Marks.              "Transfer Data Center Assets" means the Data Center assets described in Appendix 1.9A annexed hereto.              "Transfer Lease" means the real property lease listed in Appendix 1.7 annexed hereto.              "Transfer Marks" means the trademarks, service marks and copyright listed in Appendix 1.8 annexed hereto.              "Transfer Real Property" means the real property described in Appendix 1.2 annexed hereto.              "Transfer Real Property Deed" means a deed, from the Subsidiary Seller to BBMC, in the form and substance of the deed annexed hereto as Appendix 1.3.              "Transition Support Agreement" means a transition support agreement, between the Parent Seller and the Purchaser, in the form and substance of the transition support agreement annexed hereto as Appendix 1.4.              "UNITI System" means the software system described in Section 3.21 of the Corporations' Disclosure Schedule.              "UNITI System Assignment and Assumption Agreement" means an agreement, between BBMC and the Parent Seller in the form and substance of the assignment and assumption agreement annexed hereto as Appendix 1.6.              Section 1.2      Terms Defined in Other Sections.      The following terms are defined elsewhere in this Agreement in the following Sections:     Antitrust Division 7.1.2 Antitrust Laws 6.8.2 Balance Sheet Refunds and Credits 6.12.6 Base Price 2.2 Basket Amount 9.2.4 BBMC Lead-in to this Agreement Businesses 3.1 Cap Amount 9.2.4 CIC Agreement 6.10.5 Closing 2.4 Closing Date 2.4 Company Permits 3.20.1 Competing Transaction 6.11 Compliance Report 6.6.3 Confidential Information 6.6.1 Consolidated Company Employee 6.10.2 Contracts 3.17 Controlled Group Liability 3.16.1 Corporations Lead-in to this Agreement Corporations' Disclosure Schedule 3.1 Damages 9.2.1 Decreased Consideration 2.5.2.2 Employment Agreement 3.16.11 Environmental Laws 3.12 Environmental Permit 3.12 ERISA Affiliate 3.16.1 FDA Act 3.5.4 Final Accountant's Report 2.5.3.2 and 2.5.3.3 Final Purchase Price 2.5.1 Financial Statements 3.15.1 FTC 7.1.2 HSR Act 3.5.4 Increased Consideration 2.5.2.1 Indemnified/Indemnifying Party 9.2.3 Independent Entity 6.6.3 Initial Accountant's Report 2.5.3.1 Insurance Policies 3.7 Interim Balance Sheet 3.15.1 Member Company 6.12.2 Multiemployer Plan 3.16.6 Multiple Employer Plan 3.16.6 Parent Purchaser Lead-in to this Agreement Parent Seller Lead-in to this Agreement Plans 3.16.1 Preliminary Purchase Price 2.2 Proposed Statement 2.5.3.1 Purchaser Lead-in to this Agreement Qualified Plans 3.16.3 R.S.I. Lead-in to this Agreement Records 6.20.1 Returns 3.8.3 Seller Affiliated Group 6.12.2 Seller Common Parent 6.12.2 Sellers Lead-in to this Agreement Severance Plan 6.10.2 Subsidiary Seller Lead-in to this Agreement Survival period 9.1.5 Tax Claims 6.12.4 Tax Proceeding 6.12.4 Tax Returns 3.8.3 Tax Survival Period 9.1.4 Third Party Claim 9.3 Withdrawal Liability 3.16.1                  Section 1.3      Interpretation.       Unless otherwise indicated to the contrary herein by the context or use thereof: (i) the words, "herein," "hereto," "hereof" and words of similar import refer to this Agreement as a whole and not to any particular Section or paragraph hereof; (ii) words importing the masculine gender shall also include the feminine and neutral genders, and vice versa; (iii) words importing the singular shall also include the plural, and vice versa; and (iv) the word "including" means "including without limitation".   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE II Purchase and Sale of Stock              Section 2.1      Purchase and Sale of the RSI Common Stock and the BBMC Common Stock.      Upon the terms and subject to the conditions of this Agreement and on the basis of the representations, warranties and agreements contained herein, at the Closing, (i) the Parent Seller shall sell, assign, transfer, convey and deliver to the Purchaser an aggregate of one hundred (100) shares of RSI Common Stock, constituting all of the issued and outstanding shares of RSI's capital stock, (ii) the Subsidiary Seller shall sell, assign, transfer, convey and deliver to the Purchaser an aggregate of one thousand (1,000) shares of BBMC Common Stock, constituting all of the issued and outstanding shares of BBMC's capital stock, and (iii) the Purchaser shall pay, and the Parent Purchaser shall cause the Purchaser to pay, the Preliminary Purchase Price to the Sellers and the Escrow Agent in the manner provided for herein.              Section 2.2      Preliminary Purchase Price.      The purchase price payable by the Purchaser hereunder at the Closing in accordance with Section 2.3 shall consist of cash in an amount equal to (a) one hundred and eighty one million dollars ($181,000,000) (the "Base Price") plus (b) the Estimated Differential if the Estimated Differential is a positive number minus (c) the Estimated Differential if the Estimated Differential is a negative number (such aggregate amount described in clauses (a), (b) and (c), the "Preliminary Purchase Price"). At least two Business Days prior to the Closing Date, the Parent Seller will provide the Purchasers with a written notice setting forth the Estimated Differential and detailing its calculation.              Section 2.3      Deliveries at the Closing.      Upon the terms and subject to the conditions of this Agreement and on the basis of the representations, warranties and agreements contained herein, at the Closing:                           2.3.1      the Parent Seller shall deliver to the Purchaser one or more stock certificates, duly endorsed for transfer, representing 100 shares of RSI Common Stock;                           2.3.2     the Subsidiary Seller shall deliver to the Purchaser one or more stock certificates, duly endorsed for transfer, representing 1,000 shares of BBMC Common Stock;                          2.3.3     the Parent Seller and the Purchasers shall execute and deliver the Transition Support Agreement and the Sellers and the Purchasers shall execute and deliver the Escrow Agreement;                           2.3.4     the Purchaser shall pay, and the Parent Purchaser shall cause the Purchaser to pay, to the Sellers an amount equal to the Preliminary Purchase Price minus ten million dollars ($10,000,000), such aggregate amount to be paid by wire transfer to an account or accounts specified in writing by the Parent Seller; and                           2.3.5      the Purchaser shall pay, and the Parent Purchaser shall cause the Purchaser to pay, to the Escrow Agent ten million dollars ($10,000,000) of the Preliminary Purchase Price by wire transfer to an account or accounts specified in writing by the Parent Seller after consultation with the Escrow Agent, it being understood that the cash deposited with the Escrow Agent pursuant to this Section 2.3.5 shall be held by the Escrow Agent, and ultimately disbursed by the Escrow Agent, in accordance with the terms and conditions of the Escrow Agreement and this Agreement.              Section 2.4       Closing.      Subject to the rights of the parties to terminate this Agreement in accordance with Article VIII, the closing of the transactions contemplated hereby (the "Closing") shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019 at 10:00 A.M. on the fifth Business Day after the satisfaction or waiver of the conditions set forth in Article VII capable of being satisfied prior to the Closing, or at such other time and place as is mutually agreed by the Parent Purchaser and the Parent Seller. The time and date of the Closing are herein called the "Closing Date".              Section 2.5      Post-Closing Purchase Price Determination.                           2.5.1      Definition.       The term "Final Purchase Price" means (a) the Base Price plus (b) the amount, if any, by which the Net Asset Value as of the Closing Date (as reflected in the Final Accountant's Report prepared pursuant to this Section 2.5) exceeds the March 31 Value minus (c) the amount, if any, by which the March 31 Value exceeds the Net Asset Value as of the Closing Date (as reflected in the Final Accountant's Report prepared pursuant to this Section 2.5).                           2.5.2      Adjustments in the Purchase Price.                                        2.5.2.1      Increased Consideration.       If the Final Purchase Price is greater than the Preliminary Purchase Price, then, as soon as possible after final determination of the Net Asset Value pursuant to this Section 2.5 and calculation of the amount by which the Final Purchase Price exceeds the Preliminary Purchase Price (such excess amount, the "Increased Consideration"), the Purchaser shall pay, and the Parent Purchaser shall cause the Purchaser to pay, to the Sellers, by wire transfer to an account or accounts specified in writing by the Parent Seller, an amount of cash equal to the Increased Consideration plus interest on the Increased Consideration from the Closing Date to the date of such payment at a per annum rate equal to the Borrowing Rate.                                        2.5.2.2      Decreased Consideration.        If the Final Purchase Price is less than the Preliminary Purchase Price, then, as soon as possible after final determination of the Net Asset Value pursuant to this Section 2.5 and calculation of the amount by which the Preliminary Purchase Price exceeds the Final Purchase Price (such excess amount, the "Decreased Consideration"), the Sellers and the Escrow Agent shall refund the Decreased Consideration to the Purchaser as follows: the Sellers shall pay to the Purchaser, by wire transfer to an account or accounts specified in writing by the Purchaser, an amount of cash equal to ninety four and one half percent (94-1/2%) of the sum of (a) the Decreased Consideration and (b) interest on the Decreased Consideration from the Closing Date to the date of such refund at a per annum rate equal to the Borrowing Rate, and shall cause the Escrow Agent to pay (from the funds held in escrow pursuant to the Escrow Agreement) to the Purchaser, by wire transfer to an account or accounts specified in writing by the Purchaser, an amount of cash equal to five and one half percent (5-1/2%) of the sum of (c) the Decreased Consideration and (d) interest on the Decreased Consideration from the Closing Date to the date of such refund at a per annum rate equal to the Borrowing Rate; provided that the amount of such payment from the "Escrow Account" (as defined in the Escrow Agreement) shall not exceed five million dollars ($5,000,000); provided further, that to the extent that the amount of such payment exceeds five million dollars ($5,000,000) the Sellers shall pay such deficiency to the Purchasers by wire transfer.                           2.5.3      Accountants' Reports.                                        2.5.3.1      Proposed Statement and Initial Accountant's Report.      The Sellers shall prepare at their expense, and furnish to the Purchasers, a proposed statement of the Net Asset Value as of the Closing Date, which statement shall include a consolidated balance sheet of the Consolidated Companies prepared in accordance with GAAP (collectively, the "Proposed Statement"), subject to the adjustments set forth in Sections 2.5.4 and 2.5.5. The CPA shall audit the Proposed Statement and shall prepare a special accountant's report (the "Initial Accountant's Report") with respect to the Net Asset Value as of the Closing Date. The Initial Accountant's Report shall include a consolidated balance sheet of the Consolidated Companies as of the Closing Date prepared in accordance with GAAP, subject to the adjustments set forth in Sections 2.5.4 and 2.5.5. As soon as practicable, but, in any event, not more than ninety (90) days after th e CPA receives the Proposed Statement, the Purchasers shall cause the CPA to furnish the Initial Accountant's Report concurrently to the Sellers and the Purchasers, along with a schedule of any adjustments made by the CPA to the Proposed Statement, and shall cause the CPA to make its work papers with respect to the Initial Accountant's Report available to the Sellers no later than the time that the Initial Accountant's Report is so furnished. The Sellers shall cause the Corporations to conduct, and the CPA and the Purchasers shall be afforded the ability to participate in, a physical inventory as of the Closing Date.                                        2.5.3.2      Time for Objections.       After the CPA shall have furnished the Initial Accountant's Report to the Sellers, if the Sellers object to the Initial Accountant's Report on the grounds that it has not been made in accordance with this Agreement, the Sellers may give written notice of their objection to the Purchasers within thirty (30) days after their receipt of the Initial Accountant's Report. If no such assertion is made within such thirty (30) day period, or if the Purchasers and the Sellers agree upon all matters in dispute within the fifteen (15) day period specified in Section 2.5.3.3, that Initial Accountant's Report, as adjusted to reflect any such agreements, shall be final and binding on all parties hereto for the purpose of determining the Net Asset Value as of the Closing Date and shall be referred to as the "Final Accountant's Report".                                        2.5.3.3      Dispute Resolution.       The Purchasers and the Sellers will use reasonable efforts to resolve any matters in dispute (with respect to the calculation of the Net Asset Value as of the Closing Date) as rapidly as possible. If the Purchasers and the Sellers are unable to resolve all items in dispute (with respect to the calculation of the Net Asset Value as of the Closing Date) within fifteen (15) days after the Purchasers' receipt of the Sellers' written objection to the Initial Accountant's Report, then those items in dispute shall be submitted for resolution to the Independent Accountant. The Independent Accountant shall resolve such disputes by application of GAAP (subject to the adjustments set forth in Sections 2.5.4 and 2.5.5). The determination of the Independent Accountant with respect to those items in dispute, together with the determinations of the Purchasers and the Sellers with respect to those items not in dispute, shall become the "Final Accountant's Report" and shall be final and binding upon all parties hereto.                                        2.5.3.4.       Payment of Fees.       The Sellers shall pay the fees of their accountants, and the Purchasers shall pay the fees of the CPA, in connection with the preparation and review of the Initial Accountant's Report and the Final Accountant's Report. The fees and disbursements of the Independent Accountant employed pursuant to the provisions of Section 2.5.3.3 shall be borne one-half by the Purchasers and one-half by the Sellers.                           2.5.4      Asset Value.       The total assets of the Consolidated Companies shall be determined as of the Closing Date, and shall be determined in accordance with GAAP, except that in the event that an asset is transferred outside the ordinary course of business, between March 31, 2000 and the Closing Date, (a) from one of the Consolidated Companies to the Parent Seller or to a Subsidiary of the Parent Seller or (b) from the Parent Seller or a Subsidiary of the Parent Seller to one of the Consolidated Companies, such asset shall be included in calculating the Net Asset Value only if it was included in determining the March 31 Value.                           2.5.5      Liability Value.        The total liabilities of the Consolidated Companies shall be determined as of the Closing Date, and shall be determined in accordance with GAAP, except that:                                        2.5.5.1      the Consolidated Companies' liabilities for Taxes shall be stated without reference to any reserves for potential Tax liabilities, regardless of whether the Consolidated Companies have heretofore recorded any such reserves;                                          2.5.5.2      no reserves shall be established for any of the matters described in Section 9.2.1(iv); and                                          2.5.5.3      no severance liability shall be recognized with respect to employees of the Consolidated Companies whose employment is terminated prior to the Closing, provided that responsibility for severance for such employees is assumed by the Parent Seller or a Subsidiary of the Parent Seller other than the Consolidated Companies.   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE III Representations and Warranties Regarding the Consolidated Companies              The Corporations and the Sellers jointly and severally represent and warrant to the Purchasers as follows:              Section 3.1      Organization and Standing; Business.      Each of the Consolidated Companies is a corporation or limited liability company duly organized, validly existing and in good standing under the laws of the state of its organization with full corporate power and authority to own, lease, use and operate its properties and to conduct its business as and where now owned, leased, used, operated and conducted. As of the Closing, each of the Consolidated Companies will be duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the property it owns, leases or operates requires it to so qualify, except where the failure to be so qualified or in good standing in any such jurisdiction would not reasonably be expected to result in a Material Adverse Change with respect to the Consolidated Companies. The Parent Seller has heretofore furnished to the Purchasers a complete and correct copy of the certificate of incorporation and by-laws of each of the Consolidated Companies, each as in effect on the date hereof. None of the Consolidated Companies is in default in any material respect in the performance, observance or fulfillment of any provision of their respective organizational documents. The Sellers have set forth in Section 3.1 of the disclosure schedule that they have delivered to the Purchasers as of the date hereof (the "Corporations' Disclosure Schedule") a brief description of each of the businesses in which the Consolidated Companies are engaged (the "Businesses").              Section 3.2      Subsidiaries.        The Corporations do not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture, limited liability company or other entity or enterprise, except for the Subsidiaries and other entities set forth in Section 3.2 of the Corporations' Disclosure Schedule. Except as set forth in Section 3.2 of the Corporations' Disclosure Schedule, none of the Consolidated Companies is subject to any obligation or requirement to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any of the Consolidated Companies that is not wholly owned, directly or indirectly, by one of the Corporations. Except as set forth in Section 3.2 of the Corporations' Disclosure Schedule, the Corporations own, directly or indirectly, each of the outstanding shares of capital stock (or other ownership interests having by their terms ordinary voting power to elect a majority of directors or others performing s imilar functions with respect to such Subsidiary) of each of the Subsidiaries and other entities identified in Section 3.2 of the Corporations' Disclosure Schedule. Except as set forth in Section 3.2 of the Corporations' Disclosure Schedule, each of the outstanding shares of capital stock or other ownership interests of each of such Subsidiaries and such other entities is duly authorized, validly issued, fully paid and nonassessable, and, at the Closing, will be owned, directly or indirectly, by the Corporations free and clear of all Encumbrances. Other than as set forth in Section 3.2 of the Corporations' Disclosure Schedule, there are no outstanding subscriptions, options, warrants, puts, calls, agreements, understandings, claims or other commitments or rights of any type relating to the issuance, sale or transfer of any securities or other equity interests of any Subsidiary or other entity listed in Section 3.2 of the Corporations' Disclosure Schedule, nor are there outstanding any securities or other e quity interests which are convertible into or exchangeable for any shares of capital stock or other equity interests of any such Subsidiary or other entity, and none of the Consolidated Companies has any obligation of any kind to issue any additional securities or grant any additional equity interests of any Subsidiary or other entity listed in Section 3.2 of the Corporations' Disclosure Schedule or to pay for or repurchase any securities or other equity interests of any such Subsidiary or other entity or any predecessor thereof. None of the Consolidated Companies is required to file any reports with the SEC.              Section 3.3      Corporate Power and Authority.      Each of the Corporations has all requisite corporate power and authority to enter into and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by each Corporation have been duly authorized by all necessary corporate action on the part of such Corporation. This Agreement has been duly executed and delivered by each Corporation and constitutes the legal, valid and binding obligation of each Corporation enforceable against it in accordance with its terms. All Persons who executed this Agreement on behalf of the Corporations have been duly authorized to do so.              Section 3.4      Capitalization of the Corporations.      BBMC's authorized capital stock consists solely of one thousand (1,000) shares of BBMC Common Stock, all of which shares are issued and outstanding. RSI's authorized capital stock consists solely of one thousand (1,000) shares of RSI Common Stock, one hundred (100) of which shares are issued and outstanding. Each outstanding share of the capital stock of each of the Corporations is duly authorized and validly issued, fully paid and nonassessable, and has not been issued in violation of any preemptive or similar rights. There are no outstanding subscriptions, options, warrants, puts, calls, agreements, understandings, claims or other commitments or rights of any type relating to the issuance, sale, repurchase or transfer by the Corporations of any securities of the Corporations, nor are there outstanding any securities that are convertible into or exchangeable for any shar es of capital stock of the Corporations, and neither the Corporations nor any Subsidiary of the Corporations have any obligation of any kind to issue any additional securities or to pay for or repurchase any securities of the Corporations or any predecessor.              Section 3.5      Conflicts; Consents and Approvals.       Except as set forth in Section 3.5 of the Corporations' Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will:                          3.5.1      conflict with, or result in a breach of any provision of, the organizational documents of the Corporations;                           3.5.2      violate, or conflict with, or result in a breach of any provision of, or constitute a default (or an event that, with the giving of notice, the passage of time or otherwise, would constitute a default) under, or entitle any party (with the giving of notice, the passage of time or otherwise) to terminate, accelerate, modify or call a default under, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) upon any of the properties or assets of any of the Consolidated Companies under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, contract, undertaking, agreement, lease, arrangement, understanding or other instrument or obligation to which any of the Consolidated Companies is a party;                           3.5.3       violate any order, writ, injunction, decree, statute, rule or regulation applicable to any of the Consolidated Companies or any of their respective properties or assets; or                           3.5.4      require any action or consent or approval of, or review by, or registration or filing by the Corporations or any of their Affiliates with, any third party or any Governmental Authority, other than actions required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the United States Food, Drug and Cosmetics Act (the "FDA Act") or any state law comparable to the FDA Act; except in the case of Sections 3.5.2, 3.5.3 and 3.5.4 for any of the foregoing that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change with respect to the Consolidated Companies or a material adverse effect on the ability of the parties hereto to consummate the transactions contemplated hereby.              Section 3.6      No Material Adverse Change; Other Changes.      Except as disclosed in the Financial Statements or in Section 3.6 of the Corporations' Disclosure Schedule, (a) since September 30, 1999, the Consolidated Companies have operated their Businesses only in the Ordinary Course of Business, (b) since September 30, 1999, there has been no change in the business, operations, condition (financial or otherwise), properties, assets, liabilities or results of operations of the Consolidated Companies that could reasonably be expected to constitute a Material Adverse Change with respect to the Consolidated Companies or any event, occurrence or development that could reasonably be expected to have a material adverse effect on the ability of the Corporations or the Sellers to consummate the transactions contemplated hereby, (c) from October 1, 1999 through March 31, 2000, the Consolidated Companies did not engage in any material a ct outside the Ordinary Course of Business (such as, by way of example, a disposition of substantial assets outside the Ordinary Course of Business) which would cause the Consolidated Companies' consolidated financial statements for such period not to be comparable with the Consolidated Companies' consolidated financial statements for the period from October 1, 1998 through March 31, 1999, (d) there has not been any change in accounting methods, principles or practices by the Consolidated Companies except insofar as may have been required by a change in GAAP, or (e) since March 31, 2000, neither the Sellers nor the Consolidated Subsidiaries have engaged in any action which, if done after the date of this Agreement would violate Section 6.3 of this Agreement.              Section 3.7      Insurance.       The Consolidated Companies are, and since their acquisition by the Parent Seller or its Affiliates have been, covered by insurance in scope and amount customary, adequate and suitable for their Businesses. Section 3.7 of the Corporations' Disclosure Schedule lists each insurance policy and contractual right to indemnification and contribution maintained by or on behalf of or providing coverage to any of the Consolidated Companies since the inception of their Businesses of which Sellers or the Consolidated Companies have any copy or records (the "Insurance Policies"). The Sellers have previously provided the Purchasers with access to all known primary general liability Insurance Policies. All Insurance Policies are operative and in effect, and all premiums due thereon have been paid. The Corporations have complied in all material respects with the terms and conditions of the Insurance Policies to the extent applicable to the Consolidated Companies. With respect to thos e aspects of the Insurance Policies applicable to the Consolidated Companies, no Seller or Consolidated Company has received, (i) with respect to any open or pending claim, any refusal to provide coverage or any notice that a defense will be afforded with a reservation of rights that is not listed in Section 3.7 to the Corporations' Disclosure Schedule, or (ii) any notice of cancellation or any other indication that an insurance policy is no longer in operation and effect or will not be renewed or that the issuer of any policy is not willing or able to perform its obligations thereunder. Each of the Consolidated Companies has given notice to the insurer of all claims that may be insured thereby known to the Legal Department responsible for claims or suits against any of the Consolidated Companies or the Risk Manager responsible for insurance coverage for any of the Consolidated Companies. Each of the Consolidated Companies is a "named insured" or an "insured" under the Insurance Policies. None of the Cons olidated Companies or the Sellers has received any written notice, nor has the Parent Seller's risk manager received any oral notification, from any insurer that the consummation of the transactions in which the Parent Seller directly or indirectly acquired each of the Consolidated Companies provides a basis to bar coverage under a provision of an applicable Insurance Policy prohibiting the transfer or assignment of an interest in such Insurance Policy, and no claim made by Parent Seller on behalf of any of the Consolidated Companies has been rejected on such basis. The manner in which the Sellers acquired the Consolidated Companies did not affect, and nothing Parent Seller or the Consolidated Companies has done since such acquisition affected, their right to coverage under the Insurance Policies in a manner that would bar coverage under a provision of an applicable Insurance Policy that prohibits the transfer or assignment of an interest in such Insurance Policy.              Section 3.8      Taxes.        Except as set forth in Section 3.8 of the Corporations' Disclosure Schedule:                           3.8.1      The Consolidated Companies (i) have duly filed, or have received valid extensions for the filing of, all federal, state, local and foreign income, franchise, excise, real and personal property and other Tax Returns (including, but not limited to, those filed on a consolidated, combined or unitary basis) required to have been filed by the Consolidated Companies prior to the date hereof, all of which foregoing Tax Returns are true and correct in all material respects; (ii) have within the time and manner prescribed by applicable law paid in all material respects or, prior to the Closing Date, will pay in all material respects all Taxes, interest and penalties required to be paid in respect of the periods covered by such returns or reports or otherwise due to any federal, state, foreign, local or other taxing authority; (iii) have adequate reserves on their financial statements for any Taxes in excess of the amounts so paid; (iv) are not delinquent in the pay ment of any material Tax and have not requested or filed any document having the effect of causing any extension of time within which to file any returns in respect of any fiscal year which have not since been filed; and (v) have not received written notice of any material deficiencies for any Tax from any taxing authority, against any of the Consolidated Companies for which there are not adequate reserves. None of the Consolidated Companies is the subject of any currently ongoing Tax audit. As of the date of this Agreement, there are no pending requests for waivers of the time to assess any material Tax, other than those made in the Ordinary Course of Business and for which payment has been made or there are adequate reserves. With respect to any taxable period ended prior to December 31, 1994, all federal income Tax Returns including any of the Consolidated Companies have been audited by the Internal Revenue Service or are closed by the applicable statute of limitations. None of the Consolidated Compa nies has waived any statute of limitations in respect of any material Taxes or agreed to any extension of time with respect to a material Tax assessment or deficiency. There are no material liens with respect to Taxes upon any of the properties or assets, real or personal, tangible or intangible, of any of the Consolidated Companies (other than liens for Taxes not yet due). Since January 1, 1997, no claim has been made in writing by an authority in a jurisdiction where none of Consolidated Companies file Tax Returns that any of the Consolidated Companies is or may be subject to taxation by that jurisdiction. None of the Consolidated Companies has filed an election under Section 341(f) of the Code to be treated as a consenting corporation. None of the Consolidated Companies has any material liability for any Taxes of any Person other than any of the Consolidated Companies under Treas. Reg. 1.1502-6 or any comparable provision of state, local or foreign law, as a transferee or successor, by contract, or o therwise.                           3.8.2      The Consolidated Companies have, in all material respects, withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party.                           3.8.3      "Tax Returns" or "Returns" means returns, reports and forms required to be filed with any Governmental Authority of the United States or any other jurisdiction responsible for the imposition or collection of Taxes.              Section 3.9      Compliance with Law.        Except as set forth in Section 3.9 of the Corporations' Disclosure Schedule, each of the Consolidated Companies is in compliance in all material respects, and at all times since December 31, 1996 has been in compliance in all material respects, with all applicable law relating to the Consolidated Companies or the Businesses or the Consolidated Companies' properties, except where such non-compliance has been cured prior to the date hereof. Except as disclosed in Section 3.9 of the Corporations' Disclosure Schedule, no investigation or review by any Governmental Authority with respect to any of the Consolidated Companies is pending, or, to the knowledge of the Sellers and the Corporations, threatened, nor has any Governmental Authority indicated in writing, or, to the knowledge of the Sellers and the Corporations orally, an intention to conduct the same, other than those arising in the Ordinary Course of Business of the Consolidated Companies.              Section 3.10      Intellectual Property.        The Consolidated Companies own or possess, free and clear of any Encumbrance other than a Permitted Encumbrance, adequate valid licenses or other valid rights to use all of their Proprietary Rights, and there has not been any material written or, to the knowledge of the Parent Seller, oral, assertion or claim against any of the Consolidated Companies challenging the validity or the use by any of the Consolidated Companies of any of the foregoing. Other than licenses generally available to the public at reasonable cost and licenses or rights to use set forth in Section 3.10 of the Corporations' Disclosure Schedule, no license or other valid right to use any of the Consolidated Companies' Proprietary Rights is necessary for the use of these Proprietary Rights in substantially the same manner as they are presently used by the Consolidated Companies in the conduct of the Businesses. Except as set forth in Section 3.10 of the Corporations' Disclosure Schedule or with respect to commercially and readily-available third party software, the Consolidated Companies have the right and license to use, copy, modify, create derivative works from and distribute all software programs and technical documentation therefor that are included in the Proprietary Rights. To the knowledge of the Sellers and the Corporations, the conduct of the Businesses as currently conducted by the Consolidated Companies does not conflict with or infringe upon any patent, patent right, license, trademark, trademark right, trade dress, trade name, trade name right, service mark, copyright or other intellectual property right of any third party. Except as set forth in Section 3.10 of the Corporations' Disclosure Schedule, to the knowledge of the Sellers and the Corporations, there are no infringements by any third party of any of the Proprietary Rights owned by or licensed by or to any of the Consolidated Companies and no Proprietary Rights of any of the Consolidated Companies are the subject of any pending adm inistrative, judicial or other legal proceeding or other Action.              Section 3.11.      Title to Properties; Condition and Sufficiency of Assets.        Other than the Transfer Assets, the Consolidated Companies own (with good and marketable title in the case of all real property not subject to lease) free and clear of any Encumbrances or lease all real property, plants, machinery and equipment necessary and sufficient for the conduct of the Businesses of the Consolidated Companies as presently conducted, subject to Permitted Encumbrances and the Encumbrances described in Section 3.11 of the Corporations' Disclosure Schedule. The buildings, plants, structures, and equipment of the Consolidated Companies are in good operating condition and repair, reasonable wear and tear excepted, and are adequate for the uses to which they are being put; and none of such buildings, plants, structures, or equipment is in need of material maintenance or repairs, except for ordinary routine maintenance and repairs.              Section 3.12      Environmental Matters.        Except for matters disclosed in Schedule 3.12 of the Corporations' Disclosure Schedule, (a) the operations and activities of the Consolidated Companies are in compliance in all material respects with all applicable Environmental Laws and Environmental Permits and all past noncompliance of any of the Consolidated Companies with any Environmental Laws or Environmental Permits that has been resolved with any Governmental Authority has been resolved without any material pending, ongoing or future obligation, cost or liability; (b) the Consolidated Companies and the operations of the Consolidated Companies are not subject to any material existing, pending, or, to the knowledge of the Sellers and the Corporations, threatened Action or inquiry by or before any court or Governmental Authority under any Environmental Law; (c) there has been no release of any Regulated Substance into the environment by any of the Consolidated Companies or in connection with their present and past operations, other than releases which comply in all material respects with all Environmental Laws; (d) to the knowledge of the Sellers and the Corporations, there has been no exposure of any Person or property to any Regulated Substance in connection with the activities and operations of the Consolidated Companies, except for exposure that complies in all material respects with all Environmental Laws and Environmental Permits; and (e) the Parent Seller has made available to the Purchasers all internal and external environmental audits and reports (in each case, relevant to the Consolidated Companies) prepared since January 1, 1994 in the possession of any of the Consolidated Companies. The term "Environmental Laws" means all federal, state, local or foreign laws relating to pollution or protection of human health and safety or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata), including laws relating to emissions, discharges, releases or threatened relea ses of Regulated Substances into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Regulated Substances, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder, as in effect on the date hereof. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under or issued pursuant to any applicable Environmental Law. None of the Consolidated Companies has been notified in writing by a Governmental Authority or any other Person that it may be, and, to the knowledge of the Sellers and the Corporations none of the Consolidated Companies is, a Potentially Responsible Party concerning sites listed on the National Priority List under CERCLA or any state equivalent. To the knowledge of the Sellers and the Corporations, there is no hazardous waste treatment, storage or disposal facility or underground storage tanks located on any property owned by any of the Consolidated Companies. None of the Consolidated Companies is engaged in product sterilization on any of its properties. None of the Consolidated Companies is subject to any ongoing remedial activities or proceedings related to any of their present or former properties.              Section 3.13      Litigation.        Except as set forth in Section 3.13 of the Corporations' Disclosure Schedule or in any report heretofore filed by the Seller with the SEC, there is no material Action pending, and, to the knowledge of the Sellers and the Corporations, no material Action or Claim threatened, against any of the Consolidated Companies or any executive officer or director of the Consolidated Companies in their capacity as such. Except as set forth in Section 3.13 of the Corporations' Disclosure Schedule, none of the Consolidated Companies is subject to any material outstanding order, writ, injunction or decree. Except as set forth in Section 3.13 of the Corporations' Disclosure Schedule, since September 30, 1999, none of the Consolidated Companies has been subject to any outstanding order, writ, injunction or decree relating to the Consolidated Companies' methods of doing business or the Consolidated Companies' relationships with past, existing or future users or purchasers of any goods or services of any of the Consolidated Companies.              Section 3.14      Brokerage and Finder's Fees; Expenses.       Except as set forth on Section 3.14 of the Corporations' Disclosure Schedule, neither the Sellers nor any of the Consolidated Companies nor any stockholder, director, officer or employee thereof, has incurred, or will incur on behalf of any of the Consolidated Companies, any brokerage, finder's or similar fee in connection with the transactions contemplated by this Agreement.              Section 3.15      Financial Statements.                           3.15.1      Section 3.15 of the Corporations' Disclosure Schedule contains the following annual and interim consolidated financial statements of the Consolidated Companies: the consolidated balance sheets of the Consolidated Companies as of September 30, 1999 and 1998 and the related consolidated statements of income and changes in stockholders' equity of the Consolidated Companies for the years ended September 30, 1999, 1998 and 1997 and the consolidated balance sheet of the Consolidated Companies as of March 31, 2000 (the "Interim Balance Sheet") and the related consolidated statement of income of the Consolidated Companies for the six month periods ended March 31, 2000 and 1999. The financial statements delivered pursuant to this Section 3.15.1 are hereinafter referred to as the "Financial Statements". The Financial Statements fairly present the consolidated financial condition and changes in stockholders' equity of the Consolidated Companies and the consolidate d results of the Consolidated Companies' operations as at the dates and for the periods to which they apply, as the case may be, and such statements have been prepared in conformity with GAAP (except as may otherwise be indicated in the notes thereto and except that certain footnotes required by GAAP with respect to interim periods have been omitted). The Financial Statements for all interim periods include all adjustments (subject only to normal year-end adjustments) necessary for a fair presentation of the Consolidated Companies' consolidated financial position and results of operations.                           3.15.2      No unrecorded funds or assets of the Consolidated Companies have been established for any purpose; no accumulation or use of the funds of the Consolidated Companies has been made without being properly accounted for in the respective books and records of the Consolidated Companies; all payments by or on behalf of the Consolidated Companies have been duly and properly recorded and accounted for in the Consolidated Companies' books and records; no false or artificial entry has been made in the books and records of the Consolidated Companies for any reason; no payment has been made by or on behalf of the Consolidated Companies with the understanding that any part of such payment is to be used for any purpose other than that described in the documents supporting such payment; and the Consolidated Companies have not made, directly or indirectly, any illegal contributions to any political party or candidate, either domestic or foreign, or any contribution, gift , bribe, rebate, payoff, influence payment or kickback, whether in cash, property or services, to any Person, to secure business or to pay for business secured.                           3.15.3      No operations have been discontinued by the Consolidated Companies within the last five (5) years, other than Sentry Medical Systems, Inc., an Illinois corporation ("SMSI"), the operations of which were discontinued in January, 2000.                           3.15.4      The accounts and notes receivable of the Consolidated Companies as of the date of this Agreement and any accounts and notes receivable arising between the date hereof and Closing Date are or will be valid and legally binding, represent or will represent sales actually made (net of all applicable credits and/or rebates), and arose or will arise in the Ordinary Course of Business of the Consolidated Companies.                           3.15.5      (i) The inventories of the Consolidated Companies as of March 31, 2000 as reflected in the Interim Balance Sheet consist of a quality and quantity usable and merchantable in the Ordinary Course of Business, except for obsolete or damaged items or items of below-standard quality, which in all material respects have been written off or written down to their fair market value on or before March 31, 2000; (ii) all inventories as of such date not written off have been priced at the lower of cost or market on a LIFO basis; and (iii) neither the Sellers nor the Corporations knows or, as of the Closing, will know of any situations material to the Consolidated Companies in which the Consolidated Companies had, as of March 31, 2000 or will have as of the Closing Date, quantities of any type of inventory that were not reasonable under the then current circumstances of the Company.              Section 3.16      Employee Benefit Plans.                           3.16.1      For purposes of this Section 3.16, the following terms have the definitions given below:                           "Controlled Group Liability" means any and all liabilities under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code and the portability and nondiscrimination requirements of Section 701 et seq. of ERISA and Section 9801 et seq. of the Code, and (v) corresponding or similar provisions of foreign laws or regulations, in each case, other than pursuant to the Plans.                           "ERISA Affiliate" means, with respect to any entity, trade or business, any other entity, trade or business that is or was at the relevant time a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is a member of the same "controlled group" as the first entity, trade or business pursuant to Section 4001(a)(13) of ERISA.                           "Plans" means all written and material unwritten employee benefit plans, programs, policies, practices and other arrangements providing benefits to any employee or former employee or beneficiary or dependent thereof, and whether covering one Person or more than one Person, sponsored or maintained by any of the Consolidated Companies or to which any of the Consolidated Companies contributes or is obligated to contribute, or under which any current or former employee of any of the Consolidated Companies is entitled to any compensation benefits (whether or not contingent) as a result of service to any of the Consolidated Companies, including all "employee welfare benefit plans" within the meaning of Section 3(1) of ERISA and all "employee pension benefit plans" within the meaning of Section 3(2).                           "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title IV of ERISA.                           3.16.2      Section 3.16(b) of the Corporations' Disclosure Schedule includes a complete list of all Plans. With respect to each Plan, the Parent Seller has provided to the Purchasers a true, correct and complete copy of the following (where applicable): (i) each writing constituting a part of such Plan, including all plan documents, trust agreements, and insurance contracts and other funding vehicles; (ii) the two most recent Annual Reports (Forms 5500 Series) and accompanying schedules, if any; (iii) the current summary plan description, if any; (iv) the most recent annual financial report, if any; (v) the most recent determination letter from the Internal Revenue Service, and (vi) the most recent actuarial report. Except as specifically provided in the foregoing documents provided to the Purchasers, there are no amendments to any Plan that have been adopted or approved nor has any of the Consolidated Companies undertaken to make any such amendments or to adopt or approve any new Plan.                           3.16.3      Except as set forth in Section 3.16(c) of the Corporations' Disclosure Schedule, the Internal Revenue Service has issued a favorable determination letter with respect to each Plan that is intended to be a "qualified plan" within the meaning of Section 401(a) of the Code (a "Qualified Plan"), and, to the knowledge of the Sellers and the Corporations, no circumstance exists nor has any event occurred that could adversely affect the qualified status of any Qualified Plan or the related trust in a manner that cannot be cured without any material cost or liability to the Consolidated Companies.                           3.16.4      All contributions required to be made by any of the Consolidated Companies to any Plan by any applicable laws or by any plan document or other contractual undertaking, and all premiums due from or payable by the Consolidated Companies with respect to insurance policies funding any Plan, before the date hereof have been made or paid in full on or before the final due date thereof and through the Closing Date will be made or paid in full on or before the final due date thereof. Each Plan that is an employee welfare benefit plan under Section 3(1) of ERISA either (i) is funded through an insurance company contract and is not a "welfare benefit fund" with the meaning of Section 419 of the Code or (ii) is unfunded.                           3.16.5      Each of the Consolidated Companies has complied, and is now in compliance, in all material respects, with all provisions of ERISA, the Code and all laws and regulations applicable to the Plans. Each Plan has been operated in material compliance with its terms. There is not now, and there are no existing circumstances that would give rise to, any requirement for the posting of security with respect to a Plan or the imposition of any lien on the assets of any of the Consolidated Companies under ERISA or the Code.                           3.16.6      Except as set forth in Section 3.16(f) of the Corporations' Disclosure Schedule, no Plan is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor have any of the Consolidated Companies or any of their respective ERISA Affiliates, at any time within six years before the date hereof, contributed to or been obligated to contribute to any Multiemployer Plan or Multiple Employer Plan. With respect to each Multiemployer Plan described in Section 3.16(f) of the Corporations' Disclosure Schedule: (i) neither any of the Consolidated Companies nor any of their ERISA Affiliates has incurred any Withdrawal Liability that has not been satisfied in full; (ii) if any of the Consolidated Companies or any of their respective ERISA Affiliates were to experience a withdrawal or partial withdrawal from such plan, no Withdrawal Liability would be incurred; and (iii) neither any of the Consolidated Companies nor any of their ERISA Affiliates has received any notification, nor has any reason to believe, that any such plan is in reorganization, is insolvent, has been terminated, or would be in reorganization, be insolvent, or be terminated. Except for Multiemployer Plans described in Section 3.16(f) of the Corporations' Disclosure Schedule, no qualified plan maintained by any of the Consolidated Companies or any of their respective ERISA Affiliates is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code.                           3.16.7      The Consolidated Companies have not incurred any Controlled Group Liability. No circumstance exists, and no event has occurred, that would result in, any material Controlled Group Liability that would be a liability of any of the Consolidated Companies following the Closing. Without limiting the generality of the foregoing, neither any of the Consolidated Companies nor any of their respective ERISA Affiliates has engaged in any transaction described in Section 4069 or Section 4203 of ERISA.                           3.16.8      Except for health continuation coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA and except as set forth in Section 3.16(h) of the Corporations' Disclosure Schedule, none of the Consolidated Companies has any material liability for life, health, medical or other welfare benefits to former employees or beneficiaries or dependents thereof.                           3.16.9      Except as disclosed in Section 3.16(i) of the Corporations' Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in, cause the accelerated vesting, funding or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer, director or consultant of any of the Consolidated Companies. Without limiting the generality of the foregoing, except as set forth in Section 3.16(i) of the Corporations' Disclosure Schedule, no amount paid or payable by any of the Consolidated Companies in connection with the transactions contemplated by this Agreement either solely as a result thereof or as a result of such transactions in conjunction with any other events will be an "excess parachute payment" within the meaning of Section 280G of the Code.                           3.16.10      Except as disclosed in Section 3.16(j) of the Corporations' Disclosure Schedule, there are no pending or, to the knowledge of the Sellers or any of their respective ERISA Affiliates, threatened claims (other than claims for benefits in the Ordinary Course of Business), lawsuits or arbitrations which have been asserted or instituted against the Plans, any fiduciaries thereof with respect to their duties to the Plans or the assets of any of the trusts under any of the Plans, which could reasonably be expected to result in any material liability of the Consolidated Companies to the Pension Benefit Guaranty Corporation, the Department of Treasury, the Department of Labor, or any Multiemployer Plan or any other party.                           3.16.11      Section 3.16(k) of the Corporations' Disclosure Schedule sets forth a list of each employment, severance, consulting or similar agreement under which any of the Consolidated Companies is or could become obligated to provide compensation or benefits in excess of $200,000 in any one calendar year (each, an "Employment Agreement"), and the Parent Seller has provided to the Purchasers a copy of each Employment Agreement.              Section 3.17      Contracts.        Section 3.17 of the Corporations' Disclosure Schedule lists all contracts, agreements, guarantees, leases and executory commitments that exist as of the date hereof other than Plans (each a "Contract") to which any of the Consolidated Companies is a party and that fall within any of the following categories: (a) material customer and supplier agreements, (b) agreements with product vendors and suppliers that obligate such vendors and suppliers to market or support particular products, (c) Contracts not entered into in the Ordinary Course of Business other than those that are not material to the Businesses and are insignificant in amount of consideration payable by the Consolidated Companies thereunder, (d) joint venture and partnership agreements, (e) Contracts containing covenants purporting to limit the freedom of any of the Consolidated Companies to compete in any line of business in any geographic area or to hire any individual or group of individuals, (f) Contracts t hat, by their terms, after the Closing Date would have the effect of limiting the freedom of the Purchasers or their Affiliates to compete in any line of business in any geographic area or to hire any individual or group of individuals or to acquire any Persons or assets, (g) Contracts relating to any outstanding commitment for capital expenditures in excess of one million dollars ($1,000,000), (h) indentures, mortgages, promissory notes, loan agreements or guarantees of borrowed money in excess of $1,000,000, letters of credit or other agreements or instruments of any of the Consolidated Companies or commitments for the borrowing or the lending of amounts in excess of one million dollars ($1,000,000) by any of the Consolidated Companies or providing for the creation of any charge, security interest, encumbrance or lien upon any of the assets of any of the Consolidated Companies with an aggregate value in excess of one hundred thousand dollars ($100,000) and (i) Contracts providing for "earn-outs" or other c ontingent payments by any of the Consolidated Companies involving more than one hundred thousand dollars ($100,000) over the term of the Contract. Except with respect to Contracts identified as unsigned in Section 3.17 of the Corporations' Disclosure Schedule, the significant terms of each of the Contracts are in full force and effect and are valid and enforceable. None of the Consolidated Companies is party to a supply or marketing agreement related to any products that applies to Persons who, on the date of this Agreement or at or after the Closing Date are, Affiliates of the Consolidated Companies and is not terminable within ninety (90) days by such Consolidated Company.              Section 3.18      Labor Matters.        Except as set forth in Section 3.18 of the Corporations' Disclosure Schedule, none of the Consolidated Companies has any consulting agreements providing for compensation of any individual in excess of one hundred and fifty thousand dollars ($150,000) annually, or any collective bargaining agreements with any Persons employed by any of the Consolidated Companies or any Persons otherwise performing services primarily for any of the Consolidated Companies. There is no labor strike, dispute or stoppage pending or, to the knowledge of the Sellers and the Corporations, threatened against any of the Consolidated Companies, and none of the Consolidated Companies has experienced any labor strike, dispute or stoppage since September 30, 1998. To the knowledge of the Sellers and the Corporations, no event has occurred or circumstance exists that could reasonably be expected to provide the basis for any work stoppage or other material labor dispute.              Section 3.19      Undisclosed Liabilities.      Except (i) as and to the extent disclosed or reserved against on the Interim Balance Sheet, (ii) as incurred after the date of the Interim Balance Sheet in the Ordinary Course of Business and not prohibited by this Agreement, (iii) as shall be reflected in the Final Accountant's Report, (iv) as arise on or after the Closing Date pursuant to agreements in effect as of the Closing Date and (v) as set forth in Section 3.19 of the Corporations' Disclosure Schedule, the Consolidated Companies do not have any liabilities or obligations of any nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to become due, that, individually or in the aggregate, result or would result in a Material Adverse Change with respect to the Consolidated Companies. None of the Consolidated Companies has or will have any liability, whether known or unknown, accrued, con tingent or otherwise, whether due or to become due, related to the Corporations' arrangement or understanding with DeRoyal Industries.              Section 3.20      Permits; Compliance.                           3.20.1      Each of the Consolidated Companies is in possession of all material franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its Business as it is now being conducted (collectively, the "Company Permits"), and there is no material Action pending, or, to the knowledge of the Sellers and the Corporations, material Action or Claim threatened regarding any of the Company Permits. None of the Consolidated Companies is in conflict in any material respect with, or in default in any material respect (or would be in default in any material respect with the giving of notice, the passage of time, or both) with, or in violation in any material respect of, any of the Company Permits.                           3.20.2      To the knowledge of the Sellers and the Corporations, none of the Consolidated Companies or any of their officers (during the term of such Person's employment by any of the Consolidated Companies) has made any untrue statement of a material fact or fraudulent statement to any Governmental Authority or failed to disclose a material fact required to be disclosed to any Governmental Authority in connection with or relating to any Company Permits or other permitting matters.              Section 3.21      UNITI System.        The description of the UNITI System in Section 3.21 of the Corporations' Disclosure Schedule is accurate in all material respects. The components of the UNITI System described in Section 3.21 of the Corporations' Disclosure Schedule that are not set forth in Appendix 1.5 annexed hereto have been implemented in the operation of the Businesses by the Consolidated Companies.              Section 3.22      Entire Business.        The Consolidated Companies constitute all of the Persons engaged in the business of selling or distributing medical, surgical or laboratory supplies and products by the Parent Seller or any of its Affiliates within the Territory, except to the extent disclosed in Section 3.22 of the Corporations' Disclosure Schedule.              Section 3.23      March 31 Value.        Section 3.23 of the Corporations' Disclosure Schedule sets forth the manner in which the March 31 Value was calculated. The assets included in the March 31 Value reflect substantially all of the business assets (other than leased assets) that were used by the Consolidated Companies in the Businesses on March 31, 2000, other than a facility in Mobile, Alabama and the Transfer UNITI Items. The March 31 Value does not reflect any reserves of the types described in Sections 2.5.5.1 and 2.5.5.2. The March 31 Value does not reflect any liability for severance obligations that have been assumed by the Parent Seller or a Subsidiary of the Parent Seller other than the Consolidated Companies.   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE IV Representations and Warranties Regarding the Sellers              The Sellers represent and warrant to the Purchaser as follows:              Section 4.1      Organization and Qualification of the Sellers.        Each of the Sellers is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated, with full power and authority, corporate and other, to own or lease its property and assets and to carry on its business as presently owned, leased and conducted.              Section 4.2      Corporate Power and Authority.      Each of the Sellers has all requisite corporate power and authority to enter into and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by each of the Sellers have been duly authorized by all necessary corporate action on the part of such Seller. This Agreement has been duly executed and delivered by each Seller and constitutes the legal, valid and binding obligation of each of the Sellers enforceable against each of the Sellers in accordance with its terms. All Persons who executed this Agreement on behalf of the Sellers have been duly authorized to do so.              Section 4.3      Conflicts; Consents and Approvals.      Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will:                         4.3.1      conflict with, or result in a breach of any provision of, the certificate of incorporation or by-laws of the Sellers;                           4.3.2      violate, or conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with the giving of notice, the passage of time or otherwise, would constitute a default) under, or entitle any party (with the giving of notice, the passage of time or otherwise) to terminate, accelerate, modify or call a default under, or result in the creation of any Encumbrance upon any of the properties or assets of the Sellers under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, contract, undertaking, agreement, lease, arrangement or understanding or other instrument or obligation to which either of the Sellers is a party;                           4.3.3      violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Sellers or any of their properties or assets; or                           4.3.4      require any action or consent or approval of, or review by, or registration or filing by the Sellers or any of its affiliates with, any third party or any Governmental Authority, other than (i) actions required by the HSR Act, the FDA Act or any state law comparable to the FDA Act and (ii) consents or approvals of any third party or Governmental Authority set forth in Section 3.5 of the Corporations' Disclosure Schedule; except as contemplated by Section 7.1.5 with respect to the Order and except in the case of Sections 4.3.2, 4.3.3 and 4.3.4 for any of the foregoing that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change with respect to the Sellers and the Consolidated Companies or a material adverse effect on the ability of the parties hereto to consummate the transactions contemplated hereby.              Section 4.4      Ownership of Shares.        The Parent Seller owns all of the outstanding shares of RSI Common Stock beneficially and of record. The Subsidiary Seller owns all of the outstanding shares of BBMC Common Stock beneficially and of record. At the Closing, the Parent Seller will own all of the outstanding shares of RSI Common Stock and the Subsidiary Seller will own all of the outstanding shares of BBMC Common Stock, in each case free and clear of any Encumbrances. There are no voting trust arrangements, shareholder agreements or other agreements (a) granting any option, warrant or right of first refusal with respect to the RSI Common Stock or the BBMC Common Stock to any Person, (b) restricting the right of the Parent Seller to sell the RSI Common Stock to the Purchaser or the right of the Subsidiary Seller to sell the BBMC Common Stock to the Purchaser, or (c) restricting any other right of the Parent Seller with respect to the RSI Common Stock or any other right of the Subsidiary Seller with respect to the BBMC Common Stock. Except as set forth in Section 3.5 of the Corporations' Disclosure Schedule (with respect to consents to be sought prior to the Closing Date), the Parent Seller has the sole, absolute and unrestricted right, power and capacity to sell, assign and transfer all of the outstanding shares of RSI Common Stock to the Purchaser free and clear of any Encumbrances and the Subsidiary Seller has the sole, absolute and unrestricted right, power and capacity to sell, assign and transfer all of the outstanding shares of BBMC Common Stock to the Purchaser free and clear of any Encumbrances (subject to approval by its sole stockholder, the Parent Seller, which approval shall be obtained at or before Closing). Upon delivery to the Purchaser of the certificates representing the outstanding shares of RSI Common Stock and BBMC Common Stock at the Closing in exchange for the consideration to be delivered by the Purchaser at the Closing, the Purchaser will acquire good, valid and marketable title to s uch shares, free and clear of any Encumbrances of any kind (except for restrictions created by the Purchaser and restrictions imposed generally by applicable securities laws).              Section 4.5      Brokers.        With the exception of Credit Suisse First Boston Corp., no Person is or will be entitled to a broker's, finder's, investment banker's, financial adviser's or similar fee from the Sellers in connection with this Agreement or any of the transactions contemplated hereby. The fees and expenses of Credit Suisse First Boston Corp. are the sole responsibility of, and shall be paid by, the Sellers.   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE V Representations and Warranties Regarding the Purchasers              The Purchasers represent and warrant to the Sellers and the Corporations as follows:              Section 5.1      Organization and Standing.      The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware with full corporate power and authority to own, lease, use and operate its properties and to conduct its business as and where now owned, leased, used, operated and conducted. The Parent Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio with full corporate power and authority to own, lease, use and operate its properties and to conduct its business as and where now owned, leased, used, operated and conducted. Each of the Purchasers is duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the property it owns, leases or operates requires it to so qualify, except where the failure to be so qualified or in good standing in such jurisdiction would not reasonably be expected to result in a Material Adverse Change with respect to the Purchasers and their Subsidiaries.              Section 5.2      Corporate Power and Authority.      Each of the Purchasers has all requisite corporate power and authority to enter into and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by each of the Purchasers have been duly authorized by all necessary corporate action on the part of each of the Purchasers. This Agreement has been duly executed and delivered by each of the Purchasers and constitutes the legal, valid and binding obligation of each of the Purchasers enforceable against it in accordance with its terms. All Persons who executed this Agreement on behalf of each of the Purchasers have been duly authorized to do so.              Section 5.3      Conflicts; Consents and Approvals.      Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will:                           5.3.1      conflict with, or result in a breach of any provision of, each Purchaser's certificate of incorporation, by-laws, code of regulations or other organizational documents;                           5.3.2      violate, or conflict with, or result in a breach of any provision of, or constitute a default (or an event that, with the giving of notice, the passage of time or otherwise, would constitute a default) under, or entitle any party (with the giving of notice, the passage of time or otherwise) to terminate, accelerate, modify or call a default under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of either of the Purchasers or their respective Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, contract, undertaking, agreement, lease or other instrument or obligation to which either of the Purchasers or any of their Subsidiaries is a party;                           5.3.3      violate any order, writ, injunction, decree, statute, rule or regulation applicable to either of the Purchasers or any of their respective Subsidiaries or any of their respective properties or assets; or                           5.3.4      require any action or consent or approval of, or review by, or registration or filing by either of the Purchasers or any of its Affiliates with, any third party or any Governmental Authority, other than actions required by the HSR Act; except as contemplated by Section 7.1.5 with respect to the Order and except in the case of Sections 5.3.2, 5.3.3 and 5.3.4 for any of the foregoing that could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change with respect to the Purchasers and their Subsidiaries or a material adverse effect on the ability of either of the Purchasers to consummate the transactions contemplated hereby.              Section 5.4      No Material Adverse Change; Other Changes.      Except as disclosed in any report filed by the Parent Purchaser with the SEC prior to the date of this Agreement, since March 31, 2000, there has been no change in the assets, liabilities, results of operations or financial condition of the Purchasers or their Subsidiaries which would have a material adverse effect on the ability of the Purchasers or the Sellers to consummate the transactions contemplated hereby.              Section 5.5      Brokers.        No Person is or will be entitled to a broker's, finder's, investment banker's, financial adviser's or similar fee from the Purchasers in connection with this Agreement or any of the transactions contemplated hereby.   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE VI Covenants and Agreements              Section 6.1      Access and Information.                           6.1.1      Prior to the Closing, the Purchasers shall be entitled to make or cause to be made such investigation of the Consolidated Companies, including environmental testing, including the testing of soil, water and air and other samples, and the financial and legal condition thereof, as each of the Purchasers deems necessary or advisable, and the Corporations and the Sellers shall cooperate with any such investigation; provided, however, in the case of any such environmental testing on properties leased to any of the Consolidated Companies or their Affiliates, such testing shall be conducted, if at all, subject to the terms of the applicable lease. In furtherance of the foregoing, but not in limitation thereof, the Sellers and the Corporations shall (a) permit the Purchasers and their agents and representatives or cause them to be permitted to have full and complete access to the premises, books and records of the Consolidated Companies upon reasonable not ice during regular business hours, (b) furnish or cause to be furnished to the Purchasers such financial and operating data, projections, forecasts, business plans, strategic plans and other data relating to the Consolidated Companies as the Purchasers shall request from time to time and (c) cause their accountants (subject to the execution of such documents as shall be reasonably requested by such accountants) to furnish to the Purchasers and the Purchasers' accountants access to all work papers relating to the Consolidated Companies for any of the periods covered by any financial statements delivered to the Purchasers pursuant to this Agreement. Prior to the Closing, the Purchasers shall not (and shall cause their Subsidiaries not to) use any information obtained pursuant to this Section 6.1 for any purpose unrelated to the transactions described in this Agreement, except to the extent required by law. Except with respect to publicly available documents, in the event that this Agreement is terminated, th e Purchasers will deliver to the Parent Seller all documents obtained by the Purchasers from the Consolidated Companies or the Sellers in confidence and any copies thereof in the possession of the Purchasers or their agents and representatives or, at the option of the Purchasers, the Purchasers shall cause all of such documents and all of such copies to be destroyed and the Purchasers shall certify the destruction thereof to the Corporations and the Sellers.                           6.1.2      No investigation by either party of the other heretofore or hereafter made shall modify or otherwise affect (a) any representations and warranties of the Corporations or the Sellers on the one hand, or of the Purchasers on the other hand, made pursuant to this Agreement, which representations and warranties shall survive any such investigation to the extent provided herein, or (b) the conditions to the obligations of the Purchasers or the Sellers to consummate the transactions contemplated hereby.              Section 6.2      Affirmative Covenants.        Prior to the Closing, except as otherwise expressly provided herein, each of the Corporations shall (and the Corporations shall cause each of their Subsidiaries to):                           6.2.1      conduct its business only in the Ordinary Course of Business;                         6.2.2      keep in full force and effect its corporate existence and all material rights, franchises, Proprietary Rights, goodwill and rights to indemnification or contribution relating or obtaining to the Businesses;                           6.2.3      use all commercially reasonable efforts to retain its employees and preserve its present relationships with customers, suppliers, contractors, distributors and employees, and continue to compensate its employees consistent with past practices;                           6.2.4      maintain its Proprietary Rights so as not to materially and adversely affect the validity or enforcement thereof; maintain its other assets in customary repair, order and condition and maintain insurance reasonably comparable to that in effect on the date of this Agreement; and in the event of any material casualty, loss or damage to any of its assets, repair or replace such assets with assets of comparable quality;                           6.2.5      maintain its books, accounts and records in accordance with GAAP; and                           6.2.6      maintain in effect all of the Insurance Policies.              Section 6.3      Negative Covenants.        Prior to the Closing, without the prior written consent of the Purchaser or as otherwise expressly provided herein, each of the Corporations will not, the Corporations will cause each of their Subsidiaries not to, and each of the Sellers will not:                           6.3.1      take any action or omit to take any action that would result in any of the Consolidated Companies': (a) incurring any trade accounts payable outside of the Ordinary Course of Business or making any commitment to purchase quantities of any item of inventory in excess of quantities normally purchased by any of the Consolidated Companies in the Ordinary Course of Business; (b) increasing any of the Consolidated Companies' indebtedness for borrowed money except in the Ordinary Course of Business; (c) guaranteeing the obligations of any Person other than Consolidated Companies that are wholly owned, directly or indirectly, by the Corporations; (d) merging or consolidating with, purchasing substantially all of the assets of, or otherwise acquiring any business or any proprietorship, firm, association, limited liability company, corporation or other business organization; (e) increasing or decreasing the rate of compensation of or paying any unusual compensation to any officer, employee or consultant of any of the Consolidated Companies (other than regularly scheduled increases in base salary and annual bonuses consistent with prior practice and reasonable stay-pay arrangements that either (x) will not be a liability of the Consolidated Companies or the Purchasers after the Closing or (y) are consented to in writing by the Parent Purchaser); (f) entering into or materially amending any collective bargaining agreement; (g) declaring or paying any dividend or making any distribution with respect to, or purchasing or redeeming, shares of the capital stock of the Corporations; (h) selling, transferring, leasing, pledging, mortgaging, encumbering or disposing of any assets otherwise than in the Ordinary Course of Business of the Consolidated Companies; (i) issuing any shares of the capital stock of any kind of any of the Consolidated Companies or issuing or granting any subscriptions, options, rights, warrants, convertible securities or other agreements or commitments t o issue, or contracts or any other agreements obligating any of the Consolidated Companies to issue, or to transfer from treasury, any shares of capital stock of any class or kind, or securities convertible into any such shares; (j) amending, adopting or entering into any written Plan or written Employment Agreement; (k) making any change in the certificate of incorporation or by-laws of the Consolidated Companies; (l) modifying, releasing, amending, terminating, supplementing or otherwise changing any of the material Contracts of the Consolidated Companies without the consent of the Purchasers, which consent shall not be unreasonably withheld, conditioned or delayed; (m) take any action that would render any of the representations and warranties of the Sellers and the Corporations contained herein false or incorrect in any material respect; (n) except with respect to the submission of valid claims by the Parent Seller or any of its Subsidiaries, taking any action that is designed or intended to adversely af fect in any material respect the rights to coverage of any Consolidated Company under any Insurance Policy after the Closing; or (o) agreeing to do any of the foregoing;                           6.3.2      incur or create any Encumbrances on the RSI Common Stock, the BBMC Common Stock, or any of the Consolidated Companies properties or assets (other than Permitted Encumbrances on such properties or assets) ;                           6.3.3      except as contemplated herein, take any action or omit to take any action that would prejudice the Purchaser's rights to consummate each of the transactions contemplated by this Agreement;                           6.3.4      take or omit to be taken any action, or permit its Subsidiaries to take or to omit to take any action, that could reasonably be expected to result in a Material Adverse Change with respect to the Consolidated Companies; or                           6.3.5      agree or commit to take any action precluded by this Section 6.3.              Section 6.4      Negative Covenants.        Prior to the Closing, without the prior written consent of the Parent Seller or as otherwise expressly provided herein, the Purchasers will not and the Parent Purchaser will cause its Subsidiaries not to, take any action or omit to take any action (or agree to do the foregoing) which would prejudice the Sellers' rights to consummate each of the transactions contemplated by this Agreement              Section 6.5      Closing Documents.        The Corporations and the Sellers shall, prior to or on the Closing Date, execute and deliver, or cause to be executed and delivered, to the Purchaser the documents or instruments described in Sections 7.1 and 7.2. The Purchasers shall, prior to or on the Closing Date, execute and deliver, or cause to be executed and delivered, to the Sellers, the documents or instruments described in Sections 7.1 and 7.3.              Section 6.6      Non-Competition and Confidentiality Agreement.                           6.6.1      For a period of three (3) years after the Closing Date, the Sellers will not, and the Sellers will cause their Subsidiaries not to, (a) directly or indirectly, in the Territory, engage in a Competing Business or (b) use for their own benefit or divulge or convey to any third party any Confidential Information (as hereinafter defined) relating to any of the Consolidated Companies. For purposes of this Agreement, the Sellers and their Subsidiaries shall not be deemed to have violated clause (a) of this Section 6.6.1 in the event that (i) the Sellers or their Subsidiaries acquire the capital stock or a substantial portion of the assets of a Person whose revenues during its last fiscal year attributable to a Competing Business (A) are less than $55,000,000, and (B) represent less than 30% of the aggregate revenues of such Person during its last fiscal year, (ii) the Sellers promptly offer to sell such portion (the "Offending Portion") of the Person that either constitutes the Competing Business or that precludes such acquisition from being excluded from the operation of this Section 6.6.1 by virtue of the definition of the term "Competing Business", to the Parent Purchaser on commercially reasonable terms at a price that is either agreed upon by the Sellers and the Parent Purchaser or is determined by a valuation firm mutually acceptable to the Sellers and the Parent Purchaser to represent the fair market value of the Offending Portion and (iv) if the Parent Purchaser does not, or is not permitted by law to, accept such offer, the Sellers use all reasonable commercial efforts to dispose of such Offending Portion promptly. For purposes of this Agreement, the Sellers shall not be deemed to have violated clause (b) of this Section 6.6.1 if any of the Sellers or their Subsidiaries receives a request to disclose all or any part of the Confidential Information under the terms of a subpoena, civil investigative demand or order issued by a Governmental Authority, and su ch Seller or Subsidiary, to the extent not inconsistent with such request: (a) notifies the Purchasers promptly of the existence, terms, and circumstances surrounding such request; (b) consults with the Purchasers on the advisability of taking legally available steps (at Purchasers' cost and expense) to resist or narrow such request; and (c) if disclosure of any Confidential Information is required to prevent such Seller or Subsidiary from being held in contempt or becoming subject to any other penalty, to furnish only such portion of the Confidential Information as it reasonably determines such Seller or Subsidiary is legally obligated to disclose and to exercise all commercially reasonable efforts (at Purchasers' cost and expense) to obtain an order or other reliable assurance that confidential treatment will be afforded to the disclosed Confidential Information. For purposes of this Agreement, "Confidential Information" consists of all information, knowledge or data relating to any of the Consolidated Co mpanies including customer and supplier lists, formulae, know-how, processes, trade secrets, consultant contracts, pricing information, marketing plans, product development plans, business acquisition plans and all other information relating to the operation of the Consolidated Companies not in the public domain or otherwise publicly available which are or were treated as confidential by the Consolidated Companies. Information which enters the public domain or is publicly available loses its confidential status hereunder so long as neither the Sellers nor their Subsidiaries, directly or indirectly cause such information to enter the public domain.                           6.6.2        The Sellers acknowledge that the restrictions contained in Section 6.6.1 are reasonable and necessary to protect the legitimate interests of the Purchaser and that any breach by the Sellers of any provision of this Section 6.6 will result in irreparable injury to the Purchaser. The Sellers acknowledge that, in addition to all remedies available at law, the Purchaser shall be entitled to equitable relief, including injunctive relief, and an equitable accounting of all earnings, profits or other benefits arising from any such breach and shall be entitled to receive such other damages, direct or consequential, as may be appropriate.                           6.6.3        The parties acknowledge and agree that in order to confirm compliance with the limitations under Section 6.6.1(a), it may be necessary to review competitively sensitive information relating to the Parent Seller and/or its Subsidiaries, and the parties further acknowledge and agree that the Purchasers shall not under any circumstances be given access to competitively sensitive information in connection with any matter pertaining to compliance with the provisions of Section 6.6.1(a), including any matter pertaining to any of the definitions herein applicable to such compliance. In order to prevent such access and to permit Purchasers to confirm such compliance, if the Purchasers shall reasonably dispute compliance by the Parent Seller or its Subsidiaries with any aspect of Section 6.6.1(a) and the Parent Seller shall reasonably determine that resolution of such dispute requires the analysis of competitively sensitive information, then the Purchasers shall retain an independent third party (an "Independent Entity"), which shall be given access only to such competitively sensitive information as such Independent Entity shall reasonably deem necessary to calculate or otherwise determine such compliance. For purposes of this Agreement, an "Independent Entity" shall be a third party mutually acceptable to the Parent Seller and the Parent Purchaser selected jointly by the Parent Seller and the Parent Purchaser to resolve the specific dispute that has arisen under Section 6.6.1(a), which third party need not be the Independent Accountant or an entity that has been called upon to resolve any other dispute that may have arisen under Section 6.6.1(a). The Independent Entity shall review such information as it shall deem relevant to the applicable dispute, determine compliance, and issue a report (a "Compliance Report") to both the Parent Purchaser and the Parent Seller stating only (a) its conclusion of whether or not the Parent Seller and its Subsidiaries complied with the relevant provisions of this Agreement and (b) in summary form, stating the relevant limitations and the actual results compared to such limitations. The Compliance Report shall be final and binding upon the parties hereto with respect to the calculations made thereunder and shall be subject to judicial review solely with respect to the interpretation of the terms of this Agreement and not with respect to the calculations required by such terms. The fees and disbursements of such Independent Entity shall be shared equally by the Parent Purchaser and the Parent Seller. Prior to being given access to any competitively sensitive information, the Independent Entity shall be required to execute a confidentiality agreement in form and substance reasonably satisfactory to the Parent Seller. The Purchasers shall not commence an action to challenge or enforce the provisions of Section 6.6.1(a) later than the third anniversary of the Closing Date, and in any such action, the Purchasers shall not be permitt ed to discover, inspect or examine or have introduced into evidence, any competitively sensitive information pertaining to the Parent Seller or its Subsidiaries other than the Compliance Report.              Section 6.7      Reasonable Efforts; Further Assurances.       Subject to the terms and conditions herein provided, each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. The Corporations, the Sellers and the Purchasers will use all reasonable efforts to obtain consents of all Governmental Authorities and third parties necessary to the consummation of the transactions contemplated by this Agreement. In the event that at any time after Closing any further action is necessary to carry out the purposes of this Agreement or to obtain any licenses required, necessary or advisable in connection with the operation of any of the Businesses, the Sellers shall, upon Purchasers' reasonable request and at Purchasers' expense, take such commercially reasonable steps as the Purchasers shall request.              Section 6.8      Certain Covenants.                           6.8.1      Each of the Purchasers and each of the Sellers shall (a) make or cause to be made the filings required of such party or any of its subsidiaries or Affiliates under the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and in any event within ten (10) business days after the date of this Agreement, (b) comply at the earliest practicable date with any request under the HSR Act for additional information, documents, or other materials received by such party or any of its Subsidiaries from the Federal Trade Commission or the Department of Justice or any other Governmental Authority in respect of such filings or such transactions, and (c) cooperate with the other party in connection with any such filing (including, with respect to the party making a filing, providing copies of all such documents to the non-filing party and its advisors prior to filing and, if requested, to accept all reasonable additions, deletions or chang es suggested in connection therewith) and in connection with resolving any investigation or other inquiry of any such agency or other Governmental Authority under any Antitrust Laws (as hereinafter defined) with respect to any such filing or any such transaction. Each party shall use all reasonable efforts to furnish to each other all information required for any application or other filing to be made pursuant to any applicable law in connection with the transactions contemplated by this Agreement. Each party shall promptly inform the other party of any communication with, and any proposed understanding, undertaking, or agreement with, any Governmental Authority regarding any such filings or any such transaction. No party shall independently participate in any formal meeting with any Governmental Authority in respect of any such filings, investigation, or other inquiry without giving the other party prior notice of the meeting and, to the extent permitted by such Governmental Authority, the opportunity to attend and/or participate. The parties hereto will consult and cooperate with one another, in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act or other Antitrust Laws. The Sellers and the Purchasers may, as each deems advisable and necessary, reasonably designate any competitively sensitive material provided to the other under this Section 6.8 as "outside counsel only." Such materials and the information contained therein shall be given only to the outside legal counsel of the recipient and will not be disclosed by such outside counsel to employees, officers, or directors of the recipient unless express permission is obtained in advance from the source of the materials (the Sellers or the Purchasers as the case may be) or its legal counsel.                           6.8.2      Each of the Purchasers and the Sellers shall use all reasonable efforts to resolve such objections, if any, as may be asserted by any Governmental Authority with respect to the transactions contemplated by this Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other federal, state or foreign statutes, rules, regulations, orders, decrees, administrative or judicial doctrines or other laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, "Antitrust Laws"). In connection therewith, if any administrative or judicial Action is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement as violative of any Antitrust Law, each of the Purchasers and each of the Sellers shall cooperate and use all reasonable efforts vigorously to contest a nd resist any such action or proceeding, including any Action, and to have vacated, lifted, reversed, or overturned any decree, judgment, injunction or other order whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents, or restricts consummation of the transactions contemplated by this Agreement, including by vigorously pursuing all available avenues of administrative and judicial appeal and all available legislative action, unless by mutual agreement the Purchasers and the Sellers decide that litigation is not in their respective best interests. Notwithstanding the foregoing or any other provision of this Agreement, nothing in this Section 6.8 shall limit a party's right to terminate this Agreement pursuant to Section 8.1, so long as such party has up to then complied in all material respects with its obligations under this Section 6.8. Each of the Purchasers and each of the Sellers shall use all reasonable efforts to take such action as may be required to cause the ex piration of the notice periods under the HSR Act or other Antitrust Laws with respect to such transactions as promptly as possible after the execution of this Agreement.                           6.8.3      Notwithstanding anything to the contrary in this Agreement, neither the Purchasers nor the Sellers shall be required to hold separate (including by trust or otherwise) or divest any of their respective businesses or assets, provided, however, that unless the Purchasers and the Sellers otherwise agree, if required to avoid an HSR Authority instituting an action challenging the transactions under this Agreement under the Antitrust Laws and seeking to enjoin or prohibit the consummation of any of the transactions contemplated by this Agreement, the Purchasers shall agree to hold separate (including by trust or otherwise) or divest any of the Businesses or assets of the Consolidated Companies, or take or agree to take any action or agree to any limitation with regard to the Businesses or assets of the Consolidated Companies required to avoid an HSR Authority's instituting an action challenging the transactions under this Agreement under the Antitrust La ws and seeking to enjoin or prohibit the consummation of any of the transactions contemplated hereby unless such action would be materially adverse to the Purchasers (judging materiality in terms of the size of the Consolidated Companies and not in terms of the Purchasers and their Subsidiaries) or would reasonably be expected to substantially impair the overall benefits expected, as of the date hereof, to be realized from consummation of the transactions contemplated hereby. Notwithstanding any other provision of this Section 6.8, no party shall be required to (a) waive any of the conditions to the Closing set forth in Article VII as they apply to such party, or (b) divest any of their respective businesses or assets if the divestitures would be required to be consummated prior to the Closing.              Section 6.9      Notification by the Parties.      Each party hereto shall promptly inform the other party hereto in writing if, prior to the consummation of the Closing, any of the representations and warranties made by such party in this Agreement cease to be accurate and complete in all material respects (except for any representation and warranty that is qualified hereunder as to materiality or as to a Material Adverse Change, as to which such notification shall be given if the Sellers or the Corporations obtain knowledge that such representation and warranty is inaccurate in any respect).              6.10      Employees and Employee Benefits.                           6.10.1      From and after the Closing Date, the Purchasers shall treat all service by Consolidated Company Employees (as defined below) with the Sellers, the Consolidated Companies, any of the Parent Seller's other Subsidiaries and their respective predecessors prior to the Closing Date for purposes of vesting and eligibility for benefits as service with Purchasers (except to the extent such treatment would result in duplicative accrual on or after the Closing Date of benefits for the same period of service), and, with respect to any medical or dental benefit plan in which Consolidated Company Employees participate after the Closing Date, the Purchasers shall waive or cause to be waived any pre-existing condition exclusions (provided, however, that no such waiver shall apply to a pre-existing condition of any Consolidated Company Employee who was, as of the Closing Date, excluded from participation in a benefit plan of the Parent Seller or its Subsidiaries by virtue of such pre-existing condition), and shall provide that any covered expenses incurred on or before the Closing Date by a Consolidated Company Employee or a Consolidated Company Employee's covered dependent shall be taken into account for purposes of satisfying applicable deductible, coinsurance and maximum out-of-pocket provisions after the Closing Date to the same extent as such expenses are taken into account for the benefit of similarly situated employees of the Purchasers and subsidiaries of the Purchasers. In addition, the Purchasers shall provide, or cause to be provided, to Consolidated Company Employees whose employment is terminated on or before the first anniversary of the Closing Date ("Severed Employees") severance pay continuation that is not less favorable than the pay continuation that would have been provided in the same circumstances under the Sellers' severance policy as set forth in the Sellers' HR Policy and Procedure Manual dated January 1999, (Policy Number 203), as provided to the Pu rchasers before the date hereof ("Sellers' Severance Policy"). The Purchasers shall also pay a portion of the Severed Employees' cost of "COBRA" continuation coverage under Code Section 4980B equal to the portion of the cost of such coverage provided by the Purchasers with respect to similarly situated active employees for the longer of three months or the period of severance pay continuation; provided, however, that Purchasers shall not be obligated to pay the portion of the cost of such coverage provided by the Purchasers with respect to similarly situated active employees for more than six months.                           6.10.2      The term "Consolidated Company Employee" shall mean an individual who is an employee of a Consolidated Company who is actively at work (or not actively at work due to the taking of vacation, sick days, personal days or similar short-term absence) of any Consolidated Company (other than any employee referred to in Section 6.10.3 hereof). Sellers and the Consolidated Companies shall take all actions necessary and appropriate so that, before the Closing Date, (i) each individual who is an employee of any of the Consolidated Companies who does not qualify as a Consolidated Company Employee as of the Closing Date is transferred to the employ of the Sellers or one of their affiliates other than the Sellers, and (ii) the Consolidated Companies have no employees who are not actively at work (or who are not actively at work due to the taking of vacation, sick days, personal days or similar short-term absence) and no liabilities to provide compensation or benefits to any individuals other than persons who are actively at work (or who are not actively at work due to the taking of vacation, sick days, personal days or similar short-term absence) of any Consolidated Company. Sellers shall provide to Purchasers, no later than five business days following the Closing Date, a schedule ("Appendix 6.10.2") setting forth the name of each individual described in clause (i) of the second sentence of this Section 6.10.2 and his or her last position held, employment location, date of hire, date leave began and reason for absence. Without limiting the generality of the foregoing, it is expressly agreed that Sellers shall retain all obligations to provide compensation and disability, medical, retiree medical, "COBRA" continuation coverage under Code Section 4980B, pension, retirement and other employee benefits to any individual who does not qualify as a Consolidated Company Employee, including without limitation individuals who, as of the Closing Date, are on short-term or long-t erm disability leave or have retired. Notwithstanding the foregoing, the Purchasers shall hire, or cause the appropriate Consolidated Company to hire, any individual who is listed on Appendix 6.10.2 and who indicates an ability to return to active service within six months after the Closing Date; provided, however, that if the reason for the individual's absence is due to his or her own medical condition, Purchasers may require such individual to furnish a physicians' note confirming such individual's ability to return to work. Any such individual listed on Appendix 6.10.2 who returns to service with the Purchasers or a Consolidated Company shall be considered a "Consolidated Company Employee" from the date he or she actually reports for service with Purchasers or such Consolidated Company. Purchasers shall assume all responsibility in connection with the re-employment of any such individual listed on Appendix 6.10.2 and for employment related decisions from and after the date such person becomes a Conso lidated Company Employee. Purchasers shall promptly advise Sellers in writing of any such individual who becomes employed by Purchasers or a Consolidated Company within six months after the Closing Date. Sellers shall retain all employment related obligations and liabilities with respect to all such persons who do not become Consolidated Company Employees or who were improperly omitted from Appendix 6.10.2.                           6.10.3      Before the Closing Date, the Parent Seller shall transfer to its employ, or to the employ of one of its Affiliates other than the Consolidated Companies, the individuals listed on Schedule 3 to the Transition Support Agreement. Such individuals shall in no event become or be considered Consolidated Company Employees.                           6.10.4      The Purchasers shall not be treated as assuming any employment, termination and release, change of control, severance, supplemental retirement, deferred compensation or similar agreements or contracts to which any of the Consolidated Companies or Sellers or any other Affiliate of Sellers is a party, unless it expressly assumes such agreement or contract or such assumption is required by law or contract. None of the Consolidated Companies shall be treated as assuming any employment, termination and release, change of control, severance, supplemental retirement, deferred compensation or similar agreements or contracts to which Sellers or any other Affiliate of Sellers is a party, unless it expressly assumes such agreement or contract or such assumption is required by law or contract. Notwithstanding the foregoing, none of the Consolidated Companies shall be treated as assuming the Confidential Termination Agreement and Release among Sellers, the Consolida ted Companies and the employees listed on Appendix 3.16(h), which liabilities shall remain the sole responsibility of Sellers.                           6.10.5      The following provisions of the Section 6.10.5 apply with respect to those employees of the Consolidated Companies listed on Appendix 6.10.5 ("CIC Employees") who are contingently entitled to pay and/or benefits under certain change in control agreements identified on such Appendix (each a "CIC Agreement").                                        i.      If a CIC Employee continues to be employed by the Consolidated Companies, or is employed by any Purchaser, immediately following the Closing Date, and the CIC Employee shall not have waived in writing his or her rights under the applicable CIC Agreement, then the Consolidated Companies and Purchasers shall assume, and be solely liable for, any payments and benefits under such CIC Employee's respective CIC Agreement other than Excluded Benefits (as defined below). "Excluded Benefits" means all liabilities for payments and benefits to the CIC Employee for (i) retiree welfare benefits provided under any benefit plan of the Seller or its Affiliates (including without limitation any benefit pursuant to the "Rule of 80" under Seller's Medical Expense Benefits Plan), (ii) benefits under the Bergen Brunswig Corporation Supplemental Executive Retirement Plan, and (iii) any "completion bonus" referred to in the CIC Agreement.                                        ii.      If a CIC Employee is not employed by the Consolidated Companies, or by any Purchaser, immediately following the Closing Date, then: (i) Seller shall remain solely liable for any amounts and benefits which may become payable to such CIC Employee pursuant to such CIC Employee's respective CIC Agreement (as well as for any Excluded Benefits to which the CIC Employee is entitled); and (ii) if, before the expiration of the applicable salary continuation period set forth in a CIC Employee's CIC Agreement, any of the Purchasers or any Consolidated Company, or any Affiliate of any of them, hire or otherwise retain, directly or indirectly, such CIC Employee, Purchasers shall promptly reimburse Seller for any amounts paid by Seller to such CIC Employee pursuant to his or her CIC Agreement, other than Excluded Benefits.                           6.10.6 Consolidated Company Employees who, as of the later of the Closing Date or December 31, 2000, have satisfied the years of age and service to qualify for the "Rule of 80" benefits under Sellers' retiree welfare benefits program shall be treated, upon their termination of employment with the Consolidated Companies, as having retired from Sellers, and Sellers shall provide such Consolidated Company Employees with retiree welfare benefits in accordance with the terms as then in effect for similarly situated individuals who retire from employment with Sellers after having satisfied the "Rule of 80." The foregoing obligation of Sellers shall in no event be construed to limit Sellers' right to amend, terminate, curtail or otherwise modify or discontinue the "Rule of 80" retiree welfare benefits program to the extent Sellers have such right prior to Closing.                           6.10.7      The Sellers shall take all steps necessary so that Consolidated Company Employees shall be permitted to receive a distribution of their vested benefits under the Pre-Tax Investment Retirement Account Plus Employee Contributions Plan (the "PIRA PLUS") in connection with the consummation of the transactions contemplated hereby.                           6.10.8      The Sellers and Purchasers agree to share equally the costs of stay bonus payments consistent with Appendix 6.10.8 hereof.              Section 6.11       No Solicitation.        The Parent Seller agrees that, during the term of this Agreement, it shall not, and shall not authorize or permit any of its Subsidiaries or any of its or its Subsidiaries' directors, officers, employees, agents or representatives, directly or indirectly, to solicit, initiate, encourage or knowingly facilitate, or furnish or disclose non-public information in furtherance of, any inquiries or the making of any proposal with respect to any recapitalization, merger, consolidation or other business combination which involves, but is limited to, the Consolidated Companies, or acquisition of the capital stock or the assets of the Consolidated Companies, taken as a whole, in a single transaction or a series of related transactions, or any combination of the foregoing (a "Competing Transaction"), or negotiate, explore or otherwise engage in discussions with any Person (other than the Purchasers, their Subsidiaries or their or their Subsidiaries' directors, officers, employees, agents and representatives) with respect to any Competing Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate transactions contemplated by this Agreement. The Sellers' compliance with their obligations under Sections 6.10.2 and 6.10.4 shall not be considered to violate the provisions of this Section 6.11.              Section 6.12      Tax Matters.                           6.12.1      Any Tax sharing agreement between either the Parent Seller and the Subsidiary Seller (or any of their respective Subsidiaries or Affiliates, other than the Consolidated Companies) on the one hand and any of the Consolidated Companies on the other hand shall be terminated as of the Closing Date and will have no further effect for any taxable year (whether the current year, a future year or a past year).                           6.12.2      The affiliated, combined or unitary group of corporations of which the Sellers (or any of their Affiliates) are members (the "Seller Affiliated Group") shall include the income, if any, of each Consolidated Company that is a member of the Seller Affiliated Group (each such Consolidated Company, a "Member Company") (including any deferred income recognized pursuant to Treas. Reg. 1.1502-13 or Treas. Reg. 1.1502-14 and any income attributable to any excess loss account pursuant to Treas. Reg. 1.1502-19) on the Seller Affiliated Group's consolidated federal income (and, where applicable, state and local income or franchise) Tax Returns for all periods through the Closing Date and shall pay any income (or franchise) Taxes with respect to such income. The Member Companies shall furnish Tax information to the common parent of the Seller Affiliated Group (the "Seller Common Parent") for inclusion in such Tax Returns in accordance with the Member Companies' p ast custom and practice. For purposes of this Section 6.12 and Article IX, the income of the Member Companies will be apportioned between the period ending on the Closing Date and the period following the Closing Date by closing the books of the Member Companies as of the end of the Closing Date.                           6.12.3      At the Seller Common Parent's request, the Purchasers will cause any of the Member Companies to make and/or join with the Seller Common Parent in making any Tax election after the Closing Date, provided that such election applies solely to a taxable period ending on or prior to the Closing Date and that the making of such election does not have an adverse impact on the Purchasers, any of their Subsidiaries or Affiliates or any of the Consolidated Companies (such adverse impact to be determined after taking into account all indemnification rights of the Purchasers, their Subsidiaries and Affiliates and the Consolidated Companies pursuant to Article IX).                           6.12.4      The Sellers shall prepare or cause to be prepared and file or cause to be filed all Tax Returns for the Consolidated Companies for all taxable periods ending on or prior to the Closing Date (including any Tax Returns with respect to periods for which a consolidated, unitary or combined Tax Return of the Seller Affiliated Group will include the operations of any of the Consolidated Companies). All such Tax Returns shall be prepared in a manner consistent with the Sellers' and the Consolidated Companies' past practices. The Sellers shall provide the Purchasers a copy of any such Tax Returns (or, in the case of any consolidated, combined or unitary Tax Returns, pro forma separate Returns of the Consolidated Companies) reasonably promptly after such Tax Returns are filed (or, in the case of Tax Returns filed prior to the date hereof, reasonably promptly after the request of the Purchasers). In the event any such Tax Return is audited or otherwise contested by any Governmental Authority (each such audit or contest, a "Tax Claim"), then the party hereto first receiving notice of such Tax Claim promptly shall provide written notice thereof to the other party or parties hereto, and such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of the relevant portion of any correspondence received from the Governmental Authority. The Sellers (or, the Seller Common Parent, as the case may be) shall have the right to control, at their own expense, the conduct of any audit or examination by, or contest or litigation against, any Governmental Authority (a "Tax Proceeding") with respect to any taxable period of the Consolidated Companies ending on or prior to the Closing Date; provided, however, that (i) the Sellers shall provide the Purchaser with a timely and reasonably detailed account of each stage of such Tax Proceeding; (ii) the Sellers shall consult with the Purchasers before taking any significant action in connecti on with such Tax Proceeding, (iii) the Sellers shall consult with the Purchasers and offer the Purchasers an opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax Proceeding; (iv) the Sellers shall defend such Tax Proceeding diligently and in good faith as if they were the only party in interest in connection with such Tax Proceeding, and (v) the Sellers shall not settle, compromise or abandon any such Tax Proceeding without obtaining the prior written consent, which consent shall not be unreasonably withheld, of the Purchasers; provided further, however, that clauses (i) through (v) above shall apply only to the extent that such Tax Proceeding could have an adverse impact on the Purchasers, any of their Subsidiaries or Affiliates or any of the Consolidated Companies (such adverse impact to be determined after taking into account all indemnification rights of the Purchasers, their Subsidiaries and Affiliates and the Consolidated Companies pursuant to Article IX). If, in connection with any Tax Proceeding, the Purchasers reasonably withhold consent pursuant to clause (v) above, then the Sellers and the Purchasers jointly shall engage an Independent Accountant to determine, with respect to any proposed settlement, compromise or abandonment of such Tax Proceeding, the course of action for such Tax Proceeding. For the avoidance of doubt, except to the extent permitted by the above provisions of this Section 6.12, the Purchasers shall not enter into any settlement or compromise of a Tax Proceeding or make any Tax election of or with respect to any of the Consolidated Companies to the extent that such settlement, compromise or election by its terms is made with respect to, and is binding with respect to, a taxable period of the Consolidated Companies ending on or prior to the Closing Date.                           6.12.5      The Purchasers shall prepare or cause to be prepared and file or cause to be filed all Tax Returns of the Consolidated Companies for all Straddle Periods and Post-Closing Periods. Solely with respect to any Straddle Period Tax Returns of the Consolidated Companies, the Purchasers shall provide the Sellers a copy of each such Straddle Period Tax Return at least 45 days prior to the Due Date of any such Tax Return for the Sellers' review and comment. Within 15 days after receiving such Tax Return, the Sellers shall deliver to the Purchasers in writing any changes that the Sellers request to such Tax Return. If the Sellers deliver such a request, then the Purchasers and the Sellers shall undertake in good faith to resolve the issues raised in such request prior to the due date for filing such Return. If the Purchasers and the Sellers are unable to resolve any issue, then the Purchasers and the Sellers jointly shall engage an Independent Accountant to determine the correct treatment of the item or items in dispute. The Independent Accountant shall make its determination with respect to each disputed item prior to the Due Date for filing such Tax Return, and such determination shall be final and binding on the parties hereto. In the case of any Tax Return required to be filed by Purchasers under this Section 6.12.5, the Sellers shall pay to the Purchasers an amount equal to the portion of the Taxes of the Consolidated Companies in respect of such Return for which the Sellers are responsible pursuant to Section 9.2.1(iii) no later than the date that is three days prior to the Due Date for payment of such Taxes. For purposes of this Section 6.12 and Article IX, in the case of any Taxes that are imposed on a periodic basis and are payable for any Straddle Period, the portion of such Tax which relates to the Pre-Closing Period shall (i) in the case of any Taxes other than Taxes based upon or related to income or receipts, be deemed to be the amount of su ch Tax for the entire taxable period multiplied by a fraction the numerator of which is the number of days in the Pre-Closing Period and the denominator of which is the number of days in the entire taxable period, and (ii) in the case of any Tax based upon or related to income or receipts be determined based upon a closing of the books of the Consolidated Companies as of the end of the Closing Date. Any credits relating to a Straddle Period shall be determined based upon a closing of the books of the Consolidated Companies as of the end of the Closing Date. In the event any Straddle Period Tax Return is audited or otherwise contested by any Governmental Authority, then the party hereto first receiving notice of such Tax Claim promptly shall provide written notice thereof to the other party or parties hereto, and such notice shall specify in reasonable detail the basis for such Tax Claim and shall include a copy of the relevant portion of any correspondence received from the Governmental Authority. The Pur chasers shall have the right to control, at their own expense, the conduct of any Tax Proceeding with respect to any Straddle Period Tax Return or Post-Closing Period Tax Return of any of the Consolidated Companies; provided, however, that in the case of any such Tax Proceeding with respect to any Straddle Period Tax Return (i) the Purchasers shall provide the Sellers with a timely and reasonably detailed account of each stage of such Tax Proceeding; (ii) the Purchasers shall consult with the Sellers before taking any significant action in connection with such Tax Proceeding, (iii) the Purchasers shall consult with the Sellers and offer the Sellers an opportunity to comment before submitting any written materials prepared or furnished in connection with such Tax Proceeding; (iv) the Purchasers shall defend such Tax Proceeding diligently and in good faith as if they were the only party in interest in connection with such Tax Proceeding and (v) the Purchasers shall not settle, compromise or abandon any such Tax Proceeding without obtaining the prior written consent, which consent shall not be unreasonably withheld, of the Sellers. If, in connection with any Tax Proceeding, the Sellers reasonably withhold consent pursuant to clause (v) above, then the Purchasers and the Sellers jointly shall engage an Independent Accountant to determine, with respect to any proposed settlement, compromise or abandonment of such Tax Proceeding, the course of action for such Tax Proceeding. The Purchasers shall have the right to prepare and file any consolidated, combined or unitary Tax Returns that include Purchasers or any of their Subsidiaries or Affiliates and control any Tax Proceeding relating to any such Tax Return and the Sellers shall not be entitled to review any such Tax Returns or participate in any such Tax Proceedings.                           6.12.6      Any Tax refund received by the Purchasers or any of the Consolidated Companies, and any amounts credited against Tax to which the Purchasers or any of the Consolidated Companies become entitled, that relate to any Pre-Closing Period of any of the Consolidated Companies (whether arising from a claim for refund, a Tax Proceeding or otherwise) shall be for the account of the Sellers, except for those refunds and credits which are specifically identified as Tax assets in the consolidated balance sheet of the Consolidated Companies as of the Closing Date that is contained in the Final Accountant's Report (such refunds and credits, "Balance Sheet Refunds and Credits"). The Purchasers shall pay over to the Sellers any such refund or the amount of any such credit within fifteen (15) days after the Purchasers' receipt or use thereof. Any Tax refund received by the Purchasers or the Sellers or any of the Consolidated Companies, and any amounts credited against Ta x to which the Purchasers or the Sellers or any of the Consolidated Companies become entitled, that relate to the Post-Closing Period of any of the Consolidated Companies and any Balance Sheet Refunds and Credits (in each case, whether arising from a claim for refund, a Tax Proceeding or otherwise) shall be for the account of the Purchasers. The Sellers shall pay over to the Purchasers any such refund or the amount of any such credit within fifteen (15) days after the Sellers' receipt or use thereof.                           6.12.7      The Purchasers, the Consolidated Companies and the Sellers shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns pursuant to this Section 6.12 and any Tax Proceeding. Such cooperation shall include the retention and, upon a party's request, the provision of records and information reasonably relevant to any such Tax Proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Consolidated Companies and the Sellers agree (i) to retain all books and records with respect to Tax matters pertinent to the Consolidated Companies relating to any Tax period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by the Purchasers or the Sellers, any extensions thereof) of the respective Tax periods, and to abide by all record rete ntion agreements entered into with any Governmental Authority, and (ii) to give each other reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other so requests, the Consolidated Companies or the Sellers, as the case may be, shall allow the other to take possession of such books and records. The Purchasers and the Sellers further agree, upon request, to use their reasonable efforts to obtain any certificate or other document from any Governmental Authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including with respect to the transactions contemplated by this Agreement).                           6.12.8      The parties agree to treat any payments after the Closing Date pursuant to Section 2.5 as an adjustment to the purchase price for Tax purposes, unless otherwise required pursuant to a "determination" within the meaning of Code Section 1313(a) (or analogous provisions of other Tax law).              Section 6.13      UNITI System Assignment and Assumption Agreement.       Immediately prior to the commencement of the Closing, the Subsidiary Seller (or another Affiliate of the Parent Seller) and BBMC shall execute and deliver the UNITI System Assignment and Assumption Agreement. It is understood that as a result of the consummation of the UNITI System Assignment and Assumption Agreement, the Purchasers will not acquire any rights in and to the Transfer UNITI Items pursuant to this Agreement. The Sellers represent and warrant that the Consolidated Companies will suffer no material adverse consequences to their Businesses as a result of the transfer of the Transfer UNITI Items.              Section 6.14      Transfers of Certain Assets.                         6.14.1      Real Property Deed.        Immediately prior to the commencement of the Closing, the Subsidiary Seller shall execute and deliver the Transfer Real Property Deed to BBMC. It is understood and agreed that as a result of such transaction, the Subsidiary Seller will not retain any rights in and to the Transfer Real Property from and after the Closing.                           6.14.2      Lease.        Immediately prior to the commencement of the Closing, the Parent Seller shall execute and deliver the Assignment of Lease to BBMC. It is understood and agreed that as a result of such Assignment of Lease, the Parent Seller will not retain any rights in and to the Transfer Lease from and after the Closing.                           6.14.3      Transfer Marks.        Immediately prior to the commencement of the Closing, the Sellers shall execute and deliver the Assignment of Trademarks to BBMC and the Sellers and BBMC shall execute and deliver the Copyright Assignment and Assumption Agreement. It is understood and agreed that as a result of such transaction, the Sellers will not retain any rights in and to the Transfer Marks from and after the Closing.                           6.14.4      SMSI.       Immediately prior to the Closing, BBMC shall transfer all of the capital stock of SMSI to the Parent Seller or a Subsidiary of the Parent Seller other than a Consolidated Company.                           6.14.5      Data Center Assets.       Immediately prior to the commencement of the Closing, the Parent Seller or its Subsidiaries shall execute and deliver to BBMC, and BBMC shall execute and deliver, the Assignment of Data Center Assets and assumption of related liabilities. It is understood that as a result of such transaction, BBMC will acquire assets which have traditionally been furnished by the Parent Seller or its Subsidiaries to BBMC to equip and operate a data center, and operate a systems and accounts payable function.              Section 6.15      Additional Employment Matters.                           6.15.1       For a period of one year after the Closing Date, the Parent Seller shall not, and the Parent Seller shall cause its Subsidiaries not to, hire any Consolidated Company Employees; provided, however , that nothing contained in this Section 6.15.1 shall prohibit the Parent Seller or its Subsidiaries from (a) hiring any Consolidated Company Employees whose employment with the Consolidated Companies is terminated by such entities without cause, (b) hiring any Consolidated Company Employees identified by the Purchaser (in responding in good faith to a written inquiry by the Parent Seller) as Consolidated Company Employees whose services are no longer desired by the Consolidated Companies, (c) hiring or soliciting Shawn Ward, so long as the Parent Seller and its Subsidiaries do not offer employment to Shawn Ward at any time prior to the sixtieth day after the Closing Date, provided that to the extent Shawn Ward is hired by any of the Sellers or their Subsi diaries, she will be permitted by the Sellers to continue to work for the Consolidated Companies for up to 12 months after the Closing Date to the extent necessary to assist the Consolidated Companies, provided further that in continuing work for the Consolidated Companies, she will not have to relocate her workplace to a place more than 15 miles from Orange, California, (d) hiring any CIC Employee (as defined in Section 6.10.5), other than Shawn Ward, who does not continue to be employed by a Consolidated Company, or is not employed by a Purchaser, immediately following the Closing Date, or (e) hiring any individual named in Schedule 3 to the Transition Support Agreement.                           6.15.2      During the period commencing on the one year anniversary of the Closing Date and expiring one hundred and eighty (180) days thereafter, the Parent Seller shall not, and the Parent Seller shall cause its Subsidiaries not to, solicit any Consolidated Company Employees for an employment position with the Parent Seller or any of its Subsidiaries; provided, however, that nothing contained in this Section 6.15.2 shall prohibit the Parent Seller or its Subsidiaries from (a) soliciting any Consolidated Company Employees whose employment with the Consolidated Companies is terminated by such entities without cause, (b) soliciting any Consolidated Company Employees identified by the Purchaser (in responding in good faith to a written inquiry by the Parent Seller) as Consolidated Company Employees whose services are no longer desired by the Consolidated Companies, or (c) making a general solicitation that is not focused on any particular employee.              [Section 6.16 Intentionally omitted]              Section 6.17      License Agreement.        The Parent Seller and the Purchaser shall execute and deliver the License Agreement at Closing.              Section 6.18      Assignment of Insurance Proceeds.        The Sellers shall assign and transfer to the Corporations all Claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind arising under any contract of insurance, indemnity or otherwise currently or previously in force or effect, or by operation of law, in favor of the Consolidated Companies, and pertaining to, or arising out of, the Businesses of the Consolidated Companies or the properties and assets of any of the Consolidated Companies.              Section 6.19.      Other Insurance Matters.                           6.19.1      In the event that either of the Purchasers or any Consolidated Company desires after the Closing to pursue coverage under any insurance policy under which Sellers potentially have rights (including any Insurance Policy) related to any of the Consolidated Companies, Sellers will exercise all reasonable efforts and shall take all steps reasonable necessary to assist in securing coverage under such policy. Sellers will not after the Closing improperly or unnecessarily exhaust, commute, release, novate or otherwise interfere with or prejudice any right Purchasers or any Consolidated Companies may have to coverage under any policy of insurance.                           6.19.2      In the event that the Sellers and their Affiliates desire after the Closing to pursue coverage under any insurance policy under which the Purchasers or any of the Consolidated Companies potentially have rights (including any Insurance Policy) related to any of the Sellers or their Affiliates, the Purchasers and the Consolidated Companies will exercise all reasonable efforts and shall take all steps reasonable necessary to assist in securing coverage under such policy. The Purchasers and the Consolidated Companies will not after the Closing improperly or unnecessarily exhaust, commute, release, novate or otherwise interfere with or prejudice any right Sellers or any of their Affiliates may have to coverage under any policy of insurance.              Section 6.20      Access to Records after Closing.                           6.20.1       The Purchasers recognize that after the Closing they may have information documents, books, records, work papers and information (collectively, "Records") which relate to the Consolidated Companies with respect to the period or matters arising prior to the Closing, including Records pertaining to the Businesses and the Consolidated Companies' respective employees, assets and liabilities. The Purchasers further recognize that the Sellers' may need access to such Records after the Closing. The Purchasers shall provide the Sellers and their respective employees, representatives and agents access to, and the right to photocopy (at Sellers' expense), during normal business hours on reasonable advance notice, all such Records. The Purchasers shall use commercially reasonable efforts to maintain all such Records at least until the seventh anniversary of the Closing.                           6.20.2       The Sellers recognize that after the Closing they may have Records which relate to the Consolidated Companies with respect to the period or matters prior to the Closing, and that the Purchasers may need access to such Records after the Closing. The Sellers shall provide the Purchasers and their respective employees, representatives and agents access to, and the right to photocopy (at Purchasers' expense), during normal business hours on reasonable advance notice, such Records. The Sellers shall use commercially reasonable efforts to maintain all such Records at least until the seventh anniversary of the Closing, or, at the Sellers' discretion, transfer such Records to the Purchasers.                           6.20.3       Notwithstanding any provision herein to the contrary, Records pertaining to Taxes shall be governed solely by Section 6.12.              Section 6.21      Change of Name of BBMC.        Notwithstanding anything in this Agreement to the contrary, immediately prior to the Closing, the Parent Seller shall take all actions necessary to change the name of BBMC.              Section 6.22      Credit Facility Liens and Guaranties.       The Sellers shall use all commercially reasonable efforts to obtain at or before Closing (1) the release of (a) all liens on the assets of the Consolidated Companies, on the BBMC Common Stock and on the RSI Common Stock granted pursuant to the Credit Facility and (b) the guaranties granted by BBMC and RSI pursuant to the Credit Facility and (2) the delivery to the Sellers of the certificates representing all outstanding shares of BBMC Common Stock and RSI Common Stock. Promptly after the execution of this Agreement, the Sellers shall use all commercially reasonable efforts to obtain from The Chase Manhattan Bank, in its capacity as agent for the lenders under that certain Credit Agreement with Sellers dated as of April 30, 2000, a letter in form and substance reasonably satisfactory to the Parent Purchaser and the Parent Seller, confirming that each of the liens, secu rity interests, guarantee claims and other obligations created under the Credit Agreement and ancillary agreements thereto in favor of the agent and the lenders against the Consolidated Companies or the assets or stock of the Consolidated Companies shall be released upon the consummation of the transactions contemplated by this Agreement, provided that the applicable requirements of the Credit Agreement shall have been complied with.   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE VII Conditions to Closing              Section 7.1      Mutual Conditions.        The respective obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to Closing of the following conditions:                           7.1.1      No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order that is in effect or commenced any Action, that, in either case, would prohibit consummation of the transactions contemplated by this Agreement or would threaten the imposition of material damages upon consummation of such transactions.                           7.1.2       Any waiting period required by the HSR Act, and any extensions thereof obtained by request or other action of the United States Federal Trade Commission (the "FTC") and/or the Antitrust Division of the United States Department of Justice (the "Antitrust Division"), shall have expired or been terminated by the FTC and the Antitrust Division.                           7.1.3       No third party shall have instituted any suit or proceeding against any party hereto to restrain, enjoin or otherwise prevent the consummation of the transactions contemplated hereby, or to seek damages from or impose obligations upon any party hereto by reason of the transactions contemplated hereby, which, in such party's reasonable judgment, would involve expense or lapse of time that would be materially adverse to such party's interest.                           7.1.4      The Escrow Agent shall have executed and delivered the Escrow Agreement.                           7.1.5      The Order shall have been modified so as not to prohibit the purchase by the Purchasers of assets of the Parent Seller, or the Parent Purchaser and the Parent Seller shall have received confirmation, in form and substance satisfactory to each such party, that the Order will be interpreted in such a manner as not to prohibit the purchase by the Purchasers of assets of the Parent Seller.                           7.1.6.      The liens on the BBMC Common Stock, the RSI Common Stock and the assets of the Consolidated Companies granted pursuant to the Credit Facility shall have been released, the Corporations and the Sellers shall have obtained the release and termination of the guaranties made by each of the Consolidated Companies pursuant to the Credit Facility and the certificates representing all outstanding shares of BBMC Common Stock and RSI Common Stock shall be available for delivery by the Sellers to the Purchaser pursuant to Section 2.3.              Section 7.2      Conditions to the Purchaser's Obligations.       The obligations of the Purchasers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment prior to or at Closing of each of the following conditions:                           7.2.1       The representations and warranties of the Corporations and the Sellers set forth in Articles III and IV shall be true and correct in all material respects (other than representations and warranties that are qualified as to materiality and Material Adverse Change, which representations and warranties shall be true in all respects) on the date hereof and on and as of the Closing Date as though made on and as of the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitations as to "materiality" or a Material Adverse Change set forth therein) does not have and is not reasonably likely to result in, individually or in the aggregate, a Material Adverse Change with respect to the Consolidated Companies, provided that the representations and warranties set forth in Sections 3.3, 3.4, 3.5, 4.2, 4.3 and 4.4 shall be true and correct in all material respects (other than representations and warranties which are qualified as to materiality, which representations and warranties shall be true in all respects) on the date hereof and as of the Closing Date as though made on and as of the Closing Date (except for representations and warranties made as of a specified date, which shall be measured as of such specified date).                           7.2.2       Each of the Sellers and each of the Corporations shall have performed in all material respects each obligation and agreement and shall have complied in all material respects with each covenant to be performed and complied with by it under this Agreement at or prior to the Closing.                           7.2.3       Except as disclosed in the Financial Statements or in Section 3.6 of the Corporations' Disclosure Schedule, during the period from September 30, 1999 through the Closing Date, there shall not have been any Material Adverse Change affecting the Consolidated Companies, nor any loss or damage to the assets of the Consolidated Companies, whether or not insured, which materially affects the Consolidated Companies' ability to conduct the Businesses. The Purchaser shall have received a certificate (executed by the President or any Vice President of the Parent Seller to such officer's best knowledge), dated the Closing Date, to the foregoing effect. It is understood that for purposes of this Agreement (including the provisions of Section 7.2.1 and Section 7.2.2), events which occur after the date hereof and which (x) result principally from the acts or omissions of the Purchasers and/or their respective Affiliates, (y) constitute a change in or effect upon the a ssets (including intangible assets), liabilities (contingent or otherwise), condition (financial or otherwise) or results of operations of the Consolidated Companies arising out of or principally attributable to conditions, events or circumstances generally affecting the industries in which the Consolidated Companies operate or (z) constitute a change in or effect upon the assets (including intangible assets), liabilities (contingent or otherwise), condition (financial or otherwise) or results of operations of the Consolidated Companies arising out of or attributable to the loss by the Consolidated Companies of any of their customers (including business of such customers), suppliers or employees (including any financial consequences of such loss of customers (including business of such customers), suppliers or employees) due principally to the transactions contemplated hereby or the public announcement of this Agreement shall not be taken into account in determining whether any Material Adverse Change has tr anspired with respect to the Sellers or the Consolidated Companies.                           7.2.4      (i) The authorizations, consents, waivers, approvals or other actions required in connection with the execution, delivery and performance of this Agreement by the Corporations and the Sellers and referred to in Section 2 of the Corporations' Disclosure Schedule, shall have been obtained and shall be in full force and effect; and (ii) all authorizations, consents, waivers, approvals or other actions necessary to permit the Purchasers to own the RSI Common Stock and the BBMC Common Stock shall have been obtained and shall be in full force and effect.                           7.2.5       Prior to or at the Closing, the Sellers and the Corporations shall have delivered to the Purchaser the following:                                        (i)      a certificate of the President or a Vice President of the Parent Seller, dated the Closing Date, to the effect that (1) the person signing such certificate is familiar with this Agreement and (2) to the best of such person's knowledge, the conditions specified in Sections 7.2.1, 7.2.2, 7.2.3 and 7.2.4 have been satisfied; and                                        (ii)      a certificate of the Secretary or Assistant Secretary of each of the Sellers and each of the Corporations, dated the Closing Date, as to the incumbency of any officer of such entity executing this Agreement or any document related hereto; and setting forth the organizational documents of such entity and all amendments thereto and the resolutions of such entity's Board of Directors (or Executive Committees thereof) authorizing the execution, delivery and consummation of this Agreement and the transactions contemplated hereby.                           7.2.6       The Parent Seller shall have executed and delivered the Transition Support Agreement and the Sellers shall have executed and delivered the Escrow Agreement.              Section 7.3      Conditions to the Sellers' Obligations.       The obligations of the Sellers and the Corporations to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing of each of the following conditions:                           7.3.1       The representations and warranties of the Purchasers set forth in Article V shall be true and correct in all material respects (other than representations and warranties which are qualified as to materiality and Material Adverse Change, which representations and warranties shall be true in all respects) on the date hereof and on and as of the Closing Date as though made on and as of the Closing Date (except for representations and warranties made as of a specified date, which shall be measured only as of such specified date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitations as to "materiality" or a Material Adverse Change set forth therein) does not have and is not reasonably likely to have, individually or in the aggregate, a Material Adverse Change with respect to the Purchasers, provided that the representations and warranties set forth in Sections 5.2 and 5.3 shall be t rue and correct in all material respects (other than representations and warranties which are qualified as to materiality, which representations and warranties shall be true in all respects) on the date hereof and as of the Closing Date as though made on and as of the Closing Date (except for representations and warranties made as of a specified date, which shall be measured as of such specified date).                           7.3.2       The Purchasers shall have performed in all material respects each obligation and agreement and shall have complied in all material respects with each covenant to be performed and complied with by them under this Agreement at or prior to the Closing.                           7.3.3       Prior to or at the Closing, each of the Purchasers shall have delivered to the Seller the following:                                        (i)      a certificate of the President or a Vice President of such Purchaser, dated the Closing Date, to the effect that (1) the person signing such certificate is familiar with this Agreement and (2) to the best of such person's knowledge, the conditions specified in Sections 7.3.1 and 7.3.2 have been satisfied; and                                        (ii)      a certificate of the Secretary or Assistant Secretary of such Purchaser, dated the Closing Date, as to the incumbency of any officer of such Purchaser executing this Agreement or any document related hereto and setting forth the certificate of incorporation and in the case of the Parent Purchaser, its code of regulations, and in the case of the Purchaser, its by-laws, and all amendments thereto and the resolutions of each such Purchaser's Board of Directors (or Executive Committee thereof) authorizing the execution, delivery and consummation of this Agreement and the transactions contemplated hereby.                           7.3.4       At the Closing, the Purchaser shall have tendered the Preliminary Purchase Price in accordance with Sections 2.3.4 and 2.3.5.                           7.3.5       The Purchasers shall have executed and delivered the Transition Support Agreement and the Escrow Agreement.   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE VIII Termination              Section 8.1      Termination.        This Agreement may be terminated at any time prior to the consummation of the Closing, under the following circumstances:                           8.1.1       by mutual written consent of the Parent Seller and the Purchaser;                           8.1.2       by either the Parent Purchaser or the Parent Seller if any permanent injunction or other order of a court or other competent Governmental Authority preventing the consummation of the transactions contemplated hereby shall have become final and nonappealable;                           8.1.3       by either the Parent Purchaser or the Parent Seller if the Closing shall not have been consummated on or before the Outside Date; provided that the right to terminate this Agreement under this Section 8.1.3 shall not be available to any party (i) whose willful act, willful failure to act, or failure to perform all of its obligations and satisfy all conditions to be performed or satisfied by it hereunder, or (ii) whose Affiliate's willful act, willful failure to act, or failure to perform all of its obligations and satisfy all conditions to be performed or satisfied by it hereunder, has been the cause of or resulted in the failure of the Closing to be consummated on or before the Outside Date);                           8.1.4       by the Purchaser or the Parent Seller if, at or before the completion of the Closing, it shall have discovered that any representation or warranty made in this Agreement for its benefit, or in any certificate, exhibit or document furnished to it pursuant to this Agreement, is untrue in any material respect (other than representations and warranties that are qualified as to materiality or Material Adverse Change, which representations and warranties will give rise to termination if untrue in any respect); provided that, in each case, (a) the party seeking to terminate this Agreement is not then in material breach of any material representation or warranty contained in this Agreement, (b) such untrue representation or warranty cannot be or has not been cured within thirty (30) calendar days after receipt of written notice of such breach and (c) in the case of representations or warranties by the Sellers or the Corporations, except for the representations an d warranties contained in Sections 3.3, 3.4, 3.5, 4.2,4.3 and 4.4, and in the case of representations or warranties by the Purchasers, except for the representations and warranties contained in Sections 5.2 and 5.3, such untrue representation and warranty will represent, or is reasonably likely to represent, a Material Adverse Change with respect to the Consolidated Companies, or a Material Adverse Change with respect to the Purchasers, as the case may be, and in each case after giving effect to consummation of the transactions contemplated by this Agreement;                           8.1.5       by the Parent Purchaser if the Sellers or the Corporations shall have defaulted in the performance of any material obligation under this Agreement; provided, however, that in order to terminate this Agreement under this Section 8.1.5, the Purchasers shall, upon discovery of such a breach or default, give written notice thereof to the breaching party and the breaching party shall fail to cure the breach or default by the earlier of twenty (20) calendar days after receipt of such notice or the Closing Date;                           8.1.6       by the Parent Seller if the Purchasers shall have defaulted in the performance of any material obligation under this Agreement; provided, however, that in order to terminate this Agreement under this Section 8.1.6, the Parent Seller shall, upon discovery of such a breach or default, give written notice thereof to the Purchasers and the Purchasers shall fail to cure the breach or default by the earlier of twenty (20) calendar days after receipt of such notice or the Closing Date;                           8.1.7        by the Parent Purchaser, in the event that the conditions to the Purchasers' obligations set forth in Article VII hereof have not been satisfied or waived by the date set for the Closing or in the event that the Parent Purchaser reasonably determines that any such condition cannot possibly be satisfied prior to the Outside Date; and                           8.1.8       by the Parent Seller, in the event that the conditions to the Sellers' obligations set forth in Article VII hereof have not been satisfied or waived by the date set for the Closing or in the event that the Parent Seller reasonably determines that any such condition cannot possibly be satisfied prior to the Outside Date.              Section 8.2      Effect of Termination.                           8.2.1       In the event of the termination of this Agreement pursuant to Section 8.1, this Agreement, except for the last two sentences of Section 6.1.1 and the provisions of Sections 10.2 and 10.9 and this Section 8.2, shall become void and have no effect, without any liability on the part of any party hereto or its directors, officers or stockholders. Notwithstanding the foregoing, nothing in this Section 8.2 shall relieve any party to this Agreement of liability for a material breach of any covenant in this Agreement and provided, further, however, that if it shall be judicially determined that termination of this Agreement was caused by an intentional breach of this Agreement, then, in addition to other remedies at law or equity for breach of this Agreement, the party so found to have intentionally breached this Agreement shall indemnify and hold harmless the other parties for their respective out-of-pocket costs, including the fees and expenses of their counse l, accountants, financial advisors and other experts and advisors as well as fees and expenses incident to the negotiation, preparation and execution of this Agreement and related documentation.   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE IX Survival of Representations and Warranties; Indemnification              Section 9.1       Survival of Representations and Warranties.                           9.1.1       Except as set forth in Sections 9.1.2, 9.1.3 and 9.1.4, the representations and warranties provided for in this Agreement shall survive the Closing and remain in full force and effect, for the benefit of the parties hereto and their successors and assigns, for a period of twelve (12) months after the Closing Date.                         9.1.2       The representations and warranties provided for in Sections 3.15.1, 3.15.2, 3.15.4 and 3.15.5 shall survive the Closing and remain in full force and effect for the benefit of the parties hereto and their successors and assigns until the date on which the Final Accountant's Report is rendered by the Independent Accountant or, if no issues are submitted to an Independent Accountant pursuant to Section 2.5, the date on which the parties hereto agree upon the Final Accountant's Report.                           9.1.3       The representations and warranties provided for in Section 3.12 shall survive the Closing and remain in full force and effect, for the benefit of the Purchasers and their successors and assigns, for a period ending eighteen (18) months after the Closing Date.                           9.1.4       The representations and warranties provided for in Sections 3.2, 3.3, 3.4, 3.14, 4.1, 4.2, 4.4, 4.5, 5.1, 5.2 and 5.5 shall survive the Closing and remain in full force and effect, for the benefit of the parties hereto and their successors and assigns, for an indefinite period.                           9.1.5       The survival period of each representation or warranty as provided in this Section 9.1 is hereinafter referred to as the "Survival Period."              Section 9.2      Indemnification.                           9.2.1       Subject to the limitations set forth in Section 9.2.4 and 9.5, subsequent to the Closing, the Sellers shall, jointly and severally, indemnify and hold harmless the Purchasers, their Subsidiaries and Affiliates, officers, directors, employees, agents and representatives, the Consolidated Companies, and any Person claiming by or through any of the foregoing, against and in respect of any and all claims, costs, expenses, damages, penalties, liabilities, losses or deficiencies (including reasonable attorneys' and consultants' fees and other reasonable costs and expenses) (the "Damages") arising out of, resulting from or incurred in connection with (i) any inaccuracy (without giving effect to any reference to materiality, knowledge or Material Adverse Change in any specific representation and warranty other than the references to materiality, knowledge or Material Adverse Change in the provisions identified in Appendix 9.2.1 annexed hereto, it being understood that the references listed in such Appendix 9.2.1 shall be given full force and effect) in any representation, other than the representations set forth in Section 3.8 of this Agreement, made by the Sellers or the Corporations in this Agreement for the applicable Survival Period, (ii) the breach by the Sellers of any covenant or agreement to be performed by the Sellers hereunder and the breach by the Corporations of any covenant or agreement to be performed by the Corporations hereunder at or prior to the Closing, (iii) any Taxes imposed upon or relating to (A) any of the Consolidated Companies for any Pre-Closing Period, except to the extent such Taxes are specifically identified as Taxes in the consolidated balance sheet of the Consolidated Companies as of the Closing Date that is contained in the Final Accountant's Report, (B) the Transfer UNITI Items for any taxable period, the UNITI System Assignment and Assumption Agreement, the transfer of the Transfer UNITI Items pursuant to the UNITI System Assignme nt and Assumption Agreement, the Transfer Assets (including the copyrights assigned pursuant to the Copyright Assignment and Assumption Agreement) for the Pre-Closing Period, the Transfer Real Property Deed, the transfer of the Transfer Real Property pursuant to the Transfer Real Property Deed, the Copyright Assignment and Assumption Agreement, the assignment of copyrights and assumption of liabilities pursuant to the Copyright Assignment and Assumption Agreement, the Assignment of Marks, the assignment of the Transfer Marks pursuant to the Assignment of Marks, the Assignment of Lease or the assignment and assumption of the Transfer Lease pursuant to the Assignment of Lease, the Assignment of Data Center Assets, the assignment of Transfer Data Center Assets and assumption of related liabilities pursuant to the Assignment of Data Center Assets and assumption of related liabilities and (C) any Tax imposed upon or relating to the Sellers or the Seller Affiliated Group for any period, including any such Tax for which the Consolidated Companies may be liable under Section 1.1502-6 of the Treasury Regulations (or any comparable provision of state, local or foreign law), as a transferee or successor, by contract or otherwise and (iv) all Damages suffered by the Consolidated Companies subsequent to the Closing Date with respect to the following matters: (U) the "Northwestern Litigation" (as defined in Section 3.13 of the Corporations' Disclosure Schedule), (V) the "Nicol Litigation" (as defined in Section 3.13 of the Corporations' Disclosure Schedule), (W) the latex glove cases described in a schedule attached to Section 3.13 of the Corporations' Disclosure Schedule, (X)the "Lemelson Suit" (as defined in Section 3.10 of the Corporations' Disclosure Schedule), (Y) the fee dispute with Premier described in Section 3.19 of the Corporations' Disclosure Schedule and (Z) the "IBS Claim" (as defined in Section 3.13 of the Corporations' Disclosure Schedule).                           9.2.2       Subject to the limitations set forth in Sections 9.2.4 and 9.5, subsequent to the Closing, the Purchasers shall indemnify and hold harmless the Sellers, their Affiliates, officers, directors, employees, agents and representatives, and any Person claiming by or through any of them, against and in respect of any and all Damages arising out of, resulting from or incurred in connection with (i) any inaccuracy (without giving effect to any reference to materiality, knowledge or Material Adverse Change in any specific representation and warranty) in any representation made by the Purchasers in this Agreement, (ii) the breach by the Purchasers of any covenant or agreement to be performed by them hereunder, (iii) any environmental testing performed or conducted by or on behalf of the Purchasers pursuant to Section 6.1.1 and (iv) any guaranties given by the Parent Seller or its Subsidiaries (other than the Consolidated Companies) with respect to (a) liabilities of the Consolidated Companies included in the consolidated balance sheet of the Consolidated Companies as of the Closing Date that is contained in the Final Accountant's Report or (b) liabilities of the Consolidated Companies arising on and after the Closing Date under leases or other agreements of the Consolidated Companies in effect as of the Closing Date. The Purchasers shall use commercially reasonable efforts to cause the Parent Seller and its Subsidiaries (other than the Consolidated Companies) to be released from all such guaranties.                           9.2.3       Any Person providing indemnification pursuant to the provisions of this Section 9.2 is hereinafter referred to as an "Indemnifying Party" and any Person entitled to be indemnified pursuant to the provisions of this Section 9.2 is hereinafter referred to as an "Indemnified Party."                           9.2.4       The Sellers' indemnification obligations contained in Section 9.2.1(i) shall not apply to any claim for Damages until the aggregate of all such claims total one million dollars ($1,000,000) (the "Basket Amount"), in which event the Sellers' indemnity obligation contained in Section 9.2.1(i) shall apply to the total amount in excess of the Basket Amount, subject to a maximum liability to the Purchasers, in the aggregate, of twenty million dollars ($20,000,000) (the "Cap Amount") for all claims under Section 9.2.1(i) in the aggregate. It is understood and agreed that neither the Basket Amount nor the Cap Amount are applicable to the Sellers' indemnification obligations contained in Sections 9.2.1(ii), 9.2.1(iii) or 9.2.1(iv). The Purchasers' indemnification obligation contained in Section 9.2.2(i) shall not apply to any claim for Damages until the aggregate of all such claims total the Basket Amount, in which event the Purchasers' indemnity obligation cont ained in Section 9.2.2(i) shall apply to the total amount in excess of the Basket Amount, subject to a maximum liability to the Sellers, in the aggregate, of the Cap Amount for all claims under Section 9.2.2(i) in the aggregate. It is understood and agreed that neither the Basket Amount nor the Cap Amount are applicable to the Purchasers' indemnification obligations contained in Sections 9.2.2(ii), 9.2.2(iii) or 9.2(iv). All claims (other than claims relating to Taxes) made during the relevant Survival Period shall be counted in determining whether the Basket Amount or the Cap Amount specified above have been achieved; provided, however, that no claim made pursuant to Section 9.2.1(ii), 9.2.1(iii), 9.2.1(iv), 9.2.2(ii), 9.2.2(iii) or 9.2.2(iv) shall be counted toward determining whether the thresholds applicable to the Basket Amount or the Cap Amount have been achieved. Notwithstanding the foregoing, (a) no party shall be obligated to provide indemnification with respect to any claim under Sections 9 .2.1(i) or 9.2.2(i) for Damages if the entire amount of Damages relating to such claim is less than $15,000 (aggregating for such purposes like, similar or related claims) and (b) no party shall be obligated to provide indemnification under Sections 9.2.1(i) or 9.2.2(i) unless it is notified of the claim for Damages within the Survival Period applicable to such claim.                           9.2.5       The provisions of Article IX shall constitute the sole and exclusive remedy of any Indemnified Party for Damages arising out of, resulting from or incurred in connection with any inaccuracy in any representation or the breach of any warranty made by the Purchaser, the Sellers or the Corporations in this Agreement or in connection with any failure by the Consolidated Companies to pay any Taxes with respect to any Tax periods ending on or before the Closing Date.              Section 9.3       Procedures for Third Party Claims.       In the case of any claim for indemnification arising from a claim of a third party (a "Third Party Claim"), an Indemnified Party shall give prompt written notice to the Indemnifying Party of any claim or demand of which such Indemnified Party has knowledge and as to which it may request indemnification hereunder. The Indemnifying Party shall have the right (and if it elects to exercise such right, to do so within 30 days after receiving notice from the Indemnified Party) to defend and to direct the defense against any such Third Party Claim, in its name or in the name of the Indemnified Party, as the case may be, at the expense of the Indemnifying Party, and with counsel selected by the Indemnifying Party, unless (a) the Indemnifying Party shall not have taken any action to defend such Third Party Claim within such 30-day period, or (b) the Indemnified Party shall have re asonably concluded that (i) there is a conflict of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense of such Third Party Claim or (ii) the Indemnified Party has one or more material defenses not available to the Indemnifying Party. Notwithstanding anything in this Agreement to the contrary (other than the last sentence of this Section 9.3), the Indemnified Party shall, at the expense of the Indemnifying Party, cooperate with the Indemnifying Party, and keep the Indemnifying Party fully informed, in the defense of such Third Party Claim. The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel employed at its own expense; provided, however, that, in the case of any Third Party Claim described in clause (i) or (ii) of the second preceding sentence or as to which the Indemnifying Party shall not in fact have employed counsel to assume the defense of such Third Party Claim within such 30-day period, the r easonable fees and disbursements of such Indemnified Party's counsel shall be at the expense of the Indemnifying Party. The Indemnifying Party shall have no indemnification obligations with respect to any Third Party Claim which shall be settled by the Indemnified Party without the prior written consent of the Indemnifying Party, which consent (except as set forth in the immediately following sentence) shall not be unreasonably withheld or delayed. Notwithstanding the foregoing provisions of this Section 9.3, the Parent Seller shall have the right to control all claims, proceedings, suits or other actions subject to indemnification by Parent Seller under Section 9.2.1(iv), including the selection of legal counsel, provided that the Parent Purchaser shall have the right to participate in such Third Party Claim with legal counsel at its own expense, shall be kept advised of developments and shall cooperate with the Parent Seller therein; the determination as to whether or not to settle any claims, proceeding s, suits or other actions subject to indemnification by Parent Seller under Section 9.2.1(iv) shall be made by the Parent Seller. The provisions above of this Section 9.3 shall not apply to Third Party Claims involving Taxes, which claims shall instead be governed by the provisions of Section 6.12.              Section 9.4       Procedures for Inter-Party Claims.       In the event that an Indemnified Party determines that it has a claim for Damages against an Indemnifying Party hereunder (other than as a result of a Third Party Claim), the Indemnified Party shall give prompt written notice thereof to the Indemnifying Party, specifying the amount of such claim and any relevant facts and circumstances relating thereto. The Indemnified Party shall provide the Indemnifying Party with reasonable access to its books and records for the purpose of allowing the Indemnifying Party a reasonable opportunity to verify any such claim for Damages. The Indemnified Party and the Indemnifying Party shall negotiate in good faith for a thirty (30) day period regarding the resolution of any disputed claims for Damages. If no resolution is reached with regard to such disputed claim between the Indemnifying Party and the Indemnified Party within such thir ty (30) day period, the Indemnified Party shall be entitled to seek appropriate remedies in accordance with the terms hereof. Promptly following the final determination of the amount of any Damages claimed by the Indemnified Party, the Indemnifying Party shall pay such Damages to the Indemnified Party by wire transfer or check made payable to the order of the Indemnified Party, without interest. In the event that the Indemnified Party is required to institute legal proceedings in order to recover Damages hereunder, the cost of such proceedings (including costs of investigation and reasonable attorneys' fees and disbursements) shall be added to the amount of Damages payable to the Indemnified Party if the Indemnified Party recovers Damages in such proceedings. In the event that a party hereto claiming to be an Indemnified Party institutes legal proceedings in order to recover Damages hereunder and the applicable court refuses to award any Damages to such party, such party shall reimburse the defending party for the cost of such proceedings (including costs of investigation and reasonable attorneys' fees and disbursements).              Section 9.5       Calculation of Damages.        The Damages suffered by any party shall be calculated after giving effect to (a) all applicable Tax consequences of the event giving rise to indemnification and (b) the receipt of any available insurance proceeds. Notwithstanding any provision herein to the contrary, except for purposes of Section 9.2.1(iii), the term "Damages" shall not include any liability to the extent that such liability is reflected as a liability in the consolidated balance sheet of the Consolidated Companies as of the Closing Date that is contained in the Final Accountant's Report.              Section 9.6      Applicability of the Escrow Agreement.       To the extent that claims are made against the Sellers pursuant to this Article IX prior to the time that all funds have been disbursed under the Escrow Agreement, the terms of the Escrow Agreement shall govern with respect to the obligations of the Escrow Agent to make payments to the Purchasers in settlement of the Purchasers' rights under this Article IX.   -------------------------------------------------------------------------------- [ TABLE OF CONTENTS ]   ARTICLE X Miscellaneous              Section 10.1      Notices.        All notices or other communications required or permitted hereunder shall be in writing and shall be delivered personally, by facsimile, by overnight courier or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given when so delivered personally, or when so received by facsimile or courier, or if mailed, three calendar days after the date of mailing, as follows: If to the Sellers or the Corporations: Bergen Brunswig Corporation   4000 Metropolitan Drive   Orange, California 92868   Telephone: (714) 385-4000   Facsimile: (714) 385--6815   Attention: Milan A. Sawdei, Chief Legal Officer       with a copy (which shall not constitute notice) to:       Lowenstein Sandler PC   65 Livingston Avenue   Roseland, New Jersey 07068   Telephone: (973) 597-2500   Facsimile: (973) 597-2400   Attention: Peter H. Ehrenberg, Esq.     If to the Purchasers: Cardinal Health, Inc.   7000 Cardinal Place   Dublin, Ohio 43017   Telephone: (614) 757-7354   Facsimile: (614) 757-6948   Attention: Steven Alan Bennett, Chief Legal Officer       With a copy (which shall not constitute notice) to:       Wachtell, Lipton, Rosen & Katz   51 West 52nd Street   New York, New York 10019   Telephone: (212) 403-1309   Facsimile: (212) 403-2309   Attention: David A. Katz, Esq. or to such other address as any party hereto shall notify the other parties hereto (as provided above) from time to time.              Section 10.2       Expenses.        Regardless of whether the transactions provided for in this Agreement are consummated, except as otherwise provided herein, each of the parties hereto shall pay its own expenses incident to this Agreement and the transactions contemplated herein (including legal fees, accounting fees and investment banking fees).              Section 10.3       Governing Law; Consent to Jurisdiction.       This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without reference to the choice of law principles thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the United States District Court for any District within such state for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby. Service of process in connection with any such suit, action or proceeding may be served on each party hereto anywhere in the world by the same methods as are specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.              Section 10.4       No Jury Trial.        Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues, and therefore each such party hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect to any litigation directly or indirectly arising out of or relating to this Agreement or the transactions contemplated by this Agreement. Each party certifies and acknowledges that (i) no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each such party understands and has considered the implications of this waiver, (iii) each such party makes this waiver voluntarily, and (iv) each such party has been induced to enter into this Agreement by, among other things, the waivers and certifications in this Section 10.4.              Section 10.5       Assignment; Successors and Assigns; No Third Party Rights.       Except as otherwise provided herein, this Agreement may not be assigned by operation of law or otherwise, and any attempted assignment shall be null and void. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives. This Agreement shall be for the sole benefit of the parties to this Agreement, and their respective successors, assigns and legal representatives, and is not intended, nor shall be construed, to give any Person, other than the parties hereto and their respective successors, assigns and legal representatives any legal or equitable right, remedy or claim hereunder.              Section 10.6       Counterparts.        This Agreement may be executed in counterparts, each of which shall be deemed an original agreement, but all of which together shall constitute one and the same instrument.              Section 10.7       Titles and Headings.        The headings and table of contents in this Agreement are for reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement.              Section 10.8      Entire Agreement.        This Agreement (including the disclosure schedules delivered in connection with this Agreement and the agreements referenced in the appendices attached hereto), and the confidentiality agreement among the parties dated April 28, 2000 constitute the entire agreement among the parties with respect to the matters covered hereby and thereby and supersede all previous written, oral or implied understandings among them with respect to such matters.              Section 10.9      Amendment and Modification.       This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors (or Executive Committees thereof). Notwithstanding the foregoing, this Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.              Section 10.10      Publicity; Public Announcements.       Unless otherwise required by applicable laws or the requirements of any national securities exchange (and in that event only if time does not permit), at all times prior to the earlier of the consummation of the Closing or termination of this Agreement pursuant to Section 8.1, the Sellers and the Purchasers shall consult with each other before issuing any press release with respect to the transactions contemplated hereby and shall not issue any such press release prior to such consultation. The Sellers and the Purchasers will consult with each other concerning the means by which the Corporations' employees, customers, suppliers and others having dealings with the Corporations will be informed of this Agreement and the transactions contemplated hereby.              Section 10.11       Waiver.        Any of the terms or conditions of this Agreement may be waived at any time by the party or parties entitled to the benefit thereof, but only by a writing signed by the party or parties waiving such terms or conditions.              Section 10.12       Severability.        The invalidity of any portion hereof shall not affect the validity, force or effect of the remaining portions hereof. If it is ever held that any restriction hereunder is too broad to permit enforcement of such restriction to its fullest extent, such restriction shall be enforced to the maximum extent permitted by law.              Section 10.13       No Strict Construction.       The Purchasers, the Corporations and the Sellers each acknowledge that this Agreement has been prepared jointly by the parties hereto, and shall not be strictly construed against any party.              Section 10.14       Knowledge.       To the extent that any representation is made to the knowledge of the Sellers or the Corporations, such knowledge shall refer to the actual knowledge, after reasonable inquiry, of the individuals listed on Appendix 10.14.              Section 10.15       Affiliate Status.        To the extent that a party is required hereunder to take certain action with respect to entities designated herein as such party's Affiliates, such obligation shall apply to such entities only during such period of time that such entities are Affiliates of such party.   --------------------------------------------------------------------------------                               IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.       BERGEN BRUNSWIG CORPORATION       By:______________________________   Name: Neil F. Dimick   Title: Executive Vice President           DURR FILLAUER MEDICAL, INC.       By:______________________________   Name: Neil F. Dimick   Title: Executive Vice President           BERGEN BRUNSWIG MEDICAL CORPORATION       By:______________________________   Name: Neil F. Dimick   Title: Executive Vice President           RANSDELL SURGICAL, INC.       By:______________________________   Name: Neil F. Dimick   Title: Executive Vice President           ALLEGIANCE CORPORATION       By:______________________________   Name: Brendan A. Ford   Title: Executive Vice President           CARDINAL HEALTH, INC.       By:______________________________   Name: Brendan A. Ford   Title: Executive Vice President       --------------------------------------------------------------------------------     TABLE OF CONTENTS           Page         RECITALS ............................................................................................................................. 1         ARTICLE I         Certain Definitions and Other Matters     Section 1.1 Certain Definitions ................................................................... 1   Section 1.2 Terms Defined in Other Sections ........................................... 9   Section 1.3 Interpretation ............................................................................. 11     ARTICLE II      Purchase and Sale of Stock     Section 2.1 Purchase and Sale of the RSI Common Stock and the            BBMC Common Stock ..................................................... 11   Section 2.2 Preliminary Purchase Price ................................................... 11   Section 2.3 Deliveries at the Closing ........................................................ 11   Section 2.4 Closing ..................................................................................... 12   Section 2.5 Post-Closing Purchase Price Determination ...................... 12     ARTICLE III       Representations and Warranties Regarding the Consolidated Companies   Section 3.1 Organization and Standing; Business .................................. 15   Section 3.2 Subsidiaries ............................................................................ 15   Section 3.3 Corporate Power and Authority ............................................ 16   Section 3.4 Capitalization of the Corporations ........................................ 16   Section 3.5 Conflicts; Consents and Approvals ...................................... 16   Section 3.6 No Material Adverse Change; Other Changes ................... 17   Section 3.7 Insurance ................................................................................. 18   Section 3.8 Taxes ....................................................................................... 18   Section 3.9 Compliance with Law ............................................................ 19   Section 3.10 Intellectual Property ................................................................ 20   Section 3.11 Title to Properties; Condition and Sufficiency of Assets ... 20   Section 3.12 Environmental Matters ........................................................... 20   Section 3.13 Litigation ................................................................................. 21   Section 3.14 Brokerage and Finder's Fees; Expenses ........................... 22   Section 3.15 Financial Statements ............................................................ 22   Section 3.16 Employee Benefit Plans ....................................................... 23   Section 3.17 Contracts ............................................................................... 26   Section 3.18 Labor Matters ........................................................................ 26   Section 3.19 Undisclosed Liabilities ......................................................... 27   Section 3.20 Permits; Compliance ............................................................ 27   Section 3.21 UNITI System ......................................................................... 27   Section 3.22 Entire Business ..................................................................... 28   Section 3.23 March 31 Value ..................................................................... 28     ARTICLE IV       Representations and Warranties Regarding the Sellers     Section 4.1 Organization and Qualification of the Sellers .................... 28   Section 4.2 Corporate Power and Authority .......................................... 28   Section 4.3 Conflicts; Consents and Approvals .................................... 28   Section 4.4 Ownership of Shares ........................................................... 29   Section 4.5 Brokers .................................................................................. 30     ARTICLE V       Representations and Warranties Regarding the Purchasers     Section 5.1 Organization and Standing ................................................. 30   Section 5.2 Corporate Power and Authority ......................................... 30   Section 5.3 Conflicts; Consents and Approvals ................................... 30   Section 5.4 No Material Adverse Change; Other Changes ................ 31   Section 5.5 Brokers ................................................................................. 31     ARTICLE VI       Covenants and Agreements     Section 6.1 Access and Information ...................................................... 31   Section 6.2 Affirmative Covenants ......................................................... 32   Section 6.3 Negative Covenants ............................................................ 33   Section 6.4 Negative Covenants ............................................................ 34   Section 6.5 Closing Documents ............................................................. 34   Section 6.6 Non-Competition and Confidentiality Agreement ............ 34   Section 6.7 Reasonable Efforts; Further Assurances .......................... 36   Section 6.8 Certain Covenants .............................................................. 36   Section 6.9 Notification by the Parties .................................................. 38   Section 6.10 Employees and Employee Benefits .................................. 38   Section 6.11 No Solicitation ..................................................................... 41   Section 6.12 Tax Matters .......................................................................... 42   Section 6.13 UNITI System Assignment and Assumption Agreement . 45   Section 6.14 Transfer Real Property Deed ............................................ 46   Section 6.15 Additional Employment Matters ........................................ 46   Section 6.16 [Intentionally Omitted] ......................................................... 47   Section 6.17 License Agreement ............................................................ 47   Section 6.18 Assignment of Insurance Proceeds ................................. 47   Section 6.19 Insurance Matters ............................................................... 47   Section 6.20 Access to Records after Closing ..................................... 48   Section 6.21 Change of BBMC Name ................................................... 48   Section 6.22 Credit Facility Liens and Guaranties ............................... 48     ARTICLE VII       Conditions to Closing     Section 7.1 Mutual Conditions .............................................................. 49   Section 7.2 Conditions to the Purchaser's Obligations ..................... 50   Section 7.3 Conditions to the Sellers' Obligations ............................. 51     ARTICLE VIII       Termination     Section 8.1 Termination ........................................................................ 52   Section 8.2 Effect of Termination ......................................................... 54     ARTICLE IX       Survival of Representations and Warranties; Indemnification     Section 9.1 Survival of Representations and Warranties .................. 54   Section 9.2 Indemnification .................................................................. 55   Section 9.3 Procedures for Third Party Claims ................................. 57   Section 9.4 Procedures for Inter-Party Claims .................................. 58   Section 9.5 Calculation of Damages .................................................. 58   Section 9.6 Applicability of the Escrow Agreement .......................... 59     ARTICLE X       Miscellaneous     Section 10.1 Notices .............................................................................. 59   Section 10.2 Expenses .......................................................................... 60   Section 10.3 Governing Law; Consent to Jurisdiction ........................ 60   Section 10.4 No Jury Trial ...................................................................... 60   Section 10.5 Assignment; Successors and Assigns; No Third Party              Rights .......................................................................... 61   Section 10.6 Counterparts .................................................................... 61   Section 10.7 Titles and Headings ........................................................ 61   Section 10.8 Entire Agreement ............................................................ 61   Section 10.9 Amendment and Modification ........................................ 61   Section 10.10 Publicity; Public Announcements ................................... 61   Section 10.11 Waiver ............................................................................... 61   Section 10.12 Severability ....................................................................... 61   Section 10.13 No Strict Construction ..................................................... 62   Section 10.14 Knowledge ....................................................................... 62   Section 10.15 Affiliate Status ................................................................. 62   --------------------------------------------------------------------------------     APPENDICES       1.1 Escrow Agreement 1.2 Transfer Real Property description 1.3 Transfer Real Property Deed 1.4 Transition Support Agreement 1.5 Transfer UNITI Items description 1.6 UNITI System Assignment and Assumption Agreement 1.7 Transfer Lease 1.7A Assignment and Assumption of Lease 1.8 Transfer Marks 1.8A Assignment of Marks 1.8B Copyright Assignment and Assumption Agreement 1.8C Assignment of Data Center Assets and Assumption of Related Liabilities 1.9 License Agreement 1.9A Transfer Data Center Assets 6.10.2 Consolidated Company Employees 6.10.5 CIC Employees 6.10.8 Stay Pay 9.2.1 Qualifiers 10.14 Sellers' List of Persons with Knowledge

EX-10.61 3 ameracredit1061.htm 10.61 AUTO LOANS INTERNET AUTO LOAN PURCHASE AND SALE AGREEMENT   This Auto Loan Purchase and Sale Agreement ("Agreement") is made on June 5, 2000 (the "Effective Date"), by and between AmeriCredit Financial Services, Inc., a Delaware corporation with its principal office at 801 Cherry Street, Fort Worth, TX 76102 ("Correspondent") and E-LOAN, Inc., a Delaware corporation with its principal office at 5875 Arnold Road, Dublin, CA 94568 ("E-LOAN"). WHEREAS, E-LOAN maintains a website at www.eloan.com, and is engaged in the business of, among other things, origination and sale of loans to consumers for the purchase or refinance of motor vehicles ("Loans"); WHEREAS, E-LOAN desires to provide a broad range of available financing for consumers seeking Loans; WHEREAS, E-LOAN and Correspondent desire to enter into an arrangement whereby E-LOAN will sell Loans to Correspondent based on Correspondent's underwriting criteria; NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, E-LOAN and Correspondent hereby agree as follows: 1. Sale and Delivery of Loans. 1.1 Sale and Purchase of Loans. From time to time during the Term of this Agreement, E-LOAN shall sell, assign, transfer, convey and deliver to Correspondent, and Correspondent shall purchase from E-LOAN, without recourse and on a servicing released basis, all right, title and interest in and to Loans as provided in this Agreement. 1.2 Offer. From time to time during the Term of this Agreement, E-LOAN shall submit, for Correspondent's review and approval, an offer to sell one or more prospective Loans (each, an "Offer") under the terms of this Agreement. Each Offer shall be in a format acceptable to Correspondent, and shall include the items and information set forth on Exhibit A, which shall include the application relating to each offered Loan and such other information as mutually agreed by the parties. In determining whether to submit an Offer to Correspondent, E-LOAN shall apply Correspondent's underwriting and other criteria for purchase of Loans subject to this Agreement as set forth on Exhibit B ("Purchase Criteria") to the Loan application, and shall only submit Offers that E-LOAN reasonably believes satisfy the Purchase Criteria. E-LOAN is not obligated to offer to sell any Loans or prospective Loans to Correspondent. 1.3 Acceptance. On or before the Offer Expiration Date set forth on Exhibit A, Correspondent shall, in its sole discretion, accept or reject such offer, and shall inform E-LOAN of its decision. If Correspondent accepts an Offer, Correspondent shall electronically transmit to E-LOAN a Confirmation with respect to each prospective Loan to be purchased. The Confirmation shall include the information set forth on Exhibit C, and shall include a clear description of the conditions that must be met in order for Correspondent to purchase the Loan. Transmission of a Confirmation shall constitute acceptance of E-LOAN's Offer, and, except as provided herein, Correspondent shall be obligated to purchase the prospective Loan, provided that all conditions set forth in the Confirmation are met and the Loan is funded by E-LOAN prior to expiration of the Confirmation. Notwithstanding the transmission of a Confirmation by Correspondent, Correspondent shall not be obligated to purchase any loan if it has, within the past thirty (30) days, purchased a loan from any party or directly funded a loan on which the loan borrower is obligated.To withdraw a confirmation, Correspondent shall notify E-LOAN, prior to E-Loan funding the loan, in writing or in an electronic exchange mutually agreed upon by both parties that the Confirmation is no longer valid. If E-LOAN does not fund a prospective Loan and fulfill all conditions set forth in the Confirmation within thirty (30) days of E-LOAN's receipt of the Confirmation, the Confirmation shall expire, and Correspondent shall have no obligation to purchase the Loan. E-LOAN agrees that it will not offer for sale to any person other than Correspondent any Loan for which a Confirmation has been issued and is outstanding. Upon expiration of a Confirmation, E-LOAN shall be free to sell or offer to sell the subject Loan to any other person, provided, however, that E-LOAN shall give Correspondent a right of first refusal on any loan retained or sold by E-LOAN that was approved utilizing Correspondent's Confirmation. In the absence of a Confirmation issued by Correspondent with respect to a Loan, Correspondent is not obligated to purchase any Loan offered for sale by E-LOAN. 1.4 Funding and Delivery of Loans. E-LOAN shall use its best efforts to fulfill all conditions set forth in a Confirmation, and to fund the subject Loans prior to expiration of a Confirmation; however, E-LOAN is not obligated, except as provided in Section 1.3, to fund or sell any Loans to Correspondent, whether or not a Confirmation has been issued by Correspondent with respect to the subject Loan. Upon funding of a Loan subject to a Confirmation, E-LOAN shall immediately deliver to Correspondent, the loan documents and items set forth on Exhibit D, together with any other items required by the Confirmation relating to the subject Loan, evidencing funding and fulfillment of all conditions of the Confirmation ("Required Documents"). 1.5 Payment; Transfer. With respect to each Loan sold, Correspondent shall pay E-LOAN the amount set forth on Exhibit E ("Purchase Price"), in the manner, and by the time limits set forth in Exhibit E. The Purchase Price shall be the principal amount of the Loan, plus such additional compensation as the parties agree. Upon receipt by E-LOAN of the portion of the Purchase Price representing the principal balance of the Loan ("Transfer Date"), the Loan, and all rights, benefits, payments, proceeds and obligations arising from or in connection with the Loan, together with any lien or security interest in the vehicle serving as collateral for the Loan, shall vest in Correspondent. E-LOAN shall, on the Transfer Date, inform the borrower that the Loan has been sold to Correspondent, and that all payments should be made to Correspondent. Until the Transfer Date, E-LOAN shall own and control the application and all documentation relating to a prospective Loan to be sold. All Loans sold under this Agreement shall be sold without recourse, on a servicing released basis. With respect to each Loan as to which E-LOAN has not delivered to Correspondent all Required Documents prior to expiration of the Confirmation related to such Loan, Correspondent shall have no obligation to purchase the subject Loan. 2. Covenants. 2.1 Compliance with Law. Each party shall comply with all federal, state and local laws and regulations applicable to this Agreement and the respective party's obligations hereunder, including without limitation all consumer protection laws, state lending laws, the federal Equal Credit Opportunity Act, Truth in Lending Act, Fair Credit Reporting Act and Fair Debt Collection Practices Act and each of their respective regulations ("Applicable Law"). E-LOAN specifically agrees to provide all consumers rejected utilizing Correspondent's underwriting standards any adverse action notices required by state and federal law. E-LOAN shall provide prior written notice to Correspondent of any changes to the form documents for Loans, and shall update the forms as necessary to comply with Applicable Law. Correspondent shall provide prior written notice to E-LOAN of any changes to the Purchase Criteria, and shall update the Purchase Criteria as necessary to comply with Applicable Law. 2.2 Post-Closing Payments. All monies received by E-LOAN after the transfer of title to any Loan shall be promptly turned over to Correspondent in a manner specified by Correspondent. 2.3 Limited Power of Attorney. E-LOAN hereby appoints Correspondent, its agents, employees, successors and assigns, as its attorney in fact, with the full power of substitution, for the limited purpose of (1) endorsing E-LOAN's name on any checks, drafts, money orders or other forms of payment payable to E-LOAN that may come into Correspondent's possession with respect to any Loan purchased by Correspondent under this Agreement, and (2) executing any form or document necessary to effectuate the assignment of a Loan in accordance with this Agreement, or to create, perfect, assign or release a first priority security interest in a vehicle securing a Loan in favor of Correspondent. 2.4 Non-Discrimination. Correspondent's credit underwriting standards and Purchase Criteria comply with, and as such standards and Criteria may be revised from time to time throughout the term of this Agreement shall remain in compliance with, the anti-discrimination and other requirements of Applicable Law. Any allegation that Correspondent's credit underwriting standards or Purchase Criteria violate state or federal law or regulations shall be reported to and handled by Correspondent pursuant to Sections 5.1 and 5.2 of this Agreement. E-LOAN's loan origination practices comply with, and as such origination practices may be revised from time to time throughout the term of this Agreement shall remain in compliance with, the anti-discrimination and other requirements of Applicable Law. 2.5 Record Retention. Each party shall, at its own expense, maintain data, information, records and documents relating to Loans offered for sale or sold pursuant to this Agreement, in such manner and for such time period as is required by Applicable Law. Each party shall cooperate with one another and make such Loan records available to regulatory authorities to satisfy state or federal audit requirements. If a party has reasonable grounds to believe a default has occurred under this Agreement, that party shall have the right to review the records of the other party upon reasonable notice, provided that the requesting party shall be entitled to review only those records necessary to determine existence and extent of the default. Notwithstanding this section, E-LOAN shall have no right under this Agreement to review records relating to the development or application of Correspondent's credit underwriting models or Purchase Criteria. 2.6 Performance Reports. Within fifteen (15) days after the end of each calendar month during the Term of this Agreement, Correspondent shall provide to E-LOAN a report showing (i) the number of Loans purchased by Correspondent during the preceding month, and (ii) the principal balance of each Loan purchased by Correspondent during the preceding month. 2.7 Mutual Cooperation. During the term of this Agreement, the parties agree to cooperate with and assist each other, as reasonably requested, in carrying out the covenants, agreements, duties and responsibilities of one another under this Agreement, and shall from time to time, execute, acknowledge and deliver such additional instruments, assignments, endorsements, and documents as may reasonably be required or appropriate to facilitate the performance of this Agreement. Both parties shall work together with respect to coordinating the systems requirements for establishing and maintaining electronic connectivity, and each party shall bear its own expenses with respect thereto. 2.8 No Solicitation. From the date of this Agreement until any Loan sold to Correspondent is paid in full, E-LOAN agrees that it will not directly solicit the respective borrowers to apply for, or offer to such borrowers, any financial products, the proceeds of which could be used to pay off or refinance the subject Loan, including, without limitation, the solicitation or offering of any loan, line of credit, home equity loan or line of credit, or any other credit product. 3. Representations and Warranties of the Parties. As of the date of this Agreement, and throughout the Term, each party hereby represents and warrants to the other party that: 3.1 Due Organization and Good Standing. Each party is a corporation, duly organized, validly existing, and is qualified and authorized to transact business in, and is in good standing under the laws of, the jurisdiction of its organization and each jurisdiction in which it performs or will perform its obligations under this Agreement, or is otherwise doing business or is otherwise exempt under applicable Law from such qualification. 3.2 Authority and Capacity. Each party has the power, authority and capacity to execute, deliver, and perform its obligations under this Agreement. Each party's execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and legally binding agreement enforceable in accordance with its terms, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance. 3.3 Consent; Litigation. No consent or approval of any other party or any court or governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. There is no pending claim, cause of action, governmental action or litigation that, if determined adversely, would affect the party's ability to perform its obligations hereunder. This Agreement will not result in a default under any other agreement to which the party is bound. 3.4 Licenses. All necessary qualifications and licenses required by applicable law to conduct business as contemplated by this Agreement in all states where Loans are purchased and sold hereunder have been obtained, and will be maintained in good standing. 4. Additional Representations and Warranties of E-LOAN. As of each and every date E-LOAN sells and delivers a Loan to Correspondent under this Agreement, E-LOAN hereby represents and warrants to Correspondent with respect to each such Loan that: 4.1 Valid Loans. Each Loan is bona fide, valid, genuine and legally enforceable according to its terms and is duly and properly executed by the parties shown as borrowers who were, competent and had full legal capacity to enter into such Loan at the time they executed the same. E-LOAN represents and warrants that (1) there are no claims or defenses with respect to any Loan; (2) no Loan, or the obligations of any borrower, guarantor or surety with respect to any Loan, has been obtained by fraud or fraudulent representations; (3) no oral or written agreement exists or will exist whereby any of the terms of any Loan has been varied in any way; (4) the information provided to Corespondent in connection with each Loan is complete, true and correct; and (5) none of the borrowers, guarantors or sureties on the Loans are deceased, and none of such persons are the subject of any bankruptcy or other legal proceedings. 4.2 Loans Comply with Law. The form of each Loan and the transactions contemplated by the Loan comply with, and have been entered into in compliance with, all applicable law, and all required disclosures and notices have been given in compliance with all applicable law. Any applicable period during which the borrower may rescind the Loan has expired, and all Loan proceeds have been fully disbursed. 4.3 No Default. All payments required under each Loan have been made up to the date the Loan is sold. None of the payments made by borrower were made in whole or in part with funds loaned to borrower by E-LOAN or its affiliates. There is no default, breach, violation or event of acceleration existing under the terms of each Loan nor has any event occurred which, upon the giving of notice or the lapse of time, or both, would constitute a default, breach, violation or event of acceleration under the Loan. 4.4 Title and Insurance. For each Loan sold to Correspondent, the certificate of title to each vehicle securing a loan shall list E-LOAN, Correspondent or its designated nominee (as the parties shall mutually agree) as the first and only perfected purchase money lienholder on the certificate of title application or registration and on the required physical damage insurance policies and loss payable clauses relating to the vehicle securing the Loan. The certificate of title shall contain no notation of prior lemon law activity or salvage restoration.   4.5 Origination of Loans. Except as disclosed in writing to Correspondent and accepted by Correspondent prior to the Closing Date, each Loan has been originated in accordance with the Purchase Criteria and the terms and conditions of the applicable Confirmation. 4.6 Status of Loan. The information that appears on E-LOAN's accounting and all other pertinent records pertaining to any Loan accurately reflect the true status of each Loan. 4.7 Ownership of Loans. E-LOAN is the sole owner of each Loan and has good and marketable title thereto, and has the right to assign, sell and transfer the Loan to Correspondent free and clear of any encumbrance, lien, pledge, charge, claim or security interest.E-LOAN has not sold, assigned or otherwise transferred any right or interest in or to the Loan and has not pledged the Loan as collateral for any debt or other purpose. . 4.8 Sale Treatment. The sale of each Loan shall be reflected on E-LOAN's balance sheet and other financial statements as a sale of assets by E-LOAN, and E-LOAN shall not take any action or omit to take any action which would cause the transfer of the Loans to Correspondent to be treated as anything other than a sale to Correspondent of all of E-LOAN's right, title and interest in and to each Loan. 4.9 Insurance. Each vehicle securing a Loan is insured against loss under a policy issued by an insurer reasonably acceptable to Correspondent and qualified to do business in the state where the vehicle is located, in a form such that it may be endorsed to Correspondent as loss payee. To the best of E-LOAN's knowledge, there are no facts or circumstances that could provide a basis for revocation of, or a defense to any claims made under, any insurance policy covering a vehicle. 5. Indemnification & Remedies. 5.1 Indemnification. Each party (in such capacity, referred to as "Indemnitor") shall indemnify and hold the other party and its respective shareholders, directors, officers, employees, representatives, agents, servants, successors, and assigns (collectively "Indemnitee") harmless from and shall reimburse Indemnitee for any losses, damages, deficiencies, claims, causes of action or expenses of any nature (including reasonable attorneys' fees and expenses) incurred by Indemnitee arising out of or resulting from any breach of any warranty, representation covenant or obligation of Indemnitor under this Agreement. 5.2 Indemnification Procedures. After either party obtains knowledge of any claim, action, suit or proceeding (collectively a "Claim") for which it believes is entitled to indemnification under this Agreement, it shall promptly notify the other party of such Claim in writing within fifteen (15) days after such knowledge. Each party shall cooperate with the other in every reasonable manner (at the Indemnitor's sole expense) to facilitate the defense of any Claim subject to indemnification hereunder. Indemnitee's failure to promptly notify Indemnitor of a Claim shall not relieve the Indemnitor from any liability under this Section to the extent that Indemnitor is not materially adversely affected by such delay. With respect to each such notice, the Indemnitor shall, at the Indemnitee's option, immediately take all action necessary to minimize any risk or loss to the Indemnitee, including retaining counsel satisfactory to the Indemnitee and take such other actions as are necessary to defend the Indemnitee or to discharge the indemnity obligations under this Section. If the Indemnitor does not timely and adequately conduct such defense, the Indemnitee may, at its option and at Indemnitor's expense, conduct such defense, contest, litigate or settle the Claim using counsel of its own choice without prejudice to its right of indemnification under this Section. The Indemnitor shall pay on demand any liability incurred by the Indemnitee under this Section. The Indemnitor shall not settle any claim in which the Indemnitee is named without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld. The Indemnitee shall have the right to be represented by counsel at its own expense in any such contest, defense, litigation or settlement conducted by the Indemnitor. 5.3 Repurchase. The purchase and sale of Loans under this Agreement shall be without recourse to E-LOAN, except for the representations, warranties, covenants and agreements set forth in this Agreement. Notwithstanding the foregoing, in the event there is a material breach by E-LOAN of any covenant, representation, warranty or agreement under this Agreement which remains uncured for ninety (90) days and involves, relates to, or affects any Loan sold to Correspondent under this Agreement, E-LOAN shall repurchase the affected Loan from Correspondent for the outstanding balance of principal and accrued but unpaid interest on such Loan along with the referral fee paid to E-LOAN by Correspondent. Upon discovery of a suspected breach, Correspondent shall provide E-LOAN with written notice specifying the breach. In the event of such repurchase, Correspondent shall assign the affected Loan to E-LOAN without recourse and without representation or warranties, expressed or implied. 5.4 Survival of Remedies. This Section shall survive termination of the Agreement.   6. Term and Termination. 6.1 Term. Unless this Agreement is terminated earlier as provided below, this Agreement shall have an initial term of six (6) calendar months commencing on the Effective Date, and shall automatically renew for successive one (1) year term periods. The initial term, together with any renewal terms, shall be referred to herein as the "Term." 6.2 Termination. Notwithstanding the foregoing, this Agreement may be terminated as follows: (i) without cause by either party after expiration of the Initial Term, upon not less than thirty (30) days prior written notice to the other party; or (ii) by either party immediately upon written notice to the other party (a) if the other party breaches any warranty, representation, covenant or obligation under this Agreement and fails to cure such breach within thirty (30) calendar days of receiving written notice of the breach from the non-breaching party; (b) if a party has reasonable cause to believe that the other party will not be able to perform its obligations under this Agreement; (c) if there occurs a change of (25%) or more of the ownership of the other party; (d) if a material adverse change occurs in the financial condition of the other party; or (e) if the other party is subject to a dissolution, receivership, liquidation, insolvency, conservatorship, consolidation, reorganization, sale of substantially all of its assets, cessation of business, voluntary or involuntary bankruptcy. 6.3 Effect of Termination; Survival. The termination of this Agreement shall not affect the rights and obligations of the parties with respect to Loans for which Confirmations have previously been issued ("Pipeline Loans"), or transactions and occurrences that take place prior to the effective date of termination, and Correspondent shall purchase Pipeline Loans as provided in Section 1.3 if all conditions set forth in the Confirmation are met, except as otherwise provided by Applicable Law.   7. Miscellaneous. 1. Non-interference with Employment. Correspondent and E-LOAN acknowledge and agree that in order to perform their respective obligations under this Agreement, each will be placed in a direct personal and confidential relationship with the employees of the other. Further, Correspondent and E-LOAN acknowledge and agree that the employment of those employees who will be involved in the performance of this Agreement constitutes a valuable business asset of the employing party. Now, therefore, as separate and distinct consideration for this Section 7.1, receipt and sufficiency of which is hereby acknowledged, Correspondent and E-LOAN hereby mutually promise and covenant that neither party shall, either directly or indirectly, during the term of this Agreement and for a period of one (1) year following the termination of this Agreement, (a) solicit or induce any current or future employee of the other involved in the performance and administration of this Agreement to leave his or her employment for any reason whatsoever, nor (b) solicit for hire, attempt to hire or hire any current or future employee of the other involved in the performance or administration of this Agreement. Nothing in this Section 7.1, however, is intended to prevent either party from hiring any applicant for employment to the extent that the application is the result of the applicant's response to a general advertisement for employment. If either Correspondent or E-LOAN breaches this Section 7.1 and as a result thereof an employee leaves his or her employment, in addition to any other remedies provided in this Agreement or otherwise available at law, the breaching party shall pay to the non-breaching party, as liquidated damages and not as consequential, incidental or punitive damages, an amount equal to the annual compensation (salary plus bonuses) of the employee. The remedies provided in this Section 7.1 shall survive termination of this Agreement. 7.2 Confidentiality of Information. Each party and their respective affiliates, directors, officers, employees and authorized representatives shall hold in strict confidence and not use or disclose to any other person without the prior written consent of the other party, all information concerning the other party's proprietary business procedures, products, services, operations, fees, policies or plans received from the other party in connection with the negotiation and performance of this Agreement. Notwithstanding the foregoing, either party may disclose information that is required to be disclosed by Applicable Law, governmental regulation or court order, and may disclose the contents of this Agreement, with information as to the amount of, and manner of calculating the Purchase Price redacted where permitted, in required filings with the Securities Exchange Commission or other governmental agency without the other party's prior consent. This provision shall survive termination of the Agreement 7.3 Public Announcement. The timing and content of any advertisements, announcements, press releases or other promotional activity relating to this Agreement, and the use of each other's name or trademarks shall be subject to the prior written approval of both parties. 7.4 Assignment. Neither party may assign this Agreement without the prior written consent of the other party. 7.5 No Agency Relationship. The relationship between E-LOAN and Correspondent shall not be construed as a joint venture, partnership or principal-agent relationship, and under no circumstances shall any of the employees of one party be deemed to be employees of the other party for any purpose. This Agreement shall not be construed as authority for either party to act for the other in any agency or any other capacity, except as expressly set forth in this Agreement. 7.6 Third Party Beneficiaries. This Agreement is not intended and shall not be construed to create any rights or benefits upon any person not a party to this Agreement. 7.7 Costs and Expenses. Unless specifically provided for elsewhere in this Agreement, each party will bear its own costs and expenses, including legal fees, accounting fees and taxes incurred in connection with the negotiation and performance of this Agreement. 7.8 Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) three business days after being deposited in the U.S. mail, first class, postage prepaid, (ii) upon transmission, if sent by facsimile transmission, or (iii) upon delivery, if served personally or sent by any generally recognized overnight delivery service, to the following addresses: (a) If to E-LOAN, to: E-LOAN, Inc. 5875 Arnold Road Dublin, CA 94568 Attn: Curtis Kuboyama Facsimile no. (925) 241-2403 with a copy to Edward A. Giedgowd, E-LOAN's Counsel at the same address. (b) If to Correspondent, to: AmeriCredit Financial Services, Inc. 801 Cherry Street, Suite 3900 Fort Worth, Texas 76102 Attn: Chris Barry With a copy to Richard J. Mossburg, Correspondent's Counsel at the same address. 7.9 Entire Agreement. This Agreement, including any exhibits or other documents attached hereto or referenced herein, each of which is hereby incorporated into this Agreement and made an integral part hereof, constitutes the entire agreement between the parties relating to the subject matter hereof and there are no representations, warranties or commitments except as set forth herein. This Agreement supersedes all prior understandings, negotiations and discussions, written or oral, of the parties relating to the transactions contemplated by this Agreement. 7.10 Modification. This Agreement may not be changed orally but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought 7.11 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 7.12 Provisions Severable. If any provision of this Agreement shall be or become wholly or partially invalid, illegal or unenforceable, such provision shall be enforced to the extent that its legal and valid and the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, legal representatives and permitted assigns . 7.13 Waivers; Cumulative Remedies. No failure or delay by a party to insist upon the strict performance of any term or condition under this Agreement or to exercise any right or remedy available under this Agreement at law or in equity, shall imply or otherwise constitute a waiver of such right or remedy, and no single or partial exercise of any right or remedy by any party will preclude exercise of any other right or remedy. All rights and remedies provided in this Agreement are cumulative and not alternative; and are in addition to all other available remedies at law or in equity. 7.14 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY UNDER THIS AGREEMENT FOR ANY DAMAGES OR CLAIMS FOR LOST PROFITS OR CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES. 7.15 Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.16 Counterparts. This Agreement may be executed in two or more counterparts, each of which together shall be deemed an original, but all of which shall constitute one and the same instrument.   IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of the Effective Date written above.   AmeriCredit Financial Services, Inc. E-LOAN, Inc. _________________________________ By: Michael T. Miller _________________________________ By: Joe Kennedy Title: Executive Vice President Title: President and COO Date: __________________________ Date: __________________________   _________________________________ By: Frank Siskowski   Title: Chief Financial Officer   Date: __________________________   Exhibit A: Documents to be Submitted by E-Loan with Offers to sell a Loan   Product: Loan amount: Term: Trade-in vehicle: Primary Applicant information: Co-borrower information: Primary applicant name: Primary applicant SSN: Primary applicant score: Birthdate: E-mail address: Current residence: (need status of own, rent, with parents, military, etc.) Time on current residence: yrs/mos Residence Status (Rent, Own, etc.) Rent/Mortgage Payment: Previous residence: Time at previous residence: yrs/mos Home phone: Name of employer: Time on job: yrs/mos Occupation: Employer phone: Gross Monthly Income: Trade-in: Monthly Payment of Trade-in: Name of previous employer: Time on previous job: yrs/mos Previous employer address: Previous employer phone: Other Income Source: Other Income Amount: Co-borrower name: Co-borrower SSN: Co-borrower score: Birthdate: E-mail address Current residence: (need status of own, rent, with parents, military, etc.)Time on current residence: yrs/mos Residence Status (Rent, Own, etc.) Rent/Mortgage Payment: Previous residence: Time at previous residence: yrs/mos Home phone: Name of employer: Time on job: yrs/mos Occupation: Employer phone: Gross Monthly Income: Name of previous employer: Time on previous job: yrs/mos Previous employer address: Previous employer phone: Other Income Source: Other Income Amount:   Note: Offer expires in 2 hours from the time of submittal of above information to correspondent.   Exhibit B: Purchase Criteria   [*] * [*] * [*] * [*] * [*] * [*] Notes: [*] [*] [*] [*] [*] [*] Exhibit C: Information to be Included in Loan Confirmation The Loan Confirmation will include the following: For Approvals: Date and Time of the credit decision Application number Decisioning Lender Contact Information Applicant name (and Co-Applicant if applicable) Approved Amount Maximum Loan to Value % (for new and used) APR Rate (for new and used) Maximum Term (for new and used) Stipulation level 1-3 (See exhibit D for detailed stipulations by level) For Declinations: Date and Time of credit decision Application number Decisioning Lender contact information Applicant Name (and Co-Applicant if applicable) Up to 4 ECOA reasons for not approving the application as submitted Exhibit D: Loan Documents Level 1 Level 2 Level 3 (Required by Level according to matrix below prior to Funding) Basic Loan Package 1. Executed draft (front and back) 2. Promissory Note & Security Agreement (Estimated and Final) 3. Ancillary product documentation i. Warranty / Service Contract Agreement ii. Credit life policy iii. Credit disability policy iv. GAP policy v. Other product agreements 4. Lien/title work (state specific) i. Title receipt (preferred) ii. Completed and signed title application (acceptable) iii. Odometer statement (used vehicles only) 5. Buyer's order 6. Invoice (new vehicles) 7. Bookout sheet (used vehicles) 8. Proof of trade-in (if applicable) 9. Copy of insurance policy 10. Copy of valid drivers license(s) 11. 1 reference - nearest living relative 3 3 3 Proof of income (depending on type of employment) 3 3 W2 Employee - Paystub within last 30 days showing year-to-date gross income Self Employed - Two years income tax returns including Schedule C Retired/Disability - Social Security or Disability letter or bank statement showing direct deposit (six months) Child Support - court ordered document and six months of receipts Proof of Residence (depending on type of residence) 3 3 Renters - Utility bill showing current address within last 30 days Homeowners - Mortgage coupon (no older than 90 days) Verbal Verifications (completed in a manner that meets AmeriCredit's verifications standards) a. Income b. Residency c. Three references - including nearest living relative 3 Exhibit E: Purchase Price Purchase Price: The Purchase Price of the Loans shall equal the Principal Balance and will be paid to E-LOAN via ACH within 48 hours of receipt of a correctly completed loan information and document package as set forth on Exhibit F. Calculation and payment of Compensation shall be according to this Exhibit E as shown below. Compensation: * As compensation for its performance of the Services on behalf of Correspondent, E-LOAN will receive a fee ("Origination Fee") for each Loan booked by Correspondent as a result of E-LOAN's Services hereunder. Said Origination Fee shall be based on monthly closure (number of applications booked divided by the number of applications decisioned) as listed below: Closure Referral Rate Fee [*] [*] The fee is paid per funded loan booked by Correspondent. The Origination Fee will be paid on the 10th of the month following the month in which such Loan is booked via ACH. A flat fee of $[*] per funded loan will be paid by Correspondent for the first 60 days of this agreement to allow for a ramping up of approvals and bookings. Only one referral fee will be paid per funded loan.

EXHIBIT 10.2 INKTOMI CORPORATION 1998 STOCK PLAN (Updated December 30, 1999, Amended March 29, 2000 and September 12, 2000)         1.  Purposes of the Plan. The purposes of this Stock Plan are (i) to attract and retain the best available personnel for positions of substantial responsibility, (ii) to provide additional incentive to Employees, Directors and Consultants, and (iii) to promote the success of the Company’s business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan.         2.  Definitions. As used herein, the following definitions shall apply:               (a)  “Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.               (b)  “Applicable Laws” means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be, granted under the Plan.               (c)  “Board” means the Board of Directors of the Company.               (d)  “Cause” means (i) any act of personal dishonesty taken by the Optionee in connection with his responsibilities as a Service Provider and intended to result in substantial personal enrichment of the Optionee, (ii) the conviction of a felony, (iii) a willful act by the Optionee that constitutes gross misconduct and that is injurious to the Company, (iv) for a period of not less than thirty (30) days following delivery to the Optionee of a written demand for performance from the Company that describes the basis for the Company’s belief that the Optionee has not substantially performed his duties, continued violations by the Optionee of the Optionee’s obligations to the Company that are demonstrably willful and deliberate on the Optionee’s part or (v) as otherwise provided in the Option Agreement.               (e)  “Change of Control” shall mean the occurrence of any of the following:                      (i)  Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities entitled to vote generally in the election of directors;                      (ii)  Any action or event occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company);                      (iii)  The consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or entity that controls such surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company, such surviving entity or the entity that controls such surviving entity outstanding immediately after such merger or consolidation; or                      (iv)  The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets.               (f)  “Code” means the Internal Revenue Code of 1986, as amended. --------------------------------------------------------------------------------               (g)  “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.               (h)  “Common Stock” means the common stock of the Company.               (i)  “Company” means Inktomi Corporation, a Delaware corporation.               (j)  “Consultant” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.               (k)  “Director” means a member of the Board.               (l)  “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.               (m)  “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company.               (n)  “Exchange Act” means the Securities Exchange Act of 1934, as amended.               (o)  “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:                      (i)  If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;                      (ii)  If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or                      (iii)  In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.               (p)  “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.               (q)  “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.               (r)  “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Option or Stock Purchase Right grant. The Notice of Grant is part of the Option Agreement.               (s)  “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.               (t)  “Option” means a stock option granted pursuant to the Plan.               (u)  “Option Agreement” means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. 2 --------------------------------------------------------------------------------               (v)  “Option Exchange Program” means a program whereby outstanding Options are surrendered in exchange for Options with a lower exercise price.               (w)  “Optioned Stock” means the Common Stock subject to an Option or Stock Purchase Right.               (x)  “Optionee” means the holder of an outstanding Option or Stock Purchase Right granted under the Plan.               (y)  “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.               (z)  “Plan” means this 1998 Stock Plan.               (aa)  “Restricted Stock” means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.               (bb)  “Restricted Stock Purchase Agreement” means a written agreement between the Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the Notice of Grant.               (cc)  “Rule 16b-3” means Rule 16b?3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.               (dd)  “Section 16(b)” means Section 16(b) of the Exchange Act.               (ee)  “Service Provider” means an Employee, Director or Consultant.               (ff)  “Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.               (gg)  “Stock Purchase Right” means the right to purchase Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.               (hh)  “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.         3.  Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 4,000,000 Shares, plus an annual increase to be added on each anniversary date of the adoption of the Plan equal to the lesser of (i) the number of Shares needed to restore the maximum aggregate number of Shares which may be optioned and sold under the Plan to 4,000,000 Shares or (ii) a lesser amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise of an Option or Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.         4.  Administration of the Plan.               (a)  Procedure.                      (i)  Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Service Providers.                      (ii)  Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more “outside directors” within the meaning of Section 162(m) of the Code. 3 --------------------------------------------------------------------------------                      (iii)  Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.                      (iv)  Other Administration. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.               (b)  Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:                      (i)  to determine the Fair Market Value;                      (ii)  to select the Service Providers to whom Options and Stock Purchase Rights may be granted hereunder;                      (iii)  to determine the number of shares of Common Stock to be covered by each Option and Stock Purchase Right granted hereunder;                      (iv)  to approve forms of agreement for use under the Plan;                      (v)  to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;                      (vi)  to reduce the exercise price of any Option or Stock Purchase Right to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted;                      (vii)  to institute an Option Exchange Program;                      (viii)  to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;                      (ix)  to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;                      (x)  to modify or amend each Option or Stock Purchase Right (subject to Section 15(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;                      (xi)  to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable ;                      (xii)  to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Stock Purchase Right previously granted by the Administrator;                      (xiii)  to make all other determinations deemed necessary or advisable for administering the Plan.               (c)   Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Stock Purchase Rights. 4 --------------------------------------------------------------------------------         5.  Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.         6.  Limitations.               (a)  Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.               (b)  Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee’s relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee’s right or the Company’s right to terminate such relationship at any time, with or without cause.               (c)  The following limitations shall apply to grants of Options:                      (i)  No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 2,000,000 Shares.                      (ii)  In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 1,000,000 Shares which shall not count against the limit set forth in subsection (i) above.                      (iii)  The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 13.                      (iv)   If an Option is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 13), the cancelled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option.         7.  Term of Plan. Subject to Section 19 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 15 of the Plan.         8.  Term of Option. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.         9.  Option Exercise Price and Consideration.               (a)  Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:                      (i)  In the case of an Incentive Stock Option               (a)  granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. 5 --------------------------------------------------------------------------------               (b)  granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.                      (ii)  In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.                      (iii)  Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction.               (b)  Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised.               (c)  Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of:                      (i)  cash;                      (ii)  check;                      (iii)  promissory note;                      (iv)  other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;                      (v)  consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;                      (vi)  a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored deferred compensation program or arrangement;                      (vii)  any combination of the foregoing methods of payment; or                      (viii)  such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.         10.  Exercise of Option.               (a)  Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.               An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, 6 -------------------------------------------------------------------------------- notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan.               Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.               (b)  Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee’s death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. Notwithstanding the foregoing, if the Company or any successor thereto terminates the Optionee’s employment without Cause within twelve months following a Change of Control, the Optionee’s Options, Stock Purchase Rights and Restricted Stock shall become 100% vested and exercisable; provided, however, that no such acceleration shall occur in the event that it would preclude accounting for any business combination of the Company involving a Change of Control as a “pooling of interests.”               (c)  Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.               (d)  Death of Optionee. If an Optionee dies while a Service Provider, (a) solely with respect to any option grants awarded on or after September 12, 2000, the Option shall become one-hundred percent (100%) vested, and (b) the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee’s termination. The Option may be exercised by the executor or the administrator of the Optionee’s estate or, if none, by the person(s) entitled to exercise the Option under the Optionee’s will or the laws of descent and distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.               (e)  Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made.         11.  Stock Purchase Rights.               (a)  Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator.               (b)  Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary 7 -------------------------------------------------------------------------------- termination of the purchaser’s service with the Company for any reason (including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at a rate determined by the Administrator.               (c)  Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion.               (d)  Rights as a Shareholder. Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan.         12.  Transferability of Stock Options and Stock Purchase Rights               Unless determined otherwise by the Administrator, an Option or Stock Purchase Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent and distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right shall contain such additional terms and conditions as the Administrator deems appropriate. Notwithstanding the above and solely with respect to option grants awarded on or after September 12, 2000, during his or her lifetime, an Optionee may transfer, including by means of sale, all or part of a vested Non-Statutory Option to a member of the Optionee’s immediate family or to a trust, LLC or partnership for the benefit of any one or more members of such Optionee’s Immediate Family. “Immediate Family” as used herein means the spouse, lineal descendants, father, mother, brothers and sisters of the optionee. In such case, the transferee shall receive and hold the Option subject to the provisions of this Section, and there shall be no further assignment or transfer of the Option. The terms of Options granted hereunder shall be binding upon the transferees, purchasers, executors, administrators, heirs, successors and assigns of the Optionee.         13.  Adjustments Upon Changes in Capitalization, Dissolution or Change in Control.               (a)  Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option and Stock Purchase Right, the limitations on the number of Common Shares subject to Options pursuant to Section 6(c) hereof, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right.               (b)  Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action. 8 --------------------------------------------------------------------------------               (c)  Change in Control. Notwithstanding the foregoing, in the event of a Change in Control, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change in Control, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the Change in Control, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in connection with the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in connection with the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in connection with the Change in Control.               Notwithstanding any other provisions of the Plan or any Option Agreement, Restricted Stock Purchase Agreement or other related agreement, in the event that any payment or benefit received or to be received by the Optionee (whether pursuant to the terms of the Plan, any Option Agreement, Restricted Stock Purchase Agreement or other related agreement, or other plan, arrangement or agreement with the Company, any person whose actions result in a Change in Control or any person affiliated with the Company or such person) (all such payments and benefits being hereinafter called “Total Payments”) would be subject (in whole or part), to any excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the payment or benefit received or to be received by the Optionee (whether pursuant to the terms of the Plan, any Option Agreement, Restricted Stock Purchase Agreement or other related agreement) shall be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Optionee would be subject in respect of such unreduced Total Payments).               Unless the Company and the Optionee otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Optionee and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Optionee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.         14.  Date of Grant. The date of grant of an Option or Stock Purchase Right shall be, for all purposes, the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.         15.  Amendment and Termination of the Plan.               (a)  Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. 9 --------------------------------------------------------------------------------               (b)  Shareholder Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.               (c)  Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.         16.  Conditions Upon Issuance of Shares.               (a)  Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.               (b)  Investment Representations. As a condition to the exercise of an Option or Stock Purchase Right, the Company may require the person exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.         17.  Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.         18.  Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.         19.  Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the manner and to the degree required under Applicable Laws. 10 -------------------------------------------------------------------------------- INKTOMI CORPORATION 1998 STOCK PLAN STOCK OPTION AGREEMENT         This Stock Option Agreement (“Agreement”) is made and entered into as of the date of grant set forth below (the “Date of Grant”) by and between Inktomi Corporation, a Delaware corporation (the “Company”), and the participant named below (“Participant”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 1998 Stock Plan (the “Plan”). Participant:   ____________________________________________________________ Social Security Number:   ____________________________________________________________ Address:   ____________________________________________________________ Total Option Shares:   ____________________________________________________________ Exercise Price Per Share:   ____________________________________________________________ Date of Grant:   ____________________________________________________________ First Vesting Date:   ____________________________________________________________ Expiration Date:   ____________________________________________________________ Type of Stock Option:   [  ] Incentive Stock Option   [  ] Nonqualified Stock Option         1.  Grant of Option. The Company hereby grants to Participant an option (the “Option”) to purchase the total number of shares of Common Stock of the Company set forth above (the “Shares”) at the Exercise Price Per Share set forth above (the “Exercise Price”), subject to all of the terms and conditions of this Agreement and the Plan. If designated as an Incentive Stock Option above, the Option is intended to qualify as an “incentive stock option” (“ISO”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).         2.  Exercise Period.               2.1  Exercise Period of Option. This Option is exercisable immediately, in whole or in part, conditioned upon Participant entering into a Restricted Stock Purchase Agreement substantially in the form attached hereto as Exhibit B-1 (the “Restricted Stock Purchase Agreement”) with respect to any unvested Option Shares. The Shares subject to this Option shall vest and/or be released from the Company’s repurchase option, as set forth in the Restricted Stock Purchase Agreement, according to the following schedule:        , provided however that (a) Shares subject to this Option shall vest and/or be released from the Company’s repurchase option based on Participant’s continued employment with or services to the Company and (b) vested Shares shall not be subject to the Company’s repurchase option.               2.2  Expiration. The Option shall expire on the Expiration Date set forth above and must be exercised, if at all, on or before the Expiration Date.         3.  Termination.               3.1  Termination for Any Reason Except Death or Disability. If Participant is Terminated for any reason, except death or Disability, the Option, to the extent (and only to the extent) that it would have been exercisable by Participant on the date of Termination, may be exercised by Participant no later than three (3) months after the date of Termination, but in any event no later than the Expiration Date. 11 --------------------------------------------------------------------------------               3.2  Termination Because of Death or Disability. If Participant is Terminated because of death or Disability of Participant, the Option, to the extent that it is exercisable by Participant on the date of Termination, may be exercised by Participant (or Participant’s legal representative) no later than twelve (12) months after the date of Termination, but in any event no later than the Expiration Date.               3.3  No Obligation to Employ. Participant acknowledges and agrees that the vesting of Shares is earned only by continuing consultancy or employment at the will of the Company (not through the act of being hired, being granted this Option or acquiring Shares hereunder). Participant further acknowledges and agrees that nothing in the Plan or this Agreement (or any prior or future amendment thereto or restatement thereof) shall confer on Participant any right to continue in the employ of, or other relationship with, the Company or any Parent, Subsidiary or Affiliate of the Company, or limit in any way the right of the Company or any Parent, Subsidiary or Affiliate of the Company to terminate Participant’s employment or other relationship at any time, with or without cause.         4.  Manner of Exercise.               4.1  Stock Option Exercise Agreement. To exercise this Option, Participant (or in the case of exercise after Participant’ s death, Participant’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company (a) an executed stock option exercise agreement substantially in the form attached hereto as Exhibit A (the “Exercise Agreement”), and (b) if Participant is purchasing any unvested Shares, an executed Restricted Stock Purchase Agreement. If someone other than Participant exercises the Option, then such person must submit documentation reasonably acceptable to the Company that such person has the right to exercise the Option.               4.2  Limitations on Exercise. The Option may not be exercised unless such exercise is in compliance with all applicable federal and state securities laws and with all applicable requirements of any stock exchange on which the Company’s Common Stock may be listed from time to time. The Option may not be exercised as to fewer than 100 Shares unless it is exercised as to all Shares as to which the Option is then exercisable.               4.3  Payment. The Exercise Agreement shall be accompanied by full payment of the Exercise Price for the Shares being purchased in cash (by check), or where permitted by law:                      (a)  by cancellation of indebtedness of the Company to the Participant;                      (b)  at the discretion of the Committee, by surrender of shares of the Company’s Common Stock that either: (1) have been owned by Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by Participant in the open public market; and (3) are clear of all liens, claims, encumbrances or security interests;                      (c)  at the discretion of the Committee, by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code provided, however, Participants who are not employees of the Company shall not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares.                      (d)  by waiver of compensation due or accrued to Participant for services rendered;                      (e)  provided that a public market for the Company’s stock exists, (1) through a “ same day sale” commitment from Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an “NASD Dealer”) whereby Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the exercise price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company, or (2) through a “margin” commitment from Participant and an NASD Dealer whereby Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or                      (f)  by any combination of the foregoing. 12 --------------------------------------------------------------------------------               4.4  Tax Withholding. Prior to the issuance of the Shares upon exercise of the Option, Participant must pay or provide for any applicable federal or state withholding obligations of the Company. If the Committee permits, Participant may provide for payment of withholding taxes upon exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld. In such case, the Company shall issue the net number of Shares to the Participant by deducting the Shares retained from the Shares issuable upon exercise.               4.5  Issuance of Shares. Provided that the Exercise Agreement, Restricted Stock Purchase Agreement (if applicable) and payment are in form and substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in the name of Participant, Participant’s authorized assignee, or Participant’s legal representative, and shall deliver certificates representing the Shares with the appropriate legends affixed thereto (subject to the escrow provisions applicable to the Restricted Stock Purchase Agreement).         5.  Nontransferability of Option. The Option may not be transferred in any manner other than by will or by the laws of descent and distribution and may be exercised during the lifetime of Participant only by Participant. The terms of the Option shall be binding upon the executors, administrators, successors and assigns of Participant.         6.  Tax Consequences. Set forth below is a brief summary as of the Date of Grant of some of the federal and California tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.               6.1  Exercise of ISO. If the Option qualifies as an ISO, there will be no regular federal or California income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as a tax preference item for federal income tax purposes and may subject the Participant to the alternative minimum tax in the year of exercise.               6.2  Exercise of Nonqualified Stock Option. If the Option does not qualify as an ISO, there may be regular federal and California income tax liability upon the exercise of the Option. Participant will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If the Participant is an employee, the Company will be required to withhold from Participant’s compensation or collect from Participant and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.               6.3  Disposition of Shares. If the Shares are held for more than twelve (12) months after the date of the transfer of the Shares pursuant to the exercise of the Option (and, in the case of an ISO, are disposed of more than two years after the Date of Grant), any gain realized on disposition of the Shares will be treated as long term capital gain for federal and California income tax purposes. If Shares purchased under an ISO are disposed of within one year of exercise or within two years after the Date of Grant, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. The Company will be required to withhold from Participant’s compensation or collect from Participant and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.               6.4  Section 83(b) Election for Unvested Shares Purchased Pursuant to Nonqualified Stock Options. With respect to the exercise of a nonqualified stock option for unvested Shares, an election may be filed by the Participant with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within 30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase. This will result in a recognition of taxable income to the Participant on the date of exercise, measured by the excess, if any, of the Fair Market Value of the Shares, at the time the Option is exercised over the purchase price for the Shares. Absent such an election, taxable income will be measured and recognized by the Participant at the time or times on which the Company’s repurchase option lapses. Participant is strongly encouraged to seek the advice of his or her own tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) is attached hereto as Exhibit B-5 for reference. 13 --------------------------------------------------------------------------------               6.5  Section 83(b) Election for Unvested Shares Purchased Pursuant to ISOs. With respect to the exercise of an ISO for unvested Shares, an election may be filed by the Participant with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within 30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions, if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase for alternative minimum tax purposes. This will result in a recognition of income to the Participant on the date of exercise, for alternative minimum tax purposes, measured by the excess, if any, of the fair market value of the Shares, at the time the option is exercised, over the purchase price for the Shares. Absent such an election, alternative minimum taxable income will be measured and recognized by Participant at the time or times on which the Company’s repurchase option under the Restricted Stock Purchase Agreement lapses. Participant is strongly encouraged to seek the advice of his or her tax consultants in connection with the purchase of the Shares and the advisability of filing of the Election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) for alternative minimum tax purposes is attached hereto as Exhibit B-6 for reference.         PARTICIPANT ACKNOWLEDGES THAT IT IS OPTIONEE’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.         7.  Notice of Disqualifying Disposition of ISO Shares. If the Option is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (1) the date two years after the Date of Grant, and (2) the date one year after transfer of such Shares to Participant upon exercise of the Option, Participant shall immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant from the early disposition by payment in cash or out of the current wages or other compensation payable to Participant.         8.  Privilege of Stock Ownership. Participant shall not have any of the rights of a shareholder with respect to any Shares until Participant exercises the Option and pays the Exercise Price.         9.  Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by Participant or the Company to the Committee for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Participant.         10.  Entire Agreement. The Plan is incorporated herein by reference. This Agreement and the Plan constitute the entire agreement of the parties and supersede all prior undertakings and agreements with respect to the subject matter hereof. This Agreement may be modified, waived or amended only in writing signed by both parties hereto. This Agreement may only be amended, modified or waived in writing signed by both parties hereto.         12.  Notices. Any notice required to be given or delivered to the Company under the terms of this Agreement shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the address indicated above or to such other address as such party may designate in writing from time to time to the Company. All notices shall be deemed to have been given or delivered upon: personal delivery; three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested); one (1) business day after deposit with any return receipt express courier (prepaid); or one (1) business day after transmission by fax or telecopier.         13.  Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.         14.  Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California, excluding that body of laws pertaining to conflict of laws. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable. 14 --------------------------------------------------------------------------------         15.  Acceptance. Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. Participant has read and understands the terms and provisions thereof, and accepts the Option subject to all the terms and conditions of the Plan and this Agreement. Participant acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares and that Participant should consult a tax adviser prior to such exercise or disposition.         IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized representative and Participant has executed this Agreement in as of the Date of Grant. INKTOMI CORPORATION     PARTICIPANT By:       --------------------------------------------------------------------------------     --------------------------------------------------------------------------------     (Signature)           --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- (Please print name)     (Please print name)           --------------------------------------------------------------------------------     (Please print title)     15 -------------------------------------------------------------------------------- EXHIBIT A INKTOMI CORPORATION 1998 STOCK PLAN STOCK OPTION EXERCISE AGREEMENT         This Exercise Agreement is made and entered into as of ___________________, 19__ (the “Effective Date”) by and between Inktomi Corporation, a Delaware corporation (the “Company”), and the purchaser named below (the “Purchaser”). Capitalized terms not defined herein shall have the meaning ascribed to them in the Company’s 1998 Stock Plan (the “Plan”). Participant:   ______________________________________ Social Security Number:   ______________________________________ Address:   ______________________________________ Total Shares Exercised:   ______________________________________ Exercise Price Per Share:   ______________________________________ Total Purchase Price:   ______________________________________         1.  Exercise of Option.               1.1  Exercise. Pursuant to exercise of that certain option (“Option”) granted to Purchaser under the Plan and subject to the terms and conditions of this Agreement, Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the total number of shares set forth above (“Shares”) of the Company’s Common Stock at a purchase price per share set forth above for a total purchase price set forth above (the “Purchase Price”). As used in this Agreement, the term “Shares” refers to the Shares purchased under this Exercise Agreement and includes all securities received (a) in replacement of the Shares, (b) as a result of stock dividends or stock splits with respect to the Shares, and (c) all securities received in replacement of the Shares in a merger, recapitalization, reorganization or similar corporate transaction.               1.2  Title to Shares. The exact spelling of the name(s) under which Purchaser will take title to the Shares is: _______________________________________________________________________________ ____________________________________________________________________________________________. Purchaser desires to take title to the Shares as follows:               [  ]  Individual, as separate property               [  ]  Husband and wife, as community property               [  ]  Joint Tenants               [  ]  Alone or with spouse as trustee(s) of the following trust (including date): _____________ ______________________________________________________________________________________               [  ]  Other; please specify: _________________________________               1.3  Payment. Purchaser hereby delivers payment of the Purchase Price in the manner permitted in Purchaser’ s Stock Option Agreement as follows (check and complete as appropriate):               [  ]  in cash in the amount of $__________________ receipt of which is acknowledged by the Company; 1 --------------------------------------------------------------------------------               [  ]  by cancellation of indebtedness of the Company to Purchaser in the amount of $______________;               [  ]  at the discretion of the Committee, by delivery of fully-paid, nonassessable and vested shares of the Common Stock of the Company owned by Purchaser for at least six (6) months prior to the date hereof which have been paid for within the meaning of SEC Rule 144, if purchased by use of a promissory note, such note has been fully paid with respect to such vested shares), or obtained by Purchaser in the open public market, and owned free and clear of all liens, claims, encumbrances or security interests, valued at the current Fair Market Value of $______________ per share;               [  ]  at the discretion of the Committee, by tender of a Full Recourse Promissory Note in the principal amount of $_______________ secured by a Pledge Agreement of even date herewith;               [  ]  by the waiver hereby of compensation due or accrued for services rendered in the amount of $__________________.         2.  Delivery.               2.1  Deliveries by Purchaser. Purchaser hereby delivers to the Company (a) this Exercise Agreement, and (b) a Restricted Stock Purchase Agreement (together with all required ancillary agreements and documents pursuant thereto) in the form of Exhibit B to Purchaser’s Stock Option Agreement (the “Restricted Stock Purchase Agreement”), if applicable.               2.2  Deliveries by the Company. Upon its receipt of the Purchase Price and all the documents to be executed and delivered by Purchaser to the Company under Section 2.1, the Company will issue a duly executed stock certificate evidencing the Shares in the name of Purchaser, to be placed in escrow as provided under the Restricted Stock Purchase Agreement and/or payment in full to the Company of all sums due under a Note (both as applicable).         3.  Representations and Warranties of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan, the Stock Option Agreement, this Exercise Agreement, the Restricted Stock Purchase Agreement and all documents required in connection with the Restricted Stock Purchase Agreement (all as applicable), and agrees to abide by all terms and conditions set forth in such agreements and documents         4.  Rights as Shareholder. Subject to the terms and conditions of this Exercise Agreement and the Restricted Stock Purchase Agreement, Purchaser will have all of the rights of a shareholder of the Company with respect to the Shares from and after the date that Purchaser delivers payment of the Purchase Price until such time as Purchaser disposes of the Shares or the Company and/or its assignee(s) exercises its Right of First Refusal and/or its repurchase right under the Restricted Stock Purchase Agreement (“Repurchase Right”). Upon an exercise of the Right of First Refusal and/or Repurchase Right, Purchaser will have no further rights as a holder of the Shares so purchased upon such exercise, except the right to receive payment for the Shares so purchased in accordance with the provisions of this Exercise Agreement and/or the Restricted Stock Purchase Agreement, and Purchaser will promptly surrender the stock certificate(s) evidencing the Shares so purchased to the Company for transfer or cancellation.         5.  Tax Matters. Purchaser has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he (and not the Company) shall be responsible for his own tax liability that may arise as a result of Purchaser’s investment or the transactions contemplated by this Agreement.         6.  Compliance with Laws and Regulations. The issuance and transfer of the Shares will be subject to and conditioned upon compliance by the Company and Purchaser with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.         7.  Successors and Assigns. The Company may assign any of its rights under this Agreement, including its rights to repurchase Shares under the Right of First Refusal. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set 2 -------------------------------------------------------------------------------- forth, this Agreement will be binding upon Purchaser and Purchaser’s heirs, executors, administrators, legal representatives, successors and assigns.         8.  Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California, excluding that body of laws pertaining to conflict of laws. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.         9.  Notices. Any notice required to be given or delivered to the Company shall be in writing and addressed to the Corporate Secretary of the Company at its principal corporate offices. Any notice required to be given or delivered to Purchaser shall be in writing and addressed to Purchaser at the address indicated above or to such other address as Purchaser may designate in writing from time to time to the Company. All notices shall be deemed effectively given upon personal delivery, three (3) days after deposit in the United States mail by certified or registered mail (return receipt requested), one (1) business day after its deposit with any return receipt express courier (prepaid), or one (1) business day after transmission by fax or telecopier.         10.  Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.         11.  Headings. The captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. All references herein to Sections will refer to Sections of this Agreement.         12.  Entire Agreement. The Plan, the Stock Option Agreement, this Exercise Agreement, and the Restricted Stock Purchase Agreement, together with all exhibits to all such documents, constitute the entire agreement and understanding of the parties with respect to the subject matter hereof, and supersede all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter hereof. This Agreement may only be amended, modified or waived in writing signed by both parties hereto. INKTOMI CORPORATION     PARTICIPANT By:       --------------------------------------------------------------------------------     --------------------------------------------------------------------------------     (Signature)           --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- (Please print name and title)     (Please print name) 3 -------------------------------------------------------------------------------- EXHIBIT B-1 1998 STOCK PLAN RESTRICTED STOCK PURCHASE AGREEMENT         THIS AGREEMENT is made between ______________ (the “Purchaser”) and Inktomi Corporation (the “Company”) as of __________________, 199__. RECITALS         A.  Pursuant to the exercise of the stock option granted to Purchaser under the Company’s 1998 Stock Plan (the “Plan”) and pursuant to the Stock Option Agreement (the “Option Agreement”) by and between the Company and Purchaser with respect to such grant, which Option Agreement is hereby incorporated by reference, Purchaser has elected by executing an Exercise Agreement (the “Exercise Agreement ”) to purchase shares which have not become vested under the vesting schedule set forth in the Option Agreement (“Unvested Shares”). The Unvested Shares and the shares subject to the Option Agreement which have become vested are sometimes collectively referred to herein as the “Shares.”         B.  As required by the Option Agreement, as a condition to Purchaser’s election to exercise the option, Purchaser must execute this Restricted Stock Purchase Agreement, which sets forth the rights and obligations of the parties with respect to Shares acquired upon exercise of the Option. AGREEMENT         1.  Repurchase Option.               (a)  Repurchase Option. If Purchaser’s employment or consulting relationship with the Company is terminated for any reason, including for cause, death, and disability, the Company shall have the right and option to purchase from Purchaser, or Purchaser’s personal representative, as the case may be, all or any portion of the Purchaser’s then Unvested Shares as of the date of such termination at the price paid by the Purchaser for such Shares (the “Repurchase Option”).               (b)  Exercise. Upon the occurrence of a termination, the Company may exercise its Repurchase Option by delivering personally or by registered mail, to Purchaser (or his transferee or legal representative, as the case may be), within ninety (90) days of the termination, a notice in writing indicating the Company’s intention to exercise the Repurchase Option and setting forth a date for closing not later than thirty (30) days from the mailing of such notice. The closing shall take place at the Company’s office. At the closing, the holder of the certificates for the then Unvested Shares being transferred shall deliver the stock certificate or certificates evidencing the Unvested Shares, and the Company shall deliver the purchase price therefor.                 (c)  Termination. If the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety (90) days following the termination, the Repurchase Option shall terminate.         2.  Transferability of the Shares; Escrow.               (a)  Transfer. Purchaser hereby authorizes and directs the secretary of the Company, or such other person designated by the Company, to transfer the Unvested Shares as to which the Repurchase Option has been exercised from Purchaser to the Company.               (b)  Escrow. To insure the availability for delivery of Purchaser’s Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 1, Purchaser hereby appoints the secretary, or any other person designated by the Company as escrow agent, as its attorney-in-fact to sell, assign and transfer unto the Company, such Unvested Shares, if any, repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this Agreement, deliver and deposit with the secretary of the Company, or such other person designated by the Company, the share certificates representing the initial Unvested Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit B-2. The Unvested Shares and stock assignment shall be held by the secretary in escrow, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached as Exhibit B-3 hereto, until the Company exercises its Repurchase Option as provided in 1 -------------------------------------------------------------------------------- Section 1, until such Unvested Shares are vested, or until such time as this Agreement no longer is in effect. As a further condition to the Company’s obligations under this Agreement, the spouse of the Purchaser, if any, shall execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit B-4. Upon vesting of the initial Unvested Shares, the escrow agent shall promptly deliver to the Purchaser (upon request) the certificate or certificates representing such Shares in the escrow agent’s possession belonging to the Purchaser, and the escrow agent shall be discharged of all further obligations hereunder; provided, however, that the escrow agent shall nevertheless retain such certificate or certificates as escrow agent if so required pursuant to other restrictions imposed pursuant to this Agreement.               (c)  No Liability. The Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.               (d)  Restrictions on Transfer. Transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all the provisions hereof and the Exercise Notice executed by the Purchaser with respect to any Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this Agreement.         3.  Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein.         4.  Legends. The share certificate evidencing the Shares shall be endorsed with the following legend (in addition to any other required legends): THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.         5.  Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement.         6.  Notices. Notices required hereunder shall be given in person or by registered mail to the address of Purchaser shown on the records of the Company, and to the Company at its principal executive offices.         7.  Survival of Terms. This Agreement shall apply to and bind Purchaser and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.         8.  Section 83(b) Elections.               (a)  Election for Unvested Shares Purchased Pursuant to Nonqualified Stock Options. Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise of a nonqualified stock option for Unvested Shares, that unless an election is filed by the Purchaser with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within 30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase, there will be a recognition of taxable income to the Purchaser, measured by the excess, if any, of the fair market value of the Shares, at the time the Company’s Repurchase Option lapses over the purchase price for the Shares. Purchaser represents that Purchaser has consulted any tax consultant(s) Purchaser deems advisable in connection with the purchase of the Shares or the filing of the Election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) is attached hereto as Exhibit B-5 for reference.               (b)  Election for Unvested Shares Purchased Pursuant to Incentive Stock Options. Purchaser hereby acknowledges that he or she has been informed that, with respect to the exercise of an incentive stock option for Unvested Shares, that unless an election is filed by the Purchaser with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within 30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase, there will be a recognition of income to the Purchaser, for alternative minimum tax purposes, measured by the excess, if any, of the 2 -------------------------------------------------------------------------------- fair market value of the Shares, at the time the Company’s Repurchase Option lapses over the purchase price for the Shares. Purchaser represents that Purchaser has consulted any tax consultant(s) Purchaser deems advisable in connection with the purchase of the Shares or the filing of the Election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) for alternative minimum tax purposes is attached hereto as Exhibit B-6 for reference. PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER’S BEHALF.         9.  Tax Matters. Purchaser has reviewed with his own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that he (and not the Company) shall be responsible for his own tax liability that may arise as a result of Purchaser’s investment or the transactions contemplated by this Agreement.         10.  Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.         11.  Headings. The captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. All references herein to Sections will refer to Sections of this Agreement.         12.  Entire Agreement. The Plan, the Stock Option Agreement, the Exercise Agreement, and this Restricted Stock Purchase Agreement, together with all exhibits to all such documents, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter hereof. This Agreement may only be amended, modified or waived in writing signed by both parties hereto.         13.  Governing Law; Severability. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California, excluding that body of laws pertaining to conflict of laws. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.         14.  Interpretations. Any dispute regarding the interpretation of this Agreement shall be submitted by Purchaser or the Company to the Committee (as defined in the Plan) for review. The resolution of such a dispute by the Committee shall be final and binding on the Company and Participant.         IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above. INKTOMI CORPORATION     PARTICIPANT By:       --------------------------------------------------------------------------------     --------------------------------------------------------------------------------     (Signature)           --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- (Please print name)     (Please print name)           --------------------------------------------------------------------------------     (Please print title)     3 -------------------------------------------------------------------------------- EXHIBIT B-2 ASSIGNMENT SEPARATE FROM CERTIFICATE         FOR VALUE RECEIVED I, __________________________, hereby sell, assign and transfer unto                        (_____________) shares of the Common Stock of Inktomi Corporation standing in my name of the books of said corporation represented by Certificate No. _______ herewith and do hereby irrevocably constitute and appoint ______________ ______________________ to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.         This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement between Inktomi Corporation and the undersigned dated _____________, 19____. Dated: _______________, 19                               Signature:                                                                                                       INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its Repurchase Option as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser. -------------------------------------------------------------------------------- EXHIBIT B-3 JOINT ESCROW INSTRUCTIONS ____________, 19__ Corporate Secretary Inktomi Corporation 1900 South Norfolk Street, Suite 310 San Mateo, CA 94403 Dear ______________:         As Escrow Agent for both Inktomi Corporation (the “Company”), and the undersigned purchaser of stock of the Company (the “Purchaser”), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement (“Agreement”) between the Company and the undersigned, in accordance with the following instructions:         1.  In the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the “Company”) exercises the Company’s repurchase option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.         2.  At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company’s repurchase option.         3.  Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser’s attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a shareholder of the Company while the stock is held by you.         4.  Upon written request of the Purchaser, but no more than once per calendar year, unless the Company’s repurchase option has been exercised, you will deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company’s repurchase option. Within 120 days after cessation of Purchaser’s continuous employment by or services to the Company, or any parent or subsidiary of the Company, you will deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company’s repurchase option.         5.  If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.         6.  Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.         7.  You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while 1 -------------------------------------------------------------------------------- acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.         8.  You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.         9.  You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.         10.  You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.         11.  You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.         12.  Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.         13.  If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.         14.  It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.         15.  Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days’ advance written notice to each of the other parties hereto. COMPANY:   Inktomi Corporation   1900 South Norfolk Street, Suite 310   San Mateo, CA94403   Attention: Secretary   ______________________________________ PURCHASER:   ______________________________________   ______________________________________   ______________________________________   ______________________________________ ESCROW AGENT:   Corporate Secretary   Inktomi Corporation   1900 South Norfolk Street, Suite 310   San Mateo, CA94403         16.  By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.         17.  This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. 2 --------------------------------------------------------------------------------         18.  These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the laws of the State of California. INKTOMI CORPORATION     PARTICIPANT By:       --------------------------------------------------------------------------------     --------------------------------------------------------------------------------     (Signature)           --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- (Please print name)     (Please print name)           --------------------------------------------------------------------------------     (Please print title)     ESCROW AGENT           --------------------------------------------------------------------------------     (Signature)               --------------------------------------------------------------------------------     (Please print name)     3 -------------------------------------------------------------------------------- EXHIBIT B-4 CONSENT OF SPOUSE         I, ____________________, spouse of ____________, have read and approve the foregoing Stock Option Agreement, Stock Option Exercise Agreement, Restricted Stock Purchase Agreement and Escrow Agreement (collectively the “Agreements”). In consideration of granting of the right to my spouse to purchase shares of Inktomi Corporation, as set forth in the Agreements, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreements and agree to be bound by the provisions of the Agreements insofar as I may have any rights in said Agreements or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreements. Dated: __________________, 19__               --------------------------------------------------------------------------------     (Please print name)               --------------------------------------------------------------------------------     (Signature) -------------------------------------------------------------------------------- EXHIBIT B-5 ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986         The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the property described below:         1.  The name, address, taxpayer identification number and taxable year of the undersigned are as follows: NAME: TAXPAYER: SPOUSE:     ADDRESS:         IDENTIFICATION NO.: TAXPAYER: SPOUSE:     TAXABLE YEAR:             2.  The property with respect to which the election is made is described as follows: ___________ shares (the “Shares”) of the Common Stock of Inktomi Corporation (the “Company”).         3.  The date on which the property was transferred is:                , 19 ____.         4.  The property is subject to the following restrictions: The Shares may not be transferred and are subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions contained in such agreement.         5.  The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $______________________.         6.  The amount (if any) paid for such property is: $______________________.         The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.         The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner. Dated:___________________, 19____   ____________________________________________    Taxpayer         The undersigned spouse of taxpayer joins in this election. Dated:___________________, 19____   ____________________________________________    Spouse of Taxpayer -------------------------------------------------------------------------------- EXHIBIT B-6 ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986         The undersigned taxpayer hereby elects, pursuant to the provisions of Sections 55-56 and 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s alternative minimum taxable income for the current taxable year, as compensation for services, the excess, if any, of the fair market value of the property described below at the time of transfer over the amount paid for such property.         1.  The name, address, taxpayer identification number and taxable year of the undersigned are as follows: NAME: TAXPAYER: SPOUSE:     ADDRESS:         IDENTIFICATION NO.: TAXPAYER: SPOUSE:     TAXABLE YEAR:             2.  The property with respect to which the election is made is described as follows: ________________ shares (the “Shares”) of the Common Stock of Inktomi Corporation (the “Company”).         3.  The date on which the property was transferred is:                        , 199 .         4.  The property is subject to the following restrictions:         The Shares may be repurchased by the Company, or its assignee, at its original purchase price, on certain events. This right lapses with regard to a portion of the Shares over time.         5.  The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $_______________         6.  The amount paid for such property is: $_______________         The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property.         The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner.     Dated:___________________, 19____           --------------------------------------------------------------------------------     Taxpayer The undersigned spouse of taxpayer joins in this election.     Dated:___________________, 19____           --------------------------------------------------------------------------------     Spouse of Taxpayer

   EXHIBIT 10.10a AMENDMENT OF TRIBUNE COMPANY EMPLOYEE STOCK PURCHASE PLAN RESOLVED, that the Board of Directors of the Company hereby designates as “qualified subsidiaries” of the Company for purposes of the Tribune Company Employee Stock Purchase Plan (the “Plan”) all existing direct or indirect majority-owned subsidiaries of the Company including, without limitation, all majority-owned subsidiaries which were previously part of The Times Mirror Company (except for those subsidiaries comprising the Times Mirror Magazine group, the Jeppesen Sandersen business and AchieveGlobal, Inc.); FURTHER RESOLVED, that the Board of Directors of the Company deems it advisable to delegate to the Tribune Company Employee Benefits Committee the authority to designate “qualified subsidiaries” for purposes of the Plan and to amend the terms of the Plan to effect this delegation of authority as follows: By deleting the lead-in clause of Section 3 of the Plan in its entirety and, in lieu thereof, replacing that provision with the following:      "3.   Eligibility. All regular employees of Tribune Company, and of each qualified subsidiary of Tribune Company which may be designated by Tribune Company's Employee Benefits Committee, other than:" FURTHER RESOLVED, that the Secretary or Assistant Secretary of the Company is hereby authorized and empowered to take all steps necessary to effect the foregoing resolutions, including to execute and file or deliver such documents as may be required by law or as may be deemed necessary or proper in connection with the matters set forth in this resolution. *       *        *             I, Mark W. Hianik, Assistant Secretary for Tribune Company (the “Company”), hereby certify that the foregoing is a correct copy of resolutions duly adopted by the Board of Directors of the Company on July 18, 2000.     /s/  Mark W. Hianik       Mark W. Hianik

FOURTH AMENDMENT TO THE CNG NONEMPLOYEE DIRECTORS' FEE PLAN TRUST AGREEMENT THIS AMENDMENT is made and entered into as of the 25th day of April, 2000, by and between CONNECTICUT NATURAL GAS CORPORATION, a Connecticut corporation with its principal office in Hartford, Connecticut (hereinafter referred to as "CNG") and Putnam Fiduciary Trust Company (hereinafter referred to as the "Trustee"). W I T N E S S E T H: WHEREAS, by Agreement dated September 28, 1995 (the "Agreement") CNG and FLEET BANK, N.A. entered into an Agreement entitled CNG Nonemployee Directors' Fee Plan Trust Agreement; and WHEREAS, Putnam Fiduciary Trust Company has been appointed successor trustee under the Agreement and is currently serving as the trustee thereunder; and WHEREAS, the parties reserve the right to amend the Agreement in Article 10, Section 10.1 thereof, subject to the conditions set forth therein; and WHEREAS, the Company wishes to amend the Agreement in the particulars set forth below; NOW, THEREFORE, the Company and the Trustee agree to amend the Agreement, as heretofore amended by the First, Second and Third Amendments thereto, as follows effective immediately prior to the effective date of the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co.: 1. Subparagraph (j) of Paragraph 5.2, as amended by the Third Amendment, is hereby amended by the deletion of the first sentence thereof and the substitution of the following sentence in lieu thereof: "The Trustee may invest in securities (including stock or rights to acquire stock) or obligations issued by Energy East Corporation or successor thereto, including common stock thereof, as directed by CNG." 2. Except as herein above modified and amended, the Agreement, as amended, shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Fourth Amendment to be duly executed and respective corporate seals to be hereunto affixed as of the date first above written. ATTEST: CONNECTICUT NATURAL GAS CORPORATION   By S/ Jean S. McCarthy                                 Its Vice President Human Resources ATTEST: PUTNAM FIDUCIARY TRUST COMPANY   By S/ Tina Campbell                                    Its Senior Vice President   STATE OF CONNECTICUT ) ) SS. August 10, 2000 COUNTY OF HARTFORD ) Personally appeared Jean S. McCarthy, Vice President of Connecticut Natural Gas Corporation, signer of the foregoing instrument, and acknowledged the same to be his free act and deed as such Vice President, and the free act and deed of said corporation, before me.   Alfred B. Lawson, Jr.                               Commissioner of the Superior Court Notary Public My Commission Expires: 5-31-01     COMMONWEALTH OF MASSACHUSETTS ) ) SS. August 11, 2000 COUNTY OF NORFOLK ) Personally appeared Tina Campbell, Sr. Vice President of Putnam Fiduciary Trust Company, signer of the foregoing instrument, and acknowledged the same to be his free act and deed as such                       , and the free act and deed of said corporation, before me.   S/ Carol Peters                                        Notary Public My Commission Expires: 2/23/07

      TRANSITION POWER AGREEMENT (District of Columbia)   By and Between   POTOMAC ELECTRIC POWER COMPANY and SOUTHERN COMPANY ENERGY MARKETING, L.P. Dated December 19, 2000   TABLE OF CONTENTS ARTICLE 1 DEFINITIONS 1 ARTICLE 2     2.1     2.2 TERM AND TERMINATION     Term     Termination 2 2 2 ARTICLE 3     3.1     3.2 CAPACITY RESOURCES     Capacity Resources Obligations     Capacity Resources Information Requirements 2 2 3 ARTICLE 4 ANCILLARY SERVICES 4 ARTICLE 5     5.1     5.2     5.3 ENERGY     Required Energy     Optional Energy     Determination of Energy Requirements, Losses 4 4 4 5 ARTICLE 6     6.1     6.2 PRICING     Compensation for Services     Taxes 5 5 6 ARTICLE 7 SERVICES OBTAINED BY GENERATOR FROM PJM 6 ARTICLE 8     8.1     8.2 ALTERNATIVE SERVICES AND LIMITED LIABILITY     Alternative Services     Limitation on Liability 6 6 7 ARTICLE 9     9.1     9.2     9.3 FORCE MAJEURE     Effect of Force Majeure     Force Majeure Defined     Notification 7 7 7 8 ARTICLE 10     10.1     10.2     10.3     10.4 INDEMNIFICATION FOR THIRD PARTY CLAIMS     Generator's Indemnification     Pepco's Indemnification     Indemnification Procedures     Survival 8 8 8 9 9 ARTICLE 11     11.1     11.2 DEFAULT     Event of Default     Remedies 9 9 10 ARTICLE 12     12.1     12.2 PROJECTIONS AND OPERATING COMMITTEE     Projections     Operating Committee 10 10 10 ARTICLE 13     13.1     13.2     13.3 COST RESPONSIBILITIES AND BILLING PROCEDURES     Billing Procedures     Billing Disputes     Interest on Unpaid Balances 11 11 11 12 ARTICLE 14     14.1     14.2     14.3 CONFIDENTIALITY     Confidentiality Obligations of Pepco     Confidentiality of Audits     Remedies 12 12 13 13 ARTICLE 15     15.1     15.2 DISPUTE RESOLUTIONS     Disputes     Arbitration 13 13 14 ARTICLE 16     16.1     16.2 REPRESENTATIONS     Representations of Pepco     Representations of Generator 15 15 16 ARTICLE 17     17.1     17.2     17.3     17.4     17.5     17.6 ASSIGNMENT/CHANGE IN CORPORATE IDENTITY     Generally     Pepco's Assignment Rights     Generator's Assignment Rights     Mergers or Consolidations     Limitations     Successors 17 17 17 17 18 18 18 ARTICLE 18 NOTICES 18 ARTICLE 19     19.1     19.2 AMENDMENTS     Amendments     PJM Agreement Modifications 19 19 19 ARTICLE 20 AUDITS 20 ARTICLE 21     21.1     21.2     21.3     21.4     21.5     21.6     21.7     21.8     21.9     21.10     21.11 MISCELLANEOUS PROVISIONS     Waiver     No Third Party Beneficiaries     Governing Law     Counterparts     Interpretation     Jurisdiction and Enforcement     Entire Agreement     Severability     Further Assurances     Independent Contractor Status     Conflicts 20 20 21 21 21 21 22 22 22 23 23 23 SCHEDULE 1 DEFINITIONS 25 EXHIBIT A Pepco's Non-Binding Estimate for Calendar Year 2001 of Capacity Resources for the Service Load 29 EXHIBIT B Capacity Resources Plan for Contract Year 1 30                 TRANSITION POWER AGREEMENT (District of Columbia)             This Transition Power Agreement ("Agreement") dated as of December 19, 2000 by and between Potomac Electric Power Company ("Pepco") a District of Columbia and Virginia corporation, and Southern Company Energy Marketing, L.P. ("Generator") a Delaware limited partnership.   Pepco and Generator are each referred to herein as a "Party," and collectively referred to herein as the "Parties."                                                        WITNESSETH:            WHEREAS, Pepco and Southern Energy, Inc., a Delaware corporation (the "SEI") have entered into an Asset Sale and Purchase Agreement (as amended from time to time, the "Asset Sale Agreement") dated June 7, 2000 for (i) the sale and purchase of certain of Pepco's generating resources and (ii) the assignment or rights and obligations under five power purchase agreements ("PPAs") or for alternative arrangements relating to such PPAs;           WHEREAS, SEI has assigned its rights and obligations under this Agreement to Generator in accordance with Section 12.5 of the Asset Sale Agreement;           WHEREAS, certain of the PPAs provide for the purchase and sale of renewable energy resources;           WHEREAS, Pepco will continue to operate its transmission and distribution businesses which includes obligations to sell power to its retail customers; and           WHEREAS, the Parties have agreed in the Asset Sale Agreement to execute this Agreement in order to provide for the sale by Generator, and purchase by Pepco, of capacity, electric energy and certain ancillary services in accordance with the terms and conditions of this Agreement.           NOW THEREFORE, in consideration of the mutual representations, covenants and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties hereto agree as follows:                                                                ARTICLE 1                                                              DEFINITIONS           Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings specified or referred to in Schedule 1 of this Agreement.                                                               ARTICLE 2                                                 TERM AND TERMINATION           2.1      Term. This Agreement shall become effective upon consummation of the Closing ("Effective Date"). Unless terminated sooner in accordance with the terms of this Agreement, this Agreement shall continue in full force and effect from the Effective Date until the end of Contract Year 4.           2.2      Termination. The applicable provisions of this Agreement shall continue in effect after cancellation or termination hereof to the extent necessary to provide for final billings, billing adjustments and payments pertaining to liability and indemnification obligations arising from acts or events that occurred while this Agreement was in effect.                                                                      ARTICLE 3                                                           CAPACITY RESOURCES            3.1     Capacity Resources Obligations                      (a)            During the term of this Agreement, Generator shall supply to Pepco and make available within PJM on Pepco's behalf, and Pepco shall purchase from Generator, Pepco's full requirements for Capacity Resources to serve the Service Load ("Capacity Resource Requirements") at the prices set forth in Article 6 of this Agreement. Capacity Resources shall be determined, and provided by the Generator, in accordance with the PJM Reliability Agreement and other applicable PJM requirements. Capacity Resource Requirements shall mean the portion of Pepco's Accounted-For Obligation, as that term is defined and determined in accordance with the PJM Reliability Agreement and applicable PJM requirements, that is located in the District of Columbia.                      (b)            To the extent that PJM assigns to Pepco Fixed Transmission Rights for Capacity Resources contained in a Capacity Resource Plan and designated for Fixed Transmission Rights, Pepco shall transfer such Fixed Transmission Rights to Generator pursuant to PJM's procedures for assigning Fixed Transmission Rights                      (c)           Generator shall provide to the PJM System Operator or PJM Interconnection LLC, as applicable, all information and data required with respect to the Capacity Resources Requirements, with copies to Pepco, and Generator shall be responsible for any charges levied by the PJM System Operator or the PJM Interconnection LLC on Pepco or Generator due to the delayed receipt of such information and data in accordance with the PJM Reliability Agreement unless the delay is due to Pepco's delay in providing Generator with information that Pepco is required to provide.            3.2     Capacity Resources Information Requirements                       (a)           Generator shall provide in accordance with this Section 3.2 its proposed plan to satisfy its obligations hereunder to provide the Capacity Resources Requirements under this Agreement ("Capacity Resources Plan").                       (b)           Exhibit A hereto sets forth Pepco's non-binding estimate of the Capacity Resources required to supply the Service Load for each month during the 2001 calendar year. On or before April 1 preceding each Planning Period thereafter, Pepco shall provide Generator with a non-binding estimate of the Capacity Resources required to supply the Service Load for each month in the following Planning Period.                       (c)           Exhibit B hereto sets forth the Generator's Capacity Resources Plan for Contract Year 1.                       (d)           On or before May 1 preceding each Planning Period thereafter during the term of this Agreement, the Generator shall provide to the Operating Committee, for review and approval (such approval not to be unreasonably withheld or delayed), its proposed Capacity Resources Plan (including Generator's proposed designation of Capacity Resources for associated Fixed Transmission Rights) to be submitted to the PJM Interconnection LLC in accordance with Schedule 6 of the PJM Reliability Agreement for the upcoming Planning Period.                       (e)           If the Generator intends to propose any material change to a Capacity Resources Plan (including any change in a designation of Capacity Resources eligible for Fixed Transmission Rights) which has previously been approved by the Operating Committee, the Generator shall provide such proposed changes to the Operating Committee before it is submitted for approval pursuant to the PJM Reliability Agreement and such change shall be subject to the Operating Committee for review and approval (such approval not to be unreasonably withheld or delayed) if the change (1) adds a resource other than (x) capacity already certified by the PJM Interconnection LLC or PJM System Operator, as applicable, as a Capacity Resource or (y) Capacity Credits, or (2) proposes to change a designation of Capacity Resources eligible for Fixed Transmission Rights.                                                     ARTICLE 4                                               ANCILLARY SERVICES            During the term of this Agreement, Generator shall supply to Pepco and deliver within PJM on Pepco's behalf, and Pepco shall purchase, Pepco's full requirements for Ancillary Services for the Service Load ("Ancillary Services Requirements") at the prices set forth in Article 6 of this Agreement. Ancillary Services mean Regulation and Frequency Response Service (as defined in Schedule 3 of the PJM Tariff) and Operating Reserves (as defined in Schedules 5 and 6 of the PJM Tariff).                                                         ARTICLE 5                                                           ENERGY            5.1      Required Energy. During the term of this Agreement, Generator shall supply to Pepco at the Delivery Points, and Pepco shall purchase, the following percentages of Pepco's Full Energy Requirements in the year indicated below (the "Required Energy Percent") at the prices set forth in Article 6 of this Agreement:   Year Required Energy Percent   Contract Year 1 100%   Contract Year 2   75%            5.2     Optional Energy                       (a)     For the duration of each of Contract Year 2, Contract Year 3 and Contract Year 4, Pepco shall have the right to purchase from Generator (the "Call Options") the percentages of the Full Energy Requirements indicated below (the "Optional Energy Percent"). To the extent Pepco exercises a Call Option for a given year, Generator shall supply to Pepco at the Delivery Points the Optional Energy Percent at the price set forth in Article 6 of this Agreement.   Year Optional Energy Percent   Contract Year 2 25%   Contract Year 3 100% (in 25% increments)   Contract Year 4 100% (25% increments)            Notwithstanding the foregoing, the total of Pepco's Call Options exercised with respect to the Optional Energy Percent for Contract Year 3 and Contract Year 4, respectively, shall not exceed the percentage of the Full Energy Requirements that Pepco elected to purchase in the immediately preceding contract year.                       (b)     By each October 1 prior to the contract year in which the applicable Optional Energy Percent is deliverable ("Strike Date"), Pepco shall notify Generator in writing whether it is exercising any of its Call Options for the upcoming contract year, and if so, the percentage of its Full Energy Requirements it elects to purchase.                       5.3     Determination of Energy Requirements. The amount of Full Energy Requirements shall be as determined by PJM in accordance with Schedule 1, Section 3.2 of the PJM Operating Agreement at the respective PJM load buses measured by PJM for the Service Load served by Pepco (the "Delivery Points"). Generator shall be responsible for all energy losses (including allocated PJM losses, unaccounted-for energy and distribution losses) associated with delivery of Required Energy Percent and Optional Energy Percent to the Service Load.                                                                    ARTICLE 6                                                                      Pricing                       6.1     Compensation for Services.Subject to the terms of this Agreement, Pepco shall be obligated to make a monthly payment to Generator for the Services it provides which shall be comprised of the following components:                                 (a)       For each Month during the term of the Agreement, a Capacity Payment for the Capacity Resources Requirements and Ancillary Services Requirements that Generator provides to Pepco in such Month calculated as follows:                      Capacity Payment = (Capacity Price + Ancillary Services Price) x Metered                      Energy Requirements                                 Where:                                            Capacity Price = $3.50/MWh                                            Ancillary Services Price = $0.50/MWh                      (b)      For each Month during the term of the Agreement, an Energy Payment for the Required Energy Percent and Optional Energy Percent, if any, that Generator delivers to Pepco at the Delivery Points in each Month calculated as follows:                       Energy Payment = [Metered Energy Requirements x (Required                      Energy Percent + Optional Energy Percent)] x Energy Price                                 Where:                                             Energy Price = $35.50/MWh during a Summer                                             Month and $25.30/MWh during a Winter Month.                       (c)     Pepco's monthly payment to Generator will be decreased by (i) any PJM charges for transmission congestion, allocated losses and unaccounted-for energy that Pepco incurs in connection with the Services Generator delivers to Pepco pursuant to Articles 4, 5 and 6 of this Agreement, and (ii) the amounts of any payments Generator owes to Pepco pursuant to Article 8 of this Agreement.                      6.2      Taxes.  Generator shall be responsible for taxes related to the sale or provision of Services hereunder.                                                         ARTICLE 7                       SERVICES OBTAINED BY GENERATOR FROM PJM                       Pepco shall, upon Generator's request, reasonably cooperate with Generator to facilitate its acquisition in the PJM marketplace and resale to Pepco of the Services Generator is obligated to provide to Pepco under this Agreement. Pepco shall follow Generator's instructions with respect to scheduling load in the day ahead PJM market.                                                         ARTICLE 8            ALTERNATIVE SERVICES AND LIMITATION OF LIABILITY                       8.1     Alternative Services. To the extent that Generator does not provide Capacity Resources Requirements, Ancillary Services Requirements, the Required Energy and/or Optional Energy ("Services") to Pepco as required under this Agreement, Generator, as an alternative method of performing such obligations, shall pay Pepco the positive difference between the price Pepco pays for such Services in the appropriate PJM marketplace, or if not available in the PJM market, any other market ("Alternative Services") and the price Pepco would have paid to Generator for such Services under this Agreement, plus penalties and nonperformance charges, if any, assessed on Pepco by the PJM Interconnection LLC or PJM System Operator as a result of the Generator not providing the Services. Calculation of the cost of Alternative Services hereunder shall include all reasonable direct costs associated with the procurement and delivery of Alternative Services, including legal or transactional costs and expenses; taxes, energy, demand, capacity, or reservation charges; energy losses; emergency energy; and any transmission or congestion costs but does not include the cost of PJM network service. For purposes of determining the amount of Alternative Services Pepco purchases to satisfy its energy requirements, energy requirements for any day shall be the net amount of energy Pepco purchases for the Service Load in the PJM day-ahead and second settlement markets.                       8.2     Limitation of Liability. Except for indemnity obligations set forth in Article 10 and the damages, charges or penalties set forth in Sections 3.1(c), 5.3, 8.1 and 13.3 of this Agreement, neither Party, nor their respective officers, directors, agents, employees, Affiliates, or successors or assigns of any of them, shall be liable to the other Party or its Affiliates, officers, directors, agents, employees, successors or assigns for claims, suits, actions or causes of action for incidental, punitive, special, indirect, multiple or consequential damages (including, without limitation, lost revenues, claims of customers, attorneys' fees and litigation costs) connected with, or resulting from, performance or non-performance of this Agreement, or any actions undertaken in connection with or related to this Agreement, including, without limitation, any such damages which are based upon causes of action for breach of contract, tort (including negligence and misrepresentation), breach of warranty or strict liability. The provisions of this Section 8.2 shall apply regardless of fault and shall survive termination, cancellation, suspension, completion, or expiration of this Agreement.                                                          ARTICLE 9                                                        Force Majeure                       9.1     Effect of Force Majeure. Notwithstanding anything in this Agreement to the contrary, the Parties shall be excused from performing their respective obligations hereunder (except for the obligation to pay sums of money due and owing hereunder) and shall not be liable in damages or otherwise, to the extent that a Party is unable to perform or is prevented from performing by an event of Force Majeure and has complied with Section 9.3.                      9.2      Force Majeure Defined. Force Majeure includes, without limitation, storm, flood, lightning, drought, earthquake, fire, explosion, civil disturbance, acts of God or the public enemy, civil disturbance, or any other cause beyond a Party's reasonable control but only if and to the extent that the event directly affects the availability of the transmission or distribution facilities of PJM or Pepco which are necessary to deliver capacity or energy to the Service Load. Force Majeure shall not include events affecting the availability or cost of operating any generating facility or resource.                       9.3     Notification. A Party shall not be entitled to rely on the occurrence of an event of Force Majeure as a basis for being excused from performance of its obligations under this Agreement unless the Party relying on the event or condition shall: (a) provide prompt written notice of such Force Majeure event to the other Party, including an estimation of its expected duration and the probable impact on the performance of its obligations hereunder; (b) exercise all reasonable efforts to continue to perform its obligations under this Agreement; (c) expeditiously take action to correct or cure the event or condition excusing performance; (d) exercise all reasonable efforts to mitigate or limit damages to the other Party; and (e) provide prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. Subject to this Section 9.3, any obligation under this Agreement shall be suspended only to the extent caused by such Force Majeure and only during the continuance of any inability of performance caused by such Force Majeure but for no longer period.                                                        ARTICLE 10                           Indemnification FOR THIRD PARTY CLAIMS                      10.1      Generator's Indemnification. Generator shall indemnify, hold harmless, and defend Pepco and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between Pepco and a third party or Generator) for damage to property of unaffiliated third parties, injury to or death of any person, including Pepco's employees or any third parties, to the extent caused, by the negligence or willful misconduct of Generator's and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Generator's performance or breach of this Agreement, or the exercise by Generator of its rights hereunder.                       10.2     Pepco's Indemnification. Pepco shall indemnify, hold harmless, and defend Generator and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between the Generator and a third party or Pepco) for damage to property of unaffiliated third parties, injury to or death of any person, including Generator's employees or any third parties, to the extent caused by the negligence or willful misconduct of Pepco and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Pepco's performance or breach of this Agreement, or the exercise by Pepco of its rights hereunder.                       10.3     Indemnification Procedures. If either Party intends to seek indemnification under this Article 10 from the other Party, the Party seeking indemnification shall give the other Party notice of such claim within ninety (90) days of the later of the commencement of, or the Party's actual knowledge of, such claim or action. Such notice shall describe the claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. Neither Party may settle or compromise any claim without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed.                       10.4     Survival. The indemnification obligations of each Party under this Article 10 shall continue in full force and effect regardless of whether this Agreement has either expired or been terminated or canceled.                                                        ARTICLE 11                                                             Default                      11.1      Event of Default. Unless excused by Force Majeure, each of the following events shall constitute an event of default (an "Event of Default") under this Agreement:                                  (a)      the failure by a Party to pay any amount due within thirty (30) days after receipt of written notice of nonpayment by the other Party, unless the payment of such amount is disputed in good faith;                                 (b)       a Party's breach of any material term or condition of this Agreement including any material breach of a representation, warranty or covenant made in this Agreement which, after receiving written notice of the breach from the non- breaching Party (such notice to set forth in reasonable detail the nature of the default and, where known and if applicable, the steps necessary to cure such default), (i) the breaching Party fails to cure within thirty (30) days following receipt of the notice or (ii) if such default is of such a nature that it cannot be cured within thirty (30) days following receipt of such notice, the breaching Party fails within such thirty (30) days to commence the necessary cure and fails at any time thereafter diligently and continuously to prosecute such cure to completion provided that the cure is completed no later than 180 days after the receipt of the default notice;                                 (c)      the appointment of a receiver or liquidator or trustee for either Party and such receiver, liquidator or trustee is not discharged within sixty (60) days;                                 (d)       the entry of a decree adjudicating a Party as bankrupt or insolvent, and such decree is continued undischarged and unstayed for a period of sixty (60) days; or                                 (e)       the filing of a voluntary or involuntary petition in bankruptcy under any provision of any federal or state bankruptcy law by a Party or against it, and, with respect to an involuntary petition in bankruptcy, such petition continues undischarged and unstayed for a period of sixty (60) days.                       11.2     Remedies. Upon the occurrence of an Event of Default, the non- defaulting Party may (a) terminate this Agreement by providing sixty (60) days' prior written notice to the defaulting Party and this Agreement shall thereupon terminate upon receipt of regulatory approval for such termination, but not before the date specified in the notice, and/or (b) subject to Section 8.2 of this Agreement, exercise all such rights and remedies as may be available to it under this Agreement or at law or equity with respect to such Event of Default.                                                         ARTICLE 12                           PROJECTIONS AND OPERATING COMMITTEE                       12.1      Projections. No later than three (3) business days prior to each Monday during the term of this Agreement, Pepco shall provide Generator with non- binding projections of the Services to be provided by Generator to Pepco under this Agreement for the week beginning that Monday.                       12.2     Operating Committee. The Parties shall establish an operating committee consisting of one representative for each Party ("Operating Committee"). The Operating Committee shall act only by unanimous agreement or consent. The Parties shall designate their respective representatives to the Operating Committee, plus an alternate by written notice. Each Party's representative on the Operating Committee is authorized to act on behalf of such Party with respect to any matter arising under this Agreement which is to be decided by the Operating Committee, however, the Operating Committee shall not have any authority to modify or otherwise alter the rights and obligations of the Parties hereunder. The Operating Committee shall develop and implement suitable policies and procedures with to coordinate the interaction of the Parties with respect to the performance of their duties and obligations under this Agreement.                                                         ARTICLE 13                       COST RESPONSIBILITIES AND BILLING PROCEDURES 13.1     Billing Procedures.                                  (a)      Within ten (10) days after the first day of each Month Pepco shall provide to Generator a written invoice setting forth (a) the amount Pepco owes to Generator pursuant to Article 6 of this Agreement for Services and any other payments which may be due hereunder, and (b) the amounts, if any, that Generator owes to Pepco pursuant to this Agreement. Each invoice shall (i) delineate the Month in which the Services or Alternative Services were provided or reimbursable charges were incurred, (ii) fully describe the Services or Alternative Services rendered or reimbursable charges incurred, (iii) be itemized to reflect the Services or Alternative Services performed or provided or reimbursable charges incurred, and (iv) provide reasonable detail as to the calculation of the amounts involved.                                  (b)       All invoices shall be paid within fifteen (15) days after the date of issuance, but not earlier than the 25th day of the month in which the invoice is rendered. All payments shall be made by wire transfer to a bank designated in writing by such Party. Payment of invoices shall not relieve the paying Party from any responsibilities or obligations it has under this Agreement, nor shall such payment constitute a waiver of any claims arising hereunder.                                  (c)      To the extent that, for any billing period, Generator is obligated to pay to Pepco amounts due and calculated pursuant to this Section 13.1, Pepco may use such amounts as a set-off against any amounts owed by Pepco to Generator.                       13.2      Billing Disputes. In the event of a billing dispute between the Parties, (i) each Party shall continue to perform its obligations in accordance with the terms of this Agreement subject to the other Party's rights hereunder, and (ii) the Party required to make payments hereunder shall pay to the other Party all invoiced amounts when due, net of any set-offs permitted under Section 13.1(d), that are not in dispute. Payment of invoices by either Party shall not relieve the paying Party from any responsibilities or obligations it has under this Agreement; nor shall it constitute a waiver of any claims arising hereunder.                       13.3      Interest on Unpaid Balances. Interest on any unpaid amounts shall be calculated in accordance with the methodology specified for interest on refunds in FERC regulations at 18 C.F.R. Section 35.19a(a)(2)(iii). Interest on delinquent amounts shall be calculated from the due date of the bill to the date of payment. When payments are made by mail, bills shall be considered as having been paid on the date of receipt by the other Party.                                                          ARTICLE 14                                                   CONFIDENTIALITY                       14.1      Confidentiality Obligations of Pepco. Each Party shall hold in confidence, unless compelled to disclose by judicial or administrative process or other provisions of law, all documents and information furnished by one Party to the other Party in connection with this Agreement marked "Confidential" or "Proprietary." Except to the extent that such information or documents are (i) generally available to the public other than as a result of a disclosure by a receiving Party in breach of this Agreement, (ii) available to the receiving Party on a non-confidential basis prior to disclosure by the other Party , or (iii) available to the receiving Party on a non-confidential basis from a source other than the other Party, provided that such source is not known, and by reasonable effort could not be known, by the receiving Party to be bound by a confidentiality agreement with the other Party or otherwise prohibited from transmitting the information to the receiving Party by a contractual, legal or fiduciary obligation, the receiving Party shall not release or disclose such information to any other person, except to its employees, representatives or agents on a need-to-know basis, in connection with this Agreement who has not first been advised of the confidentiality provisions of this Section 14.1 and has agreed in writing to comply with such provisions. In no event shall such information be disclosed in violation of the requirements of FERC Orders 889 and 889-A, and any successor thereto. The Party receiving confidential information from the other Party shall promptly notify the other Party if it receives notice or otherwise concludes that the production of any information subject to this Section 14.1 is being sought under any provision of law and the receiving Party shall use reasonable efforts in cooperation with the other Party to seek confidential treatment for such confidential information provided thereto.                       14.2      Confidentiality of Audits. The independent auditor performing any audit, as referred to in Article 20, shall be subject to a confidentiality agreement between the auditor and the Party being audited. Such audit information shall be treated as confidential except to the extent that its disclosure is required by regulatory or judicial order, for reliability purposes pursuant to PJM requirements and pursuant to the FERC's rules and regulations. Except as provided herein, neither Party will disclose the audit information to any third party, without the other Party's prior written consent. Audit information in the hands of the Party not being audited shall be subject to all provisions of Article 20.                       14.4      Remedies. The Parties agree that monetary damages would be inadequate to compensate a Party for the other Party's breach of its obligations under Sections 14.1 and 14.2. Each Party accordingly agrees, subject to Section 8.2, that the other Party shall be entitled to equitable relief, by way of injunction or otherwise, if the first Party breaches or threatens to breach its obligations under Sections 14.1 or 14.2 of this Agreement, as applicable, which equitable relief shall be granted without bond or proof of damages, and the receiving Party shall not plead in defense that there would be an adequate remedy at law.                                                                    ARTICLE 15                                                         DISPUTE RESOLUTION                       15.1     Disputes. A Party with a claim or dispute under this Agreement shall submit to the Operating Committee a notification of such claim or dispute within sixty (60) days after the circumstances that gave rise to the claim or the question or issue in dispute. The notification shall be in writing and shall include a concise statement of the claim or the issue or question in dispute, a statement of the relevant facts and documentation to support the claim. In the event the Operating Committee is unable, in good faith, to resolve their disagreement in a manner satisfactory to both Parties within thirty (30) days after receipt by the Operating Committee of a notification specifying the claim, issue or question in dispute, the Parties shall refer the dispute to their respective senior management. If, after using their good faith best efforts to resolve the dispute, senior management cannot resolve the dispute within thirty (30) days, the Parties shall utilize the arbitration procedures set forth below in Section 15.2 to resolve a dispute, provided that nothing herein or therein shall prohibit a Party from at any time requesting from a court of competent jurisdiction a temporary restraining order, preliminary injunction, or other similar form of equitable relief to enforce performance of the provisions of this Agreement.                       15.2      Arbitration.                                  (a)       Unless the Parties otherwise mutually agree in writing to another form of dispute resolution such as dispute resolution under the PJM Agreement or the MAAC agreement, any arbitration initiated under this Agreement shall be conducted before a single neutral arbitrator appointed by the Parties within thirty (30) days of receipt by respondent of the demand for arbitration. If the Parties are unable to agree on an arbitrator, such arbitrator shall be appointed by the American Arbitration Association. Unless the Parties agree otherwise, the arbitrator shall be an attorney or retired judge with at least fifteen (15) years of experience, and shall not have any current or past substantial business or financial relationships with any Party to the arbitration. If possible, the arbitrator shall have experience in the electric utility industry. Unless otherwise agreed, the arbitration shall be conducted in accordance with the American Arbitration Association's Commercial Arbitration Rules, then in effect. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. Sections 1 et seq. The location of any arbitration hereunder shall be in the District of Columbia.                                  (b)       The arbitration shall, if possible, be concluded not later than six (6) months after the date that it is initiated. The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall have no power to modify or change any of the above in any manner. The arbitrator shall have no authority to award punitive or multiple damages or any damages inconsistent with this Agreement. The arbitrator shall, within thirty (30) days of the conclusion of the hearing, unless such time is extended by agreement of the Parties, notify the Parties in writing of his or her decision, stating his or her reasons for such decision and separately listing his or her findings of fact and conclusions of law. The decision of the arbitrator rendered in such a proceeding shall be final and binding on the Parties. Judgment on the award may be entered upon it in any court having jurisdiction.                                  (c)       Nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with FERC with respect to any arbitrable claim over which FERC has jurisdiction. In such case, the other Party may request FERC to reject or to waive jurisdiction. If FERC rejects or waives jurisdiction with respect to all or a portion of the claim, the portion of the claim not so accepted by FERC shall be resolved through arbitration, as provided in this Agreement. To the extent that FERC asserts or accepts jurisdiction over the claim, the decision, finding of fact or order of FERC shall be final and binding, subject to judicial review under the Federal Power Act, and any arbitration proceedings that may have commenced with respect to the claim prior to the assertion or acceptance of jurisdiction by FERC shall be terminated.                                                ARTICLE 16                                              Representations                       16.1      Representations of Pepco. Pepco hereby represents and warrants to Generator as follows:                                  (a)      Incorporation. Pepco is a corporation duly organized, validly existing and in good standing under the laws of the District of Columbia and the Commonwealth of Virginia, and has all requisite corporate power and authority to own, lease and operate its material assets and properties and to carry on its business as now being conducted.                                  (b)       Authority. Pepco has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by Pepco of this Agreement and the consummation by Pepco of the transactions contemplated hereunder have been duly and validly authorized by the Board of Directors of Pepco or by a committee thereof to whom such authority has been delegated and no other corporate proceedings on the part of Pepco are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Pepco and, assuming that this Agreement constitutes a valid and binding agreement of Generator, constitutes a valid and binding agreement of Pepco, enforceable by Pepco in accordance with its terms.                                  (c)       Consents and Approvals; No Violation.                                  (i)       Neither the execution and delivery of this Agreement by Pepco nor performance by Pepco of its obligations hereunder will (A) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-laws of Pepco, (B) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement, lease or other instrument or obligation to which Pepco or any of its subsidiaries is a party or by which any of their respective assets may be bound or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Pepco, or any of its assets, except in the case of clauses (B) and (C) for such failures to obtain a necessary consent, defaults and violations which would not, individually or in the aggregate, have a material adverse effect on the ability of Pepco to discharge its obligations under this Agreement (a "Pepco Material Adverse Effect").                                  (ii)       No declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental authority is necessary for performance by Pepco of its obligations hereunder, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made would not, individually or in the aggregate, have a Pepco Material Adverse Effect.                       16.2      Representations of Generator. Generator hereby represents and warrants to Pepco as follows:                                    (a)       Incorporation. Generator is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware, and has all requisite limited partnership power and authority to own, lease and operate its material assets and properties and to carry on its business as now being conducted.                                  (b)       Authority. Generator has all necessary limited partnership power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by the Generator of this Agreement and the consummation by Generator of the transactions contemplated hereby have been duly and validly authorized by the partnership of Generator or by a committee thereof to whom such authority has been delegated and no other limited partnership proceedings on the part of Generator are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Generator and, assuming that this Agreement constitutes a valid and binding agreement of Pepco, constitutes a valid and binding agreement of Generator, enforceable against Generator in accordance with its terms.                                  (c)        Consents and Approvals.                                    (i)        Neither the execution and delivery of this Agreement by Generator nor performance by Generator of its obligations hereunder will (A) conflict with or result in any breach of any provision of the Certificate of Limited Partnership or Partnership Agreement or other charter documents of Generator, (B) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement, lease or other instrument or obligation to which Generator or any of its subsidiaries is a party or by which any of their respective assets may be bound or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Genrator, or any of its assets, except in the case of clauses (B) and (C) for such failures to obtain a necessary consent, defaults and violations which would not, individually or in the aggregate, have a material adverse effect on the ability of Generator to discharge its obligations under this Agreement (a "Generator Material Adverse Effect").                                  (ii)      No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for performance by Generator of its obligations hereunder, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made would not, individually or in the aggregate, have a Generator Material Adverse Effect.                                                         ARTICLE 17                       ASSIGNMENT/CHANGE IN CORPORATE IDENTITY                       17.1      Generally. Except as otherwise set forth in this Article 17, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party hereto, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed.                       17.2      Pepco's Assignment Rights. Subject to Section 17.5 below, upon ten (10) days prior written notice to Generator, Pepco may assign this Agreement, and Pepco's rights, interests and obligations hereunder, to an Affiliate of Pepco that assumes Pepco's obligations to provide Services to the Service Load.                       17.3     Generator's Assignment Rights. Subject to Section 17.5 below, Generator may assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or other Person for the purposes of financing or refinancing the Auctioned Assets, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment in accordance with this Section 17.3 shall relieve or in any way discharge Generator from the performance of its duties and obligations under this Agreement. Pepco agrees to execute and deliver, at Generator's expense, such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Facility, so long as Pepco's rights under this Agreement are not thereby altered, amended, diminished or otherwise impaired.                       17.4      Mergers or Consolidations. Subject to Section 17.5 below, either Party may assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes in writing and becomes liable for all of such Party's duties and obligations hereunder.                       17.5     Limitations                                  (a)       No assignment, transfer, conveyance, pledge or disposition of rights, interests, duties or obligations under this Agreement by a Party shall relieve that Party from liability and financial responsibility for the performance thereof after any such transfer, assignment, conveyance, pledge or disposition unless and until (i) the transferee or assignee shall agree in writing to assume the obligations and duties of that Party under this Agreement and to impose such obligations on subsequent permitted transferees and assignees and (ii) the non-assigning Party has consented in writing to such assumption and to a release of the assigning Party from such liability, such consent not to be unreasonably withheld or delayed.                                   (b)       If Generator terminates its existence as a limited partnership entity by merger, acquisition, sale, consolidation or otherwise, or if all or substantially all of Generator's assets are transferred to another person or business entity without complying with this Article 17, Pepco shall have the right, enforceable in a court of competent jurisdiction, to enjoin Generator's successor from using its assets in any manner that does not comply with the requirements of this Agreement or that impedes Pepco's ability to carry on its ongoing business operations.                       17.6      Successors. This Agreement and all of the provisions hereof are binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns.                                                       ARTICLE 18                                                         NOTICES            Except as otherwise expressly set forth in this Agreement, all notices and other communications hereunder shall be in writing and shall be deemed given (as of the time of delivery or, in the case of a telecopied communication, of confirmation) if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):                       if to Pepco, to:                                   Potomac Electric Power Company                                  1900 Pennsylvania Avenue, N. W.                                  Washington, D.C. 20068                                  Telecopier: (202) 261-7889                                  Attention: William T. Torgerson                                                   General Counsel                       if Generator, to:                                  c/o Southern Company Energy Marketing L.P.                                  1155 Perimeter Center West                                  Suite 130                                  Atlanta, GA 30338                                  Telecopier: (678) 579-5752                                  Attention: Sonnet Edmonds                                                           ARTICLE 19                                                       AMENDMENTS                       19.1      Amendments. Except as provided in Section 19.2, this Agreement shall not be amended, modified, or supplemented unless mutually agreed to by the Parties in writing. Except as provided in Section 19.2(b) below, the rates, terms and conditions contained in this Agreement are not subject to change under Sections 205 or 206 of the Federal Power Act absent the mutual written agreement of the Parties. It is the intent of this Section 19.1 that, except as provided in Section 19.2(b) below, the rates, terms and conditions of this Agreement shall not be subject to change except by mutual written agreement by the Parties.                       19.2      PJM Agreement Modifications                                  (a)       If the PJM Agreements are amended or modified so that any schedule or section references herein to such agreements is changed, such schedule or section references herein shall be deemed to automatically (and without any further action by the Parties) refer to the new or successor schedule or section in the PJM Agreements which replaces that originally referred to in this Agreement.                                  (b)      If the applicable provisions of the PJM Agreements referenced herein, or any other PJM rules relating to the implementation of this Agreement, are changed materially from those in effect on May 31, 2000, the Operating Committee shall cooperate to make conforming changes to this Agreement to fulfill the purposes of this Agreement; provided that no such changes shall alter the economic benefits of this Agreement between the Parties. If the Operating Committee fails to agree on such changes within 15 days, Pepco may unilaterally make conforming changes to this Agreement to fulfill the purposes of this Agreement, and shall file such changes with the FERC on behalf of both Parties; provided that nothing herein shall prejudice the Generator's rights to protest such change.                                                        ARTICLE 20                                                           AUDITS            The Parties shall have the right, during normal business hours, to audit each other's accounts and records pertaining to transactions under this Agreement, upon twenty (20) days prior written notice, at the offices where such accounts and records are maintained. Any such audit of a Party's accounts and records will be at the expense of the auditing Party, shall not be made more frequently than once in any twelve (12) month period, and no such audit may be made with respect to accounts and records relating to periods more than twenty-four (24) months prior to the date of the audit notice. The Party being audited will be entitled to review the audit report and any supporting materials. The Party conducting the audit shall maintain the confidentiality of all information obtained during the audit in compliance with Section 14.2 of this Agreement. To the extent that audited information includes confidential information, the auditing Party shall designate an independent auditor at its expense to perform such audit.                                                     ARTICLE 21                                         Miscellaneous Provisions                      21.1      Waiver. Except as otherwise provided in this Agreement, any failure of a Party to comply with any obligation, covenant, agreement, or condition herein may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement, or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.                      21.2      No Third Party Beneficiaries.Nothing in this Agreement is intended to confer upon any other person except the Parties any rights or remedies hereunder or shall create any third party beneficiary rights in any person. No provision of this Agreement shall create any rights in any such persons in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement except as expressly provided for thereunder.                      21.3      Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the District of Columbia (regardless of the laws that might otherwise govern under applicable principles of conflicts of law).                      21.4      Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.                      21.5      Interpretation. When a reference is made in this Agreement to an article, section, schedule or exhibit, such reference shall be to an article or section  of, or schedule or exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation" or equivalent words. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise expressly stated otherwise herein, the word "day" shall mean any calendar day including weekends and holidays. Any agreement, instrument, statute, regulation, rule or order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, statute, regulation, rule or order as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. Each Party acknowledges that it has been represented by counsel in connection with the review and execution of this Agreement, and, accordingly, there shall be no presumption that this Agreement or any provision hereof be construed against the Party that drafted this Agreement.                      21.6      Jurisdiction and Enforcement. Each of the Parties irrevocably submits to the exclusive jurisdiction of (i) the Superior Court of the District of Columbia and (ii) the United States District Court for the District of Columbia, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Parties agrees to commence any action, suit or proceeding relating hereto either in the United States District Court for the District of Columbia or, if such suit, action or proceeding may not be brought in such court for jurisdictional reasons, in the Superior Court of the District of Columbia. Each of the Parties further agrees that service of process, summons, notice or document by hand delivery or U.S. registered mail at the address specified for such Party in Article 18 (or such other address specified by such Party from time to time pursuant to Article 18) shall be effective service of process for any action, suit or proceeding brought against such Party in any such court. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in (i) the Superior Court of the District of Columbia and (ii) the United States District Court for the District of Columbia, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.                       21.7     Entire Agreement. This Agreement, the Asset Sale Agreement, the Confidentiality Agreement and the Ancillary Agreements including the exhibits, schedules, documents, certificates and instruments referred to herein or therein and other contracts, agreements and instruments contemplated hereby or thereby, embody the entire agreement and understanding of the Parties in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly set forth or referred to herein or therein. This Agreement, the Asset Sale Agreement and the Ancillary Agreements supersede all prior agreements and understandings between the Parties with respect to the transactions contemplated by this Agreement other than the Confidentiality Agreement.                      21.8      Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.                      21.9      Further Assurances. The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may be reasonably requested in order to effectuate the transactions contemplated hereby. Each Party agrees to cooperate with, assist and accommodate all reasonable requests made by the other Party in respect of any regulatory approval necessary for, or any regulatory proceeding relating to, the execution, delivery or performance of this Agreement. Each Party further agrees to comply in all material respects with all laws of governmental authorities relating to this Agreement and the consummation of the transactions contemplated hereby.                      21.10      Independent Contractor Status. Nothing in this Agreement shall be construed as creating any relationship between Pepco and Generator other than that of independent contractors.                      21.11      Conflicts. Except with respect to the amendments, indemnification, liability, default and remedies provisions contained herein or as otherwise expressly provided herein, in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Asset Sale Agreement, the terms of the Asset Sale Agreement shall prevail.                      IN WITNESS WHEREOF, Pepco and Generator have caused this Transition Power Agreement (District of Columbia) to be signed by their respective duly authorized officers as of the date first above written.                                                           POTOMAC ELECTRIC POWER COMPANY                                                         By: /s/ MARY SHARPE-HAYES                                                                         Name:    Mary Sharpe-Hayes                                                                          Title:    Vice President                                                             SOUTHERN COMPANY ENERGY                                                            MARKETING, L.P.                                                            By: /S/ DAVID L. DAVIS                                                                        Name:      David L. Davis                                                                         Title:      Attorney-in-Fact                                                         SCHEDULE 1                                                        DEFINITIONS Part A.      Capitalized terms not defined in the body of the Agreement shall have the                 meaning set forth in Part A of this Schedule 1. (Part B of this Schedule 1 sets                 forth capitalized terms defined within the Agreement.)           1.            "Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934.            2.            "Auctioned Assets" has the meaning set forth in the Asset Sale Agreement.            3.            "Capacity Credits" has the meaning set forth in the PJM Reliability Agreement.           4.            "Capacity Resources" has the meaning set forth in the PJM Reliability Agreement.            5.            "Contract Year 1" means the period beginning on the Effective Date and ending thirteen calendar months thereafter.            6.            "Contract Year 2" means the period beginning immediately after the end of Contract Year 1 and ending twelve calendar months thereafter.           7.            "Contract Year 3" means the period beginning immediately after the end of Contract Year 2 and ending twelve calendar months thereafter.            8.            "Contract Year 4" means the period beginning immediately after the end of Contract Year 3 and ending twelve calendar months thereafter.            9.            "Closing" has the meaning set forth in the Asset Sale Agreement.            10.           "Confidentiality Agreement" has the meaning set forth in the Asset Sale Agreement.            11.           "FERC" means the Federal Energy Regulatory Commission or its successors.            12.           "Fixed Transmission Rights" has the meaning set forth in the PJM Operating Agreement.           13.           "Full Energy Requirements" means the full electric energy requirements of the Service Load in any hour, measured in megawatt hours at the Delivery Points.            14.           "Generator" has the meaning set forth in the preamble of this Agreement and shall include its permitted successors and assigns.            15.           "Metered Energy Requirements" means the full electric energy requirements of the Service Load in any hour, measured in megawatt hours at the retail (customer revenue meter) level. For customers without, interval metering, Pepco will use customer or retail class profiles in accordance with the District of Columbia Public Service Commission regulations to distribute periodic metered energy usage to obtain hourly customer energy usage. When Pepco curtailable load programs are operated, customer loads which are curtailed will be increased by Pepco to reflect the hourly energy usage which would have occurred if curtailments had not taken place.            16.           "Month" means a calendar month.            17.           Network Customer" has the meaning set forth in the PJM Tariff.            18.           "Network Load" has the meaning set forth in the PJM Tariff.            19.           "Optional Energy" means the Optional Energy Percent, as elected by Pepco through the exercise of its Call Options, of Pepco's Full Energy Requirements.            20.           "Pepco" has the meaning set forth in the preamble of this Agreement and shall include its permitted successors or assigns.            21.           "PJM" means the Pennsylvania New Jersey-Maryland interconnected power pool operated under the PJM Operating Agreement and any successor thereto including any regional transmission organization, independent system operator, transco, or any other independent system administrator that possesses operational control or planning control over Pepco's transmission system.            22.           "PJM Agreements" means the PJM Operating Agreement, PJM Reliability Agreement, and PJM Tariff.            23.           "PJM Control Area" has the meaning set forth in the PJM Reliability Agreement.            24.           "PJM Operating Agreement" means the Amended and Restated Operating Agreement of the PJM Interconnection LLC dated as of June 2, 1997.            25.           "PJM Interconnection LLC" means the independent system operator of the PJM Control Area pursuant to the PJM Operating Agreement and the PJM Tariff.            26.           "PJM Reliability Agreement" means the PJM Reliability Assurance Agreement dated June 2, 1997, establishing obligations, standards and procedures for maintaining the reliable operation of the PJM Control Area.            27.           "PJM System Operator" means the PJM Interconnection LLC energy control center staff responsible for central dispatch as provided in the PJM Agreement.            28.           "PJM Tariff" means the PJM Open Access Transmission Tariff providing transmission service within the PJM Control Area.            29.           "Planning Period" has the meaning set forth in the PJM Reliability Agreement.            30.           "Required Energy" means the Required Energy Percent of Pepco's Full Energy Requirements.            31.           "Service Load" means (i) all of Pepco's default service retail electric energy customers located in Pepco's service territory, as such territory exists on the Effective Date, in the District of Columbia, and (ii) the energy requirements of the Washington Metropolitan Area Transit Authority in the Commonwealth of Virginia which Pepco is required to provide.            32.           "Summer Month" means each Month during the period of May 1 through September 30.            33.           "Winter Month" means each Month during the period of October 1 through April 30. Part B.      The following terms have the meaning specified in the section of this                 Agreement set forth opposite to such term: Term Agreement Reference Agreement Preamble Alternative Services Section 8.1 Ancillary Services Article 4 Ancillary Services Requirements Article 4 Asset Sale Agreement First Recital Call Options Section 5.2(a) Capacity Resources Plan Section 3.2(a) Capacity Resources Requirements Section 3.1(a) Delivery Points Section 5.3 Effective Date Section 2.1 Event of Default Section 11.1 Force Majeure Section 9.2 Generator Material Adverse Effect Section 16.2(c)(i) Operating Committee Article 12 Optional Energy Percent Section 5.2(a) Pepco Material Adverse Effect Section 16.1(c)(i) Party or Parties Preamble PPAs First Recital Required Energy Percent Section 5.1 Services Section 8.1                                                            EXHIBIT A Pepco's Non-Binding Estimate for Calendar Year 2001 of Capacity Resources for                                            the Service Load MW Capacity Obligation (1) w/o Migration w Migration (2) January-01 2467 2126 February-01 2467 2022 March-01 2467 1565 April-01 2467 1289 May-01 2467 1014 June-01 2503 749 July-01 2503 747 August-01 2503 745 September-01 2503 743 October-01 2503 741 November-01 2503 739 December-01 2503 737 (1) PEPCO's current Unforced Capacity without Benning and Buzzard Point is approx. 5750 MWs . (2) Migration estimates are based on observation of retail choice programs in other jurisdictions. Exhibit B to Transition Power Agreement (DC) D.C.Capacity Resource Plan - 2001   Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 CHALK POINT 1 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 CHALK POINT 2 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 139.7 CHALK POINT 3 266.4 266.4 266.4 266.4 266.4 265.4 265.4 265.4 265.4 265.4 265.4 265.4 CHALK POINT 4 261.1 261.1 261.1 261.1 261.1 261.1 261.1 261.1 261.1 261.1 261.1 261.1 CHALK POINT CT 1 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 6.2 CHALK POINT CT 2 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 CHALK POINT CT 3 37.7 37.7 37.7 37.7 37.7 37.7 37.7 37.7 37.7 37.7 37.7 37.7 CHALK POINT CT 4 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 37.5 CHALK POINT CT 5 41.6 41.6 41.6 41.6 41.6 41.6 41.6 41.6 41.6 41.6 41.6 41.6 CHALK POINT CT 6 47.7 47.7 47.7 47.7 47.7 47.7 47.7 47.7 47.7 47.7 47.7 47.7 DICKERSON 1 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 DICKERSON 2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 79.2 DICKERSON 3 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 80.0 DICKERSON CT 1 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 5.4 DICKERSON HCT 1 27.3 27.3 27.3 27.3 27.3 26.3 26.3 26.3 26.3 26.3 26.3 26.3 DICKERSON HCT2 60.8 60.8 60.8 60.8 60.8 60.8 60.8 60.8 60.8 60.8 60.8 60.8 MCRRF 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3 MORGANTOWN 1 250.6 250.6 250.6 250.6 250.6 250.6 250.6 250.6 250.6 250.6 250.6 250.6 MORGANTOWN 2 247.2 247.2 247.2 247.2 247.2 247.2 247.2 247.2 247.2 247.2 247.2 247.2 MORGANTOWN CT 1 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 6.4 MORGANTOWN CT 2 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 MORGANTOWN CT 3 20.8 20.8 20.8 20.8 20.8 20.8 20.8 20.8 20.8 20.8 20.8 20.8 MORGANTOWN CT 4 20.6 20.6 20.6 20.6 20.6 20.6 20.6 20.6 20.6 20.6 20.6 20.6 MORGANTOWN CT 5 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 MORGANTOWN CT 6 18.8 18.8 18.8 18.8 18.8 18.8 18.8 18.8 18.8 18.8 18.8 18.8 PANDA 101.1 101.1 101.1 101.1 101.1 101.1 101.1 101.1 101.1 101.1 101.1 101.1 POTOMAC RIVER 1 35.3 35.3 35.3 35.3 35.3 35.3 35.3 35.3 35.3 35.3 35.3 35.3 POTOMAC RIVER 2 36.7 36.7 36.7 36.7 36.7 36.7 36.7 36.7 36.7 36.7 36.7 36.7 POTOMAC RIVER 3 44.8 44.8 44.8 44.8 44.8 44.8 44.8 44.8 44.8 44.8 44.8 44.8 POTOMAC RIVER 4 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1 43.1 POTOMAC RIVER 5 44.7 44.7 44.7 44.7 44.7 44.7 44.7 44.7 44.7 44.7 44.7 44.7 SMECO 33.7 33.7 33.7 33.7 33.7 33.7 33.7 33.7 33.7 33.7 33.7 33.7 OE 200.0 200.0 200.0 200.0 200.0 200.0 - - 200.0 200.0 200.0 200.0 Owned 2,464.2 2,464.2 2,464.2 2,464.2 2,464.2 2,464.2 2,262.2 2,262.2 2,462.2 2,462.2 2,462.2 2,462.2 Purchased 2.8 2.8 2.8 2.8 2.8 40.8 240.8 240.8 40.8 40.8 40.8 40.8 Total Requirements 2,467.0 2,467.0 2,467.0 2,467.0 2,467.0 2,503.0 2,503.0 2,503.0 2,503.0 2,503.0 2,503.0 2,503.0

Exhibit 10.7 ASSIGNMENT AND AMENDMENT OF EMPLOYMENT AGREEMENT       THIS ASSIGNMENT AND AMENDMENT of employment agreement made as of the 12th day of September 2000, by and between Stockwalk.com, Inc., a Minnesota corporation (“Stockwalk”), Online Brokerage Solutions, Inc. (“OBS”) and Frank H. Lallos (“Lallos”). WITNESSETH       WHEREAS, Stockwalk and Lallos entered into an Employment Agreement dated as of February 7, 2000(“Agreement”); and       WHEREAS, Stockwalk has restructured its business so that its online private label business will be run in OBS and Stockwalk and Lallos desire to assign the Agreement to OBS and to otherwise clarify and amend the Agreement.       NOW THEREFORE, in consideration of the premises and the mutual covenants and conditions contained herein, the parties hereto agree as follows: 1. For value received, the adequacy and receipt of which are hereby acknowledged, Stockwalk hereby sells, conveys, assigns, transfers and delivers to OBS, its successors and assigns, to have and to hold forever, all of Stockwalk’s right, title and interest in, to and under the Agreement. Lallos hereby consents to the assignment of the rights and obligations of Stockwalk under the Agreement by OBS. In connection with the assignment of the Agreement and effective the date of this Assignment and Amendment, Lallos resigns from any and all offices held by him in Stockwalk, including but not limited to President and Stockwalk hereby accepts such resignations. Subject to the terms and conditions hereof, the Company shall employ Employee and Employee agrees to be so employed in the capacity of President. 2. In connection with Stockwalk’s conveyance, assignment, transfer and delivery of the Agreement, OBS agrees to assume and pay or perform, promptly as they become due, the obligations of Stockwalk under the Agreement. 3. All references in the Agreement to Stockwalk shall be replaced with OBS to reflect the Assignment of the Agreement. 4. Except as hereinabove supplemented and amended, all of the terms, covenants and conditions of the Agreement are hereby ratified and confirmed.       Stockwalk.com, Inc.   By: /s/ Philip T. Colton Its: General Counsel   Online Brokerage Solutions, Inc. By: /s/ Philip T. Colton Its: General Counsel   /s/ Frank H. Lallos Frank H. Lallos Exhibit 10.7-1

EXHIBIT 10.1 EMPLOYMENT AGREEMENT       AGREEMENT made as of July 1, 2000 by and between JONES APPAREL GROUP, INC., a Pennsylvania corporation (the "Company") and SIDNEY KIMMEL (the "Executive"). W I T N E S S E T H:       WHEREAS, Executive has been serving as a senior executive of the Company; and     WHEREAS, the Company wishes to continue to employ the Executive, and the Executive wishes to continue employment with the Company, on the terms and conditions hereinafter set forth.     NOW, THEREFORE, it is agreed as follows:     1.   Employment. During the term of this Agreement, the Company shall employ the Executive as the Chairman and Chief Executive Officer of the Company, with such responsibilities and authority as Executive has heretofore had as Chairman and Chief Executive Officer of the Company. The Executive shall report directly to the Board of Directors of the Company. During the term of this Agreement, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote all of Executive's business time and attention to the business affairs of the Company, and to perform such responsibilities in a professional manner. Notwithstanding the foregoing, during the term of this Agreement, it shall not be a violation of this Agreement for the Executive to (a) serve on civic or charitable boards or committees; (b) deliver lectures, fulfill speaking engagements or teach at educational institutions; (c) serve as a non-employee member of a board of directors of a business entity which is not competitive with the Company and as to which the Board of Directors of the Company has given its consent; and (d) attend to personal business, so long as such activities do not interfere with the performance of the Executive's responsibilities as a senior executive of the Company in accordance with this Agreement.     2.    Term. The Company shall employ the Executive for the period commencing as of July 1, 2000 and ending as of June 30, 2003 (the "Expiration Date"), as renewed in accordance with the following sentence (the "Term"). The Executive's employment with the Company will continue, and this Agreement will be automatically extended without limitation, for successive 12-month periods commencing July 1 and ending June 30 (a "Contract Year"), unless either party to this Agreement advises the other in writing, no later than June 30, 2001 and no later than each June 30 thereafter, that such party does not wish to extend (a "Non-extension Notice"). If this Agreement shall be so extended, the "Expiration Date" shall mean the then applicable extended "Expiration Date", and the "Term" shall mean the period commencing July 1, 2000 and <PAGE> 2 ending on the then applicable extended "Expiration Date." For example, (i) if by June 30, 2001, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through June 30, 2004, and (ii) if the Term is so extended through June 30, 2004, then if by June 30, 2002, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through June 30, 2005.     3.    Salary, Retirement Plans, Fringe Benefits and Allowances.         (a) Throughout the Term, the Executive shall receive a salary at the annual rate of not less than $1,100,000. The Executive's salary shall be payable at such regular times and intervals as the Company customarily pays its senior executives from time to time, but no less frequently than once a month.         (b) During the Term, the Executive shall be eligible to participate in all savings and retirement plans, practices, policies and programs to the extent applicable generally to other senior executives of the Company.         (c) During the Term, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare, fringe and other benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription drug, dental, disability, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other senior executives of the Company.         (d) The Executive shall be entitled to paid vacation during each calendar year of the Term for such periods as Executive deems reasonable and which are consistent with past practices, provided that such vacation time shall not interfere with the proper performance of Executive's duties. The Executive shall also be entitled to the benefits of the Company's policies relating to sick leave and holidays.         (e) The Executive shall have all expenses reasonably incurred by Executive on behalf of the Company reimbursed by the Company in accordance with the Company's standard policies and practices. The Executive shall be entitled to first class seating for air travel on Company business.         (f) The Company shall make available to the Executive all perquisites that are made available to senior executives of the Company.     4.    Bonus.     Executive shall participate in the Company's Executive Annual Incentive Plan (the "Bonus Plan"), pursuant to which the Executive may be entitled to receive annual bonus payments for each full calendar year of employment which ends prior to the Expiration Date and 2 <PAGE> 3 throughout which the Executive has been employed by the Company, conditioned upon the attainment of annual criteria and objectives established for participants in the Bonus Plan.     5.    Stock Options. Subject to the absolute authority of the Stock Option Committee of the Board of Directors of the Company from time to time to grant (or not to grant) to eligible individuals options to purchase common stock of the Company ("Options"), it is the intention of the Company and the expectation of the Executive that while the Executive is employed hereunder, the Executive will receive Options annually, on the following terms and conditions (and any Options so granted shall be subject to the following terms and conditions, which shall govern any conflicts in the terms hereof with any terms and conditions in any stock option agreement):         (a) Target awards will be in an amount (plus or minus 25%) equal to 400% of Executive's salary;         (b) For purposes of determining the number of shares subject to a given Option grant, the value of such Option shall be determined using the Black-Scholes valuation method, or another generally recognized valuation method which is being used uniformly by the Company for its senior executives;         (c) The exercise price per share of the Options shall be the fair market value of the common stock on the date of grant, and the Options shall expire on the tenth anniversary of the date of grant; and         (d) The Options shall vest ratably on the first three anniversaries of the date of grant; provided, however, that all Options and all other options to purchase Common Shares then held by the Executive which are not then vested (in the aggregate being referred to herein as "Accelerated Options") shall become fully vested and immediately exercisable during the remaining original term of each such Accelerated Option, upon the occurrence of any of the following events ("Acceleration Events"): Executive's Retirement (as defined herein), death, Disability, a Change in Control (as defined herein), and termination of Executive's employment by the Company without Cause or by the Executive for Good Reason; and         (e) The Options shall be granted on such other terms and conditions as are generally made applicable to Options granted to the other senior executives of the Company.     6.    Termination of Employment.         (a) By the Company for Cause, or by the Executive without Good Reason. The Company may terminate the Executive's employment for Cause (as defined herein) before the Expiration Date. If the Executive's employment is terminated for Cause, or if Executive resigns during the Term without Good Reason (as defined below), the Company shall pay to the Executive any unpaid salary through the date of termination, as well as reimburse the Executive for any unpaid reimbursable expenses incurred on behalf of the Company, and thereafter the 3 <PAGE> 4 Company shall have no additional obligations to the Executive under this Agreement.         (b) Death or Disability; Retirement. (i) If the Executive's employment terminates before the Expiration Date because of Executive's death or Disability (as defined herein), the Company shall pay Executive or Executive's duly appointed personal representative, as the case may be, (i) any unpaid salary through the date of death or the Disability Termination Date (as defined herein), as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) an amount equal to Executive's monthly salary during each of the six (6) months following Executive's death or the Disability Termination Date, and (iii) the Target Bonus for the calendar year in which Executive dies or becomes Disabled, prorated for the portion of such year preceding Executive's death or the Disability Termination Date, which shall be paid not later than 120 days after the end of such year. Except as set forth in this Section 6(b), the Company shall have no additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Section 6(b).             (ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, all Accelerated Options which were held by the Executive at the time of the Executive's Retirement, death or the Disability Termination Date, shall become fully exercisable and shall remain exercisable by the Executive or by the Executive's estate or his representative, as the case may be, during the remaining original term of the Accelerated Option in the case of the Executive's Retirement or Disability, or during the 3-year period following the date of the Executive's death.         (c) By the Company without Cause, or by the Executive for Good Reason. (i) The Company may terminate the Executive's employment before the Expiration Date without Cause, and the Executive may terminate Executive's employment before the Expiration Date for Good Reason, upon 30-days written notice to the other party. If the Executive's employment is so terminated by the Company without Cause, or by the Executive for Good Reason, as the case may be, the Company shall pay and provide to the Executive (i) any unpaid salary through the date of termination, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination (payable no later than the 30th day immediately following termination of employment), (iii) during each month of the Severance Period (as defined below), an amount equal to the sum of (x) Executive's monthly salary at the rate in effect immediately preceding termination and (y) one-twelfth of the Executive's Target Bonus for the calendar year in which termination occurs, (iv) throughout the Severance Period, continuation of Executive's participation (including the Company's contributions thereto) in all benefit plans and practices in which Executive was participating immediately preceding termination, and (v) reimbursement to the Executive for up to $10,000 of executive outplacement services. Except as set forth in this Subsection 6(c), the Company shall not have any additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Subsection 6(c).         (ii) In addition to the foregoing and notwithstanding any other agreement between 4 <PAGE> 5 the Executive and the Company, all Accelerated Options which were held by the Executive at the time of the termination of the Executive's employment by the Company without Cause or by the Executive for Good Reason (whether or not following a Change of Control), shall become fully exercisable and shall remain exercisable for the same period following termination as would apply if the Executive's employment had not terminated.         (d) Change in Control. If, following a "Change in Control" (as defined herein) and prior to the Expiration Date, the Company terminates the Executive's employment without Cause, or the Executive terminates employment hereunder for Good Reason, the Company shall pay to the Executive, within 20 days following termination, (i) any unpaid salary through the date of termination, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination, (iii) a lump-sum payment equal to (x) the sum of (q) Executive's yearly salary at the rate in effect immediately preceding termination and (r) Executive's Target Bonus for the calendar year in which termination occurs, multiplied by (y) the Severance Multiple (as defined herein), (iv) reimbursement to the Executive for up to $10,000 of executive outplacement services, and (v) a lump-sum equal to the Company's cost for health insurance, life insurance and retirement benefits for the Severance Period.         (e) As used herein:             (i) the term "Cause" shall mean (v) the Executive's commission of an act of fraud or dishonesty or a crime involving money or other property of the Company; (w) the Executive's conviction of a felony or a plea of guilty or nolo contendere to an indictment for a felony; (x) if, in carrying out Executive's duties hereunder, the Executive engages in conduct which constitutes willful misconduct or gross negligence; (y) the Executive's failure to carry out a lawful order of the Board of Directors of the Company or its Chief Executive Officer; or (z) a material breach by the Executive of this Agreement. Any act or failure to act on the part of the Executive which is based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or authorized in writing by the Chief Executive Officer of the Company, or based upon the advice of counsel for the Company, shall not constitute Cause as used herein. For purposes of this provision only, a breach shall be "material" if it is demonstrably injurious to the Company, its affiliates or any of its respective business units, financially or otherwise.             Cause shall not exist unless and until the Company (i) has delivered to the Executive a written Notice of Termination that specifically identifies the events, actions, or non-actions, as applicable, that the Company believes constitute Cause hereunder, and, in the case of termination for Cause under clauses (x), (y) or (z) above, the Executive has been provided with an opportunity to cure the offending conduct (if curable) within 30 days after delivery of the written Notice of Termination, and has not so cured such conduct (if curable), and (ii) the Executive has been provided an opportunity to be heard (with counsel) within 30 days after delivery of the Notice of Termination; provided, however, that in the case of termination for 5 <PAGE> 6 Cause under clauses (x), (y), and (z) above, the date of termination shall be no earlier than 35 days after delivery of the Notice of Termination.             (ii)  the term "Good Reason" shall mean any one of the following:                 (1) a material breach of the Company's obligations under this Agreement, which breach has not been cured within 20 business days after the Company's receipt of written notice from the Executive of such breach;                 (2) a reduction in the Executive's then annual base salary;                 (3) the relocation of the Executive's office to a location more than 30 miles from Executive's present office;                 (4) the failure to pay the Executive any undisputed portion of the Executive's compensation within 15 business days after the date of receipt of written notice that such compensation or payment is due;                 (5) the failure to continue in effect any compensation or benefit plan in which the Executive is participating, unless either (i) an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan; or (ii) the failure to continue the Executive's participation therein (or in such substitute or alternative plan) does not discriminate against the Executive, both with respect to the amount of benefits provided and the level of the Executive's participation, relative to other similarly situated participants;                 (6) a reduction in the Executive's title and status as Chairman and Chief Executive Officer of the Company, or any change in the Executive's status as reporting directly to the Board of Directors; or the assignment to the Executive of any duties materially inconsistent with the Executive's position (including, without limitation, status, office, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 1 of this Agreement, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose any action not taken in bad faith and which is remedied by the Company no later than thirty (30) days after written notice by the Executive; or                 (7) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted in this Agreement.             (iii) the terms "Disabled" or "Disability" shall mean the Executive's physical or mental incapacity which renders the Executive incapable, even with a reasonable accommodation by the Company, of performing the essential functions of the duties required of Executive by this Agreement for one hundred twenty (120) or more consecutive days; the term "Disability Termination Date" shall mean the date as of which the Executive's employment with the Company is terminated, either by the Executive or by the Company, following the suffering 6 <PAGE> 7 of a Disability by the Executive.             (iv) the term "Severance Period" shall mean the period commencing with the termination of the Executive's employment and ending with the Expiration Date.             (v) the term "Severance Multiple" shall mean 3 times.             (vi) the term "Change in Control" shall have the same meaning as in the Company's 1999 Stock Option Plan, as in effect on the date hereof.             (vii) the term "Target Bonus" shall mean 100% of Executive's annual salary for any given year during the Term.             (viii) the term "Retirement" shall mean voluntary retirement by the Executive after attaining age 55 with 10 years of service with the Company, or, if the Executive has not attained age 55 and/or has less than 10 years of service with the Company, the Company determines that circumstances exist that warrant the granting of Retirement status.             (f) The Executive shall have no obligation to seek other employment or otherwise mitigate the Company's obligations to make payments under this Section 6, and the Company's obligations shall not be reduced by the amount, if any, of other compensation or income earned or received by the Executive after the effective date of Executive's termination.     7.    Effect of Section 280G of the Internal Revenue Code.             (a) Notwithstanding any other provision of this Agreement to the contrary, and except as provided in Section 7(b), to the extent that any payment or distribution of any type to or for the benefit of the Executive by the Company (or by any affiliate of the Company, any person or entity who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder), or any affiliate of such person or entity, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Total Payments"), is or will be subject to the excise tax imposed under Section 4999 of the Code (the "Excise Tax"), then the Total Payments shall be reduced (but not below zero) if and to the extent that a reduction in the Total Payments would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received the entire amount of such Total Payments. Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Total Payments, by first reducing or eliminating the portion of the Total Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined herein). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any 7 <PAGE> 8 other plan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation.         (b) The determination of whether the Total Payments shall be reduced as provided in this Section 7 and the amount of such reduction shall be made at the Company's expense by an accounting firm selected by the Company from among its independent auditors and the five (5) largest accounting firms (an "Eligible Accounting Firm") in the United States (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation to the Company and the Executive within ten (10) days of the last day of Executive's employment. If the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to the Total Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such payments and, absent manifest error, such Determination shall be binding, final and conclusive upon the Company and the Executive. If the Accounting Firm determines that an Excise Tax would be payable, the Executive shall have the right to accept the Determination of the Accounting Firm as to the extent of the reduction, if any, pursuant to this Section 7, or to have such Determination reviewed by another Eligible Accounting Firm selected by the Executive, at the expense of the Company, in which case the determination of such second accounting firm shall be binding, final and conclusive upon the Company and Executive.     8.    Company Property. Any trade name or mark, program, discovery, process, design, invention or improvement which the Executive makes or develops, which relates, directly or indirectly, to the business of the Company or its affiliates, or Executive's employment by the Company, shall be considered as "made for hire" and shall belong to the Company and shall be promptly disclosed to the Company. During the Executive's employment and thereafter, the Executive shall, without additional compensation, execute and deliver to or as requested by the Company, any instruments of transfer and take such other action as the Company may reasonably request to carry out the provisions hereof, including filing, at the Company's sole expense, trademark, patent or copyright applications for any trade name or mark, invention or writing covered hereby and assigning such applications to the Company.     9.    Confidential Information. The Executive shall not, either during the term of Executive's employment by the Company or thereafter, disclose to anyone or use (except, in each case, in the performance of Executive's responsibilities hereunder and in the regular course of the Company's business), any information acquired by the Executive in connection with or during the period of Executive's employment by the Company, with respect to any confidential, proprietary or secret aspect of the affairs of the Company or any of its affiliates, including but not limited to the requirements and terms of dealings with existing or potential licensors, licensees, designers, suppliers and customers and methods of doing business, all of which the Executive acknowledges are confidential and proprietary to the Company, and any of its affiliates, as the case may be.     10.    Competition; Recruitment; Non-Disparagement. 8 <PAGE> 9         (a) The Executive shall not, at any time during Executive's employment by the Company and during the Severance Period (provided that the Company is making the payments to Executive which may be required hereby during such Severance Period) (the "Non-Compete Period") and under the following circumstances, engage or become interested (as an owner, stockholder, partner, director, officer, employee, consultant or otherwise) in any business which then competes, directly or indirectly, with the business then conducted by the Company or any of its subsidiaries or affiliates. The ownership of less than 5% of the stock of a publicly owned company which competes with the Company, any of its subsidiaries or affiliates, in and of itself, shall not be considered a violation of the provisions of this Section 10.         (b) The Executive shall not, at any time during Executive's employment by the Company and thereafter until the second anniversary of the expiration of the Non-Compete Period, recruit, solicit for employment, hire or engage, or assist any person or entity in recruiting, soliciting for employment, hiring or engaging, any employee or consultant of the Company, any of its subsidiaries or affiliates, or any person who was an employee or consultant of the Company, any of its subsidiaries or affiliates within one year before the termination of the Executive's employment.         (c) For the longer of any period applicable under this Section 10 or a period of three years immediately following the date of termination, (i) the Company, and its respective affiliates and employees shall not disparage the Executive, and (ii) the Executive shall not disparage the Company, or its respective affiliates and employees.         (d) The Executive acknowledges that these provisions are necessary for the protection of the Company, and its subsidiaries and affiliates and are not unreasonable, because the Executive would be able to recruit and hire personnel other than employees of the Company, and any of their subsidiaries and affiliates. The Executive further agrees that a breach of Section 8, 9 or 10 of this Agreement shall result in the immediate cessation of any payments pursuant to this Section 10 and Section 6 hereof, if applicable. The duration and the scope of these restrictions on the Executive's activities are divisible, so that if any provision of this Section 10 is held or deemed to be invalid, that provision shall be automatically modified to the extent necessary to make it valid.     11.    Notices. Any notice or other communication to the Company or to the Executive under this Agreement shall be in writing and shall be considered given when mailed by certified mail, return receipt requested, to such party at Executive's address below, or to the Company at 1411 Broadway, New York, New York 10018, Attention: General Counsel (or at such other address as such party may specify by written notice to the other party).     12.    Successors; Binding Agreement.         (a) Company's Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company, except that such rights or 9 <PAGE> 10 obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the business or assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the business or assets of the Company and such assignee or transferee assumes all of the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company will require any such successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid, which executes and delivers the agreement provided for in this Section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement or by operation of law.         (b)    Executive's Successors. This Agreement shall not be assignable by the Executive. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Upon the Executive's death, all amounts to which Executive is entitled hereunder, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate.     13.    Indemnification. The Company shall indemnify Executive and hold the Executive harmless, to the maximum extent permitted by applicable law, from and against all claims, actions, suits, proceedings, loss, damage, liability, costs, charges and expenses, including reasonable attorneys' fees and costs arising in connection with the Executive's performance of Executive's duties hereunder or Executive's status as an employee, officer, director or agent of the Company or its affiliates, in accordance with the Company's indemnity policies for its senior executives.     14.    Interest on Late Payments. "Undisputed Late Obligations" shall bear interest beginning on the Due Date until paid in full at an annual rate of one percent (1.0%) plus the prime rate as declared from time to time by The Chase Manhattan Bank. For purposes hereof, "Undisputed Late Obligations" shall mean any obligation which remains unpaid 5 days after written notice thereof is delivered to the other party in accordance with Section 11 (the "Due Date") for money under this Agreement owing from one party to another, which obligation (i) is not subject to any bona fide dispute or (ii) has been adjudicated by an arbitration panel or court of competent jurisdiction to be due and payable.     15.    Arbitration. Except as otherwise provided herein, all controversies, claims or disputes arising out of or related to this Agreement shall be settled under the rules of the American Arbitration Association then in effect in the State of New York, as the sole and exclusive remedy of either party, and judgment upon such award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction. 10 <PAGE> 11     16.    Attorneys' Fees. The Company shall reimburse the Executive (or the Executive shall reimburse the Company) for all reasonable costs, including without limitation reasonable attorneys' fees, of the Executive or the Company, as the case may be, in any dispute, arbitration or proceeding arising under this Agreement (collectively, a "Proceeding"), so long as the Executive or the Company, as the case may be, "prevails in substantial part" with respect to Executive's or the Company's claims or defenses in such Proceeding. For purposes hereof, the Executive shall be deemed to have "prevailed in substantial part" if (i) the Executive is the party originally demanding a Proceeding, and the arbitrator(s) shall have awarded the Executive at least 75% of the amount originally demanded by the Executive, or (ii) the Company is the party originally demanding a Proceeding, and the arbitrator(s) shall have denied the Company the relief originally requested. The Company shall be deemed to have "prevailed in substantial part" if the Executive is the party originally demanding a Proceeding and the arbitrator(s) shall have awarded the Executive less than 25% of the amount originally demanded by the Executive.     17.    Miscellaneous.         (a) Given that a breach of the provisions of this Agreement would injure the Company irreparably, the Company may, in addition to its other remedies, obtain an injunction or other comparable relief restraining any violation of this Agreement, and no bond, security or other undertaking shall be required of the Company in connection therewith.         (b) The provisions of this Agreement are separable, and if any provision of this Agreement is invalid or unenforceable, the remaining provisions shall continue in full force and effect.         (c) This Agreement constitutes the entire understanding and agreement between the parties, supersedes all other existing agreements between them and cannot be amended, unless such amendment is in writing and signed by both parties to this Agreement.         (d) This Agreement shall be governed by and construed in accordance with the laws of the State of New York (other than its choice of laws rules), where it has been entered and where it is to be performed. The parties hereto consent to the exclusive jurisdiction of any federal or state court in the State of New York to resolve any dispute arising under this Agreement or otherwise.         (e) The headings in this Agreement are solely for convenience of reference and shall not affect its interpretation.         (f) The failure of either party to insist on strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. For any waiver of a provision of this Agreement to be effective, it must be in writing and signed by the party against whom the waiver is claimed. 11 <PAGE> 12         (g) The obligations of the Executive and the Company hereunder shall survive the termination of the term of this Agreement and the Executive's employment hereunder, to the extent necessary to give full effect to the provisions of this Agreement.     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written. JONES APPAREL GROUP, INC. By: /s/ Jackwyn Nemerov      President      /s/ Sidney Kimmel      Executive 12

EX-10.36 2 stryker.htm STRYKER stryker license (redacted) CONFIDENTIAL AND BINDING LICENSE AGREEMENT This License Agreement ("Agreement") dated and effective as of the 28th day of June, 2000 ("Effective Date"), is by and between the following parties: Stryker Corporation, a corporation organized under the laws of the State of Michigan having its principal office at 2725 Fairfield Road, Kalamazoo, MI 49002, on its own behalf and on behalf of its Affiliates ("Stryker"); and ArthroCare Corporation, a corporation organized under the laws of the State of Delaware having its principal office at 595 North Pastoria Avenue, Sunnyvale, California 94086, on its own behalf and on behalf of its Affiliates ("ArthroCare"). NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, the parties agree as follows: ARTICLE 1 - DEFINITIONS The following terms, when used with initial capital letters, shall have the meanings set forth below. 1.1 "Ablation Product(s)" shall mean * * * 1.2 * * * 1.3 "Affiliate" means any corporation or other entity which is directly or indirectly controlling, controlled by or under the common control with a party hereto. For the purpose of this Agreement, "control" shall mean the direct or indirect ownership of at least 50% of the outstanding shares or other voting rights of the subject entity to elect directors, or if not meeting the preceding definition, any entity owned or controlled by or owning or controlling at the maximum control or ownership right permitted in the country where such entity exists. 1.4 "ASP" means * * * 1.5 "Calendar Quarter" is the usual and customary Stryker calendar quarter, used for internal accounting purposes. 1.6 "Change in Control" shall mean (i) the sale, lease, exchange or other transfer, directly or indirectly, of substantially all of the assets of one of the parties or the divisions or subsidiaries of the parties, such as Stryker Endoscopy, operating under the license hereof (in one transaction or in a series of related transactions) to one or more persons or entities that are not affiliates of that party; (ii) the approval by the shareholders of one of the parties of any plan or proposal for its liquidation, voluntary bankruptcy, or dissolution; or (iii) a merger or consolidation of one of the parties if the shareholders of that party immediately prior to the effective date of such merger or consolidation have beneficial ownership, immediately following the effective date of such merger or consolidation, of securities of the surviving corporation representing fifty percent (50%) or less of the combined voting power of the surviving corporation's then outstanding securities ordinarily having the right to vote at elections of directors. 1.7 "Controller(s)" shall mean a radio frequency power supply that operates at any frequency between 10Khz and 20Mhz. 1.8 "Disposable Product(s)" shall mean medical instruments and components of such medical instruments which may have one or more electrode(s) and electrical connection(s) for coupling the electrode(s) to a Controller(s). 1.9 "Distributed" shall mean sold, placed, given, supplied or otherwise provided to any person or entity that is not an Affiliate of Stryker (or ArthroCare) regardless of whether Stryker (or ArthroCare) receives any monetary or other compensation for such distribution. * * * 1.10 "Field of Use" shall mean * * * 1.11 "Licensed Patent Rights" will mean all issued U.S. and foreign patents and pending patent applications, * * * including all priority applications, divisionals, continuations, continuations-in-part, substitutions, reissues, re-examinations, extensions and all foreign counterparts thereof. The Licensed Patent Rights specifically include all patents and patent applications listed in Schedule A. ArthroCare believes that Schedule A is a complete listing of Patent Rights as of the Effective Date and any omissions from Exhibit A will be deemed to be inadvertent and will not be deemed a material breach of the Agreement. 1.12 "Licensed Product(s)" shall mean any Controller or Disposable Product within the scope of a Valid Claim, * * * For purposes of this Agreement only, the Stryker products attached as Schedule B hereto shall be deemed Licensed Products * * * Nothing in this Agreement shall limit the Licensed Products to those identified in Schedule B. 1.13 * * * 1.14 "Net Sales" shall mean the invoice prices of Licensed Products sold by Stryker or Affiliates (or ArthroCare or Affiliates) to unaffiliated third parties (including sales made in connection with clinical trials unless exempt under 35 U.S.C. 271(e)(1)), less, to the extent included in such invoice price the total of: (1) ordinary and customary trade, quantity or cash discounts actually allowed; (2) credits, rebates and returns (including, but not limited to, wholesaler and retailer returns); (3) freight, postage, insurance, transportation and duties paid for and separately identified on the invoice or other documentation maintained in the ordinary course of business, and (4) sales, use, tariff and other excise taxes, other consumption taxes, customs duties and compulsory payments to governmental authorities actually paid and separately identified on the invoice or other documentation maintained in the ordinary course of business. Net Sales shall also include the fair market value of all other consideration received by Stryker (or ArthroCare) in respect of Licensed Products, whether such consideration is in cash, payment in kind, exchange or another form. Net Sales of Licensed Products outside of the United States only shall be determined in accordance with Article 3.7. For purposes of calculating Net Sales, transfer to an Affiliate for end use (but not resale) by the Affiliate shall be treated as sales by Stryker (or ArthroCare) at the average invoice price for the Calendar Period of Licensed Products sold by Stryker (or ArthroCare) to unaffilitated third parties as calculated above. 1.15 "The Parties" to this Agreement are ArthroCare and Stryker. 1.16 "RF" shall mean radiofrequency. 1.17 * * * 1.18 "Valid Claim" is an unexpired issued claim of a patent within the Licensed Patent Rights that has not been held invalid or unenforceable by a final decision of a court or other governmental agency of competent jurisdiction, which final decision is not appealable or appealed within the time allowed for appeal, or which has not been admitted to be invalid or unenforceable by the patent owner or its successors or assigns through reissue or disclaimer.   ARTICLE 2 - ARTHROCARE LICENSE AND OPTION GRANT 2.1 License Grant. Subject to the terms and conditions of this Agreement, ArthroCare grants to Stryker a * * *, non-exclusive worldwide license * * * under the Licensed Patent Rights to make, have made, market, use, import, distribute, sell, have sold, and offer for sale the Licensed Products solely in the Field of Use. 2.2 Option Grant. Subject to the terms and conditions of this Agreement, ArthroCare grants to Stryker an option for a * * * license (without the right to sublicense) under the Licensed Patent Rights to make, have made, market, use, import, distribute, sell, have sold and offer for sale Licensed Products * * * This option may be exercised by Stryker in writing no sooner than * * *. In such event, Stryker and ArthroCare will negotiate in good faith a separate * * *. In addition, if at the time that Stryker exercises its option for * * * 2.3 Change in Control. If there is a Change in Control in * * *, the option granted in Article 2.2 shall * * * 2.4 No Implied Rights. Only the licenses granted pursuant to the express terms of this Agreement shall be of any legal force or effect. No other license rights shall be granted or created by implication, estoppel or otherwise.   ARTICLE 3 - PAYMENTS 3.1 License Fee. In consideration for the license and other rights granted to Stryker under this Agreement, within seven (7) business days of the Effective Date, Stryker will pay ArthroCare * * * as a non-refundable license fee. 3.2 Royalty Payments. In further consideration for the license and other rights granted to Stryker under this Agreement, Stryker shall pay ArthroCare, on a quarterly basis pursuant to Article 4.1, below, royalties for the term of the license granted in Article 2 (or for such other period of time as may otherwise be specified in this Agreement) as follows: a. Stryker shall pay ArthroCare a royalty of * * * of Stryker's Net Sales worldwide of the Licensed Products that are * * * in the Field of Use. b. Stryker shall pay ArthroCare a royalty of * * * of Stryker's Net Sales worldwide of the Licensed Products that are * * * in the Field of Use. c. Notwithstanding anything to the contrary in Articles 3.2(a) and (b), Stryker shall pay ArthroCare a royalty of * * * in the Field of Use. d. * * * e. * * * No multiple royalties shall be payable because a Licensed Product is covered by more than one of the patents within the Licensed Patent Rights or more than one Valid Claim within the Licensed Patent Rights If a product falls within the definition of a * * *, the royalties due and payable hereunder are only the royalties due for * * *. However, if ArthroCare chooses to manufacture and sell * * * 3.3 Minimum Royalty Payments. Stryker shall not have any annual minimum royalty obligations under this Agreement. 3.4 Royalty Adjustments. On or before the * * * day following the end of each Calendar Quarter, ArthroCare will compute * * * ArthroCare will provide Stryker with * * * * * * * * * * * * * * * 3.5 Payment in U.S. Dollars. Royalties and the license fee shall be paid in United States Dollars. In the event Stryker receives payment for Licensed Products in a currency other than U.S. dollars, the payment payable by Stryker to ArthroCare shall be computed using the identical U.S. revenue that Stryker reports, or would report, to the Securities and Exchange Commission ("SEC") for such payments. 3.6 Place for Payment. The payment of royalties and the license fee shall be made payable to ArthroCare Corporation, and sent to the following address: ArthroCare Corporation, Attn. Christine Hänni, Vice President, Finance and CFO, 595 North Pastoria Avenue, Sunnyvale, CA 94085-2936 or such address or individual as ArthroCare provides Stryker in writing under Article 15.4 below. 3.7 International Sales. For the purposes of calculating Stryker's Net Sales of Licensed Products outside of the United States only, Stryker will use the following formula for each Calendar Quarter (this formula shall be computed separately for each of the following product categories: * * * * * * * * * For the purposes of the above calculation in Article 3.7 only, * * * ARTICLE 4 - RECORD KEEPING AND REPORTS 4.1 Stryker shall keep accurate books and records of Stryker's Net Sales of the Licensed Product, and of all payments due ArthroCare hereunder. Stryker shall deliver to ArthroCare written reports of Stryker's Net Sales of the Licensed Products (including number of units Distributed by Stryker and revenue received) during the preceding Calendar Quarter on or before the * * * day following the end of each Calendar Quarter. Such report shall include a summary of the units Distributed by Stryker and revenue received for the relevant time period on a product-by-product basis and shall be accompanied by the monies due for such reported Calendar Quarter. 4.2 ArthroCare shall have the right at its own expense, after * * * days advance written notice to Stryker to nominate an independent accountant. The independent accountant shall have access to Stryker's books and records during reasonable business hours for the sole purposes of auditing the royalty reports (and supporting books and records) and verifying the royalties payable as provided for in this Agreement for the three preceding calendar years. This right may not be exercised more than once with respect to any calendar year. During the inspection, the independent accountant shall solicit or receive only information relating solely to the accuracy of the royalty report and the royalty payments made according to this Agreement. Although the fees and expenses of such inspection/audit shall initially be borne by ArthroCare, if an underpayment in royalties of more than * * * of the total royalties due to ArthroCare hereunder for any Calendar Quarter is discovered, then such fees and expenses shall be borne by Stryker, and Stryker shall promptly pay ArthroCare any such delinquent royalty amounts with interest thereon at the prime rate reported by the Bank of America, San Francisco, plus * * *, computed from the date such royalty amounts were due until the date Stryker pays such royalty amounts. 4.3 ArthroCare shall keep accurate books and records of * * *, as discussed above in Article 3.4. If the * * *, then ArthroCare shall send a royalty adjustment report to Stryker detailing the * * * on or before the * * * day following the end of the Calendar Quarter. 4.4 Stryker shall have the right at its own expense, after * * * days advance written notice to ArthroCare, to nominate an independent accountant. The independent accountant shall have access to ArthroCare's books and records during reasonable business hours for the sole purposes of auditing the royalty adjustment reports (and supporting books and records) and verifying * * * as provided for in this Agreement for the three preceding calendar years. This right may not be exercised more than once with respect to any calendar year. During the inspection, the independent accountant shall solicit or receive only information relating solely to the accuracy of the royalty adjustment report. Although the fees and expenses of such inspection/audit shall initially be borne by Stryker, if an overpayment in royalties of more than * * * of the total royalties due to ArthroCare hereunder for any Calendar Quarter is discovered, then such fees and expenses shall be borne by ArthroCare, and ArthroCare shall promptly pay Stryker any such overpayment in royalty amounts with interest thereon at the prime rate reported by the Bank of America, San Francisco, plus * * *, computed from the date such royalty amounts were due until the date ArthroCare pays such royalty amounts.   ARTICLE 5 - INTELLECTUAL PROPERTY 5.1 Enforcement. If either party hereto becomes aware that any Licensed Patent Rights in the Field of Use are being or have been infringed by any third party, such party shall promptly notify the other party hereto. ArthroCare shall have the sole right (but not the obligation) to bring suit to abate any infringement or misappropriation of the Licensed Patent Rights in the Field of Use, using counsel of its choice.. 5.2 Patent Prosecution. ArthroCare shall be responsible for and control the prosecution of all patent applications under the Licensed Patent Rights and the maintenance of all patents under the Licensed Patent Rights, using patent counsel of its own choice. Prosecution and maintenance of all patents and patent applications in the Licensed Patent Rights shall be in ArthroCare's sole discretion.   ARTICLE 6 - WARRANTIES AND REPRESENTATIONS 6.1 ArthroCare expressly warrants and represents that: a. ArthroCare is the owner of the Licensed Patent Rights and has the right to grant the license to Stryker granted herein; b. ArthroCare has no outstanding encumbrances or agreements, including any agreements with academic institutions, universities, or other third parties, whether written, oral or implied, which would be inconsistent with the license granted herein; and a. Schedule A includes to the best of ArthroCare's knowledge all of the patents and patent applications filed as of the Effective Date within Licensed Patent Rights; 6.2 Stryker expressly warrants and represents that: a. Stryker has no outstanding encumbrances or agreements, including any agreements with academic institutions, universities, or other third parties, whether written, oral or implied, which would be inconsistent with the license granted herein. 6.3 Notwithstanding anything to the contrary herein, the parties agree that a breach of Sections 6.1 and 6.2 initially shall not be deemed to be a material breach. Upon knowledge of any such breach by one party, the non-breaching party shall notify the breaching party of the breach. The breaching party shall have a period of ninety (90) days from the date of receipt of the notice to correct the breach, at which point, if the breach has not been cured, the breach shall be deemed material. Should either party decide to submit the matter to arbitration pursuant to Article 10 herein, then the ninety-day period shall be tolled pending the outcome of the arbitration.   ARTICLE 7 - DISCLAIMER OF CERTAIN WARRANTIES AND MUTUAL RELEASE 7.1 Nothing in this Agreement is or shall be construed as: a. A warranty or representation by any party as to the validity, enforceability or scope of any patent claim or patent within the Licensed Patent Rights; or b. A warranty or representation by ArthroCare that anything made, used, imported, sold, or offered for sale under the licenses granted by ArthroCare to Stryker hereunder is or will be free from infringement of any Licensed Patent Rights, foreign or domestic, or other intellectual property right of any third party and/or ArthroCare's patent rights not covered by this Agreement, except that ArthroCare warrants or represents that the Stryker products listed in Schedule B are free from infringement of any ArthroCare patent rights not covered by this Agreement and within the Field of Use; or c. An obligation of ArthroCare to bring or prosecute actions or suits against third parties for infringement of the Licensed Patent Rights; or d. Granting, by implication, estoppel, or otherwise, any licenses or rights to Stryker under patents or other rights of ArthroCare or third parties other than as expressly provided herein, regardless of whether such patents or other rights are dominant or subordinate to any patents or applications within the Licensed Patent Rights.   7.2 ARTHROCARE MAKES NO WARRANTIES WITH RESPECT TO ANY OF THE LICENSED PRODUCTS, WHETHER EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, ARTHROCARE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF QUALITY, MERCHANTABILITY. FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. 7.3 Each party hereby absolutely and unconditionally releases and forever discharges the other party from any and all actions, suits, claims, demands or liabilities, whether liquidated or unliquidated, absolute or contingent, know or unknown, and whether related or unrelated to the present Licensed Patent Rights, which each party has ever had, presently has , or now, claims up to the Effective Date of this Agreement against the other party. ARTICLE 8 - LIMITATION OF LIABILITY 8.1 NO PARTY WILL BE LIABLE TO ANY OTHER PARTY WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (A) ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, (B) ANY LOST PROFITS OR LOST BUSINESS OR (C) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES; EVEN IF THE REMEDIES PROVIDED FOR IN THIS AGREEMENT FAIL OF THEIR ESSENTIAL PURPOSE AND EVEN IF EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OR PROBABILITY OF SUCH DAMAGES. ARTICLE 9 - TERM AND TERMINATION 9.1 The licenses granted under Article 2, and the payment obligations under Article 3, shall remain in effect until the expiration or termination of the last-to-expire patent within the Licensed Patent Rights. 9.2 Stryker or ArthroCare may terminate this Agreement upon ninety (90) days prior written notice to the other party for any material breach or default of such other party of any material provision of this Agreement. Such written notice shall set forth a description of such material breach. Subject to the provisions of Article 10 below, such termination shall become effective at the end of the ninety (90) day period unless during such period the party in breach or default cures such breach or default. From the date one Party notifies the other it wishes to commence an arbitration proceeding or a mediation under Article 10, until such time as the matter has been finally settled through mediation or by arbitration, the running of the time period referred to herein, as to which a party must cure a breach, shall be suspended as to the subject matter of the dispute. This Agreement will remain in full force and effect during any ninety (90) day cure period and/or during any such mediation or arbitration. 9.3 If this Agreement is terminated for cause under Article 9.2, then the license and option granted under Article 2 and the payment obligations under Article 3 shall be terminated. 9.4 Articles 4.2, 4.4, 6, 7, 8, 9.4, 10 and 11 shall survive the termination or expiration of this Agreement.   ARTICLE 10 - BINDING ARBITRATION 10.1 Any dispute, claim or controversy arising from or related in any way to this Agreement or to the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud or otherwise, will be submitted for resolution to final and binding arbitration pursuant under the then current Commercial Arbitration Rules of the American Arbitration Association ("AAA"), by one (1) arbitrator, who shall be a former federal court judge, in Santa Clara County, California; provided, however, that California Code of Civil Procedure ß 1283.05 shall apply to any such proceeding. Such arbitrator shall be selected by the mutual agreement of the parties or, failing such agreement, shall be selected according to the AAA rules. The arbitrator will be instructed to prepare and deliver a written, reasoned opinion stating his decision within thirty (30) days of the completion of the arbitration. Such arbitration shall be concluded within nine (9) months following the filing of the initial request for arbitration. 10.2 The Parties agree that the arbitration hearings, the award, and the written opinion will be kept confidential. The arbitrator(s) shall issue appropriate protective orders to safeguard The Parties' confidential information. Each Party to this Agreement hereby knowingly and voluntarily waives its right to trial by jury of any dispute, claim or controversy arising from or related in any way to this Agreement or to the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud or otherwise. 10.3 Each Party to this Agreement hereby knowingly and voluntarily waives any claim to punitive or exemplary damages from another Party as part of any dispute, claim or controversy arising from or related in any way to this Agreement or to the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud or otherwise. This waiver includes any claim to increased damages premised on an allegation of willful patent infringement. Each Party to this Agreement is hereby precluded from requesting or receiving such damages in any arbitration proceeding under this Article. 10.4 Each Party to this Agreement hereby knowingly and voluntarily waives any right to seek or receive injunctive relief as part of any dispute, claim or controversy arising from or related in any way to this Agreement or to the interpretation, application, breach, termination or validity thereof, including any claim of inducement of this Agreement by fraud or otherwise. Each Party to this Agreement is hereby precluded from requesting or receiving injunctive relief in any arbitration proceeding under this Article. 10.5 The Parties agree that there is no right of appeal from the final decision of the arbitrator(s). Each Party to this Agreement acknowledges that the final decision of the arbitrator(s) shall be binding upon The Parties, and hereby knowingly and voluntarily waives any right to appeal the decision of the arbitrator(s) to the federal or state courts. The decision of the arbitrator(s) may be vacated, modified or corrected only upon the grounds specified in the Federal Arbitration Act. 10.6 The United States District Court for the jurisdiction in which the arbitration is held may enter judgment upon any award rendered under this Article to ensure that the award is enforceable against The Parties. The Parties consent to the jurisdiction of that United States District Court for the enforcement of this Agreement and for the entry of judgment on any award. In the event that such Court lacks jurisdiction, then any court having jurisdiction of this matter may enforce this Article and enter judgment upon any award rendered under this Article. 10.7 The Parties agree that the Party initiating arbitration under this Article shall initially pay all costs of the arbitration (except the costs and attorney fees of the other Parties to the arbitration). The Parties further agree that the losing Party in arbitration under this Article will be responsible for the prevailing Party's reasonable costs, including all costs of the arbitration. The written opinion rendered by the arbitrator(s) under clause 10.1 will include a determination as to which Party (if any) is to be considered the "prevailing Party" for the purposes of this Article. If there is no "prevailing Party," then each Party will bear its own costs, and the costs of the arbitration paid by the Party initiating the arbitration shall be shared equally. Each party shall bear its own attorney fees. 10.8 The arbitrator(s) shall be bound by the express terms of this Agreement, and may not amend or modify such terms in any manner. Any award rendered by the arbitrator(s) shall be consistent with the terms of this Agreement, and such terms herein shall control the rights and obligations of the parties. 10.9 Any dispute controversy or claim arising out of or related to this agreement, or the interpretation, application, breach, termination or validity thereof, including any claim of inducement by fraud or otherwise, which claim would, but for this provision, be submitted to arbitration shall, before submission to arbitration, first be mediated through non-binding mediation in accordance with the Model Procedures for the Mediation of Business Disputes promulgated by the CPR Institute for Dispute Resolution, or successor ("CPR") then in effect, except where those rules conflict with these provisions, in which case these provisions control. The Parties shall agree upon the place of the Mediation once the mediator is selected. The Mediation shall be attended by a senior executive with authority to resolve the dispute from each of the operating companies that are Parties. 10.10 The mediator shall be neutral, independent, disinterested and shall abide by the Canons of Ethics of the American Bar Association for neutral, independent arbitrators and will be selected from a professional mediation firm such as ADR Associates or JAMS/ENDISPUTE or CPR. The Parties shall promptly confer in an effort to select a mediator by mutual agreement. In the absence of such an agreement, the mediator shall be selected from a list generated by CPR with each party having the right to exercise challenges for cause and two peremptory challenges within 72 hours of receiving the CPR list. The mediator shall confer with the Parties to design procedures to conclude the mediation within no more than 45 days after initiation. Under no circumstances shall the commencement of arbitration under Article 10.1, above, be delayed more than 45 days by the mediation process specified herein absent contrary agreement. 10.11 Each Party agrees to toll all applicable statutes of limitation during the mediation process and not to use the period or pendancy of the mediation to disadvantage the other Party procedurally or otherwise. No statements made by either Party during the mediation may be used by the other Party during any subsequent arbitration or other proceeding. From the date one party notifies the other it wishes to commence an arbitration proceeding or a mediation, until such time as the matter has been finally settled through mediation or by arbitration the running of the time period referred to in Article 9.2 above, as to which a party must cure a breach shall be suspended as to the subject matter of the dispute.     ARTICLE 11 - MISCELLANEOUS 11.1 Marketing Obligations. ArthroCare acknowledges that Stryker has no affirmative obligation to market or sell the Licensed Products. All business decisions, including without limitation the design, manufacture, sale, price and promotion of the Licensed Products, shall be within the sole discretion of Stryker. 11.2 Confidentiality. No Party shall disclose the terms of this Agreement to an unaffiliated third party, except for legal, financial, accounting or other similar advisors who agree to keep the terms of this Agreement confidential, without the prior written approval of the other party, or as required by law or regulation. Furthermore, except as required by law or regulation, or otherwise agreed to by the parties, no party will originate any publicity, news release, or other public announcement, written or oral, whether to the public press, to stockholders, or otherwise, relating to this Agreement, to any amendment hereto or to performance hereunder or the existence of an arrangement between the parties without the prior written approval of the other parties. Notwithstanding anything to the contrary herein, the Parties agree that an unintentional breach of Section 11.2 shall not be deemed to be a material breach so long as the breaching Party uses reasonable efforts to remedy or mitigate any such breach within a reasonable time after being notified of such breach. 11.3 Notices. All notices hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, one day after delivery to a nationally recognized overnight delivery service, charges prepaid, three days after sent by registered or certified mail, postage prepaid, or when receipt is confirmed if by, facsimile or other telegraphic means: In the case of ArthroCare Corporation: ArthroCare Corporation 595 North Pastoria Avenue Sunnyvale, California 94086 Attn: Michael A. Baker Fax: (408) 732-2752 with a copy to: John T. Raffle, Esq. ArthroCare Corporation 595 North Pastoria Avenue Sunnyvale, California 94086 Fax: (408) 530-9143   In the case of Stryker: Curtis E. Hall or General Counsel Stryker Corporation 2725 Fairfield Road Kalamazoo, MI 49002 With a copy to: William Enquist or President Stryker Endoscopy 2590 Walsh Avenue Santa Clara, California 95051 Such addresses may be altered by written notice given in accordance with this Article 11.3 11.4 Assignment. Any Party may assign this Agreement or any rights and obligations contemplated herein to an Affiliate or to a company acquiring substantially all of the assets, voting stock, or business of the Party (or the Affiliate to which such rights have been assigned) to which this Agreement relates, without the consent of the other Party, upon giving written notice thereof to the other Party. Upon any such assignment, the assignee shall become subject to all of the terms and conditions of this Agreement. In all other instances, no Party shall assign this Agreement or any rights granted hereunder without the prior written consent of the other Party. Subject to the foregoing, this Agreement shall bind and inure to the benefit of the respective Parties hereto and their successors and assigns. 11.5 Force Majeure. Any delays in or failures of performance by any Party under this Agreement shall not be considered a breach of this Agreement if and to the extent caused by occurrences beyond the reasonable control of the party affected, including but not limited to: acts of God; acts, regulations or laws of any government; strikes or other concerted acts of workers; fires; floats; explosions; riots; wars; rebellions; and sabotage; and any time for performance hereunder shall be extended by the actual time of delay caused by such occurrence. 11.6 Relationship of Parties. The Parties hereto are entering into this Agreement as independent contractors, and nothing herein is intended or shall be construed to create between the Parties a relationship of principal and agent, partners, joint venturers or employer and employee. No Party shall hold itself out to others or seek to bind or commit the other Parties in any manner inconsistent with the foregoing provisions of this Article. 11.7 Integration. This Agreement constitutes the entire agreement and understanding between the Parties with respect to the matters contained herein, and there are no prior oral or written promises, representations, conditions, provisions or terms related thereto other than those set forth in this Agreement. The Parties may from time to time during the term of this Agreement modify any of its provisions by mutual agreement in writing. 11.8 Headings. The inclusion of headings in this Agreement is for convenience only and shall not affect the construction or interpretation hereof. 11.9 Construction. The Parties agree and acknowledge that this Agreement is the product of both parties and shall not be construed against either party. 11.10 Governing Law. The validity and interpretation of this Agreement and the legal relations of the parties to it shall be governed by the internal laws of the State of California. 11.11 Severability. If any provision of this Agreement is held to be illegal or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. 11.12 Execution of Agreement in Counterparts. This Agreement may be executed in any number of counterparts, and execution by each of the Parties of any one of such counterparts will constitute due execution of this Agreement. Each such counterpart hereof shall be deemed to be an original instrument, and all such counterparts together shall constitute but one agreement.   This Agreement is signed as indicated below by duly authorized representatives of ArthroCare and Stryker, respectively.   ARTHROCARE CORPORATION     Date: _____________________ By: _____________________________ Michael A. Baker President and CEO     STRYKER CORPORATION     Date: _____________________ By: _____________________________ William R. Enquist President, Stryker Endoscopy     * * *

EXHIBIT 10.3a TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 21, 2000 between Harcourt General, Inc. and Kathleen Bursley (the "Executive"). Executive is a skilled and dedicated employee who has important management responsibilities and talents which benefit the Company. The Company believes that its best interests will be served if Executive is encouraged to remain with the Company or its Subsidiaries. The Company has determined that Executive's ability to perform Executive's responsibilities and utilize Executive's talents for the benefit of the Company, and the Company's ability to retain Executive as an employee, will be significantly enhanced if Executive is provided with fair and reasonable protection from the risks of a change in control of the Company. Accordingly, the Company and Executive agree as follows: 1. Defined Terms. Unless otherwise indicated, capitalized terms used in this Agreement which are defined in Schedule A shall have the meanings set forth in Schedule A. 2. Effective Date; Term. This Agreement shall be effective as of June 21, 2000 (the Effective Date") and shall remain in effect until June 20, 2002 ("the Term"); provided, however, that commencing with June 21, 2001 and on each anniversary thereof (each an "Extension Date"), the Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the applicable Extension Date that the Term shall not be so extended. Notwithstanding the foregoing, this Agreement shall, if in effect on the date of a Change of Control, remain in effect for two years following the Change of Control. 3. Change of Control Benefits. (i) If Executive's employment with the Company and its Subsidiaries is terminated at any time within the two years following a Change of Control by the Company and any of its Subsidiaries without Cause or by Executive for Good Reason (the effective date of either such termination hereafter referred to as the "Termination Date"), Executive shall be entitled to, and the Company shall be required to provide, subject to Executive's execution of a general release in favor of the Company substantially in the form attached hereto as Exhibit A (the "Release"), the payments and benefits provided hereafter in this Section 3 and as set forth in this Agreement. If Executive's employment by the Company and any of its Subsidiaries is terminated prior to a Change of Control by the Company and any of its Subsidiaries without Cause in connection with or in anticipation of a Change of Control, Executive shall be entitled to the benefits provided hereafter in Sections 3 and 4 and as otherwise set forth in this Agreement, but only if an anticipated Change of Control actually occurs, and Executive's Termination Date shall be deemed to have occurred immediately following the Change of Control. Notwithstanding the preceding sentence, in the event of any such termination, Executive shall continue to receive Executive's Base Salary at the annual rate in effect immediately prior to such termination (but not less than the annual rate in effect on the date of this Agreement) and any Bonus to which Executive would have been entitled had Executive remained employed until the date of the anticipated Change of Control, provided, however that such Base Salary and Bonus continuation shall end on the date of the anticipated Change of Control or the date that the agreement or other circumstance that would have resulted in the anticipated Change of Control terminates, whichever is applicable. Notice of termination without Cause or for Good Reason shall be given in accordance with Section 14, and shall indicate the specific termination provision hereunder relied upon, the relevant facts and circumstances and the Termination Date. a. Severance Payments. Within the later of (i) fifteen business days after the Termination Date or (ii) the expiration of the revocation period, if applicable, under the Release (the "Payment Period"), the Company shall pay Executive a cash lump sum equal to: (1) the Severance Multiple times the greater of Executive's Base Salary in effect (i) immediately prior to the date of the Change of Control or (ii) immediately prior to the event set forth in the notice of termination giving rise to the Termination Date; and (2) the Severance Multiple times the Target Bonus; and (3) Executive's Target Bonus multiplied by a fraction, the numerator of which shall equal the number of days Executive was employed by the Company or any of its Subsidiaries in the Company fiscal year in which the Executive's termination occurs and the denominator of which shall equal 365. b. Continuation of Active Employee Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall provide Executive and Executive's spouse and dependents (each as defined under the applicable program) with medical (including Executive Medical), dental, accidental death and dismemberment, life insurance and long-term disability coverages at the same benefit level, duration and at the same cost to Executive as provided to Executive immediately prior to the Change of Control; provided, however, that if Executive becomes employed by a new employer, (i) continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which Executive becomes enrolled and (ii) long-term disability benefits provided by the new employer shall offset long-term disability benefits provided by the Company. In addition, the period in which Executive is entitled to continued coverage under COBRA shall commence on the Termination Date. c. Payment of Earned But Unpaid Amounts. Within the Payment Period, the Company shall pay Executive any unpaid Base Salary through the Termination Date, any Bonus earned but unpaid as of the Termination Date for any previously completed fiscal year of the Company, all compensation previously deferred by Executive but not yet paid as well as the Company's matching contribution with respect to such deferred compensation and all accrued interest thereon; provided that if Executive is eligible for retirement under the terms of the applicable deferred compensation plan Executive shall receive the deferred compensation and interest pursuant to Executive's election under such plan unless Executive obtains the consent of the Company to receive the deferred compensation and interest in a lump sum or otherwise. In addition, Executive shall be entitled to prompt reimbursement of any unreimbursed expenses properly incurred by Executive in accordance with Company policies prior to the Termination Date. Executive shall also receive such other compensation (including any stock options or other equity-related payments) and benefits, if any, to which Executive may be entitled from time to time pursuant to the terms and conditions of the employee compensation, incentive, equity, benefit or fringe benefit plans, policies or programs of the Company, other than any Company severance policy (payments and benefits in this subsection (c), the "Accrued Benefits"). d. Retirement Benefits. (i) For purposes of eligibility for retirement, for early commencement or actuarial subsidies and for purposes of benefit accruals under any Company defined benefit pension plan (or any such alternative contractual arrangement that the Executive may have with the Company or any of its Subsidiaries), (i) Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that accrued as of the Termination Date, (ii) Executive will become fully vested in any defined benefit pension benefits provided by the Company and (iii) for purposes of calculating Executive's benefit, compensation shall include both Base Salary and Bonus; provided, that, (A) Base Salary applicable to any period of service deemed to occur after the Termination Date will be increased by five percent for each year of such additional service and (B) Executive's Bonus for each such year of additional service shall be based on the Target Bonus percentage; provided, further, that if any benefits afforded by this Agreement, including the benefits arising from the grant of additional service and age, are not provided under the qualified pension plan of the Company, the benefit, or its equivalent in value, shall be provided under a nonqualified pension plan of the Company or the general assets of the Company. Except for benefits payable under the qualified defined benefit pension plan of the Company (which shall be governed by the terms of such plan), the benefits payable under this Section 3(d) shall be paid to Executive by the Company and shall be determined pursuant to the terms of the Harcourt General Inc. Supplemental Executive Retirement Plan as in effect immediately prior to the Change of Control (the "SERP"), after giving effect to the provisions of this Section 3(d); provided that Executive may, if Executive obtains the consent of the Company, receive the benefits payable under this Section 3(d) in a lump sum or otherwise, within the Payment Period using the methodology set forth in Schedule B e. Retiree Medical. Following Executive's entitlement to continued activeemployee benefits pursuant to Section 3(b), if Executive is eligible for retiree medical benefits, using the eligibility criteria in effect immediately prior to the Change of Control, Executive shall be entitled to, and Company shall be required to pay, retiree medical coverage at the same benefit level and at the same cost to Executive as specified by the retiree medical plan in effect immediately prior to the Change of Control; provided, that for all purposes under this Section 3(e), Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that eligible to be taken into account under the retiree medical plan as of the Termination Date. f. Other Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall promptly pay (or, in the discretion of Executive, reimburse Executive for all reasonable expenses incurred) for (A) professional outplacement services by qualified consultants selected by Executive (but only until the date Executive first obtains full-time employment after the Termination Date) (not to exceed $25,000), and (B) subject to the terms and conditions in effect immediately prior to the Change of Control, tax preparation fees, estate planning and financial counseling (not to exceed 3% in total of the sum of the amounts payable pursuant to Section 3(a)(1) and 3(a)(2)). (ii) In the event of a Change of Control during a three-year Performance Period under the Harcourt, Inc. Performance Long-Term Cash Incentive Plan (the "Long-Term Incentive Plan"), Executives who were participants in the Long-Term Incentive Plan shall be entitled to, and the Company shall be required to pay, within the Payment Period, a lump sum cash payment equal to Executive's Equity Share (as defined in the Long-Term Incentive Plan) of a portion of the Incentive Pool (as defined in the Long-Term Incentive Plan) for each such Performance Period equal to the total Incentive Pool for the applicable three-year Performance Period multiplied by a fraction, the numerator of which shall equal the number of days that have elapsed in the Performance Period and the denominator of which shall equal 1,095. The Incentive Pool shall be calculated based on the assumption that all target performance goals were attained through the Change of Control.   4. Equity Pool. In the event of a Change of Control, Executive shall be entitled to a 2.73% interest in the Equity Pool (an "Equity Share"). Subject to Executive's continued employment with the Company or any of its Subsidiaries, the Equity Share shall be payable in a lump sum cash payment on the date which is six months following the Change of Control (the "Payment Date"); provided, however, that if (i)(A) Executive is terminated by the Company and its Subsidiaries without Cause, (B) Executive's employment terminates due to Executive's death or Permanent Disability or (C) Executive resigns with Good Reason following the Change of Control but prior to the Payment Date or (ii) Executive is terminated prior to the Change in Control, under the circumstances described in Section 3, Executive shall be entitled to the payment of the Equity Share within fifteen business days after (x) such termination of employment or (y) if later, the date of the Change of Control. The Equity Shares shall not be considered compensation under any qualified or nonqualified pension, welfare or deferred compensation plan of the Company. 5. Mitigation. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, and, subject to Section 3(b), compensation earned from such employment or otherwise shall not reduce the amounts otherwise payable under this Agreement. No amounts payable under this Agreement shall be subject to reduction or offset in respect of any claims which the Company or any of its Subsidiaries (or any other person or entity) may have against Executive. 6. Gross-Up. a. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 3(a), unless an alternative method of reduction is elected by Executive. b. All determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive's residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive's behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due ("Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. c. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. d. If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Section 6, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.     7. Termination for Cause. Nothing in this Agreement shall be construed to prevent the Company or any of its Subsidiaries from terminating Executive's employment for Cause. If Executive is terminated for Cause, the Company shall have no obligation to make any payments under this Agreement, except for the Accrued Benefits. 8. Indemnification; Director's and Officer's Liability Insurance. (i) Executive shall retain all rights to indemnification under the Company's Certificate of Incorporation or By-Laws, and (ii) the Company shall maintain Director's and Officer's liability insurance on behalf of Executive, in both cases at the level in effect immediately prior to the Termination Date or immediately prior to the Change in Control, whichever is greater, for a number of years equal to the Severance Multiple following the Termination Date, and throughout the period of any applicable statute of limitations. 9. Arbitration. All disputes and controversies arising under or in connection with this Agreement shall be settled by arbitration conducted before one arbitrator sitting in Boston, Massachusetts, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect. The determination of the arbitrator shall be made within 30 days following the close of the hearing on any dispute or controversy and shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. 10. Costs of Proceedings. The Company shall pay all costs and expenses of the Company and, at least monthly, Executive in connection with any arbitration relating to the interpretation or enforcement of any provision of this Agreement; provided that if Executive instituted the proceeding and the arbitrator or other individual presiding over the proceeding affirmatively finds that Executive instituted the proceeding in bad faith, Executive shall reimburse the Company for all costs and expenses of Executive previously paid by the Company pursuant to this Section 10.   11. Assignment. Except as otherwise provided herein, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Company and Executive and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section 11 shall continue to apply to each subsequent employer of Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer.   12. Withholding. Notwithstanding any other provision of this Agreement, the Company may, to the extent required by law, withhold applicable federal, state and local income and other taxes from any payments due to Executive hereunder. 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts of laws principles thereof. 14. Notice. For the purpose of this Agreement, any notice and all other communication provided for in this Agreement shall be in writing and shall be deemed to have been duly given when received at the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith. If to the Company: Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 Attention: General Counsel If to Executive: To the most recent address of Executive set forth in the personnel records of the Company.   15. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and, except as expressly provided herein, supersedes all other prior agreements expressly concerning the effect of a Change of Control on the relationship between the Company and the other members of the Company and Executive. Except as expressly provided herein, this Agreement shall not interfere in any way with the right of the Company to reduce Executive's compensation or other benefits or terminate Executive's employment, with or without Cause. Any rights that Executive shall have in that regard shall be as set forth in any applicable employment agreement between Executive and the Company. This Agreement may be changed only by a written agreement executed by the Company and Executive.       16. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement on the 21st day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Kathleen Bursley             EXECUTIVE   Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms, when capitalized, have the meaning indicated: I. "Act" means the Securities Exchange Act of 1934, as amended. II. "Base Salary" means Executive's annual rate of base salary in effect on the date in question. III. "Board" means the board of directors of the Company. IV. "Bonus" means the amount payable to Executive under the Company's applicable annual incentive bonus plan with respect to a fiscal year of the Company. V. "Cause" means either of the following: (1) If Executive has an employment agreement, the definition contained therein; otherwise (2) (i) conviction of a felony under the laws of the United States or any state thereof, or (ii) Executive's willful malfeasance or willful misconduct in connection with Executive's duties hereunder, or Executive's repeated willful refusal to perform Executive's duties after written notice to Executive and a reasonable opportunity to cure (not including any duties in excess of Executive's duties immediately prior to the Change of Control) which, in each case, results in demonstrable harm to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates. VI. "Change of Control" means the first to occur of any of the following: (1) any "person" or "group" (as described in the Act) becomes or is the beneficial owner of 25% or more of the combined voting power of the then outstanding voting securities with respect to the election of the Board (counting each share of Class B Stock as having ten votes per share), and also holds more of such combined voting power than any group or person who is the beneficial owner, on the Effective Date, of over 20% of the combined voting power of the then outstanding voting securities with respect to the election of the Board. "Person" does not include any Company employee benefit plan, any company the shares of which are held by the Company shareholders in substantially the same proportion as such shareholders held the stock of the Company immediately prior to acquiring the shares of such company, or any testamentary trust or estate; (2) any merger, consolidation, amalgamation, plan of arrangement, reorganization or similar transaction involving the Company, other than, in the case of any of the foregoing, a transaction in which the Company shareholders immediately prior to the transaction hold immediately thereafter, in the same proportion as immediately prior to the transaction, not less than 66 2/3% of the combined voting power of the then outstanding voting securities with respect to the election of the board of directors of the resulting entity (it being understood that if the Class B Stock shall remain outstanding following such transaction, each share of Class B Stock shall be counted as having ten votes per share for purposes of such calculation); (3) any change in a majority of the Board within a 24-month period unless the change was approved by a majority of the Incumbent Directors; (4) any liquidation or sale of all or substantially all of the assets of the Company; or (5) any other transaction so denominated by the Board. VII. "Class B Stock" means Class B Stock, par value $1.00 per share, of the Company. VIII. "Code" means the Internal Revenue Code of 1986, as amended. IX. "Company" means Harcourt General, Inc. and, after a Change of Control, any successor or successors thereto. X. "Equity Pool" means the product of (i) 75,500,000 multiplied by (ii) the price per share received by shareholders in connection with the Change in Control, as determined by the Board in its sole discretion (the "Share Price") multiplied by (iii) zero if the Share Price is below $45, .55% if the Share Price is $45, .99% if the Share Price is $65 or higher and, if the Share Price is between $45 and $65, as determined by linear interpolation between .55% and .99%. XI. "Good Reason" means any of the following actions on or after a Change of Control, without Executive's express prior written approval, other than due to Executive's Permanent Disability or death: (1) any decrease in, or any failure to increase in accordance with an agreement between Executive and the Company or any of its Subsidiaries, Base Salary or Target Bonus; (2) any material diminution in the aggregate employee benefits afforded to the Executive immediately prior to the Change of Control; for this purpose employee benefits shall include, but not be limited to pension benefits, life insurance and medical and disability benefits; (3) any diminution in Executive's title or reporting relationship, or substantial diminution in duties or responsibilities (other than solely as a result of a Change of Control in which the Company immediately thereafter is no longer publicly held); or (4) any relocation of Executive's principal place of business of 35 miles or more, other than normal travel consistent with past practice. Executive shall have six months from the time Executive first becomes aware of the existence of Good Reason to resign for Good Reason. XII. "Incumbent Director" means a member of the Board at the beginning of the period in question, including any director who was not a member of the Board at the beginning of such period but was elected or nominated to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change of Control or engage in a proxy or other control contest). XIII. "Permanent Disability" means inability, by reason of any physical or mental impairment, to substantially perform the significant aspects of his regular duties which inability has lasted for six months and is reasonably expected to be permanent. XIV. "Publicly Traded Company" means a company whose common equity securities (including American Depositary Shares or American Depositary Receipts relating to such equity securities) are traded or quoted on a principal United States, Canadian or European stock market or trading system, and are owned by more than 1,000 shareholders. XV. "Severance Multiple" means three. XVI. "Subsidiary" means a subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). XVII ."Target Bonus" means the greatest of (i) 35% of Executive's Base Salary (as determined in Section 3(a)(1)), (ii) Executive's target Bonus in effect on the date of the Change of Control or (iii) Executive's target Bonus in effect immediately prior to the event set forth in the notice of termination giving rise to the Termination Date.   Schedule B CALCULATION OF PENSION LUMP SUM AMOUNT   1.     Lump Sum Amount The lump sum value of the pension benefit payable pursuant to the provisions of Section 3(d) shall be equal to the Actuarial Equivalent of the single life annuity benefit described in the Harcourt General Inc. Supplemental Executive Retirement Plan (SERP) as enhanced by Section 3(d) of this Agreement. The single life annuity amount above shall be determined at the earliest possible age the employee could retire under the Harcourt General Inc. Retirement Plan (after giving effect to the additional years of age and service granted under Section 3(d)), but not before the Executive's age at the Termination Date plus such additional years of age. 2. Actuarial Equivalent Assumptions The Actuarial Equivalent of the benefit described in (1) above shall be calculated using the following assumptions: a. 6% interest, compounded annually b. no pre-retirement mortality, c. post-retirement mortality determined under the 1983 Group Annuity Mortality Table, weighted 50% for males and 50% for females. 3. Coordination of Agreement with existing SERP and Retirement Plan Notwithstanding any provision in the SERP or this Agreement, the benefits provided under this Agreement are intended to enhance the benefits payable under the existing SERP. Accordingly, this Agreement shall be considered an Individual Pension Agreement, which shall have the effect of superseding in full any benefits actually payable under the SERP. Exhibit A WAIVER AND RELEASE OF CLAIMS   In consideration of, and subject to, the payments to be made to me by Harcourt General, Inc., or any of its subsidiaries, or its or their successor(s) or assigns (the "Company"), pursuant to the attached Termination Protection Agreement ("TPA") dated June ____, 2000, I agree to and do release and forever discharge the Company, and its respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Act, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the TPA; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law, and certificates of incorporation and bylaws of the Company, and my rights under any directors' and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgement of my rights reserved under the second paragraph above. I acknowledge that I have been given not less than [twenty-one (21)] [forty-five (45)] days to review and consider this Waiver and Release of Claims, and that I have had the opportunity to consult with an attorney or other advisors of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. ___________________________________ Employee's Signature ___________________________________ Print Name ___________________________________ Date Signed

EX-10.66 8 wells1066.htm 10.66 AUTO LOANS INTERNET   AUTO LOAN PURCHASE AND SALE AGREEMENT   This Auto Loan Purchase and Sale Agreement ("Agreement") is made on May 1, 2000 (the "Effective Date"), by and between WELLS FARGO BANK, N.A. - Auto Finance Group, a national banking association, a California corporation with its principal office at 1350 Montego Way, Walnut Creek, CA 94598 ("Correspondent") and E-LOAN, Inc., a Delaware corporation with its principal office at 5875 Arnold Road, Dublin, CA 94568 ("E-LOAN"). R E C I T A L S WHEREAS, E-LOAN maintains a website at www.eloan.com, and is engaged in the business of, among other things, origination and sale of loans to consumers for the purchase or refinance of motor vehicles ("Loans"); WHEREAS, Correspondent is a company purchasing certain motor vehicle loans; WHEREAS, E-LOAN desires to provide a broad range of available financing for consumers seeking Loans; WHEREAS, E-LOAN and Correspondent desire to enter into an arrangement whereby E-LOAN will sell Loans to Correspondent ; NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, E-LOAN and Correspondent hereby agree as follows: 1. Sale and Delivery of Loans. 1.1 Sale and Purchase of Loans. From time to time during the Term of this Agreement, E-LOAN shall sell, assign, transfer, convey and deliver to Correspondent, and Correspondent shall purchase from E-LOAN, without recourse and on a servicing released basis, all right, title and interest in and to Loans as provided in this Agreement. 1.2 Offer. From time to time during the Term of this Agreement, E-LOAN shall submit, for Correspondent's review and approval, an offer to sell one or more prospective Loans (each, an "Offer") under the terms of this Agreement. Each Offer shall be in a format acceptable to Correspondent, and shall include the items and information set forth on Exhibit A, which shall include the application relating to each offered Loan and such other information as mutually agreed by the parties. In determining whether to submit an Offer to Correspondent, E-LOAN shall apply Correspondent's underwriting and other criteria for purchase of Loans subject to this Agreement as set forth on Exhibit B ("Purchase Criteria") to the Loan application, and shall only submit Offers that E-LOAN reasonably believes satisfy the Purchase Criteria. E-LOAN is not obligated to offer to sell any Loans or prospective Loans to Correspondent. 1.3 Acceptance. On or before the Offer Expiration Date set forth on Exhibit A, Correspondent shall, in its sole discretion, accept or reject such offer, and shall inform E-LOAN of its decision. In determining whether to accept or reject an Offer, Corespondent shall apply the Purchase Criteria to each Loan offered for sale. If Correspondent accepts an Offer, Correspondent shall transmit to E-LOAN a Confirmation with respect to each prospective Loan to be purchased. The Confirmation shall include the information set forth on Exhibit C, and shall include a clear description of the conditions that must be met in order for Correspondent to purchase the Loan. Transmission of a Confirmation shall constitute acceptance of E-LOAN's Offer, and Correspondent shall be obligated to purchase the prospective Loan, provided that all conditions set forth in the Confirmation are met and the Loan is funded by E-LOAN prior to expiration of the Confirmation. If E-LOAN does not fund a prospective Loan and fulfill all conditions set forth in the Confirmation within thirty (30) days of E-LOAN's receipt of the Confirmation ("Offer Expiration Date"), the Confirmation shall expire, and Correspondent shall have no obligation to purchase the Loan. E-LOAN agrees that it will not offer for sale to any person other than Correspondent any Loan for which a Confirmation has been issued and is outstanding. Upon expiration of a Confirmation, E-LOAN shall be free to sell or offer to sell the subject Loan to any other person. In the absence of a Confirmation issued by Correspondent with respect to a Loan, Correspondent is not obligated to purchase any Loan offered for sale by E-LOAN. 1.4 Funding and Delivery of Loans. E-LOAN is not obligated to fund or sell any Loans to Correspondent, whether or not a Confirmation has been issued by Correspondent with respect to the subject Loan. However, if E-LOAN funds and sells a Loan to Correspondent hereunder, E-LOAN shall fulfill all conditions set forth in the applicable Confirmation, and fund the subject Loan prior to expiration of a Confirmation. Upon funding of a Loan subject to a Confirmation, E-LOAN shall immediately deliver to Correspondent, the loan documents and items set forth on Exhibit D, together with any and all other items required by the Confirmation relating to the subject Loan, evidencing funding and fulfillment of all conditions of the Confirmation ("Required Documents"). 1.5 Payment; Transfer. With respect to each Loan sold, Correspondent shall pay E-LOAN the amount set forth on Exhibit E ("Purchase Price"), in the manner, and by the time limits set forth in Exhibit E. The Purchase Price shall be the principal amount of the Loan, plus such additional compensation as the parties agree. Such additional compensation shall be on a per funded/boarded Loan basis and shall be aggregately paid on the 10th day of the month for the prior month's Loan activity. Upon receipt by E-LOAN of the portion of the Purchase Price representing the principal balance of the Loan ("Transfer Date"), the Loan, and all rights, benefits, payments, proceeds and obligations arising from or in connection with the Loan, together with any lien or security interest in the vehicle serving as collateral for the Loan, shall vest in Correspondent. Until the Transfer Date, E-LOAN shall own and control the application and all documentation relating to a prospective Loan to be sold. All Loans sold under this Agreement shall be sold without recourse, on a servicing released basis. With respect to each Loan as to which E-LOAN has not delivered to Correspondent all Required Documents,, Correspondent shall have no obligation to purchase the subject Loan. 1.6. Direct Electronic Deposit. E-LOAN and Correspondent agree that the payments for the Purchase Price of the Loan will normally be made by direct electronic deposit, with advise of remittance, to E-LOAN's demand deposit account in the financial institution specified by E-LOAN. E-LOAN authorizes Correspondent to initiate credit entries or adjustments to the specified account to correct any credit entries made in error. Payments will be made by check if the information provided is blank, incomplete or incorrect, or if electronic deposit facilities are unavailable to Correspondent for any reason. E-LOAN is providing the information shown below in this Agreement to facilitate this service. Bank of America/Oakland, CA Depository/Branch Name Oakland, CA, 94612 City, State, Zip 510-273-5313 Telephone No. [*] Transit/ABA Number [*] Account Number 1.7. Changes to Purchase Criteria. E-LOAN understands that Correspondent reserves the right from time to time to change its Purchase Criteria and the types of loans it will purchase. The temporary or permanent discontinuance of the purchase of one or more types of loans will not affect the terms of this Agreement which apply to previously purchased Loans of any type. 1.8. Effects of Correspondent's Action. After the purchase and assignment of the Loan to Correspondent by E-LOAN, E-LOAN understands and agrees that Correspondent may without notice to E-LOAN extend the due dates of payments due or to become due under any Loan, amend any Loan by agreement with the borrower(s) or otherwise deal with borrower(s) or any other party obligated to Correspondent in connection with the transaction in whatever manner Correspondent deems reasonable and appropriate, without affecting E-LOAN obligations under this Agreement. 1.9. Most Competitive Compensation. At all times E-LOAN will provide to Correspondent its most competitive compensation offered to any existing and hereafter motor vehicle loan correspondents or lenders. If requested by Correspondent, E-LOAN will provide documentation concerning this subject matter, except as prohibited by applicable confidentiality provisions.   2. Covenants. 2.1 Compliance with Law. Each party shall comply with all federal, state and local laws and regulations applicable to this Agreement and the respective party's obligations hereunder, including without limitation all consumer protection laws, the federal Equal Credit Opportunity Act, Truth in Lending Act, Fair Credit Reporting Act, Fair Debt Collection Practices Act and state licensing laws and each of their respective regulations ("Applicable Law"). E-LOAN shall provide prior written notice to Correspondent of any changes to the form documents for Loans, and shall update the forms as necessary to comply with Applicable Law. Correspondent shall provide prior written notice to E-LOAN of any changes to the Purchase Criteria, and shall update the Purchase Criteria as necessary to comply with Applicable Law. E-LOAN and Correspondent shall each conduct its operations, and shall ensure that the operations of its affiliates, subsidiaries and their respective officers and agents are conducted, in a manner that does not have a material adverse impact on the reputation or business of the other. 2.2 Post-Closing Payments. All monies received by E-LOAN after the transfer of title to any Loan shall be promptly turned over to Correspondent no later than three (3) business days from receipt. 2.3 Limited Power of Attorney. E-LOAN hereby appoints Correspondent, its agents, employees, successors and assigns, as its attorney in fact, with the full power of substitution, for the limited purpose of (1) endorsing E-LOAN's name on any checks, drafts, money orders or other forms of payment payable to E-LOAN that may come into Correspondent's possession with respect to any Loan purchased by Correspondent under this Agreement, (2) executing any form or document necessary to effectuate the assignment of a Loan in accordance with this Agreement, or to create, perfect, assign or release a first priority security interest in a vehicle securing a Loan in favor of Correspondent, and (3) executing any form or document necessary to effectuate the transfer of the certificate of title with respect to any Loan purchased by Correspondent. 2.4 Non-Discrimination. Correspondent's credit underwriting standards and Purchase Criteria comply with, and as such standards and Purchase Criteria may be revised from time to time throughout the term of this Agreement shall remain in compliance with, the anti-discrimination and other requirements of Applicable Law. E-LOAN's loan origination practices comply with, and as such origination practices may be revised from time to time throughout the term of this Agreement shall remain in compliance with, the anti-discrimination and other requirements of Applicable Law. 2.5 Record Retention. Each party shall, at its own expense, maintain data, information, records and documents relating to Loans offered for sale or sold pursuant to this Agreement, in such manner and for such time period as is required by Applicable Law. Each party shall cooperate with one another and make such Loan records available to regulatory authorities to satisfy state or federal audit requirements. If a party has reasonable grounds to believe a default has occurred under this Agreement, that party shall have the right to review the records of the other party upon reasonable notice, provided that the requesting party shall be entitled to review only those records necessary to determine existence and extent of the default. 2.6 Performance Reports. Within fifteen (15) days after the end of each calendar month during the Term of this Agreement, Correspondent shall provide to E-LOAN a report showing (i) the number of Loans purchased by Correspondent during the preceding month; (ii) the principal balance of each Loan purchased by Correspondent during the preceding month; (iii) the number of Loans purchased by Correspondent since the Effective Date having delinquencies of 30 days or more; and (iv) the number of Loans purchased by Correspondent since the Effective Date that have been charged off on an annual basis. 2.7 Mutual Cooperation. During the term of this Agreement, the parties agree to cooperate with and assist each other, as reasonably requested, in carrying out the covenants, agreements, duties and responsibilities of one another under this Agreement, and shall from time to time, execute, acknowledge and deliver such additional instruments, assignments, endorsements, and documents as may reasonably be required or appropriate to facilitate the performance of this Agreement. Both parties shall work together with respect to coordinating the systems requirements for establishing and maintaining electronic connectivity, and each party shall bear its own expenses with respect thereto. 2.8 No Solicitation or Disclosure. From the date of this Agreement until any Loan sold to Correspondent is paid in full, E-LOAN agrees that: (i) it will not directly or indirectly solicit the respective borrowers to apply for, or offer to such borrowers, any financial products, the proceeds of which could be used to pay off or refinance the subject Loan, including, without limitation, the solicitation or offering of any loan, line of credit, home equity loan or line of credit, or any other credit product; and (ii) it will not directly or indirectly disclose in any manner or sell the names of such borrowers to any third party. This provision shall not prohibit E-LOAN from soliciting products to the public generally. 2.9 Communications with Borrower. After the Loan has been purchased by Correspondent , all written and oral communications with borrower(s) of the Loan by E-LOAN will be fully documented in writing and promptly sent to the Correspondent. Furthermore, any written communications with the borrower(s) of the Loan will be prior approved by Correspondent. 3. Representations and Warranties of the Parties. As of the date of this Agreement, and throughout the Term, each party hereby represents and warrants to the other party that: 3.1 Due Organization and Good Standing. Each party is a corporation, duly organized, validly existing, and is qualified and authorized to transact business in, and is in good standing under the laws of, the jurisdiction of its organization and each jurisdiction in which it performs or will perform its obligations under this Agreement, or is otherwise doing business or is otherwise exempt under Applicable Law from such qualification. 3.2 Authority and Capacity. Each party has the power, authority and capacity to execute, deliver, and perform its obligations under this Agreement. Each party's execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action. This Agreement constitutes a valid and legally binding agreement enforceable in accordance with its terms, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance. 3.3 Consent; Litigation. No consent or approval of any other party or any court or governmental authority is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. There is no pending claim, cause of action, governmental action or litigation that, if determined adversely, would affect the party's ability to perform its obligations hereunder. This Agreement will not result in a default under any other agreement to which the party is bound. 3.4 Licenses. All necessary qualifications and licenses required by applicable law to conduct business as contemplated by this Agreement in all states where Loans are purchased and sold hereunder have been obtained, and will be maintained in good standing. 4. Additional Representations and Warranties of E-LOAN. As of each and every date E-LOAN sells and delivers a Loan to Correspondent under this Agreement, E-LOAN hereby represents and warrants to Correspondent with respect to each such Loan that: 4.1 Valid Loans. Each Loan is bona fide, valid, genuine and legally enforceable according to its terms and is duly and properly executed by the parties shown as borrowers who were, to the best of E-LOAN's knowledge, competent and had full legal capacity to enter into such Loan at the time they executed the same. To the best of E-LOAN's knowledge, (1) there are no claims or defenses with respect to any Loan; (2) no Loan, or the obligations of any borrower, guarantor or surety with respect to any Loan, has been obtained by fraud or fraudulent representations; (3) no oral or written agreement exists or will exist whereby any of the terms of any Loan has been varied in any way; (4) the information provided to Corespondent in connection with each Loan is complete, true and correct; (5) none of the borrowers, guarantors or sureties on the Loans are deceased, and none of such persons are the subject of any bankruptcy or other legal proceedings between E-LOAN and such persons. ; and (6) terms and conditions of the Dealer Agreement attached hereto as Exhibit F have been met. 4.2 Loans Comply with Law. The form of each Loan and the transactions contemplated by the Loan comply with, and have been entered into in compliance with, all Applicable law, and all required disclosures and notices have been given in compliance with all Applicable law. Any applicable period during which the borrower may rescind the Loan has expired, and all Loan proceeds have been fully disbursed. 4.3 No Default. All payments required under each Loan have been made up to the date the Loan is sold. There is no default, breach, violation or event of acceleration existing under the terms of each Loan nor has any event occurred which, upon the giving of notice or the lapse of time, or both, would constitute a default, breach, violation or event of acceleration under the Loan. 4.4 Title and Insurance. For each Loan sold to Correspondent, the certificate of title to each vehicle securing a loan shall list E-LOAN, Correspondent or its designated Affiliate (as the parties shall mutually agree) as the first and only lienholder on the certificate of title application or registration and on the required physical damage insurance policies and loss payable clauses relating to the vehicle securing the Loan. For purposes of this Agreement, "Affiliate" means any person or entity which directly, or indirectly through one or more intermediaries, owns or controls, is owned or controlled by, or is under common control or ownership with, E-LOAN or Correspondent, respectively, or their respective ultimate parent.   4.5 Origination of Loans. Except as disclosed in writing to Correspondent and accepted by Correspondent prior to the Closing Date, each Loan has been originated in accordance with the Purchase Criteria and the terms and conditions of the applicable Confirmation. 4.6 Status of Loan. The information that appears on E-LOAN's accounting and all other pertinent records pertaining to any Loan accurately reflect the true status of each Loan. 4.7 Ownership of Loans. For each Loan sold to Correspondent, (a) E-LOAN is the sole owner of each Loan and has good and marketable title thereto, and has the right to assign, sell and transfer the Loan to Correspondent free and clear of any encumbrance, lien, pledge, charge, claim or security interest, and (b) E-LOAN has not sold, assigned or otherwise transferred any right or interest in or to the Loan and has not pledged the Loan as collateral for any debt or other purpose. . 4.8 Sale Treatment. The sale of each Loan shall be reflected on E-LOAN's balance sheet and other financial statements as a sale of assets by E-LOAN, and E-LOAN shall not take any action or omit to take any action which would cause the transfer of the Loans to Correspondent to be treated as anything other than a sale to Correspondent of all of E-LOAN's right, title and interest in and to each Loan. 4.9 Insurance. Each vehicle securing a Loan is insured against loss under a policy issued by an insurer and coverage amount reasonably acceptable to Correspondent and qualified to do business in the state where the vehicle is located, in a form such that it may be endorsed to Correspondent as loss payee. There are no facts or circumstances that could provide a basis for revocation of, or a defense to any claims made under, any insurance policy covering a vehicle. 4.10 E-LOAN'S Compliance. This Agreement covers E-LOAN existing website www.eloan.com and any other website owned or controlled by E-LOAN during the term of this Agreement. Any E-LOAN website format, information, content and the marketing and use thereof by E-LOAN for this Agreement shall be in full compliance with all Applicable Law. E-LOAN has obtained, or will have obtained in connection with the transactions contemplated by this Agreement, all necessary federal and state approvals in connection with operation and ownership of its website and the content thereof. The privacy notices and policies of any E-LOAN'S website shall be consistent and comply with all federal and state laws, including but not limited to the Federal Trade Commission's procedures or rules, and comply with acceptable trade practices and Applicable Law. 5. Indemnification & Remedies. 5.1 Indemnification. Each party (in such capacity, referred to as "Indemnitor") shall indemnify and hold the other party and its respective shareholders, directors, officers, employees, representatives, agents, servants, successors, and assigns (collectively "Indemnitee") harmless from and shall reimburse Indemnitee for any losses, damages, deficiencies, claims, causes of action or expenses of any nature (including reasonable attorneys' fees and expenses) (including allocated costs for in-house legal counsel) incurred by Indemnitee arising out of or resulting from any breach of any warranty, representation, covenant or obligation of Indemnitor under this Agreement. 5.2 Indemnification Procedures. After either party obtains knowledge of any claim, action, suit or proceeding (collectively a "Claim") for which it believes is entitled to indemnification under this Agreement, it shall promptly notify the other party of such Claim in writing within ten (10) days after such knowledge. Each party shall cooperate with the other in every reasonable manner (at the Indemnitor's sole expense) to facilitate the defense of any Claim subject to indemnification hereunder. Indemnitee's failure to promptly notify Indemnitor of a Claim shall not relieve the Indemnitor from any liability under this Section to the extent that Indemnitor is not materially adversely affected by such delay. With respect to each such notice, the Indemnitor shall, at the Indemnitee's option, immediately take all action necessary to minimize any risk or loss to the Indemnitee, including retaining counsel satisfactory to the Indemnitee and take such other actions as are necessary to defend the Indemnitee or to discharge the indemnity obligations under this Section. If the Indemnitor does not timely and adequately conduct such defense, the Indemnitee may, at its option and at Indemnitor's expense, conduct such defense, contest, litigate or settle the Claim using counsel of its own choice without prejudice to its right of indemnification under this Section. The Indemnitor shall pay on demand any liability incurred by the Indemnitee under this Section. The Indemnitor shall not settle any claim in which the Indemnitee is named without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld. The Indemnitee shall have the right to be represented by counsel at its own expense in any such contest, defense, litigation or settlement conducted by the Indemnitor. 5.3 Repurchase. The purchase and sale of Loans under this Agreement shall be without recourse to E-LOAN, except for the representations, warranties, covenants and agreements set forth in this Agreement. Notwithstanding the foregoing, if Correspondent determines, in good faith, that E-LOAN has breached any covenant, representation, warranty or agreement under this Agreement which remains uncured for sixty (60) days and involves, relates to, or affects any Loan sold to Correspondent under this Agreement, E-LOAN shall repurchase the affected Loan from Correspondent for the outstanding balance of principal and accrued but unpaid interest on such Loan, including as respects any premiums advanced by Correspondent for force-placed insurance coverage, less any unearned finance charge and any returned premium receivable by Correspondent for said force-placed insurance therein, plus any then due amounts under the Loan. Upon discovery of a suspected breach, Correspondent shall provide E-LOAN with written notice specifying the breach. In the event of such repurchase, Correspondent shall assign the affected Loan to E-LOAN without recourse and without representation or warranties, expressed or implied. 5.4 Survival of Remedies. This Section shall survive termination of the Agreement. 6. Term and Termination. 6.1 Term. Unless this Agreement is terminated earlier as provided below, this Agreement shall have an initial term of one (1) year commencing on the Effective Date, and shall automatically renew for successive one (1) year term periods. The initial term, together with any renewal terms, shall be referred to herein as the "Term." 6.2 Termination. Notwithstanding the foregoing, this Agreement may be terminated as follows: (i) without cause by either party , upon not less than thirty (30) days prior written notice to the other party; or (ii) by either party immediately upon written notice to the other party (a) if the other party breaches any warranty, representation, covenant or obligation under this Agreement and fails to cure such breach within thirty (30) calendar days of receiving written notice of the breach from the non-breaching party; (b) if a party has reasonable cause to believe that the other party will not be able to perform its obligations under this Agreement; (c) if there occurs a change of twenty-five percent (25%) or more of the ownership of the other party; (d) if a material adverse change occurs in the financial condition of the other party; or (e) if the other party is subject to a dissolution, receivership, liquidation, insolvency, conservatorship, consolidation, reorganization, sale of substantially all of its assets, cessation of business, voluntary or involuntary bankruptcy. 6.3 Effect of Termination; Survival. The termination of this Agreement shall not affect the rights and obligations of the parties with respect to Loans for which Confirmations have previously been issued ("Pipeline Loans"), or transactions and occurrences that take place prior to the effective date of termination, and Correspondent shall purchase Pipeline Loans as provided in Section 1.3 if all conditions set forth in the Confirmation are met, except as otherwise provided by Applicable Law. Upon termination of this Agreement for any reason, E-LOAN and Correspondent agree to cooperate in the orderly and timely wind-up of this Agreement as determined by the parties' respective rights and obligations under this Agreement. 7. Miscellaneous. 7.1 Confidentiality of Information. Each party and their respective Affiliates, directors, officers, employees and authorized representatives shall hold in strict confidence and not use or disclose to any other person without the prior written consent of the other party, all information concerning the other party's proprietary business procedures, products, services, operations, fees, policies or plans received from the other party in connection with the negotiation and performance of this Agreement. Notwithstanding the foregoing, either party may disclose information that is required to be disclosed by Applicable Law, governmental regulation or court order, and may disclose the contents of this Agreement, with information as to the amount of, and manner of calculating the Purchase Price redacted where permitted, in required filings with the Securities Exchange Commission or other governmental agency without the other party's prior consent This provision shall survive termination of the Agreement 7.2 Public Announcement. The timing and content of any advertisements, announcements, press releases or other promotional activity relating to this Agreement, and the use of each other's name or trademarks shall be subject to the prior approval of both parties. 7.3 Assignment; Successors. Neither party may assign this Agreement without the prior written consent of the other party, which consent may be withheld in the other party's sole discretion; provided that either party may assign this Agreement or parts thereof to its parent, an affiliate or a subsidiary by providing at least thirty (30) days written notice to the other party. This Agreement shall be binding upon and inure to the benefits of the parties hereto and their respective successors. 7.4 No Agency Relationship. The relationship between E-LOAN and Correspondent shall not be construed as a joint venture, partnership or principal-agent relationship, and under no circumstances shall any of the employees of one party be deemed to be employees of the other party for any purpose. This Agreement shall not be construed as authority for either party to act for the other in any agency or any other capacity, except as expressly set forth in this Agreement. 7.5 Third Party Beneficiaries. This Agreement is not intended and shall not be construed to create any rights or benefits upon any person not a party to this Agreement. 7.6 Costs and Expenses. Unless specifically provided for elsewhere in this Agreement, each party will bear its own costs and expenses, including legal fees, accounting fees and taxes incurred in connection with the negotiation and performance of this Agreement. 7.7 Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) three (3) business days after being deposited in the U.S. mail, first class, postage prepaid, (ii) upon transmission, if sent by facsimile transmission, or (iii) upon delivery, if served personally or sent by any generally recognized overnight delivery service, to the following addresses: (a) If to E-LOAN, to: E-LOAN, Inc. 5875 Arnold Road Dublin, CA 94568 Attn: Curtis M. Kuboyama Facsimile No. (925) 803-3507 with a copy to Edward A. Giedgowd, E-LOAN's Counsel at the same address. (b) If to Correspondent, to: WELLS FARGO BANK, N.A. - Auto Finance Group 1350 Montego Way Walnut Creek, CA 94598 Attn: Paul S. Tsang Facsimile No.: (925) 746-4390 with a copy to Richard M. Acuna, Esq. Wells Fargo Bank, N.A. Suite 1040 333 South Grand Avenue Los Angeles, CA 90071 Facsimile No.: (213) 628-9918 7.8 Entire Agreement. This Agreement, including any Exhibits or other documents attached hereto or referenced herein, each of which is hereby incorporated into this Agreement and made an integral part hereof, constitutes the entire agreement between the parties relating to the subject matter hereof and there are no representations, warranties or commitments except as set forth herein. This Agreement supersedes all prior understandings, negotiations and discussions, written or oral, of the parties relating to the transactions contemplated by this Agreement. 7.9 Modification. This Agreement may not be changed orally but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought 7.10 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 7.11 Provisions Severable. If any provision of this Agreement shall be or become wholly or partially invalid, illegal or unenforceable, such provision shall be enforced to the extent that its legal and valid and the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, legal representatives and permitted assigns. 7.12 Waivers; Cumulative Remedies. No failure or delay by a party to insist upon the strict performance of any term or condition under this Agreement or to exercise any right or remedy available under this Agreement at law or in equity, shall imply or otherwise constitute a waiver of such right or remedy, and no single or partial exercise of any right or remedy by any party will preclude exercise of any other right or remedy. All rights and remedies provided in this Agreement are cumulative and not alternative; and are in addition to all other available remedies at law or in equity. 7.13 Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY UNDER THIS AGREEMENT FOR ANY DAMAGES OR CLAIMS FOR LOST PROFITS OR CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES. 7.14 Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 7.15 Counterparts. This Agreement may be executed in two or more counterparts, each of which together shall be deemed an original, but all of which shall constitute one and the same instrument. 8. Trademark Licenses. 8.1. E-LOAN'S Mark. During the Term and subject to this Agreement, E-LOAN hereby grants to Wells Fargo a non-exclusive, royalty-free, worldwide license to reproduce, display, distribute, create derivative works from, publicly perform, publicly and digitally perform E-LOAN'S Marks (as defined below) in connection with links to or from or in conjunction with any Wells Fargo's website or any Wells Fargo & Company website. As used herein, E-LOAN'S Marks are E-LOAN, ELOAN, E-TRACK, E-LOAN LTD., and E-LOAN.com. Wells Fargo name not use the E-LOAN Marks, including its service marks, trade names, logos, or other commercial or product designation for any other purpose whatsoever without the prior written consent of E-LOAN.  8.2. Wells Fargo's Mark. During the Term and subject to this Agreement, WELLS FARGO hereby grants to E-LOAN a non-exclusive, royalty-free, worldwide license to reproduce, display, distribute, create derivative works of, publicly perform, publicly and digitally perform WELLS FARGO's Marks (as defined below) in connection with links to or from or in conjunction with the E-LOAN website and in any presentations materials, both public and private, used by E-LOAN. As used herein, the Wells Fargo Marks are Wells Fargo and WellsFargo.com. E-LOAN may not use the Wells Fargo Marks, including Wells Fargo's service marks, trade names, logos, or other commercial or product designation for any other purpose whatsoever without the prior written consent of Wells Fargo. 9. ARBITRATION. 9.1. AGREEMENT TO ARBITRATE. E-LOAN AND CORRESPONDENT AGREE TO SUBMIT TO BINDING ARBITRATION TO RESOLVE ALL CLAIMS, DISPUTES AND CONTROVERSIES (WHETHER IN TORT, CONTRACT, OR OTHERWISE, EXCEPT "CORE PROCEEDINGS" UNDER THE U.S. BANKRUPTCY CODE) ARISING BETWEEN THEMSELVES AND THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS AND OTHER AGENTS, WHICH RELATE IN ANY WAY (WITHOUT LIMITATION) TO EXISTING AND FUTURE LOANS AND EXTENSIONS OF CREDIT OR REQUESTS FOR ADDITIONAL CREDIT, INCLUDING BY WAY OF EXAMPLE (BUT NOT BY WAY OF LIMITATION) THE NEGOTIATION, COLLATERALIZATION, ADMINISTRATION, REPAYMENT, MODIFICATION, DEFAULT, TERMINATION AND ENFORCEMENT OF SUCH LOANS OR EXTENSIONS OF CREDIT. CLAIMS, DISPUTES, AND CONTROVERSIES SUBMITTED TO ARBITRATION ARE NOT RESOLVED IN COURT BY A JUDGE OR JURY. 9.2. RULES GOVERNING ARBITRATION. ARBITRATION UNDER THIS AGREEMENT WILL BE GOVERNED BY THE FEDERAL ARBITRATION ACT AND WILL PROCEED AND BE CONDUCTED IN ACCORDANCE WITH THE AMERICAN ARBITRATION ASSOCIATION'S COMMERCIAL ARBITRATION RULES ("AAA RULES") AT A LOCATION: (A) IN THE STATE IN WHICH THE CORRESPONDENT'S PRINCIPAL PLACE OF BUSINESS IS LOCATED THAT IS MUTUALLY AGREEABLE TO E-LOAN AND CORRESPONDENT; OR (B) IF E-LOAN AND CORRESPONDENT CANNOT MUTUALLY AGREE ON SUCH LOCATION, IN THE CITY OF SAN FRANCISCO, CALIFORNIA. 9.3. SELECTION OF ARBITRATORS. ARBITRATION WILL BE CONDUCTED BEFORE A PANEL OF THREE (3) NEUTRAL ARBITRATORS ELECTED IN ACCORDANCE WITH AAA RULES, EACH OF WHOM SHALL BE AN ATTORNEY WHO HAS PRACTICED COMMERCIAL LAW FOR AT LEAST TEN YEARS AND WHO IS KNOWLEDGEABLE IN THE SUBSTANTIVE LAWS THAT APPLY TO THE CLAIM, DISPUTE, OR CONTROVERSY. 9.4. STATUTES OF LIMITATION AND PROCEDURAL ISSUES. THE THREE ARBITRATORS WILL DETERMINE WHETHER AN ISSUE IS ARBITRATABLE AND WILL GIVE EFFECT TO APPLICABLE STATUTES OF LIMITATION. JUDGMENT UPON THE ARBITRATORS' AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE THREE ARBITRATORS HAVE THE DISCRETION TO DECIDE, UPON DOCUMENTS ONLY OR WITH A HEARING, ANY MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM OR ANY MOTION FOR SUMMARY JUDGMENT. 9.5. JUDICIAL REVIEW. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IN ANY ARBITRATION IN WHICH THE AMOUNT IN CONTROVERSY EXCEEDS $25,000.00, THE ARBITRATORS SHALL BE REQUIRED TO MAKE SPECIFIC, WRITTEN FINDINGS OF FACT AND CONCLUSIONS OF LAW. IN SUCH ARBITRATIONS (A) THE ARBITRATIONS SHALL NOT HAVE THE POWER TO MAKE ANY AWARD WHICH IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE OR WHICH IS BASED ON LEGAL ERROR, (B) AN AWARD SHALL NOT BE BINDING UPON THE PARTIES UNLESS THE FINDINGS OF FACT ARE SUPPORTED BY SUBSTANTIAL EVIDENCE AND THE CONCLUSIONS OF LAW ARE NOT ERRONEOUS UNDER THE SUBSTANTIVE LAW OF THE STATE OF CALIFORNIA, AND (C) THE PARTIES SHALL HAVE IN ADDITION TO THE GROUNDS REFERRED TO IN THE FEDERAL ARBITRATION ACT OF VACATING, MODIFYING OR CORRECTING AN AWARD THE RIGHT TO JUDICIAL REVIEW OF (I) WHETHER THE FINDINGS OF FACT RENDERED BY THE ARBITRATORS ARE SUPPORTED BY SUBSTANTIAL EVIDENCE, AND (II) WHETHER THE CONCLUSIONS OF LAW ARE ERRONEOUS UNDER THE SUBSTANTIVE LAW OF THE STATE OF CALIFORNIA. JUDGMENT CONFIRMING AN AWARD IN SUCH A PROCEEDING MAY BE ENTERED ONLY IF A COURT DETERMINES THE AWARD IS SUPPORTED BY SUBSTANTIAL EVIDENCE AND NOT BASED ON LEGAL ERROR UNDER THE SUBSTANTIVE LAW OF THE STATE OF CALIFORNIA. 9.6. DISCOVERY. DISCOVERY WILL BE GOVERNED BY THE STATE RULES OF CIVIL PROCEDURE FOR THE STATE IN WHICH THE BORROWER'S PRINCIPAL PLACE OF BUSINESS IS LOCATED. IN ANY EVENT, HOWEVER, DISCOVERY MUST BE COMPLETED AT LEAST 20 DAYS BEFORE THE HEARING DATE AND WITHIN 180 DAYS OF THE COMMENCEMENT OF ARBITRATION. EACH REQUEST FOR AN EXTENSION AND ALL OTHER DISCOVERY DISPUTES WILL BE DETERMINED BY THE THREE ARBITRATORS UPON A SHOWING THAT THE REQUEST IS ESSENTIAL FOR THE PARTY'S PRESENTATION AND THAT NO ALTERNATIVE MEANS FOR OBTAINING INFORMATION ARE AVAILABLE DURING THE INITIAL DISCOVERY PERIOD. 9.7. EXCEPTIONS TO ARBITRATION. THIS AGREEMENT DOES NOT LIMIT THE RIGHT OF EITHER PARTY TO: A) FORECLOSE AGAINST REAL OR PERSONAL PROPERTY COLLATERAL; B) EXERCISE SELF-HELP REMEDIES SUCH AS SETOFF, FUNDS TRANSFERS, OR REPOSSESSION; C) OBTAIN PROVISIONAL REMEDIES SUCH AS REPLEVIN, INJUNCTIVE RELIEF, ATTACHMENT OR THE APPOINTMENT OF A RECEIVER DURING THE PENDENCY OR BEFORE OR AFTER ANY ARBITRATION PROCEEDING; OR D) OBTAIN A COGNOVIT JUDGMENT, IF AVAILABLE. THESE EXCEPTIONS DO NOT CONSTITUTE A WAIVER OF THE RIGHT OR OBLIGATION OF EITHER PARTY TO SUBMIT ANY CLAIM, DISPUTE, OR CONTROVERSY TO ARBITRATION, INCLUDING THOSE ARISING FROM THE EXERCISE OF THESE REMEDIES 9.8. ARBITRATION COSTS AND FEES. THE ARBITRATORS WILL AWARD COSTS, ATTORNEYS' FEES (INCLUDING ALLOCATED COSTS FOR IN-HOUSE LEGAL COUNSEL) AND EXPENSES TO THE PREVAILING PARTY. 9.9. SURVIVAL. THE PROVISIONS IN THIS SECTION 10 [ARBITRATION] SHALL SURVIVE ANY TERMINATION, AMENDMENT, OR EXPIRATION OF THIS AGREEMENT.     IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of the Effective Date written above.   WELLS FARGO BANK, N.A. - Auto Finance Group E-LOAN, Inc. By: ____________________________ Paul S. Tsang By: ____________________________ Joe Kennedy Title: Vice President Title: President Date: ________________, 2000 Date: _________________, 2000_________         By: _____________________________ Frank Siskowski   Title: Chief Financial Officer   Date: _________________, 2000_________   Exhibit A Documents to be Submitted by E-Loan with Offers to Sell a Loan   Product: Loan amount Term Trade-in vehicle: Primary Applicant information: Co-applicant information: Primary applicant name: Primary applicant SSN: Primary applicant score: Birthdate: Current residence: Time on current residence: Rent/Mortgage Payment: Previous residence: Time at previous residence: Name of employer: Time on job: Occupation: Employer phone: Gross Monthly Income: Name of previous employer: Time on previous job: Previous employer address: Previous employer phone: Other Income Source: Other Income Amount: Co-applicant name: Co-applicant SSN: Co-applicant score: Birthdate: Current residence: Time on current residence: Rent/Mortgage Payment: Previous residence: Time at previous residence: Name of employer: Time on job: Occupation: Employer phone: Gross Monthly Income: Name of previous employer: Time on previous job: Previous employer address: Previous employer phone: Other Income Source: Other Income Amount:   Exhibit B Purchase Criteria   [*]   Exhibit C Information to be Included in Confirmation The Confirmation will include the following: Within 2 hours of Correspondent's receipt of an Offer from E-LOAN, during Wells Fargo's business hours, Correspondent shall, in its sole discretion, accept or reject such offer, and shall inform E-LOAN of its decision. For Approvals: Date and Time of the credit decision Application number Decisioning Lender Contact Information Applicant name (and Co-Applicant if applicable) Approved Amount Maximum Loan to Value % (for new and used) APR Rate (for new and used) Maximum Term (for new and used) Stipulations, which may include but not be limited to specifically required documents, such as tax lien information, proof of income, proof of employment, proof of address, individual credit bureau trade line issues, etc. For Declinations: Date and Time of credit decision Application number Decisioning Lender contact information Applicant Name (and Co-Applicant if applicable) Up to 4 ECOA reasons for not approving the application as submitted   Exhibit D Loan Documents Note and Security Agreement (Estimated) Note and Security Agreement (FINAL) Copy of front and back of Documentary Draft Drivers License(s) Proof of Insurance Title Application Sale Contract (New Vehicle) Credit Application (for Gold Rush Pre-approval program only) Bill of Sale or Buyers Order (Used Vehicle) Odometer Statement (Used Vehicle) Dealer Factory Invoice (New Vehicle) Warranty Certificate (if applicable)   Exhibit E: Purchase Price Purchase Price: With respect to each Loan made, Wells Fargo shall pay E-LOAN, via ACH in the account specified in Section 1.6, the Principal Balance of each Loan within 48 hours of receipt of the Required Documents for such Loan. Calculation and payment of Additional Compensation shall be as shown below. Additional Compensation: * As additional compensation for E-LOAN's performance of Services hereunder, Wells Fargo will pay E-LOAN a fee equal to $[*] ("Origination Fee") for each Loan purchased under this Agreement. On or before the 10th of each month, Wells Fargo shall pay E-LOAN the aggregate Origination Fees for all Loans made in the prior calendar month pursuant to this Agreement. Notwithstanding the foregoing, E-LOAN shall refund the Origination Fee to Wells Fargo for each Loan that is prepaid in full within 135 days from the date such Loan is funded.                                                                 Exhibit F Dealer Agreement By signing, endorsing or negotiating the Draft, the Dealer listed on the Draft agrees to comply with the terms of this Dealer Agreement. The Draft will not be honored and paid unless Dealer does all of the following: Confirm that the following information has been properly completed on the Draft: * Correct name of the dealership is filled out on the "Seller" line; * Correct dealership phone number and the state where the dealership is located; * Vehicle Year, Make, Model, VIN, and New/Demo or Used box checked; * Amount of the Draft (This will be the loan amount.) NOTE: The amount of the Draft must be within the minimum and maximum loan amounts, and Must not exceed the percentages of the vehicle's estimated value, set forth on the front of the Draft. For Florida dealers, the Florida Documentary Stamp Tax must be included on the Draft and will be deducted from the loan proceeds. * Borrower signature - and Co-Borrower signature (if applicable). Confirm Vehicle Eligibility, The Draft may not be used with vehicles that will be used primarily for business or commercial purposes. The Draft may only be used with: * New/Demo Vehicles, model year 2001-2000, maximum mileage 6,000; or * Used Vehicles, model year 2000-1995, maximum mileage 80,000. Call E-LOAN toll free at 1-877-305-2404 for authorization code . Read and sign the back of the Draft . Fax copies of the following to 1-888-322-9850 : * Bill of Sale, Purchase Order or Buyer's Order. For Florida dealers, the Florida Documentary Stamp Tax must be included in the Bill of Sale or Buyer's Order. * Factory Invoice for new vehicle, book-out for used vehicle * Certificate copies of credit life insurance, disability insurance, MBI, service contract and warranty, if applicable * Signed Odometer Disclosure Statement for used vehicles * Copy of Borrower(s) Driver's License * Proof of Borrower(s) Insurance * Application for Certificate of Title showing first and only lien holder as: E-LOAN, Inc., 5875 Arnold Road, Dublin, CA 94568 Copy of front and back of dated and signed Draft Additional conditions of approval: ____________________________________________________________________________________. THE DRAFT WILL NOT BE APPROVED FOR PAYMENT UNLESS ALL OF THE ABOVE REQUIREMENTS ARE MET.         Exhibit G [*]

  EXHIBIT 10.1 EMPLOYMENT AGREEMENT            This EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and among Washington Gas Light Company (the "Company") and James B. White (the "Executive"), as of the 19th day of July, 1999. RECITALS            The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. AGREEMENT               NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:               1.     Certain Definitions. (a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated within twelve months prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment.               (b)    The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the second anniversary of the Effective Date.               2.      Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:               (a)     The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or               (b)     Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or               (c)     Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or               (d)     Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.               3.       Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the "Employment Period").               4.       Terms of Employment. (a) Positions and Duties. (i) During the Employment Period, (A) the Executive's position, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date (it being understood that changes in reporting relationships or offices shall not necessarily constitute a material change in position, duties or responsibilities) and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location; and               (ii)     During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of the activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.               (b)     Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. As used herein, "Annual Base Salary" will include all wages or salary paid to the Executive and will be calculated before any salary reduction or deferrals, including but not limited to reductions made pursuant to Section 125 and 401(k) of the Internal Revenue Code of 1986, as amended. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company.               (ii)    Annual Incentive. In addition to Annual Base Salary, the Executive shall earn annual incentive compensation (the "Annual Incentive") for each fiscal year ending during the Employment Period, at least equal to that available to other peer executives of the Company and its affiliated companies. Each such Annual Incentive shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Incentive is awarded, unless the Executive shall elect to defer the receipt of such Annual Incentive. In the event the Executive is terminated during the Employment Period, the Executive's Annual Incentive for the most recent year shall be prorated for the portion of that year that the Executive worked in the manner set forth in Section 6(a)(i)(A)(2).               (iii)    Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.               (iv)    Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's beneficiaries, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.               (v)     Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.               (vi)    Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.               (vii)   Office. During the Employment Period, the Executive shall be entitled to an office at least equal to that of other peer executives of the Company and its affiliated companies.               (viii)  Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.              5.     Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative.              (b)    Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean:       (i)     the willful and continued failure of the Executive to perform substantially the Executive's duties with  the Company or one of its affiliates (other than any such failure from incapacity due to physical or mental illness),  after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or       (ii)    the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.               (c)     Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean:        (i)     the assignment to the Executive of any duties inconsistent in any material respect with the Executive's position as contemplated by Section 4(a) of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by the Executive;        (ii)    any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure which is remedied by the Company promptly after receipt of notice thereof given by the Executive;        (iii)   failure by the Company to reimburse the Executive for expenses related to a required relocation;        (iv)   any required relocation of the Executive more than thirty five miles from Washington, D.C.,other than on a temporary basis (less than two months);        (v)    any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or        (vi)   any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.                (d)   Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder.                (e)   Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.                6.   Obligations of the Company upon Termination During Employment Period. (a) Good Reason, Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason:        (i)   the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:           A.        the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Target Annual Incentive (as defined in the Executive Compensation Plan of the Company) in the fiscal year of the Executive's Termination and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not therefore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and           B.        Subject to the provisions of Section 9, the amount equal to two times the Executive's Highest Pay. For purposes of this Agreement, Highest Pay shall mean the sum of (1) the Executive's Annual Base Salary, plus (2) the highest of the Executive's Annual Incentive actually earned for the last three full fiscal years. (ii)     for two years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's beneficiaries at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. After this two-year term, the Executive shall immediately be eligible for COBRA benefits. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the last day of such period;         (iii)   to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits");         (iv)   the Company shall credit the Executive with up to an additional two years of benefit service under the Company's Supplemental Executive Retirement Plan (the "SERP"), but in no event shall such additional years of benefit service result in total years of benefit service exceeding the maximum under the SERP;         (v)    the Company shall, at its sole expense as incurred, provide the Executive with reasonable outplacement services the scope and provider of which shall be selected by the Executive in the Executive's sole discretion; and         (vi)   immediately prior to termination of the Executive's employment, all restricted stock grants made to the Executive which are outstanding at the time of such event shall be accelerated and vest.                 (b)    Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peers and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.                 (c)    Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term "Other Benefits" as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's beneficiaries, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.                 (d)    Cause: Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) the Executive's Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.                 7.      Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.                 8.      Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.                 9.      Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.                 (b)     Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such certified public accounting firm as may be designated by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Company shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.                 (c)     In the event the Internal Revenue Service ("IRS") subsequently challenges the Excise Tax computation herein described, then the Executive shall notify the Company in writing of any claim by the IRS that, if successful, would require the payment by the Executive of additional Excise Taxes. Such notification shall be given no later than ten days after the Executive receives written notice of such claim. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Executive shall cooperate with the Company in good faith in order effectively to contest such claim and permit the Company to participate in any proceedings relating to such claim. In the event a final determination is made with respect to the IRS claim, or in the event the Company chooses not to further challenge such claim, then the Company shall reimburse the Executive for the additional Excise Tax owed to the IRS in excess of the Excise Tax calculated by the Accounting Firm. The Company shall also reimburse the Executive for all interest and penalties related to the underpayment of such Excise Tax. The Company will also reimburse the Executive for all federal and state income tax and employment taxes thereon.                 10.    Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.                 11.     Successors & Assigns. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.                 (b)     This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.                 (c)     The Company will require any successor or any party that acquires control of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or any party that acquires control of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.                 12.     Miscellaneous. (a) Governing Law; Headings; Amendment. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.                 (b)     Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:              If to the Executive:                 at the address for Executive that is on file with the Company              If to the Company:                 Washington Gas Light Company                 1100 H Street, N.W.                 Washington, D.C. 20080                 ATTN: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.                 (c)     Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.                 (d)     Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.                 (e)      Waiver. The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right under this Agreement.                 (f)      At Will Employment. The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.                 (g)     Arbitration. In the event of any dispute between the parties regarding this Agreement, the parties shall submit to binding arbitration, conducted in Washington, DC or in Virginia within 25 miles of Washington, DC. The arbitration shall be conducted pursuant to the rules of the American Arbitration Association. Each of the parties shall select one arbitrator, who shall not be related to, affiliated with or employed by that party. The two arbitrators shall, in turn, select a third arbitrator. The decision of any two of the arbitrators shall be binding upon the parties, and may, if necessary, be reduced to judgment in any court of competent jurisdiction. Notwithstanding the foregoing, the parties expressly agree that nothing herein in any way precludes Company from seeking injunctive relief or declaratory judgment through a court of competent jurisdiction with respect to a breach (or an alleged breach) of any covenant not to compete or of any confidentiality covenant contained in this Agreement. In the event the Executive pursues arbitration pursuant to this Section herein, the Executive shall be compensated up to $150,000 in legal costs.                 (h)     Pooling of Interests Accounting. In the event any provision of this Agreement would prevent the use of pooling of interests accounting in a corporate transaction involving the Company and such transaction is contingent upon pooling of interests accounting, then that provision shall be deemed amended or revoked to the extent required to preserve such pooling of interests. The Executive will, upon advice from the Company, take (or refrain from taking, as appropriate) all actions necessary or desirable to ensure that pooling of interests accounting is available.                 (i)     Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes the Employment Agreement dated May 19, 1997 between the Company and the Executive.                 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.                   /s/ James B. White                    .                  James B. White           WASHINGTON GAS LIGHT COMPANY   By:     /s/ James H. DeGraffenreidt, Jr.              .                                                                                       James H. DeGraffenreidt, Jr.                                                                              Title: Chairman and Chief Executive Officer  

CERTIFICATE OF DESIGNATION OF SERIES C REDEEMABLE 5% CUMULATIVE PREFERRED STOCK OF PEASE OIL AND GAS COMPANY PURSUANT TO SECTION 78.1955 OF THE GENERAL CORPORATION LAW OF THE STATE OF NEVADA         Pease Oil and Gas Company, a Nevada corporation (the “Company”), certifies that pursuant to the authority contained in its Articles of Incorporation, as amended, and in accordance with the provisions of Section 78.1955 of the General Corporation Law of the State of Nevada, its Board of Directors (the “Board of Directors”) has adopted the following resolution creating a series of Preferred Stock, par value $0.01 per share, designated as Series C Redeemable 5% Cumulative Preferred Stock:         RESOLVED, that a series of the class of authorized Preferred Stock, par value $0.01 per share, of the Company be hereby created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows:          1.  Designation and Amounts.         The shares of such series shall be designated as the “Series C Redeemable 5% Cumulative Preferred Stock” (the “Series C Preferred Stock”) and the number of shares initially constituting such series shall be 99,503, which number may be decreased (but not increased) by the Board of Directors without a vote of the stockholders; provided, however, that such number may not be decreased below the number of then currently outstanding shares of Series C Preferred Stock. The Series C Preferred Stock shall rank senior to the $0.10 par value common stock (“Common Stock”) of the Company with respect to both the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up.         2. Dividends.         (a) The holders of the Series C Preferred Stock shall be entitled to receive, out of any assets legally available therefor, cumulative dividends at the rate of $2.50 per share per annum, commencing April 1, 2001, and payable quarterly in arrears beginning on June 30, 2001 and on each succeeding September 30, December 31, March 31 and June 30 of each year, when and as declared by the Board of Directors, in preference and priority to any payment of any dividend on the Common Stock or any other class or series of stock of the Corporation while any of the Series C Preferred Stock is outstanding. Such dividends shall accrue on any given share from April 1, 2001 and shall accrue from day to day thereafter whether or not earned or declared. If at any time dividends on the outstanding Series C Preferred Stock, at the rate set forth above, shall not have been paid or declared and set apart for payment with respect to all preceding periods, the amount of the deficiency shall be fully paid or declared and set apart for payment, but without interest, before any distribution, whether by way of dividend or otherwise, shall be declared or paid upon or set apart for the shares of any other class or series of stock of the Corporation. Redemption of the Series C Preferred Stock shall not effect any holder’s right to receive any accrued but unpaid dividends on the Series C Preferred Stock.         3. Liquidation Preference.         (a) In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, the holders of the Series C Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any assets of the Corporation to the holders of any other class or series of shares, the amount of $50 per share plus any accrued but unpaid dividends (the “Liquidation Preference”).         (b) A consolidation or merger of the Corporation with or into any other corporation or corporations, or a sale of all or substantially all of the assets of the Corporation, shall not be deemed a liquidation, dissolution or winding up within the meaning of this Section 3 unless, following the consolidation or merger, or the sale of all or substantially all of the assets of the Corporation, the holders of the Series C Preferred Stock are no longer entitled to the Liquidation Preference.         4. Conversion.The holders of the Series C Preferred Stock shall have no right to convert the Series C Preferred Stock into any other right or security.         5. Mandatory Redemption.         (a) On December 31, 2005 (the “Mandatory Redemption Date”), the Corporation shall redeem all of the outstanding shares of the Series C Preferred Stock at a redemption price equal to the Liquidation Preference (the “Mandatory Redemption Price”).         (b) At least 30 days prior to the Mandatory Redemption Date, written notice (the “Mandatory Redemption Notice”) shall be mailed, first class postage prepaid, by the Corporation to each holder of record of the Series C Preferred Stock, at the address last shown on the records of the Corporation for such holder, notifying such holder of the redemption which is to be effected, the Mandatory Redemption Date, the Mandatory Redemption Price, the place at which payment may be obtained and calling upon each such holder to surrender to the Corporation, in the manner and at the place designated, a certificate or certificates representing the total number of shares of Series C Preferred Stock held by such holder. On or after the Mandatory Redemption Date, each holder of Series C Preferred Stock shall surrender to the Corporation the certificate or certificates representing the shares of Series C Preferred Stock owned by such holder as of the Mandatory Redemption Date, in the manner and at the place designated in the Mandatory Redemption Notice, and thereupon the Mandatory Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled.         (c) >From and after the Mandatory Redemption Date, unless there shall have been a default in payment of the Mandatory Redemption Price, all rights of the holders of shares which have been redeemed (except the right to receive the Mandatory Redemption Price without interest upon surrender of the certificate or certificates representing such shares) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever.         6. Optional Redemption by Corporation.         (a) At any time from and after the date of issuance of the Series C Preferred Stock until December 31, 2003, the Corporation may at its sole election redeem some or all of the Series C Preferred Stock at a redemption price equal to two-thirds of the Liquidation Preference ($33.33 per share, hereafter the “Corporation’s Optional Redemption Price”). If the Corporation elects to redeem less than all of the Series C Preferred Stock, each such redemption shall be made pro rata from the holders of all outstanding Series C Preferred Stock.         (b) At least 30 days prior to the date on which the Corporation intends to redeem the Series C Preferred Stock pursuant to this Section (the “Corporation’s Optional Redemption Date”), written notice (the “Corporation’s Optional Redemption Notice”) shall be mailed, first class postage prepaid, by the Corporation to each holder of record of the Series C Preferred Stock, at the address last shown on the records of the Corporation for such holder, notifying such holder of the redemption which is to be effected, whether some or all shares will be redeemed, the Corporation’s Optional Redemption Date, the Corporation’s Optional Redemption Price, the place at which payment may be obtained and calling upon each such holder to surrender to the Corporation, in the manner and at the place designated, a certificate or certificates representing the total number of shares of Series C Preferred Stock held by such holder. On or after the Corporation’s Optional Redemption Date, each holder of Series C Preferred Stock shall surrender to the Corporation the certificate or certificates representing the shares of Series C Preferred Stock owned by such holder as of the Corporation’s Optional Redemption Date, in the manner and at the place designated in the Corporation’s Optional Redemption Notice, and thereupon the Corporation’s Optional Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. If fewer than all shares are to be redeemed, the Corporation shall, as of the date of the redemption, issue and deliver to the appropriate holder, certificates representing the shares of Series C Preferred Stock not redeemed.         (c) >From and after the Corporation’s Optional Redemption Date, unless there shall have been a default in payment of the Corporation’s Optional Redemption Price, all rights of the holders of the shares which have been redeemed (except the right to receive the Corporation’s Optional Redemption Price without interest upon surrender of the certificate or certificates representing such shares) shall cease with respect to such shares, and the shares redeemed shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever.         (d) Notwithstanding any other terms or provisions applying to the Series C Preferred Stock, the Corporation and any holder of Series C Preferred Stock ( a “Consenting Holder”) may, without consent of any other holder, agree to redemption or conversion of the Series C Preferred Stock held by the Consenting Holder by the Corporation on such terms as they may agree, provided that the other holders of outstanding Series C Preferred Stock are not adversely affected.         7. Other Provisions. For all purposes of this Designation, the term "date of issuance" shall mean the day on which shares of the Series C Preferred Stock are first issued by the Corporation. Any provision herein which conflicts with or violates any applicable usury law shall be deemed modified to the extent necessary to avoid such conflict or violation.         8. Restrictions and Limitations. The Corporation shall not undertake the following actions without the consent of the holders of a majority of the Series C Preferred Stock outstanding: (i) modify its Certificate of Designation or Bylaws so as to amend or change any of the rights, preferences, or privileges of the Series C Preferred Stock, (ii) authorize or issue any other preferred equity security senior to or on a parity with the Series C Preferred Stock, or (iii) purchase or otherwise acquire for value any Common Stock or other equity security of the Corporation either junior or senior to or on a parity with the Series C Preferred Stock while there exists any arrearage in the payment of cumulative dividends hereunder.         9. Voting Rights. Except as provided herein or as provided for by law, the Series C Preferred Stock shall have no voting rights.         10. Attorneys' Fees.Any holder of Series C Preferred Stock shall be entitled to recover from the Corporation the reasonable attorneys' fees and expenses incurred by such holder in connection with enforcement by such holder of any obligation of the Corporation hereunder.         IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of Series C Redeemable 5% Cumulative Preferred Stock to be duly executed by its President and attested to by its Secretary and has caused its corporate seal to be affixed hereto, this 3rd day of November, 2000.                                                                              PEASE OIL AND GAS COMPANY S E A L                                                                              By: /s/ Patrick J. Duncan                                                                                          Patrick J. Duncan, President ATTESTED: By: /s/ Marilyn L. Adams                                 Marilyn L. Adams, Secretary STATE OF COLORADO                    )                                                                 ) ss. COUNTY OF MESA                           )         Subscribed, acknowledged and sworn to before me this 3rd day of November, 2000, by Patrick J. Duncan.         Witness my hand and official seal.         My commission expires: 2/16/2003 S E A L                                                                              By /s/ Laura Sue Bray                                                                                                                                                    Notary Public STATE OF COLORADO                    )                                                                 ) ss. COUNTY OF MESA                           )         Subscribed, acknowledged and sworn to before me this 3rd day of November, 2000, by Marilyn L. Adams.         Witness my hand and official seal.         My commission expires: 2/16/2003 S E A L                                                                              By /s/ Laura Sue Bray                                                                                                                                                    Notary Public

EXHIBIT 10.1 EMPLOYMENT AGREEMENT Between INTERMET CORPORATION And GARY F. RUFF -------------------------------------------------------------------------------- THIS AGREEMENT, dated as of the first day of June, 1999 is made by and between INTERMET CORPORATION, a Georgia corporation having its principal place of business in Troy, Michigan (the “Company”), and Gary F. Ruff (the “ Executive”). WHEREAS, the Company desires to continue the services of the Executive, and the Executive is willing to continue to render such services; and WHEREAS, in order to secure the continued services of the Executive, the Company believes it should provide the Executive with an agreement for severance payments. NOW, THEREFORE, the Company and the Executive agree as follows: Termination of Employment 1.1   Termination of Employment for Cause or Other Than for Good Reason. If, before the end of the Contract Term, the Company terminates the Executive’s employment for Cause or the Executive terminates employment other than for Good Reason, then the Company shall pay to the Executive in a lump sum immediately after the Date of Termination that portion of the Executive’s then current annual base salary which is accrued but unpaid as of such Date of Termination. The Executive will not be entitled to receive any other compensation or benefits under this Agreement.   1.2   Termination of Employment for Death or Disability. If, before the end of the Contract Term, the Executive’s employment terminates due to death or Disability, the Company shall pay to the Executive (or to the Executive’s estate), in accordance with Company policy following the Date of Termination:   (a)   that portion of the Executive’s annual base salary which is accrued but unpaid as of the Date of Termination;   (b)   the amount of any Annual Bonus applicable to any Annual Bonus Period which ended prior to the Date of Termination, but which is unpaid as of the Date of Termination;   (c)   disability, life insurance, and other benefits as typically provided to an executive under the Company’s employee welfare benefit plans as a result of such an executive’s death or Disability; and   (d)   a pro rata portion of the Annual Bonus applicable to the Annual Bonus Period during which the Date of Termination occurs based upon actual performance for the Annual Bonus Period (such pro rata bonus shall be based on the portion of such Annual Bonus Period that expired prior to the Date of Termination, shall be payable following such Annual Bonus Period in accordance with Company policy and shall be determined 2 -------------------------------------------------------------------------------- without regard to any reduction in earnings on account of interest paid on additional debt incurred by the Company in connection with any Change in Control). 1.3   Termination of Employment BY the Company Without Cause or By the Executive for Good Reason. If, before the end of the Contract Term, the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason, the Executive shall receive the following:   (a)   In a lump sum, that portion of the Executive’s annual base salary which is accrued but unpaid as of the Date of Termination and any unpaid Annual Bonus applicable to any Annual Bonus Period which ended prior to the Date of Termination;   (b)   In monthly payments, the amount of the Executive’s annual base salary (not taking into account any reductions which would constitute Good Reason) which would be payable for the period beginning on the Date of Termination and ending on the last day of the Contract Term;   (c)   Following the Annual Bonus Period during which the Date of Termination occurs and in accordance with Company policy, a pro rata portion of the Annual Bonus applicable to such Annual Bonus Period based upon actual performance for the Annual Bonus Period (such pro rata bonus shall be based on the portion of such Annual Bonus Period that expired prior to the Date of Termination, shall be payable following such Annual Bonus Period in accordance with Company policy and shall be determined without regard to any reduction in earnings on account of interest paid on additional debt incurred by the Company in connection with any Change in Control); and   (d)   The benefits to which the Executive was entitled during the Contract Term. (The amount of any benefits shall be reduced or eliminated to the extent the Executive becomes entitled to duplicative benefits by virtue of his/her subsequent employment after the Date of Termination.)   1.4   Other Termination Benefits. In addition to any amounts or benefits provided upon termination of employment hereunder and except as otherwise provided herein, the Executive shall be entitled to any payments or benefits explicitly provided under the terms of any plan, policy or program of the Company or as otherwise required by applicable law. Certain Definitions 2.1   “Annual Bonus” means the annual cash bonus paid to the Executive pursuant to the Company’s annual bonus plan. During the Contract Term, the Company shall maintain an annual bonus plan that provides the Executive with benefits that are substantially equivalent to the benefits provided under the Company’s current annual bonus plan. 3 -------------------------------------------------------------------------------- 2.2   “Annual Bonus Period” means the annual period on which the Executive’s Annual Bonus is based.   2.3   “Contract Term” means the period commencing on June 1, 1999 and ending on December 31, 2000; provided, that, commencing December 31, 1999 the Contract Term shall be automatically extended by one day on each day the Executive remains employed.   2.4   “Date of Termination” means the date on which the Executive’s employment with the Company terminates.   2.5   “Disability” means any medically determinable physical or mental impairment that can be expected to last for a continuous period of not less than six (6) months, and that renders the Executive unable to perform the duties required under this Agreement. The date of the determination of Disability is the date on which the Executive is certified as having incurred a Disability by a physician acceptable to the Company.   2.6   “Cause” means (a) the Executive’s committing any felony or other crime involving dishonesty; (b) any serious misconduct in the course of the Executive’s employment; or (c) the Executive’s habitual neglect of the Executive’s duties (other than on account of Disability), except that (d) Cause shall not mean:   (1)   bad judgment or negligence other than habitual neglect of duty;   (2)   any act or omission believed by the Executive in good faith to have been in or not opposed to the interest of the Company (without intent of the Executive to gain therefrom, directly or indirectly, a profit to which the Executive was not legally entitled); or   (3)   any act or omission with respect to which a determination could properly have been made that the Executive met the applicable standard of conduct for indemnification or reimbursement under the By-Laws of the Company, any applicable indemnification agreement or the laws and regulations under which the Company is governed, in each case in effect at the time of such act or omission.   2.7   “Change in Control” means the occurrence of any of the following events:   (a)   any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”) and as used in Sections 1 3(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 1 3d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board of Directors of the Company (the “Company Voting Securities”) provided, however, that the event 4 --------------------------------------------------------------------------------     described in this paragraph shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (i) by the Company or, direct or indirect, majority-owned subsidiaries of the Company, (ii) by any employee benefit plan sponsored or maintained by the Company or any corporation controlled by the Company, (iii) by any underwriter temporarily holding securities pursuant to an offering of such securities, (iv) pursuant to a Non-Control Transaction (as defined in paragraph (c)), (v) pursuant to any acquisition by the Executive or any group of persons including the Executive, or (vi) in which Company Voting Securities are acquired from the Company, if a majority of the Board of Directors of the Company approves a resolution providing expressly that the acquisition pursuant to this clause (vi) does not constitute a Change in Control under this paragraph (a);   (b)   individuals who, on June 1, 1999, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that (i) any person becoming a director subsequent to June 1, 1999, whose election, or nomination for election, by the Company’s shareholders was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this paragraph (b), considered as though such person were a member of the Incumbent Board; Provided however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors shall be deemed to be a member of the Incumbent Board;   (c)   the consummation of a merger or consolidation or similar form of corporate reorganization, or sale or other disposition of all or substantially all of the assets, of the Company (a “Business Combination”) is consummated, unless immediately following such Business Combination: (i) more than 50% of the total voting power of the corporation resulting from such Business Combination (including, without limitation, for purposes of making such 50% determination, any shares owned through any entity which directly or indirectly has beneficial ownership of the Company Voting Securities or all or substantially all of the Company’s assets) eligible to elect directors of such corporation is represented by shares held by shareholders of the Company immediately prior to such Business Combination (either by remaining outstanding or being converted), (ii) no person (other than any holding company resulting from such Business Combination, any employee benefit plan sponsored or maintained by the Company (or the corporation resulting from such Business Combination), or any person which beneficially owned, immediately prior to such Business Combination, directly or indirectly, 30% or more of the Company Voting Securities) becomes the beneficial owner, directly or indirectly of 30% or more of the total voting power of the outstanding voting securities eligible to elect directors of the corporation resulting from such Business Combination, and (iii) 5 --------------------------------------------------------------------------------     at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or action of the Board of Directors, providing for such Business Combination (a “Non-Control Transaction”); or   (d)   the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than 30% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which, by reducing the number of Company Voting Securities outstanding, increases the percentage of shares beneficially owned by such person; provided, that if a Change in Control would occur as a result of such an acquisition by the Company (if not for the operation of this sentence), and after the Company’s acquisition such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, then a Change in Control shall occur. 2.8   “Good Reason” means the occurrence of any one of the following events:   (a)   assignment to the Executive of any duties materially and adversely inconsistent with the Executive’s current position (or such other position to which he/she may be promoted) (but excluding a diminution of title which does not result in a diminution of status, offices, or responsibilities), or any other action by the Company which results in a material and adverse change in such position, status, offices, titles or responsibilities;   (b)   the failure of the Company to assign this Agreement to a successor to the Company,   (c)   any reduction in the Executive’s annual base salary, or   (d)   any material adverse change to the terms and conditions of the Executive’s employment under this Agreement, if the Company fails to cure such event within thirty (30) days after written notice from the Executive; provided, however, that if the event is intentional, knowing or repeated, the Executive shall not be required to provide written notice or an opportunity to cure. 6 -------------------------------------------------------------------------------- Restrictive Covenants 3.1   Trade Secrets. Confidential and Proprietary Business Information   (a)   The Company has advised the Executive and the Executive acknowledges that it is the policy of the Company to maintain as secret and confidential all Protected Information (as defined below), and that Protected Information has been and will be developed at substantial cost and effort to the Company. “Protected Information” means trade secrets, confidential and proprietary business information of the Company, any information of the Company other than information which has entered the public domain (unless such information entered the public domain through the efforts of or on account of the Executive), and all valuable and unique information and techniques acquired, developed or used by the Company relating to its business, operations, employees and customers, which give the Company a competitive advantage over those who do not know the information and techniques and which are protected by the Company from unauthorized disclosure, including by not limited to, customer lists (including potential customers), sources of supply processes, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agents or employees.   (b)   The Executive acknowledges that the Executive will acquire Protected Information with respect to the Company and its successors in interest, which information is valuable, special and a unique asset of the Company’s business and operations and that disclosure of such Protected Information would cause irreparable damage to the Company.   (c)   The Executive shall not, directly or indirectly, divulge, furnish or make accessible to any person, firm, corporation, association or other entity (otherwise than as may be required in the regular course of the Executive’s employment) nor use in any manner, either during or after termination of employment by the Company and Protected Information or cause any such information of the Company to enter the public domain.   3.2   Non-Competition.   (a)   The Executive agrees that the Executive shall not during the Executive’s employment with the Company, and, if the Executive’s employment is terminated for any reason other than termination of employment without Cause or for Good Reason, thereafter for a period of one (1) year, directly or indirectly, in any capacity, engage or participate in or become employed by or render advisory or consulting or other services in connection with any Prohibited Business as defined below.   (b)   The Executive agrees that the Executive shall not during the Executive’s employment with the Company, and, if the Executive’s employment is terminated for 7 --------------------------------------------------------------------------------     any reason, thereafter for a period of one (1 ) year, make any financial investment, whether in the form of equity or debt, or own any interest, directly or indirectly, in any Prohibited Business. Nothing in this Section 7.02 shall, however, restrict the Executive from making any investment in any Company whose stock is listed on a national securities exchange or actively traded in the over-the-counter market; provided that (i) such investment does not give the Executive the right or ability to control or influence the policy decisions of any Prohibited Business, and (ii) such investment does not create a conflict of interest between the Executive’s duties hereunder and the Executive’s interest in such investment.   (c)   “Prohibited Business” shall be defined as any business and any branch, office or operation thereof, which is a direct and material competitor of the Company wherever the Company does business, in the United States or abroad, and which has established or seeks to establish contact, in whatever form (including but not limited to solicitation of sales, or the receipt or submission of bids) with any entity who is at any time a client, customer or supplier of the Company (including but not limited to all subdivisions of the federal government).   (d)   Notwithstanding any other provisions in this Section 3.2, this Section 3.2 shall not apply if the Executive’s employment with the Company terminates for any reason during the one-year period following a Change in Control.   3.3   Undertaking Regarding Employees. From the date hereof until two years after the Executive’s Date of Termination, the Executive shall not, directly or indirectly, (a) encourage any employee of the Company or its successors in interest to leave their employment with the Company or its successors in interest; or (b) employ, hire, solicit or, cause to be employed or hired or solicited (other than by the Company or its successors in interest), or establish a business with, or encourage others to hire, any person who within two (2) years prior thereto was employed by the Company or its successors in interest, to leave their employment with the Company or its successors in interest.   3.4   Disclosure of Employee-Created Trade Secrets. Confidential and Proprietary Business Information. The Executive agrees to promptly disclose to the Company all Protected Information developed in whole or in part by the Executive during the Executive’s employment with the Company and which relate to the Company’s business. Such Protected Information is, and shall remain, the exclusive property of the Company. All writings created during the Executive’s employment with the Company (excluding writings unrelated to the Company’s business) are considered to be “works-for-hire. for the benefit of the Company and the Company shall own all rights in such writings. 8 -------------------------------------------------------------------------------- Successors 4.1   The Company shall cause this Agreement to be binding on the Company and any successor to the Company. INTERMET CORPORATION /s/ John Doddridge By: John Doddridge      Chairman & Chief Executive Officer /s/ Gary F. Ruff By: Gary F. Ruff 9

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10(n) FIRST AMENDMENT     THIS FIRST AMENDMENT is made and entered into as of this 1st day of August, 2000 (the "Effective Date"), between Minntech Corporation, a Minnesota corporation (the "Company") and Thomas J. McGoldrick ("McGoldrick"). RECITALS     WHEREAS, the Company and McGoldrick have previously entered into a Separation and Consulting Agreement dated July 7, 2000 (the "Agreement"); and     WHEREAS, both parties desire to amend the Agreement on the terms and conditions set forth in this First Amendment.     NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and therein and for other good and valuable consideration, the parties agree as follows:     1.  Section 3 e. shall be deleted in its entirety and the following substituted therefor:     "e.  Time.  At the Company's request, McGoldrick shall devote up to an average of 40 hours per month to his duties as a Consultant. If at the time of such request McGoldrick reasonably demonstrates to the Company that he is engaged in other business activities which would substantially interfere with McGoldrick's ability to provide up to an average of 40 hours per month to the Company, the Company shall release McGoldrick from the foregoing obligation. Notwithstanding the foregoing, McGoldrick shall be obligated to provide a minimum of at least 4 hours per month to his duties as a Consultant."     The remainder of the Agreement shall stay in full force and effect. MINNTECH CORPORATION   MCGOLDRICK   -------------------------------------------------------------------------------- Barbara A. Wrigley Executive Vice President       -------------------------------------------------------------------------------- Thomas J. McGoldrick -------------------------------------------------------------------------------- QUICKLINKS FIRST AMENDMENT

QuickLinks -- Click here to rapidly navigate through this document BUILDING LEASE 1.  BASIC TERMS     This Section 1 contains the Basic Terms of this Lease between Landlord and Tenant, named below. Other Sections of the Lease referred to in this Section 1 explain and define the Basic Terms and are to be read in conjunction with the Basic Terms.     1.1.   Date of Lease: August  , 2000.           1.2.       Landlord: Hoyt/DTLK LLC, a Minnesota limited liability corporation.           1.3.       Tenant: Datalink Corporation, a Minnesota corporation.           1.4.       Premises: Approximately 98,604 rentable square feet included in the Building Improvements (as defined in Exhibit "B" hereto) to be constructed pursuant to the terms of this Lease.           1.5.       Property: That certain real property legally described on Exhibit "A" attached hereto.           1.6.       Lease Term: Fifteen (15) years (the "Term"), commencing on Apri1, 2001 (the Commencement Date as defined in Exhibit "B" attached hereto) and ending 15 years thereafter unless sooner terminated as provided in this Lease (the "Expiration Date"), subject to any Renewal Term as provided in Section 2.2.           1.7.       Rent Commencement Date: Tenant's obligation to pay Base Rent (as hereinafter defined) and Additional Rent (as hereinafter defined) under this Lease shall commence on the Commencement Date as defined on Exhibit "B" attached hereto.           1.8.       Permitted Uses: (See Section 4): Office, technical and distribution.           1.9.       Tenant's Guarantor: (if none, so state): None           1.10.       Brokers:       (See Section 23; if none, so state) (A) Tenant's Broker: Mohr Partners. (B) Landlord's Broker: Hoyt Properties Inc.           1.11.       Security Deposit: (See Section 4): $500,000 cash, refundable upon the Commencement Date of the Lease.           1.12.       Base Rent is: An average of $1,156,353 per year Base Rent payable annually pursuant to the attached Exhibit C.           1.13.       Exhibits A, B, B-2, B-3, C, D, E and F are attached and made a part of this Lease.                             2.  LEASE OF PREMISES; RENT     2.1.  Lease of Premises for Lease Term.  Landlord hereby leases the Premises to Tenant, and Tenant hereby rents the Premises from Landlord, for the Term and subject to the conditions of this Lease.     2.2.  Renewal Term.  Provided that this Lease is in full force and effect and Tenant is not in default under the terms hereof, and the Premises are occupied by the Tenant named herein, Landlord hereby grants to Tenant the option to extend the Term of this Lease (the "Renewal Option") on the same terms, conditions and provisions as contained in this Lease, except as otherwise provided herein, for two periods of five (5) years each (a "Renewal Term"). The Initial Term, as extended by any Renewal Term is herein referred to as the Lease Term. In order to exercise the Renewal Option, Tenant must give Landlord written notice thereof not less than two hundred seventy (270) days prior to the Expiration Date of the Term, or the first Renewal Term, as the case may be. -------------------------------------------------------------------------------- The annual Base Rent for the Premises during the first Renewal Term shall be: the annual Base Rent payable during the last full month of the Initial Term increased at a rate of two and one-half percent (2.5%) per annum compounded annually over the entire first Renewal Term. The annual Base Rent for the Premises during the second Renewal Term, if any, shall be: the annual Base Rent payable during the last full month of the first Renewal Term increased at a rate of two and one-half percent (2.5%) per annum compounded annually over the entire second Renewal Term.     2.3.  Types of Rental Payments.  Commencing on the Rent Commencement Date, Tenant shall pay rents of (a) annual base rent (as set forth in Section 1.12 hereof), payable in monthly installments, in advance, on the first day of each and every calendar month during the term of this Lease (the "Base Rent"); and (b) all costs, expenses and charges of every kind or nature relating to, or incurred in connection with, the ownership and operation of the Premises and the Property and that are attributable to, or become due, during the Term, including, but not limited to, the cost of insurance under Section 10.1 hereof (collectively, "Additional Rent"); (c) structural, parking lot and roof replacement reserves in amounts and at times to be determined by Landlord and Tenant; which Landlord presently estimates to be $.10—.15 per rentable square foot annually. In the event any monthly installment of Base Rent or Additional Rent, or both, is not paid within ten (10) days of the date when due, Tenant shall pay a late charge in an amount equal to the late charge, if any, assessed by Landlord's lender on the Mortgage encumbering the Property (the "Late Charge"). The Late Charge, Base Rent and Additional Rent shall collectively be referred to as "Rent", and shall be payable to Hoyt Properties Inc., 708 South Third Street, Suite 108, Minneapolis, MN 55415 (or such other entity designated as Landlord's management agent, if any, and if Landlord so appoints such a management agent, the "Agent"), or pursuant to such other directions as Landlord shall designate in this Lease or otherwise in writing.     2.4.  Covenants Concerning Rental Payments.  Tenant shall pay the Rent promptly when due, without notice or demand, and without any abatement, deduction or setoff, except as may otherwise be expressly and specifically provided in this Lease. No payment by Tenant, or receipt or acceptance by Landlord, of a lesser amount than the correct Rent shall be deemed to be other than a payment on account, nor shall any endorsement or statement on any check or letter accompanying any payment be deemed an accord or satisfaction, and Agent or Landlord may accept such payment without prejudice to its right to recover the balance due or to pursue any other remedy available to Landlord. If the Commencement Date occurs on a day other than the first day of a calendar month, the Rent due for the first calendar month of the Term shall be prorated on a per diem basis, and the term shall be extended to terminate at the end of the calendar month in which the Expiration Date stated in Section 1.6 above occurs. 3.  TAXES     Tenant agrees to pay as Additional Rent for the Premises (i) all governmental taxes, assessments, fees and charges of every kind or nature (other than Landlord's income taxes), whether general, special, ordinary or extraordinary, due at any time, or from time to time during the Term, and any renewals or extensions thereof, in connection with the ownership, leasing or operation of the Premises, or of the personal property and equipment located therein or used in connection therewith, and (ii) any reasonable expenses incurred by Landlord in contesting such taxes or assessments and/or the assessed value of the Premises (the "Taxes"). All such Taxes shall be paid by Tenant before they become delinquent. The Taxes for the first and last years of the Term will be appropriately prorated. If any special assessments levied against the Premises are payable in installments, Tenant shall be responsible only for those installments that are due and payable during the Term. For purposes hereof, 2 -------------------------------------------------------------------------------- Taxes for any year shall be Taxes that are due for payment or paid in that year, rather than taxes that are assessed or become a lien or accrue during such year. Tenant, at its cost and expense, shall have the right to contest the Taxes levied against the Leased Premises or the valuation assessed there-against, through the commencement of appropriate proceedings (herein "Tax Contest"). Landlord shall cooperate with Tenant in prosecuting any Tax Contest and shall execute any documents reasonably requested by Tenant. Any refund given in such Tax Contest proceeding shall be the sole and exclusive property of Tenant.     Tenant may pay such Taxes directly to the taxing authority. Any Taxes which Tenant is required to pay shall be paid no later than the date on which such taxes are due. If Tenant fails to pay any Taxes which it is required to pay within the time period provided above, Landlord may, at its option, pay said Taxes, together with any and all penalties and interest, and said amount shall become immediately due and payable as Additional Rent. 4.  USE OF PREMISES; SECURITY DEPOSIT     4.1.  Use of Premises.  The Premises shall be used for the purpose(s) set forth in Section 1.8 above and for no other purpose whatsoever. Tenant shall not, at any time, use or occupy, or suffer or permit anyone to use or occupy, the Premises, or do or permit anything to be done in the Premises, in any manner that may (a) violate any Certificate of Occupancy for the Premises or the Property; (b) cause, or be liable to cause, injury to the Property or any equipment, facilities or systems therein; (c) constitute a violation of the laws and requirements of any public authority or the requirements of insurance bodies, including any covenant, condition or restriction affecting the Property; (d) exceed the load bearing capacity of the floor of the Premises; or (e) unreasonably annoy, inconvenience or disrupt the operations or tenancies of other tenants or users of the Property or, if any or other users or occupants of the park within which the Property is located, if applicable.     4.2.  Signage.  Tenant shall not affix any sign of any size or character to any portion of the Property, without prior written approval of Landlord, which approval shall not be unreasonably withheld or delayed. Tenant's signage shall comply with all laws, codes, ordinances, restrictions rules and regulations applicable thereto. Tenant shall remove all signs of Tenant upon the expiration or earlier termination of this Lease and immediately repair any damage to the Property caused by, or resulting from, such removal.     4.3.  Security Deposit.  Tenant has on August 1, 2000 deposited with Landlord the sum set forth in Section 1.11 above, in cash (the "Security"), representing security for the performance by Tenant of the covenants and obligations hereunder. The Security shall be held by Landlord, without interest, in favor of Tenant until the Commencement Date under the Lease, at which time the Security shall be refunded immediately to Tenant without notice or demand. In the event the Security is not refunded by Landlord on the Commencement Date, Tenant shall have the right to offset the Security against installments of Rent as they become due under this Lease, until the Security is exhausted. If Tenant fails to take possession of the Premises on the Commencement Date, Landlord may retain the Security and exercise any legal or equitable remedies. 5.  CONDITION AND DELIVERY OF PREMISES     5.1.  Condition of Premises.  Landlord shall deliver the Premises to Tenant in a condition substantially consistent with the Final Plans and Specifications, as may be revised or amended by change orders or Tenant's Extra Work, subject to the "punch list" items (all as hereinafter defined and further described in Exhibit "B" hereto). Except as otherwise expressly provided in Exhibit "B", Landlord shall not be obligated to make any repairs, replacements or improvements (whether structural or otherwise) of any kind or nature to the Premises in connection with, or in consideration of, this Lease. 3 --------------------------------------------------------------------------------     5.2.  Delay in Commencement.  Except as otherwise expressly provided in Exhibit "B", Landlord shall not be liable to Tenant if Landlord fails to deliver possession of the Premises to Tenant on or before the Delivery Date (as defined in Exhibit "B" hereto). The obligations of Tenant under the Lease shall not thereby be affected, except that the Commencement Date shall be delayed to the extent expressly provided in Exhibit "B". 6.  SUBORDINATION; NOTICES TO SUPERIOR LESSORS AND MORTGAGEES     6.1.  Subordination.  Provided that Tenant is provided with a reasonable and customary subordination, nondisturbance and attornment agreement duly executed by the holder of any mortgage or deed of trust or the Landlord pursuant to any ground lease, this Lease shall be subject and subordinate at all times to all ground leases or underlying leases which may now exist or hereafter be executed affecting the Premises and/or the land upon which the Premises and Property are situated and to any mortgage or deed of trust which may now exist or be placed upon the Property, land, ground leases or underlying leases, or Landlord's interest or estate in any of said items, which is specified as security. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated any such ground leases or underlying leases or any such liens to this Lease. Tenant shall execute and deliver, upon demand by Landlord and in the form reasonably requested by Landlord, any additional documents evidencing the priority or subordination of this Lease with respect to any such ground leases or underlying leases or any such mortgage or deed of trust.     6.2.  Estoppel Certificates.  Tenant agrees, from time to time and within ten (10) days after request by Landlord, to deliver to Landlord, or Landlord's designee, an estoppel certificate stating such matters pertaining to this Lease as may be reasonably requested by Landlord. Failure by Tenant to timely execute and deliver such certificate shall constitute an acceptance of the Premises and acknowledgment by Tenant that the statements included therein are true and correct without exception. Landlord and Tenant intend that any statement delivered pursuant to this section may be relied upon by any prospective purchaser or mortgagee of the Property or of any interest therein or any other Landlord designee.     6.3.  Transfer by Landlord.  After the Commencement Date, in the event of a sale or conveyance by Landlord of the Property, the same shall operate to release Landlord from any future liability for any of the covenants or conditions, express or implied, herein contained in favor of Tenant, and in such event Tenant agrees to look solely to Landlord's successor in interest with respect thereto and agrees to attorn to such successor. 7.  QUIET ENJOYMENT     Subject to the provisions of this Lease, so long as Tenant pays all of the Rent and performs all of its other obligations hereunder, Tenant shall not be disturbed in its possession of the Premises by Landlord, Agent or any other person lawfully claiming through or under Landlord. This covenant shall be construed as a covenant running with the Property and is not a personal covenant of Landlord. 8.  ASSIGNMENT, SUBLETTING AND MORTGAGING     8.1.  Prohibition.  Tenant acknowledges that this Lease and the Rent due under this Lease have been agreed to by Landlord in reliance upon Tenant's reputation and creditworthiness and upon the continued operation of the Premises by Tenant for the particular use set forth in Section 4 above; therefore, Tenant shall not, whether voluntarily, or by operation of law, or otherwise: (a) assign or otherwise transfer this Lease; (b) sublet the Premises or any part thereof, or allow the same to be used or occupied by anyone other than Tenant;, if Tenant shall not remain liable to Landlord for all Tenant obligations, including those under Section 2.3 of the Lease; or (c) mortgage, pledge, encumber, or otherwise hypothecate this Lease or the Premises, or any part thereof, in any manner whatsoever, 4 -------------------------------------------------------------------------------- without in each instance obtaining the prior written consent of Landlord, which consent may be given or withheld in Landlord's sole, but reasonable, discretion. Any purported assignment, mortgage, transfer, pledge or sublease made without the prior written consent of Landlord shall be absolutely null and void. No assignment of this Lease shall be effective and valid unless and until the assignee executes and delivers to Landlord any and all documentation reasonably required by Landlord in order to evidence assignee's assumption of all obligations of Tenant hereunder. Any consent by Landlord to a particular assignment, sublease or mortgage shall not constitute consent or approval of any subsequent assignment, sublease or mortgage, and Landlord's written approval shall be required in all such instances. Any consent by Landlord to any assignment or sublease shall not be deemed to release Tenant from its obligations hereunder and Tenant shall remain fully liable for performance of all obligations under this Lease.     8.2.  Rights of Landlord.  If this Lease is assigned, or if the Premises (or any part thereof) are sublet or used or occupied by anyone other than Tenant, whether or not in violation of this Lease, Landlord or may (without prejudice to, or waiver of its rights), collect Rent from the assignee, subtenant or occupant. Landlord or may apply the net amount collected to the Rent herein reserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of any of the provisions of this Section 8.     8.3.  Permitted Transfers.  The provisions of Section 8.1(a) shall apply to a transfer of a majority of the voting stock of Tenant or to any other change in voting control of Tenant whether effectuated in one (1) or more transactions, as if such transfer were an assignment of this Lease; but said provisions shall not apply to such a transfer if the successor to Tenant (or any party remaining liable for the obligations of Tenant hereunder) (i) has a net worth at least equal to the net worth of Tenant as of the Commencement Date or (ii) is capable of satisfying Tenant's obligations hereunder, in Landlord's reasonable judgment. Any such permitted transferee shall execute and deliver to Landlord any and all documentation reasonably required by Landlord in order to evidence assignee's assumption of all obligations of Tenant hereunder. 9.  COMPLIANCE WITH LAWS     9.1.  Compliance with Laws.  As of the Commencement Date and thereafter, Tenant shall, at its sole expense (regardless of the cost thereof), comply with all local, state and federal laws, rules, regulations and requirements now or hereafter in force and all judicial and administrative decisions pertaining thereto (collectively, "Laws") pertaining to the Premises or Tenant's use thereof, including, without limitation, any restrictions of record affecting the Property, any and all laws pertaining to Hazardous Materials (as hereinafter defined) or which otherwise deal with or relate to air or water quality, air emissions, soil or ground conditions or other environmental matters of any kind (collectively, "Environmental Laws") and the Americans with Disabilities Act, 42 U.S.C. §§ 12101-12213, whether or not any of the foregoing were in effect at the time of the execution of this Lease. Landlord warrants that the Premises will on the Commencement Date comply with all Laws including the Americans with Disabilities Act. If any license or permit is required for the conduct of Tenant's business in the Premises, Tenant, at its expense, shall procure such license prior to the Commencement Date, and shall maintain in good standing such license or permit. Tenant shall give prompt notice to Landlord of any written notice it receives of the alleged violation of any law or requirement of any governmental or administrative authority with respect to the Premises or the use or occupation thereof. The judgment of any court of competent jurisdiction, or the admission of Tenant in any action or proceeding against Tenant, whether Landlord is a party thereto or not, that any such Law pertaining to the Premises has been violated, shall be conclusive of that fact as between Landlord and Tenant.     9.2.  Hazardous Materials.  If during the Term (or any extension thereof) any Hazardous Material (defined below) is generated, transported, stored, used, treated or disposed of at, to, from, on or in the 5 -------------------------------------------------------------------------------- Premises: (i) Tenant shall, at its own cost, at all times comply (and cause all others to comply) with all laws (federal, state or local) relating to Hazardous Materials, including, but not limited to, all Environmental Laws, and Tenant shall further, at its own cost, obtain and maintain in full force and effect at all times all permits and other approvals required in connection therewith; (ii) Tenant shall promptly provide Landlord or Agent with complete copies of all communications, permits or agreements with, from or issued by any governmental authority or agency (federal, state or local) or any private entity relating in any way to the presence, release, threat of release, or placement of Hazardous Materials on or in the Premises or any portion of the Property, or the generation, transportation, storage, use, treatment, or disposal at, on, in or from the Premises, of any Hazardous Materials; (iii) Landlord, Agent and their respective agents and employees shall have the right to enter the Premises and/or conduct appropriate tests for the purposes of ascertaining Tenant compliance with all applicable laws (including Environmental Laws), rules or permits relating in any way to the generation, transport, storage, use, treatment, disposal or presence of Hazardous Materials on, at, in or from the Premises, the Property or any portion thereof; and (iv) upon reasonable written request by Landlord or Agent, Tenant shall provide Landlord with the results of appropriate tests of air, water or soil to demonstrate that Tenant complies with all applicable laws, rules or permits relating in any way to the generation, transport, storage, use, treatment, disposal or presence of Hazardous Materials on, at, in or from the Property or any portion thereof. This Section 9.2 does not authorize the generation, transportation, storage, use, treatment or disposal of any Hazardous Materials at, to, from, on or in the Premises in contravention of this Section 9. Tenant covenants to investigate, clean up and otherwise remediate any release of Hazardous Materials caused, contributed to or created by (i) Tenant or any of Tenant's officers, directors, invitees, agents, employees, contractors or representatives ("Tenant's Parties") at its sole expense during the Term. Such investigation and remediation shall be performed only after Tenant has obtained Landlord's prior written consent; provided, however, that Tenant shall be entitled to respond immediately to an emergency without first obtaining such consent. All remediation shall be performed in strict compliance with Environmental Laws and to the satisfaction of Landlord. Tenant shall be liable for any and all conditions covered hereby, and for all costs relating thereto, which were caused or created by Tenant or any of Tenant's Parties. Tenant shall not enter into any settlement agreement, consent decree or other compromise with respect to any claims relating to any Hazardous Materials in any way connected to the Premises without first obtaining Landlord's written consent and affording Landlord the reasonable opportunity to participate in any such proceedings. As used herein, the term "Hazardous Materials" shall mean any waste, material or substance (whether in the form of liquids, solids or gases, and whether or not air-borne) which is or may be deemed to be or include a pesticide, petroleum, asbestos, polychlorinated biphenyl, radioactive material, urea formaldehyde or any other pollutant or contaminant which is or may be deemed to be hazardous, toxic, ignitable, reactive, corrosive, dangerous, harmful or injurious, or which presents a risk to public health or to the environment, and which is or becomes regulated by any Environmental Law. 10. INSURANCE     10.1.  Landlord Insurance.  Landlord shall maintain (a) "all-risk" property insurance covering the Premises (at its full replacement cost), but excluding Tenant's Property, and (b) commercial general public liability insurance covering Landlord for claims arising out of liability for bodily injury, death, personal injury, advertising injury and property damage occurring in and about the Property and otherwise resulting from any acts and operations of Landlord, its agents and employees, and (c) rent loss insurance (collectively, "Landlord's Policies"), all of the above with limits that are required by any lender(s) of Landlord, or as are otherwise reasonably determined by Landlord.     10.2.  Tenant Insurance.  Tenant shall purchase at its own expense and keep in force during this Lease a policy or policies of (i) "All-risk" property insurance covering its contents (and otherwise resulting from any acts or operations of Tenant); (ii) commercial general liability insurance, including personal injury and property damage, in the amount of not less than Two Million Dollars 6 -------------------------------------------------------------------------------- ($2,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00) annual general aggregate per location, and comprehensive automobile liability insurance covering Tenant against any losses arising out of liability for personal injuries or deaths of persons and property damage occurring in or about the Premises and Property; and (iii) Business Interruption Coverage. Said policies shall (a) name Landlord and any party holding an interest to which this Lease may be subordinated as additional insureds; (b) be issued by an insurance company with a Best rating of A-X or better and otherwise reasonably acceptable to Landlord and licensed to do business in the state in which the Property is located; (c) provide that said insurance shall not be canceled or materially modified unless thirty (30) days' prior written notice shall have been given to Landlord, (d) provide coverage on an occurrence basis; (e) contain a severability of insured parties provision and a cross liability endorsement; (f) be primary, not contributing with, and not in excess of coverage which Landlord may carry; (g) include a fire endorsement. Said policy or policies or, at Landlord's option, Certificate of Insurance on the so-called "ACORD" form 27 evidencing said policies, shall be delivered to Landlord by Tenant upon commencement of the Lease and renewals thereof shall be delivered at least thirty (30) days prior to the expiration of said insurance.     10.3.  Waiver of Subrogation.  To the extent permitted by law, and without affecting the coverage provided by insurance required to be maintained hereunder, Landlord and Tenant each waive any right to recover against the other (a) damages for injury to or death of persons, (b) damages to property, (c) damages to the Premises or any part thereof or (d) claims arising by reason of the foregoing, to the extent such damages and claims are insured against or required to be insured against by Landlord or Tenant under this Lease. This provision is intended to waive, fully and for the benefit of each party, any rights and/or claims which might give rise to a right of subrogation by any insurance carrier. The coverage obtained by each party pursuant to this Lease shall include, without limitation, a waiver of subrogation by the carrier which conforms to the provisions of this section. 11. ALTERATIONS     11.1.  Procedural Requirements.  Tenant may, from time to time, at its expense, make alterations or improvements in and to the Premises (hereinafter collectively referred to as "Alterations"), provided that Tenant first obtains the written consent of Landlord in each instance. Landlord's consent to Alterations shall not be unreasonably withheld, provided that: (a) the Alterations are non-structural and the structural integrity of the Property shall not be affected; (b) the Alterations are to the interior of the Premises; (c) the proper functioning of the mechanical, electrical, heating, ventilating, air-conditioning ("HVAC"), sanitary and other service systems of the Property shall not be affected; (d) the Alterations have no adverse effect on the Property; (e) Tenant shall have appropriate insurance coverage, reasonably satisfactory to Landlord, regarding the performance and installation of the Alterations; (f) the Alterations shall conform with all other requirements of this Lease including compliance with the Americans with Disabilities Act; and (g) Tenant shall have provided Landlord with reasonably detailed plans (the "Plans") for such Alterations in advance of requesting Landlord's consent. Additionally, before proceeding with any Alterations, Tenant shall (i) at Tenant's expense, obtain all necessary governmental permits and certificates for the commencement and prosecution of Alterations; (ii) submit to Agent, for Landlord's written approval, working drawings, plans and specifications and all permits for the work to be done and Tenant shall not proceed with such Alterations until it has received said approval; and (iii) cause those contractors, materialmen and suppliers engaged to perform the Alterations to deliver to Landlord Certificates of Insurance (on the so-called "ACORD" Form 27) evidencing policies of commercial general liability insurance (providing the same coverages as required in Section 10.2(ii) above) and workers compensation insurance. Such insurance policies shall satisfy the obligations imposed under Section 10.2. After obtaining Landlord's approval to the Alterations, Tenant shall give Landlord at least five (5) days' prior written notice of the commencement of any Alterations at the Premises, and Landlord may elect to record and post notices of commencement of construction, non-responsibility or the like, at the Premises. 7 --------------------------------------------------------------------------------     11.2.  Performance of Alterations.  Tenant shall cause the Alterations to be performed in compliance with all applicable permits, laws and requirements of public authorities, restrictions of record affecting the Property including the Americans with Disabilities Act. Tenant shall cause the Alterations to be diligently performed in a good and workmanlike manner, using new materials and equipment at least equal in quality and class to the standards for the Property established by Landlord or Agent. Tenant shall obtain all necessary permits and certificates for final governmental approval of the Alterations and shall provide Landlord with "as built" plans, copies of all construction contracts, governmental permits and certificates and proof of payment for all labor and materials, including, without limitation, copies of paid invoices and final lien waivers.     11.3.  Lien Prohibition.  Tenant shall pay when due all claims for labor and material furnished to the Premises in connection with the Alterations. Tenant shall not permit any mechanics or materialmen's liens to attach to the Premises, the Property, or Tenant's leasehold estate. Tenant, at its expense, shall procure the satisfaction or discharge of record of all such liens and encumbrances within thirty (30) days after the filing, or Tenant may procure (for Landlord's benefit), a bond or other protection against any such lien or encumbrance. In the event Tenant has not so performed, Landlord may, at its option, pay and discharge such liens and Tenant shall be responsible to reimburse Landlord, on demand and as Additional Rent under this Lease, for all costs and expenses incurred in connection therewith, together with interest thereon at the rate set forth in Section 22.3 below, which expenses shall include reasonable fees of attorneys of Landlord's choosing, and any costs in posting bond to effect discharge or release of the lien as an encumbrance against the Premises or the Property. 12. LANDLORD'S AND TENANT'S PROPERTY     12.1.  Landlord's Property.  Subject to Section 12.2 below, the Building Improvements and all fixtures, machinery, equipment, improvements and appurtenances attached to, or built into, the Premises at the commencement of, or during the Term, whether or not placed there by or at the expense of Tenant, shall become and remain a part of the Premises; shall be deemed the property of Landlord (the "Landlord's Property"), without compensation or credit to Tenant; and shall not be removed by Tenant at the Expiration Date unless Landlord requests their removal. Further, any personal property in the Premises on the Commencement Date, movable or otherwise, unless installed and paid for by Tenant, shall be and shall remain the property of Landlord and shall not be removed by Tenant. In no event shall Tenant remove any of the following materials or equipment without Landlord's prior written consent: any power wiring or power panels, lighting or lighting fixtures, wall or window coverings, carpets or other floor coverings, heaters, air conditioners or any other HVAC equipment, fencing or security gates, or other similar building operating equipment and decorations.     12.2.  Tenant's Property.  All movable non-structural partitions, business and trade fixtures, machinery and equipment, communications equipment and office equipment, that are installed in the Premises by, or for the account of, Tenant and that can be removed without structural damage to the Property, and all furniture, furnishings and other articles of movable personal property owned by Tenant and located in the Premises (collectively, the "Tenant's Property") shall be and shall remain the property of Tenant and may be removed by Tenant at any time during the Term, provided Tenant repairs or pays the cost of repairing any damage to the Premises or to the Property resulting from the installation and/or removal thereof. At or before the Expiration Date, or the date of any earlier termination, Tenant, at its expense, shall remove from the Premises all of Tenant's Property and any Alterations (except such items thereof as Landlord shall have expressly permitted, in writing, to remain, which property shall become the property of Landlord), and Tenant shall repair any damage to the Premises or the Property resulting from any installation and/or removal of Tenant's Property. Any other items of Tenant's Property that shall remain in the Premises after the Expiration Date, or following an earlier termination date, may, at the option of Landlord, be deemed to have been abandoned, and in such case, such items may be retained by Landlord as its property or be disposed of by Landlord, in 8 -------------------------------------------------------------------------------- Landlord's sole and absolute discretion and without accountability, at Tenant's expense. Notwithstanding the foregoing, if Tenant is in default under the terms of this Lease, it may remove Tenant's Property from the Premises only upon the express written direction of Landlord. 13. REPAIRS AND MAINTENANCE     Tenant shall, at its expense, throughout the Term, maintain and preserve, in first class condition, (subject to normal and customary wear and tear), the Premises and the fixtures and appurtenances therein. Except as otherwise specifically provided in Exhibit "B" hereto, Tenant shall also be responsible for all structural and non-structural repairs and replacements, interior and exterior, ordinary and extraordinary, in and to the Premises and the facilities and systems thereof (but not limited to, the roof, the Premises, sidewalks, driveways, curbs, loading areas, landscaped areas and parking lot, and the electrical, mechanical, HVAC, and plumbing systems). Tenant shall enter into a preventative maintenance and service contract with a reputable service provider for maintenance of the HVAC systems of the Premises. Without limiting the generality of the foregoing, any repairs or replacements required to be made by Tenant including repairs to the mechanical, electrical, sanitary, HVAC, or other systems of the Premises shall be performed, at Tenant's expense, by appropriately licensed contractors. All such repairs or replacements shall be subject to the supervision and control of Landlord, and all repairs and replacements shall be made with materials of equal or better quality than the items being repaired or replaced. After Substantial Completion of the Premises, Landlord shall transfer to Tenant all warranties Landlord has received with respect to any and all work, maintenance and service for which Tenant is responsible under the terms and conditions of this Lease. Tenant shall comply with all post-construction requirements including those relating to the load bearing capacity of the Improvements as set forth in the Final Plans and Specifications or as otherwise directed by Landlord. 14. UTILITIES     Tenant shall purchase all utility services from the utility or municipality providing such service; shall provide for scavenger, cleaning and extermination services; and shall pay for such services when payments are due. Tenant shall be solely responsible for the repair and maintenance of any meters necessary in connection with such services. Tenant's use of electrical energy in the Premises shall not, at any time, exceed the capacity of either or both of (i) any of the electrical conductors and equipment in or otherwise servicing the Premises; and (ii) the Property's HVAC systems. 15. INVOLUNTARY CESSATION OF SERVICES     Landlord shall have no liability or responsibility for a cessation of services to the Premises or to the Property that occurs as a result of causes beyond Landlord's reasonable control. No such interruption of service shall be deemed an eviction or disturbance of Tenant's use and possession of the Premises or any part thereof, or render Landlord liable to Tenant for damages, or relieve Tenant from performance of Tenant's obligations under this Lease, including, but not limited to, the obligation to pay Rent; provided, however, that if any interruption of services persists for a period in excess of five (5) consecutive business days Tenant shall, as Tenant's sole remedy, be entitled to a proportional abatement of Rent to the extent, if any, of any actual loss of use of the Premises by Tenant. 16. LANDLORD'S RIGHTS     Landlord, Agent and their respective agents, employees and representatives shall have the right to enter and/or pass through the Premises at any time or times upon reasonable prior notice (except in the event of emergency) (a) to examine and inspect the Premises and to show them to actual and prospective lenders, prospective purchasers or mortgagees of the Property or providers of capital to Landlord and its affiliates; and (b) to make such repairs, alterations, additions and improvements in or to the Premises and/or in or to the Property or its facilities and equipment as Landlord is required or 9 -------------------------------------------------------------------------------- desires to make. Landlord and Agent shall be allowed to take all materials into and upon the Premises that may be required in connection with any repairs, alterations, additions or improvements, without any liability to Tenant and without any reduction or modification of Tenant's covenants and obligations hereunder; provided, however, that Landlord shall use reasonable efforts to avoid interference with Tenant's business operations and Tenant's occupancy and use of the Premises. Additionally, Landlord and Agent shall have the following rights exercisable, without notice to Tenant, without liability to Tenant, and without being deemed an eviction or disturbance of Tenant's use or possession of the Premises or giving rise to any claim for setoff or abatement of Rent: (i) to designate and approve, prior to installation, all types of signs; (ii) to have pass keys, access cards, or both, to the Premises; and (iii) to decorate, remodel, repair, alter or otherwise prepare the Premises for reoccupancy at any time after Tenant vacates or abandons the Premises for more than thirty (30) consecutive days or with no intention of reoccupying the Premises. During the period of six (6) months prior to the Expiration Date (or at any time, if Tenant has vacated or abandoned the Premises or is otherwise in default under this Lease), Landlord and its agents may exhibit the Premises to prospective tenants and erect a "For Lease" sign thereon. 17. NON-LIABILITY AND INDEMNIFICATION     17.1.  Non-Liability.  Except as provided in Section 17.2.2, Landlord or its affiliates, owners, partners, directors, officers, agents and employees shall not be liable to Tenant for any loss, injury, or damage, to Tenant or to any other person, or to its or their property, irrespective of the cause of such injury, damage or loss. Further, except as provided in Section 17.2.2, Landlord, or its respective members, partners, directors, officers, agents and employees shall not be liable (a) for any damage caused by other tenants or persons in, upon or about the Property, or caused by operations in construction of any public or quasi-public work; (b) with respect to matters for which Landlord is liable, for consequential or indirect damages purportedly arising out of any loss of use of the Premises or any equipment or facilities therein by Tenant or any person claiming through or under Tenant; (c) any latent defect in the Premises or the Property; (d) injury or damage to person or property caused by fire, or theft, or resulting from the operation of heating or air conditioning or lighting apparatus, or from falling plaster, or from steam, gas, electricity, water, rain, snow, ice, or dampness, that may leak or flow from any part of the Property, or from the pipes, appliances or plumbing work of the same.     17.2.  Indemnification       17.2.1.  Tenant Indemnification.  Tenant hereby indemnifies, defends, and holds Landlord and its affiliates, members, owners, partners, directors, officers, agents and employees (collectively, "Landlord Indemnified Parties") harmless from and against any and all Losses (defined below) arising from or in connection with (a) the conduct or management of either or both the Property and the Premises or any business therein, or any work, Tenant Improvements, or Alterations done, or any condition created (other than by Landlord) in or about the Premises during the Term or during the period of time, if any, prior to the Commencement Date that Tenant may have been given access to the Premises; (b) any act, omission or negligence of Tenant or Tenant's Parties; (c) any accident, injury or damage whatsoever (unless caused by Landlord's gross negligence or willful misconduct) occurring in, at or upon either or both the Property and the Premises; (d) any breach by Tenant of any of its warranties, representations or covenants under this Lease; (e) any actions necessary to protect Landlord's interest under this Lease in a bankruptcy proceeding or other proceeding under the Bankruptcy Code; (f) any violation or alleged violation by Tenant of any Laws, including, without limitation, any Environmental Law; (g) any breach of the provisions of Article 9 by Tenant or any of Tenant's Parties; (h) any generation, transport, storage, use, treatment, disposal or presence on, about or from the Premises or the Property of any Hazardous Materials; (i) claims for work or labor performed or materials supplies furnished to or at the 10 -------------------------------------------------------------------------------- request of Tenant; and (j) claims arising from any breach or default on the part of Tenant in the performance of any covenant contained in this Lease (collectively, "Tenant's Indemnified Matters"). In case any action or proceeding is brought against any or all of Landlord and the Landlord Indemnified Parties by reason of any of Tenant's Indemnified Matters, Tenant, upon notice from any or all of Landlord, Agent or any Superior Party (defined below), shall resist and defend such action or proceeding by counsel reasonably satisfactory to Landlord. The term "Losses" shall mean all claims, demands, expenses, actions, judgments, damages (whether direct or indirect, known or unknown, foreseen or unforeseen), penalties, fines, liabilities, losses of every kind and nature (including, without limitation, property damage, diminution in value of Landlord's interest in the Premises or the Property, damages for the loss or restriction on use of any space or amenity within the Premises or the Property, damages arising from any adverse impact on marketing space in the Property, sums paid in settlement of claims and any costs and expenses associated with injury, illness or death to or of any person), suits, administrative proceedings, costs and fees, including, without limitation, attorneys' and consultants' fees and expenses, and the costs of cleanup, remediation, removal and restoration, that are in any way related to any matter covered by the foregoing indemnity. The provisions of this Section 17.2.1 shall survive the expiration or termination of this Lease.     17.2.2.  Landlord Indemnification.  Landlord hereby indemnifies, defends and holds Tenant harmless from and against any and all claims, losses, costs, damages (actual, but not consequential or speculative), judgments, causes of action, administrative proceedings and third party expenses (including, but not limited to, court costs and reasonable attorneys' fees) actually suffered or incurred by Tenant as the sole and direct result of any negligent, willful or intentional acts or omissions of any or all of Landlord, Agent and any parties within the direct and sole control of either of Landlord or Agent. In the event that any action or proceeding is brought against Tenant, and the foregoing indemnity is applicable to such action or proceeding, then Landlord, upon notice from Tenant, shall resist and defend such action or proceeding by counsel reasonably satisfactory to Tenant. Notwithstanding anything to the contrary set forth in this Lease, however, in all events and under all circumstances, the liability of Landlord to Tenant shall be limited to the interest of Landlord in the Property, and Tenant agrees to look solely to Landlord's interest in the Property for the recovery of any judgment or award against Landlord, it being intended that Landlord shall not be personally liable for any judgment or deficiency. The provisions of this Section 17.2.2 shall survive the expiration or termination of this Lease.     17.3.  Force Majeure.  The obligations of Tenant hereunder shall not be affected, impaired or excused, and Landlord shall have no liability whatsoever to Tenant, with respect to any act, event or circumstance arising out of (a) Landlord's failure to fulfill, or delay in fulfilling any of its obligations under this Lease by reason of labor dispute, governmental preemption of property in connection with a public emergency or shortages of fuel, supplies, or labor, or any other cause, whether similar or dissimilar, beyond Landlord's reasonable control; or (b) any failure or defect in the supply, quantity or character of utilities furnished to the Premises, or by reason of any requirement, act or omission of any public utility or others serving the Property, beyond Landlord's reasonable control. 18. DAMAGE OR DESTRUCTION     18.1.  Notification and Repair.  Tenant shall give prompt notice to Landlord and Agent of (a) any fire or other casualty to the Premises or the Property, and (b) any damage to or defect in any part or appurtenance of the Property's sanitary, electrical, HVAC, elevator or other systems located in or passing through the Premises or any part thereof. Subject to the provisions of Section 18.3 below, if the Property or the Premises is damaged by fire or other insured casualty, Landlord shall repair (or cause Agent to repair) the damage and restore and rebuild the Property and/or the Premises (except for Tenant's Property) with reasonable dispatch after (x) notice to it of the damage or destruction and 11 -------------------------------------------------------------------------------- (y) the adjustment of the insurance proceeds attributable to such damage. Subject to the provisions of Section 18.3 below, Tenant shall not be entitled to terminate this Lease and no damages, compensation or claim shall be payable by Landlord for purported inconvenience, loss of business or annoyance arising from any repair or restoration of any portion of the Premises or of the Property pursuant to this Section. Landlord (or Agent, as the case may be) shall use its diligent, good faith efforts to make such repair or restoration promptly and in such manner as not to unreasonably interfere with Tenant's use and occupancy of the Premises, but Landlord or Agent shall not be required to do such repair or restoration work except during normal business hours of business days.     18.2.  Rental Abatement.  If (a) the Property is damaged by fire or other casualty thereby causing the Premises to be inaccessible or (b) the Premises are partially damaged by fire or other casualty, the Rent shall be proportionally abated to the extent of any actual loss of use of the Premises by Tenant.     18.3.  Total Destruction.  If the Property or the Premises shall be totally destroyed by fire or other casualty, or if the Property shall be so damaged by fire or other casualty that (in the opinion of a reputable contractor or architect designated by Landlord) (i) its repair or restoration requires more than one hundred eighty (180) days or (ii) such repair or restoration requires the expenditure of more than fifty percent (50%) of the full insurable value of the Property immediately prior to the casualty or (iii) the damage (x) is less than the amount stated in (ii) above, but more than ten percent (10%) of the full insurable value of the Property; and (y) occurs during the last two (2) years of the Initial Term or Renewal Term, Landlord and Tenant shall each have the option to terminate this Lease (by so advising the other, in writing) within ten (10) days after said contractor or architect delivers written notice of its opinion to Landlord and Tenant, but in all events prior to the commencement of any restoration of the Premises or the Property by Landlord. In such event, the termination shall be effective as of the date upon which either Landlord or Tenant, as the case may be, receives timely written notice from the other terminating this Lease pursuant to the preceding sentence. If neither Landlord nor Tenant timely delivers a termination notice, this Lease shall remain in full force and effect. If (A) any holder of a mortgage or deed of trust encumbering the Property or landlord pursuant to a ground lease encumbering the Property (collectively, "Superior Parties") or other party entitled to the insurance proceeds fails to make such proceeds available to Landlord in an amount sufficient for restoration of the Premises or the Property, or (B) the issuer of any casualty insurance policies on the Property fails to make available to Landlord sufficient proceeds for restoration of the Premises or the Property, then Landlord may, at Landlord's sole option, terminate this Lease by giving Tenant written notice to such effect within thirty (30) days after Landlord receives notice from the Superior Party or insurance company, as the case may be, that such proceeds shall not be made available, in which event the termination of this Lease shall be effective as of the date Tenant receives written notice from Landlord of Landlord's election to terminate this Lease. For purposes of this Section 18.3 only, "full insurable value" shall mean replacement cost, less the cost of footings, foundations and other structures below grade. 12 -------------------------------------------------------------------------------- 19. EMINENT DOMAIN     If the whole, or any substantial portion, of the Property is taken or condemned for any public use under any Law or by right of eminent domain, or by private purchase in lieu thereof, and such taking would prevent or materially interfere with the Permitted Use of the Premises, this Lease shall terminate effective when the physical taking of said Premises occurs. If less than a substantial portion of the Property is so taken or condemned, or if the taking or condemnation is temporary (regardless of the portion of the Property affected), this Lease shall not terminate, but the Rent payable hereunder shall be proportionally abated to the extent of any actual loss of use of the Premises by Tenant. Landlord shall be entitled to any and all payment, income, rent or award, or any interest therein whatsoever, which may be paid or made in connection with such a taking or conveyance, and Tenant shall have no claim against Landlord for the value of any unexpired portion of this Lease. Notwithstanding the foregoing, any compensation specifically awarded to Tenant for loss of business or goodwill, or for its personal property, shall be the property of Tenant. 20. SURRENDER AND HOLDOVER     On the last day of the Term, or upon any earlier termination of this Lease, or upon any re-entry by Landlord upon the Premises, (a) Tenant shall quit and surrender the Premises to Landlord "broom-clean" and in good order, condition and repair, except for ordinary wear and tear and such damage or destruction as Landlord is required to repair or restore under this Lease, and (b) Tenant shall remove all of Tenant's Property therefrom, except as otherwise expressly provided in this Lease. The obligations imposed under the preceding sentence shall survive the termination or expiration of this Lease. If Tenant remains in possession after the Expiration Date hereof or after any earlier termination date of this Lease or of Tenant's right to possession: (a) Tenant shall be deemed a tenant-at-will; (b) Tenant shall pay one hundred fifty percent (150%) of the aggregate of the Base Rent and Additional Rent last prevailing hereunder, and also shall pay all damages sustained by Landlord, directly by reason of Tenant's remaining in possession after the expiration or termination of this Lease; (c) there shall be no renewal or extension of this Lease by operation of law; and (d) the tenancy-at-will may be terminated upon thirty (30) days' written notice from Landlord. The provisions of this Section 20 shall not constitute a waiver by Landlord of any re-entry rights of Landlord provided hereunder or by law. 21. EVENTS OF DEFAULT     21.1.  Default Provisions.  Without limitation of the other terms and provisions of this Lease, each of the following shall constitute a default by Tenant under this Lease: (a) if Tenant fails to pay Rent or any other payment when due hereunder; or (b) if Tenant fails, whether by action or inaction, to timely comply with, or satisfy, any or all of the obligations imposed on Tenant under this Lease (other than the obligation to pay Rent) for a period of thirty (30) days after Landlord's delivery to Tenant of written notice of such default under this Subsection 21.1; provided, however, that if the default cannot, by its nature, be cured within such thirty (30) day period, but Tenant commences and diligently pursues a cure of such default promptly within the initial thirty (30) day cure period, then Landlord shall not exercise its remedies under Section 22 unless such default remains uncured for more than sixty (60) days after Landlord's notice.     21.2.  Bankruptcy of Tenant.  It shall be a default by Tenant under this Lease if Tenant makes an assignment for the benefit of creditors, or files a voluntary petition under any state or federal bankruptcy or insolvency law, or an involuntary petition alleging an act of bankruptcy or insolvency is filed against Tenant under any state or federal bankruptcy or insolvency law that is not dismissed within ninety (90) days, or whenever a petition is filed by or against (to the extent not dismissed within ninety (90) days) Tenant under the reorganization provisions of the United States Bankruptcy Code or under the provisions of any law or like import, or whenever a petition shall be filed by Tenant under the arrangement provisions of the United States Bankruptcy Code or similar law, or whenever a receiver of 13 -------------------------------------------------------------------------------- Tenant, or of, or for, the property of Tenant shall be appointed, or Tenant admits it is insolvent or is not able to pay its debts as they mature. 22. RIGHTS AND REMEDIES     22.1.  Landlord's Cure Rights Upon Default of Tenant.  If Tenant defaults in the performance of any of its obligations under this Lease, Landlord, without thereby waiving such default, may (but shall not be obligated to) perform the same for the account, and at the expense of, Tenant upon compliance with any notice requirements and cure periods set forth in Section 21.2.     22.2.  Landlord's Remedies.  In the event of any default by Tenant under this Lease, Landlord, at its option, and after the proper notice and cure period, but without additional notice or demand from Landlord, if any, as provided in Section 21.1 has expired, may, in addition to all other rights and remedies provided in this Lease, or otherwise at law or in equity: (a) terminate this Lease and Tenant's right of possession of the Premises, and recover all damages to which Landlord is entitled under law, specifically including, without limitation, accelerated Base Rent and Additional Rent attributable to the balance of the Term, and all Landlord's reasonable expenses of reletting the Premises (including repairs, alterations, improvements, additions, decorations, legal fees and brokerage commissions), or (b) terminate Tenant's right of possession of the Premises without terminating this Lease; provided, however, that Landlord shall use its reasonable efforts, whether Landlord elects to proceed under Subsections (a) or (b) above, to relet the Premises, or any part thereof for the account of Tenant, for such rent and term and upon such terms and conditions as are acceptable to Landlord. If Landlord elects to pursue its rights and remedies under Subsection (b), then Landlord shall at any time have the further right and remedy to rescind such election and pursue its rights and remedies under Subsection (a). For purposes of any reletting, Landlord is authorized to decorate, repair, alter and improve the Premises to the extent deemed necessary by Landlord, in its sole, but reasonable, discretion. If the Premises are relet and a sufficient sum is not realized therefrom, to satisfy the payment, when due, of Base Rent and Additional Rent reserved under the Lease for any monthly period (after payment of all Landlord's reasonable expenses of reletting), then Tenant shall, in Landlord's sole judgment, either (i) pay any such deficiency monthly or (ii) pay such deficiency on an accelerated basis, which accelerated deficiency shall be discounted at a rate of six percent (6%) per annum. If Landlord fails to relet the Premises, then Tenant shall pay to Landlord the sum of (x) the projected costs of Landlord's reasonable expenses of reletting (including the anticipated costs of repairs, alterations, improvements, additions, legal fees and brokerage commissions) as reasonably estimated by Landlord and (y) the accelerated amount of Base Rent and Additional Rent due under the Lease for the balance of the Term, discounted at a rate of six percent (6%) per annum. Tenant agrees that Landlord may file suit to recover any sums due to Landlord hereunder from time to time and that such suit or recovery of any amount due Landlord hereunder shall not be any defense to any subsequent action brought for any amount not theretofore reduced to judgment in favor of Landlord. In the event Landlord elects, pursuant to Subsection (b) of this Section 22.2, to terminate Tenant's right of possession only, without terminating this Lease, Landlord may, at Landlord's option, enter into the Premises, remove Tenant's Property, Tenant's signs and other evidences of tenancy, and take and hold possession thereof, as provided in Section 20 hereof; provided, however, that such entry and possession shall not terminate this Lease or release Tenant, in whole or in part, from Tenant's obligation to pay the Base Rent and Additional Rent reserved hereunder for the full Term, or from any other obligation of Tenant under this Lease. Any and all property that may be removed from the Premises by Landlord pursuant to the authority of the Lease or of law, to which Tenant is or may be entitled, may be handled, removed or stored by Landlord at the risk, cost and expense of Tenant, and in no event or circumstance shall Landlord be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all expenses incurred in such removal and all storage charges against such property so long as the same shall be in Landlord's possession or under Landlord's control. Any such property of Tenant not retaken from storage by Tenant within thirty (30) days after the end of the 14 -------------------------------------------------------------------------------- Term, however terminated, shall be conclusively presumed to have been conveyed by Tenant to Landlord under this Lease as in a bill of sale, without further payment or credit by Landlord to Tenant.     22.3.  Additional Rights of Landlord.  Any and all costs, expenses and disbursements, of any kind or nature, incurred by Landlord or Agent in connection with the enforcement of any and all of the terms and provisions of this Lease, including reasonable attorneys' fees (through all appellate proceedings), shall be due and payable (as Additional Rent) upon Landlord's submission of an invoice therefor. All sums advanced by Landlord or Agent on account of Tenant under this Section, or pursuant to any other provision of this Lease, and all Base Rent and Additional Rent, if delinquent or not paid by Tenant and received by Landlord when due hereunder, shall bear interest at the rate of five percent (5%) per annum above the "prime" or "reference" or "base" rate of interest publicly announced as such, from time to time, by The First National Bank of Chicago, from the due date thereof until paid, and such interest shall be and constitute Additional Rent and be due and payable upon Landlord's or Agent's submission of an invoice therefor. The various rights, remedies and elections of Landlord reserved, expressed or contained herein are cumulative and no one of them shall be deemed to be exclusive of the others or of such other rights, remedies, options or elections as are now or may hereafter be conferred upon Landlord by law.     22.4.  Event of Bankruptcy.  In addition to, and in no way limiting the other remedies set forth herein, Landlord and Tenant agree that if Tenant ever becomes the subject of a voluntary or involuntary bankruptcy, reorganization, composition, or other similar type proceeding under the federal bankruptcy laws, as now enacted or hereinafter amended, then: (a) "adequate assurance of future performance" by Tenant and/or any assignee of Tenant pursuant to Bankruptcy Code Section 365 will include (but not be limited to) payment of an additional/new security deposit in the amount of three (3) times the then-current Base Rent payable hereunder; (b) any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code, shall be deemed, without further act or deed, to have assumed all of the obligations of Tenant arising under this Lease on and after the effective date of such assignment. Any such assignee shall, upon demand by Landlord, execute and deliver to Landlord an instrument confirming such assumption of liability; (c) notwithstanding anything in this Lease to the contrary, all amounts payable by Tenant to or on behalf of Landlord under this Lease, whether or not expressly denominated as "Rent", shall constitute "rent" for the purposes of Section 502(b)(6) of the Bankruptcy Code; and (d) if this Lease is assigned to any person or entity pursuant to the provisions of the Bankruptcy Code, any and all monies or other considerations payable or otherwise to be delivered to Landlord or Agent (including Base Rent, Additional Rent and other amounts hereunder), shall be and remain the exclusive property of Landlord and shall not constitute property of Tenant or of the bankruptcy estate of Tenant. Any and all monies or other considerations constituting Landlord's property under the preceding sentence not paid or delivered to Landlord or Agent shall be held in trust by Tenant or Tenant's bankruptcy estate for the benefit of Landlord and shall be promptly paid to or turned over to Landlord. 23. BROKER     Tenant covenants, warrants and represents that the broker set forth in Section 1.10(A) was the only broker to represent Tenant in the negotiation of this Lease ("Tenant's Broker"). Landlord covenants, warrants and represents that the broker set forth in Section 1.10(B) was the only broker to represent Landlord in the negotiation of this Lease ("Landlord's Broker"). Landlord shall be solely responsible for paying the commission of Landlord's Broker. Each party agrees to and hereby does defend, indemnify and hold the other harmless against and from any brokerage commissions or finder's fees or claims therefor by a party claiming to have dealt with the indemnifying party and all costs, expenses and liabilities in connection therewith, including, without limitation, reasonable attorneys' fees and expenses, for any breach of the foregoing. The foregoing indemnification shall survive the termination of this Lease for any reason. 15 -------------------------------------------------------------------------------- 24. MISCELLANEOUS     24.1.  Merger.  All prior understandings and agreements between the parties are merged in this Lease, which alone fully and completely expresses the agreement of the parties. No agreement shall be effective to modify this Lease, in whole or in part, unless such agreement is in writing, and is signed by the party against whom enforcement of said change or modification is sought.     24.2.  Notices.  Any notice required to be given by either party pursuant to this Lease, shall be in writing and shall be deemed to have been properly given, rendered or made only if personally delivered, or if sent by Federal Express or other comparable commercial overnight delivery service, addressed to the other party at the addresses set forth below (or to such other address as Landlord or Tenant may designate to each other from time to time by written notice), and shall be deemed to have been given, rendered or made on the day so delivered or on the first business day after having been deposited with the courier service: If to Landlord;   Hoyt Properties Inc. 708 South Third Street Suite 108 Minneapolis, MN 55415   If to Tenant:       Datalink Corporation 7423 Washington Ave. So. Minneapolis, MN 55439   If to Tenant after Lease Commencement:       Datalink Corporation (to be assigned)             --------------------------------------------------------------------------------     24.3  Non-Waiver.  The failure of either party to insist, in any one or more instances, upon the strict performance of any one or more of the obligations of this Lease, or to exercise any election herein contained, shall not be construed as a waiver or relinquishment for the future of the performance of such one or more obligations of this Lease or of the right to exercise such election, but the Lease shall continue and remain in full force and effect with respect to any subsequent breach, act or omission. The receipt and acceptance by Landlord or Agent of Base Rent or Additional Rent with knowledge of breach by Tenant of any obligation of this Lease shall not be deemed a waiver of such breach.     24.4  Legal Costs.  Any party in breach or default under this Lease (the "Defaulting Party") shall reimburse the other party (the "Nondefaulting Party") upon demand for any legal fees and court (or other administrative proceeding) costs or expenses that the Nondefaulting Party incurs in connection with the breach or default, regardless whether suit is commenced or judgment entered. Such costs shall include legal fees and costs incurred for the negotiation of a settlement, enforcement of rights or otherwise. Furthermore, in the event of litigation, the court in such action shall award to the party in whose favor a judgment is entered a reasonable sum as attorneys' fees and costs, which sum shall be paid by the losing party. Tenant shall pay Landlord's attorneys' reasonable fees incurred in connection with Tenant's request for Landlord's consent under provisions of this Lease governing assignment and subletting, or in connection with any other act which Tenant proposes to do and which requires Landlord's consent.     24.5  Parties Bound.  Except as otherwise expressly provided for in this Lease, this Lease shall be binding upon and inure the benefit of, the successors and assignees of the parties hereto. Tenant hereby releases Landlord named herein from any obligations of Landlord for any period subsequent to the conveyance and transfer of Landlord's ownership interest in the Property. In the event of such conveyance and transfer, Landlord's obligations shall thereafter be binding upon each transferee 16 -------------------------------------------------------------------------------- (whether Successor Landlord or otherwise). No obligation of Landlord shall arise under this Lease until the instrument is signed by, and delivered to, both Landlord and Tenant.     24.6  Recordation of Lease.  Tenant shall not record or file this Lease (or any memorandum hereof) in the public records of any county or state.     24.7  Survival of Obligations.  Upon the expiration or other termination of this Lease, neither party shall have any further obligation or liability to the other except as otherwise expressly provided in this Lease and except for such obligations as, by their nature or under the circumstances, can only be, or by the provisions of this Lease, may be performed after such expiration or other termination.     24.8  Governing Law; Construction.  This Lease shall be governed by and construed in accordance with the laws of the state in which the Property is located. If any provision of this Lease shall be invalid or unenforceable, the remainder of this Lease shall not be affected but shall be enforced to the extent permitted by law. The captions, headings and titles in this Lease are solely for convenience of reference and shall not affect its interpretation. This Lease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Lease to be drafted. Each covenant, agreement, obligation, or other provision of this Lease to be performed by Tenant, shall be construed as a separate and independent covenant of Tenant, not dependent on any other provision of this Lease. All terms and words used in this Lease, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other gender as the context may require. This Lease may be executed in counterpart and, when all counterpart documents are executed, the counterparts shall constitute a single binding instrument.     24.9  Time.  Time is of the essence of this Lease. If the time for performance hereunder falls on a Saturday, Sunday or a day that is recognized as a holiday in the state in which the Property is located, then such time shall be deemed extended to the next day that is not a Saturday, Sunday or holiday in said state.     24.10  Authority of Tenant.  If Tenant is a corporation, partnership, association or any other entity, it shall deliver to Landlord, concurrently with the delivery to Landlord of an executed Lease, certified resolutions of Tenant's directors or other governing person or body (i) authorizing execution and delivery of this Lease and the performance by Tenant of its obligations hereunder and (ii) certifying the authority of the party executing the Lease as having been duly authorized to do so.     24.11  WAIVER OF TRIAL BY JURY.  THE LANDLORD AND THE TENANT, TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY ANY PARTY TO THIS LEASE WITH RESPECT TO THIS LEASE, THE PREMISES, OR ANY OTHER MATTER RELATED TO THIS LEASE OR THE PREMISES.     24.12  Submission of Lease.  Submission of this Lease to Tenant for signature does not constitute a reservation of space or an option to lease. This Lease is not effective until execution by and delivery to both Landlord and Tenant.     24.13  Right of First Opportunity to Purchase.  If at any time during the Lease Term the Landlord decides to market the Property for sale, Landlord shall advise Tenant in writing of its intent to market the Property, and indicate terms upon which Landlord would sell the Property to a qualified third party. Tenant shall have thirty (30) days from the date of receipt of such notice to negotiate with Landlord a purchase in general conformity with Landlord's terms. Landlord and Tenant agree to negotiate in good faith. After such thirty (30) day period (if Landlord and Tenant have not executed a Purchase Agreement), Landlord may market the Property to third party prospective buyers without regard to any right(s) to purchase the Property by Tenant pursuant to this Lease. If Landlord enters into an agreement to sell the Property to a third party, Tenant agrees to execute an Estoppel confirming (a) the status of the Lease and (b) Tenant's waiver of right(s) to purchase the Property. 17 -------------------------------------------------------------------------------- Tenant's rights hereunder shall not survive past the initial sale of the Property to a third party. Future owners of the Property shall have no obligation to offer Tenant any such opportunity to purchase the Property.     24.14  Riders.  All Riders and Exhibits attached hereto and executed (or initialed both by Landlord and Tenant) shall be deemed to be a part hereof and hereby incorporated herein.     IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of the day and year first above written.     LANDLORD:   HOYT/DTLK LLC                   By:       /s/ STEVEN B. HOYT             --------------------------------------------------------------------------------             Its:   Chief Manager                 --------------------------------------------------------------------------------           TENANT:       DATALINK CORPORATION                   By:       /s/ GREG MELAND             --------------------------------------------------------------------------------             Its:   President & CEO                 -------------------------------------------------------------------------------- 18 -------------------------------------------------------------------------------- LEASE EXHIBIT A LEGAL DESCRIPTION Lot 5, Block 1, Chanhassan Lakes Business Park 7th Addition Carver County, Minnesota A-1 -------------------------------------------------------------------------------- LEASE EXHIBIT B CONSTRUCTION OF IMPROVEMENTS     This Exhibit B to the Lease sets forth the rights and obligations of Landlord and Tenant with respect to the construction of the Improvements (as hereinafter defined).     1.  Definitions:  For purposes of this Exhibit, the following terms shall have the following meanings, and terms which are not defined below, but which are defined in the Lease shall have such meanings herein as are ascribed to such terms by the Lease:     (a)  Preliminary Drawings:  The term "Preliminary Drawings" shall mean the outline specifications and preliminary drawings prepared on behalf of Landlord and approved by Tenant for the Improvements to be constructed by Landlord which are described in attached Exhibit B-1.     (b)  Improvements:  The term "Building Improvements" shall mean a 2 story building (the "Building") located on the Property containing approximately 97,055 square feet, together with all building shell improvements and all related nonstructural improvements and utilities to be located on the Property, to be as more particularly shown and described in the Building Improvements Final Plans and Specifications (defined below) to be prepared by Landlord as hereinafter provided. Building Improvements shall not include the "Tenant Improvements" referred to in Section 1(d) below.     (c)  Substantial Completion and Substantially Complete.  The terms "Substantial Completion" and "Substantially Complete" shall each mean the earlier of: (i) the date when the construction of the Building Improvements and the Tenant Improvements have been substantially completed in accordance with the requirements of the Final Plans and Specifications and the Tenant Improvement Plans and Specifications, respectively, excepting only "punch list items", or (ii) the date Tenant begins conducting business or commences operations within the Building, or (iii) the issuance of a temporary or permanent certificate of occupancy by the City of Chanhassen.     (d)  Tenant Improvements.  "Tenant Improvements" shall mean the alterations, additions or improvements to be made or constructed to the interior of the Building in excess of Building Improvements.     2.  Construction of Building Improvements:  The parties acknowledge that they currently contemplate that Landlord shall cause the General Contractor to construct the Improvements in substantial accordance with the Preliminary Drawings; and that the final plans, specifications and working drawings for the construction of the Building Improvements will be prepared on behalf of Landlord, based on the Preliminary Drawings (the "Final Plans and Specifications").     (a)  Development and Approval of Building Final Plans and Specifications:  As soon hereafter as is reasonably practical, Landlord shall cause the Building Final Plans and Specifications to be prepared and delivered to Tenant for its review and approval (which approval shall not be unreasonably withheld). For purposes of this Lease, Tenant's review and approval of the Building Final Plans and Specifications shall be limited solely to those items that do not materially conform to the Preliminary Drawings. Tenant, acting reasonably and in good faith, shall have five (5) business days from Landlord's delivery of the Building Final Plans and Specifications to advise Landlord, in writing, as to whether or not Tenant desires any changes to the Building Final Plans and Specifications because of a material deviation from the Preliminary Drawings. If Tenant fails to timely respond, Tenant shall automatically be deemed to have approved the Building Final Plans and Specifications. If Tenant timely requests a change to the Building Final Plans and Specifications ("Tenant's Objection"), Tenant shall also, within such 5 business day period, advise Landlord, with reasonable specificity and detail, of Tenant's Objection, and provided Landlord determines and agrees that such requested change is necessary due to a material deviation in the Building Final Plans and Specifications from the Preliminary Drawings, Landlord shall then use its reasonable efforts to incorporate such change in the Building Final Plans and Specifications as B-1 -------------------------------------------------------------------------------- soon as reasonably practicable after delivery of Tenant's Objection. Upon approval or deemed approval of the Building Final Plans and Specifications, those Building Final Plans and Specifications shall replace and be utilized and relied on in lieu of the Preliminary Drawings. (The date on which Landlord and Tenant mutually agree upon the Building Final Plans and Specifications, or the date on which Tenant is deemed to have approved them, whichever is applicable, shall be referred to as the "Building Improvements Plan Approval Date").     (b)  Building Improvements Construction Contract.  The parties acknowledge that Landlord proposes to enter into a contract for construction (the "Building Improvements Construction Contract") of the Building Improvements with a general contractor (the "General Contractor") to be selected by Landlord, subject to Tenant's consent, which consent shall not be unreasonably withheld. Landlord may elect to replace, in its reasonable discretion and for good cause, the General Contractor at any time.     (c)  Commencement and Completion of Construction of the Building Improvements.  Landlord shall, at Landlord's sole cost and expense (except as otherwise provided herein), furnish all of the design, material, labor and equipment required to construct the Improvements on the Property, pursuant to and as described by the Preliminary Drawings, as revised by the Final Plans and Specifications. The Building Improvements shall be constructed in a good and workmanlike manner, substantially in accordance with the Building Final Plans and Specification and completed substantially in accordance with all applicable statutes, ordinances and building codes, governmental rules, regulations and orders relating to construction of the Improvements (but not relating to Tenant's use or occupancy). Landlord shall diligently proceed with the construction of the Building Improvements. If Landlord fails to substantially complete the Building Improvements and deliver possession of the Premises to Tenant on or before the Tenant's Possession Date and such failure is caused or contributed to by Tenant Delays (as hereinafter defined), or delays caused by Tenant or those acting for or under Tenant, or Force Majeure Delays (as hereinafter defined) (collectively, "Excused Delays") then the Tenant's Possession Date shall be extended for any and all delays in the Substantial Completion of the Building Improvements caused by or attributable to such Excused Delay(s).     (d)  Changes to Final Plans and Specifications.  After the Building Improvements Plan Approval Date, Tenant shall not have the right to order extra work or change orders with respect to the construction of the Improvements without the prior written consent of Landlord. Extra work or change orders requested by either Landlord or Tenant shall be made in writing, shall specify in detail any added or reduced cost and/or estimate of construction delay resulting therefrom, and shall become effective and a part of the Building Final Plans and Specifications once approved in writing by both parties. If a change order approved or requested by Tenant results in an increase in the cost of constructing the Improvements, Tenant shall pay the amount of such increase caused by the change order approved or requested by Tenant as provided in Section 3 below.     (e)  Increases in Cost of Construction.  In the event that due to any Excused Delays or any requested change in the scope or design of the Project by Tenant, Landlord will incur additional or increased costs in connection with construction of the Improvements, then Tenant shall be solely responsible for such costs, which Tenant shall pay promptly upon receipt of invoices from Landlord, and in any event within fifteen (15) days after receipt of such invoices. Provided, however, that any increased costs attributable to winter conditions shall not exceed $175,000.     3.  Construction of Tenant Improvements.  The parties acknowledge that they currently contemplate that Tenant shall cause the "Tenant's General Contractor" to construct the Tenant Improvements in substantial accordance with the plans, specifications, and working drawings for the construction of the Tenant Improvements to be prepared on behalf of Tenant (the "Tenant Improvement Plans and Specifications"). B-2 --------------------------------------------------------------------------------     (a)  Development and approval of the Tenant Improvements Plans and Specifications.  As soon hereafter as reasonably practical, Tenant shall cause the Tenant Improvement Plans and Specifications to be prepared and delivered to Landlord for its review and approval (which approval shall not be unreasonably withheld). Landlord, acting reasonably and in good faith, shall have five (5) business days from Tenant's delivery of the Tenant Improvement Plans and Specifications to advise Tenant, in writing, as to whether Landlord desires any changes to the Tenant Improvement Plans and Specifications. If Landlord timely requests a change to the Tenant Improvement Plans and Specifications ("Landlord's Objection"), Landlord shall also, within such five (5) business day period, advise Tenant, with reasonable specificity and detail, of Landlord's Objection, and provided Tenant determines and agrees that such requested change is reasonable and in accord with Tenant's space plan and desired design criteria, Tenant shall then use its reasonable efforts to incorporate such change into the Tenant Improvement Plans and Specifications as soon as reasonably practical after delivery of Landlord's Objection. Upon approval or deemed approval of the Tenant Improvement Plans and Specifications, the Tenant Improvement Plans and Specifications shall be considered final and complete unless subsequently changed as provided herein. The date on which Landlord and Tenant mutually agree on the Tenant Improvement Plans and Specifications, or the date on which Tenant is deemed to have approved them, whichever is applicable, shall be referred to as the "Tenant Improvement Plans Approval Date").     (b)  Tenant Improvements Construction Contract.  The parties acknowledge that Tenant proposes to enter into a contract for construction (the "Tenant Improvements Construction Contract") of the Tenant Improvements with a general contractor (the "Tenant's General Contractor") selected by it, subject to Landlord's consent, which consent shall not be unreasonably withheld.     (c)  Commencement and completion of Construction of the Tenant Improvements.  Tenant shall, at Tenant's sole cost and expense (except as otherwise provided herein), furnish all of the design, material, labor and equipment required to construct to Tenant Improvements on the Premises, pursuant to and as described by the Tenant Improvements Plans and Specifications. The Tenant Improvements shall be constructed in a good and workmanlike manner, substantially in accordance with the Tenant Improvements Plans and Specifications and completed substantially in accordance with all applicable statutes, ordinances, and building codes, governmental rules, regulations and orders relating to construction of the Tenant Improvements. Provided that Landlord diligently proceeds with construction of the Building Improvements, Tenant shall, at such time as the building shell is complete, diligently proceed with construction of the Tenant Improvements.     (d)  Changes to Tenant Improvement Plans and Specifications.  After the Tenant Improvements Plans Approval Date, Tenant shall not have the right to order extra work or change orders with respect to the construction of the Tenant Improvements which would affect the structural integrity of the Building or the efficiency or operation of the Building's heating, ventilating, plumbing or electrical equipment or systems without the prior written consent of Landlord. Extra work or change orders requested by either Landlord or Tenant shall be made in writing, shall specify in detail any added or reduced cost and/or estimate of construction delay resulting therefrom, and shall become effective and a part of the Tenant Improvements Plans and Specifications once approved in writing by both parties.     (e)  Landlord's Contribution.  Upon completion of the Tenant Improvements and Tenant's satisfaction of all requirements as set forth herein, Landlord shall make a dollar contribution of Two million five hundred thousand ($2,500,000) Dollars ("Landlord's Contribution") for application to the cost of the Tenant Improvements. If the cost of the Tenant Improvements exceeds the Landlord's Contribution, Tenant shall have the sole responsibility for the payment of such excess cost. If the cost of the Tenant Improvements is less than Landlord's Contribution, Tenant may elect (a) to receive a refund from Landlord in an amount equal to the difference B-3 -------------------------------------------------------------------------------- between the cost of the Tenant Improvements and $2,500,000, or (b) receive a credit toward installments of Rent as they become due under the Lease. At Tenant's option, Tenant may request that portions of Landlord's Contribution be paid out in installments utilizing prudent construction draw disbursement procedures reasonably required by Landlord; provided, however, that it is understood and agreed that (i) if Landlord elects to make such disbursements through a title insurance company, Tenant will pay all fees and costs of the title insurance company; and (ii) Tenant shall not make more than one draw request in any calendar month.     4.  Tenant's Extra Work.  If Tenant desires that any work be performed in connection with the construction of the Improvements other than, or in addition to, the work described in the Preliminary Drawing (or the Final Plans and Specifications once completed and delivered to Tenant), as approved by Landlord and Tenant [such other work is hereinafter called "Tenant's Extra Work"], the following provisions shall be applicable:     (a) Tenant shall, at its sole cost and expense, furnish to Landlord, Landlord's architect, Landlord's General Contractor, and any electrical and mechanical consultants engaged by Landlord (collectively, "Landlord's Consultants"), such information as may reasonably be necessary to cause Landlord's Consultants to prepare and submit to Landlord all necessary drawings, plans and specifications covering the Tenant's Extra Work (such drawings, plans and specifications are hereinafter called "Tenant's Extra Work Plans"). Tenant shall pay the reasonable fees and expenses of Landlord's Consultants to prepare Tenant's Extra Work Plans within ten (10) business days of Landlord's delivery of the billing statement(s) therefor.     (b) Landlord agrees to construct the Tenant's Extra Work provided (a) the Tenant's Extra Work Plans are acceptable to Landlord in its sole discretion and approved in writing by it, and (b) Tenant has not defaulted under, or otherwise breached, the terms and provisions of this Lease.     (c) Prior to commencing any Tenant's Extra Work, Landlord shall submit to Tenant for Tenant's approval, a written estimate of the cost of Tenant's Extra Work and any projected delay in the estimated Commencement Date resulting from the proposed Tenant's Extra Work (hereinafter called "Estimate"). Landlord shall not be obligated to proceed with Tenant's Extra Work until the Estimate is approved in writing by Tenant. Tenant shall have five (5) business days from Landlord's delivery of the Estimate to advise Landlord of Tenant's approval or disapproval thereof. If Tenant fails to timely approve the Estimate, then Tenant shall automatically be deemed to have disapproved the Estimate and therefore, Landlord shall have no obligation to perform Tenant's Extra Work. The cost incurred in the performance of Tenant's Extra Work is due and payable to Landlord within a reasonable period of time prior to such time as Landlord is obligated to pay its contractor for such work pursuant to its Construction Contract with such contractor (whether on a percentage of completion basis or otherwise). If Tenant fails timely to make any payments for Tenant's Extra Work, Landlord may immediately cease to perform the Tenant's Extra Work and any delays in the Commencement Date set forth in the Estimate shall nonetheless remain effective for all relevant purposes. For purposes hereof, Tenant's Extra Work shall be deemed to also include the following items: i) All subcontract costs and general conditions pertaining to the Tenant's Extra Work; and (ii) An overhead, profit and building supervision charge of nine percent (9%) of the total cost of Tenant's Extra Work.     5.  Rent Commencement Date:  Landlord and Tenant contemplate that the Building and the Premises will be substantially complete on or about April 1, 2001 (the "Scheduled Commencement Date"). Tenant shall be liable to Landlord for the payment of Base Rent and any other payments under the Lease beginning on the day (the "Commencement Date") after the date on which the Building Improvements and the Tenant Improvements are Substantially Completed; subject, however, to any postponement of the Commencement Date occurring as a result of Tenant Delays. If the Building Improvements or Tenant Improvements are not Substantially Completed but are partially ready for occupancy, Tenant may, but need not, occupy the portion of the Improvements that is ready for B-4 -------------------------------------------------------------------------------- occupancy, provided such partial occupancy is permitted by applicable law, and in the event of such partial occupancy, Tenant shall pay to Landlord pro rata Rent based upon the area of the Premises so occupied by Tenant. Such obligation to pay Rent on a proportionate basis shall commence on the date on which Tenant first occupies and takes possession of any portion of the Premises, and shall continue through the date on which all of the Improvements are Substantially Completed. Tenant's right to so occupy and utilize a portion of the Premises shall nevertheless be subject to Landlord's reasonable approval, and throughout such partial occupancy, Tenant shall fully cooperate with Landlord to facilitate Landlord's Substantial Completion of any remaining or outstanding Improvements without any interference. If Tenant occupies any portion of the Premises prior to Substantial Completion thereof, the provisions of this Lease shall apply to such occupancy or use of the Premises by Tenant, except that the Term of this Lease shall not commence until the date that the entire Premises is Substantially Completed.     6.  Delays in Completion.       (a)  Force Majeure Delays.  If Landlord, as the result of any (i) strikes, lockouts or labor disputes, (ii) inability to obtain labor or materials or reasonable substitutes therefor, (iii) inclement weather which delays or precludes construction, acts of God or the public enemy, condemnation, civil commotion, fire or other casualty, (iv) shortage of fuel, (v) action or nonaction of public utilities or of local, state or federal governments, affecting the work, including, but not limited to, any delays in the permitting process as a result of the action or inaction or such governmental authorities, or (vi) other conditions similar to those enumerated above which are beyond the reasonable anticipation or control of Landlord, cannot reasonably perform any obligation on its part to be performed hereunder within the time periods herein specified (collectively, the "Force Majeure Delays"), then such failure shall be excused and not be a breach of Landlord's obligations under this Lease, and the deadline for performance shall be extended for a period equal to the period of delay, and Landlord will notify Tenant of the nature and probable duration of such delay. Landlord shall make reasonable efforts to minimize the impact of such delay.     (b)  Tenant Delays:  If Landlord shall be delayed in Substantially Completing the Improvements as a result of any "Tenant Delays," then, the Commencement Date and the payment of Rent under the Lease shall not be affected or deferred on account of any such Tenant Delays. "Tenant Delays" shall mean any or all of the following:      i) Tenant's failure to approve change orders on a timely basis and/or to pay invoices (within five (5) business days of submission thereof to Tenant) for excess Total Project Costs in accordance herewith; or      ii) Tenant's changes in the Preliminary Drawings and/or Building Improvements Final Plans and Specifications; or     iii) The failure by Tenant, or any person, firm or corporation employed by Tenant or its representatives or agents, to cooperate with Landlord in completion of any work in or about the Premises; or     iv) Any other act or omission by Tenant or its employees, representatives or agents; or      v) Any delay in the Substantial Completion of the Building Improvements occasioned by the Tenant Improvements; or     vi) Any delay in the Commencement Date resulting from any Tenant Extra Work to the extent that such delay was set forth in an Estimate and approved by Tenant;     vii) Any delay in the Commencement Date resulting from the acts or omissions of Tenant or its agents, employees, representatives, invitees, contractors or subcontractors in connection with Tenant's use or occupancy of the Premises. B-5 --------------------------------------------------------------------------------     Tenant hereby indemnifies, defends and holds Landlord harmless from and against any and all losses, damages, liabilities, claims, costs and expenses (including reasonable legal fees) suffered or incurred by Landlord as a result of, or because of, any Tenant Delays.     Landlord shall promptly notify Tenant of any events, conditions, circumstances, acts or omissions on the part of Tenant or its employees, agents, contractors or subcontractors that have resulted in a Tenant Delay, which notice shall specify (i) the anticipated delay in the Commencement Date resulting from such Tenant Delay as of the date of such notice and (ii) whether the conditions, events, acts, omissions or circumstances giving rise to such Tenant Delay persist as of the date of such notice.     7.  Delivery of Possession, Punch List, and Acceptance Agreement.  As soon as the Building Improvements are Substantially Completed, Landlord and Tenant shall together walk through the Premises and inspect all Improvements so completed, using reasonable efforts to discover all uncompleted or defective construction in the Improvements. After such inspection has been completed, each party shall sign an acceptance agreement in the form attached hereto as Exhibit B-2 (herein the "Acceptance Agreement"), which shall include by attachment a list of all "punch list" items which the parties agree are to be corrected by Landlord. As soon as such inspection has been completed and the Acceptance Agreement executed, Landlord shall deliver possession of the Premises to Tenant. Landlord shall use reasonable efforts to complete and/or repair such "punch list" items within thirty (30) days after executing the Acceptance Agreement. Landlord shall have no obligation to deliver possession of the Premises to Tenant until such procedures regarding the preparation of a punch list and the execution of the Acceptance Agreement have been completed     8.  Warranty.  Landlord shall, subject to the criteria and conditions set forth herein, provide its warranty with respect to the Improvements in connection with any defective workmanship and materials discovered and brought to Landlord's attention pursuant to a proper Tenant's Defect Notice (as hereinafter defined) delivered during a period of one (1) year from the date the Improvements are Substantially Completed (the "Warranty Period"). During the Warranty Period Landlord shall, at Landlord's sole cost and expense, repair or replace any defective item occasioned by defective workmanship or materials in and with respect to the construction and installation of the Improvements (and specifically excluding any installations by Tenant or any deficiencies in the Improvements created by, through or under Tenant or otherwise through no fault of or defective performance on the part of Landlord), provided that (i) Tenant notifies Landlord, in writing and with reasonable specificity and detail, of the nature and extent of any such alleged defects in the Improvements ("Tenant's Defect Notice") and (ii) Tenant delivers Tenant's Defect Notice to Landlord prior to the expiration of the Warranty Period. In no event shall Landlord be liable to Tenant for damages as a result of such defect, resulting from loss of business by Tenant or other consequential or speculative damages. Notwithstanding anything to the contrary contained herein, in no event shall Landlord be liable for, and the warranty specified above shall not apply to, defects or alleged deficiencies in any materials or workmanship in or concerning the Improvements if and to the extent the defect or deficiency is due to or caused by any Alterations performed by Tenant, installation of Tenant Improvements or the abuse, neglect, negligence or willful or intentional act or omission of Tenant or its agents, subtenants, contractors, subcontractors, invitees, successors or assigns, including, without limitation, Tenant's failure to maintain a maintenance contract with respect to the HVAC systems. From and after the expiration of the Warranty Period, (x) Landlord shall have no liability or obligation, of any nature whatsoever, to remedy, replace or correct any alleged defects and deficiencies; and (y) Landlord shall reasonably cooperate with Tenant (but at no out-of-pocket expense to Landlord) in the enforcement, by Tenant, at Tenant's sole cost and expense, of any express warranties or guarantees of workmanship or materials given by any subcontractors, architects, draftsmen, or materialmen engaged by Landlord to supply or complete any of the Improvements, if and to the extent that such guarantees or warranties remain in effect after the expiration of the Warranty Period. In providing a Tenant Defect Notice, Tenant shall be obligated to set forth with reasonable specificity and detail the nature and extent of such defect. Except as otherwise expressly set forth above in this Section from and after the earlier of the date Tenant takes B-6 -------------------------------------------------------------------------------- partial occupancy or the Commencement Date, Tenant shall have and hold the Premises in an "as-is," "where-is" condition, without any liability or obligation on the part of Landlord for making any alterations, improvements, repairs or replacements, of any kind, in or about the Premises at any time during the Term of this Lease or any extension or renewal thereof, and Tenant shall maintain the Premises, and all parts thereof, in a good and sufficient state of repair as required under this Lease. Notwithstanding Tenant's timely delivery of a Tenant's Defect Notice, at no time during the Term of this Lease, shall Tenant have any right, of any nature whatsoever, to withhold the timely payment of any Rent due under the Lease, from time to time, as a result of, or due to, or because of, any alleged breaches by Landlord under this Lease or the alleged existence of any defects or deficiencies in the Improvements. Notwithstanding anything contained herein to the contrary, none of the following items that may occur in the Improvements shall be considered defective items occasioned by defective workmanship or materials required to be repaired by Landlord pursuant to this Section 7: (i) Any chips, scratches or marks on such items as tile, woodwork, mirrors, walls, porcelain, glass (including breakage or cracks), plumbing fixtures, lighting fixtures, or doors not noted in the punch list set forth in the applicable Acceptance Agreement; (ii) Defects resulting from ordinary wear and tear, misuse or neglect, or failure to provide proper maintenance; (iii) Cracking or scaling of the concrete flat work (which includes, but is not limited to, sidewalks and warehouse floors) and cracks in foundation walls, if any, not resulting from infiltration of free water; (iv) Cracks in walks, driveways, parking lots, floor or fountains due to expanding and contracting of concrete from change in temperature and compacting of the soil on which the concrete is placed; (v) The color of the concrete; (vi) Shrinkage in structural wood members; and (vii) Drywall cracks, nail pops or seems due to drying out and normal expansion and contraction of the wood or masonry to which it has been secured.     9.  Tenant's Access.  Landlord, in its sole discretion, may permit Tenant and Tenant's agents or independent contractors to enter the Premises prior to the Commencement Date for the purpose of constructing the Tenant Improvements. Such entry shall be subject to the conditions that (i) Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers and invitees shall work in harmony and not interfere with Landlord and its agents and contractors in doing its work in, to, or on the Premises; (ii) Tenant and/or Tenant's General Contractor shall maintain in full force and effect the insurance policy or policies required under the Lease; and shall cause the Landlord to be designated an additional insured with respect to the Building Improvements; and (iii) Tenant shall pay for any utilities required solely by Tenant in connection with the Tenant's early access to the Premises. Tenant agrees that any such entry into and access to the Premises shall be deemed to be under all of the terms, covenants, conditions and provisions of the Lease, except as to the covenant to pay Rent. Tenant further agrees that to the extent permitted by law, Landlord and its principals shall not be liable in any way for any injury or death to any person or persons, loss or damage to any of Tenant's work and installations made in the Premises or loss or damage to property placed therein prior to the Commencement Date, the same being at Tenant's sole risk, unless such occurrence is due to Landlord's or Landlord's agents' gross negligence or willful misconduct. Tenant agrees to indemnify, defend and hold harmless Landlord from and against all actions, claims, demands, costs, damages (including, without limitation incidental damages and consequential damages), penalties or expenses of any kind (including, without limitation, reasonable attorneys' fees), which may be brought or made against Landlord, or which Landlord may pay or incur, by reason of the Tenant's early access to the Premises pursuant to this section or due to Tenant Improvements.     10.  Authorized Representatives:  Tenant hereby appoints Mike Jaeb as its duly authorized representative to review and approve the Preliminary Drawings and to review the Building Improvements Final Plans and Specifications, so as not to unreasonably delay completion of the Building Improvements, and Landlord hereby appoints Gary Lally as its duly authorized representative to review and approve the Tenant Improvements Plans and Specifications. Landlord and Tenant hereby represent and warrant to each other that their respective authorized representatives have authority to approve the Building Improvement Plans and Specifications and the Tenant Improvements Plans and Specifications. B-7 -------------------------------------------------------------------------------- EXHIBIT B-2 ACCEPTANCE AGREEMENT     THIS ACCEPTANCE AGREEMENT (this "Agreement") is made and entered into this      day of            ,       , by and between Datalink Corporation ("Tenant"), and Hoyt/DTLK LLC. ("Landlord"). RECITALS     A.  Landlord and Tenant have entered into that certain Lease dated August  , 2000 (as amended from time to time, the "Lease"). Capitalized terms used herein and not otherwise defined shall have the meanings respectively ascribed to them in the Lease.     B.  Landlord and Tenant desire to enter into this Agreement to set forth their understanding with respect to the Leased Property and the Lease. AGREEMENT     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:     1.  Tenant acknowledges and agrees that Tenant has completed its walk-through of the Premises. Attached hereto as Exhibit A is a punch list of items required to be completed by Landlord in or about the Premises, which punch list was prepared Westin Construction Company (the "Contractor"). Tenant hereby unconditionally accepts possession of the Leased Property for purposes of the Lease (subject, however, to the attached punch list containing only items which do not interfere with the Tenant's use and possession of the Leased Property).     2.  Tenant hereby acknowledges that there are no defaults under the Lease and that Landlord has completed all of Landlord's Work except for the attached punchlist items, and that the Premises have been delivered to Tenant for its use and occupancy.     3.  Landlord and Tenant hereby acknowledge that the Commencement Date of the Lease is      .     4.  As modified hereby, the terms of the Lease, including, without limitation, the Base Rent established pursuant to Section 1 of the Lease, are hereby ratified and shall remain in full force and effect.     IN WITNESS WHEREOF, Landlord and Tenant have executed this Agreement as of the date first above written. LANDLORD:   HOYT/DTLK LLC           By:                 --------------------------------------------------------------------------------         Its:                 --------------------------------------------------------------------------------   TENANT:             --------------------------------------------------------------------------------           By:                 --------------------------------------------------------------------------------         Its:                 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT C SCHEDULE OF BASE RENT Month --------------------------------------------------------------------------------   Monthly Base Rent --------------------------------------------------------------------------------   Annual Base Rent --------------------------------------------------------------------------------   1 - 12   $ 83,583   $ 1,002,996  13 - 24   $ 85,255   $ 1,023,060  25 - 36   $ 86,960   $ 1,043,520  37 - 48   $ 88,699   $ 1,064,388  49 - 60   $ 90,473   $ 1,085,676  61 - 72   $ 92,282   $ 1,107,384  73 - 84   $ 94,128   $ 1,129,536  85 - 96   $ 96,011   $ 1,152,132  97 - 108   $ 97,931   $ 1,175,172 109 - 120   $ 99,889   $ 1,198,668 121 - 132   $ 101,887   $ 1,222,644 133 - 144   $ 103,925   $ 1,247,100 145 - 156   $ 106,003   $ 1,272,036 157 - 168   $ 108,124   $ 1,297,489 169 - 180   $ 110,286   $ 1,323,432 Total Base Rent   $ 17,345,232 Average Annual Base Rent   $ 1,156,353 -------------------------------------------------------------------------------- EXHIBIT D SIGNAGE AND TENANT IDENTIFICATION     Tenant shall be responsible for the design, installation and cost of signage and tenant identification. All such signage shall comply with applicable building codes and regulations. Provided, however, Landlord shall furnish and install Building address letters and numbers for the Building at its sole cost and expense. -------------------------------------------------------------------------------- EXHIBIT E MANAGEMENT FEE     Tenant agrees to pay to Landlord, as a component of Additional Rent, a management fee equal to 2% of Base Rent. Basic services provided for this fee include: •Physical property management related to shell building components •Vendor/Supplier management •Real Estate tax analysis and recommendation regarding appeal •Payment of building Operating Expenses •Reconciliation of building Operating Expenses •Compliance and response to requests from municipality and/or governmental agencies regarding the Property.     Additional services may be provided by Landlord for an additional fee. -------------------------------------------------------------------------------- EXHIBIT F MISCELLANEOUS PROVISIONS Preliminary Drawings     To be completed by Architect by August 31, 2000 and used by Contractor to generate costs to be included in Construction Contract. Building Improvements Construction Contract     To be executed by Landlord and Contractor by August 31, 2000. It shall include construction costs based upon specifications for and related to development of the shell building. Tenant Improvements     Tenant shall diligently work with its consultants to develop specifications for its Tenant Improvements. All costs incurred in connection therewith (including architectural fees, space planning, etc.) shall be Tenant's responsibility, except that Tenant may utilize the Tenant Improvement Allowance described in Exhibit B-3 to pay for same. Tenant Improvements Construction Contract     To be executed by Tenant and General Contractor as soon as practical after development of Tenant Improvement Plans and Specifications. Winter Conditions     The Construction Contract will have $0 allowance for costs related to winter construction. Landlord and Contractor will use their best efforts to minimize such costs. Any such actual costs, however, shall be Tenant's responsibility, provided that Tenant's maximum responsibility shall be $175,000. -------------------------------------------------------------------------------- QUICKLINKS BUILDING LEASE LEASE EXHIBIT B CONSTRUCTION OF IMPROVEMENTS EXHIBIT B-2 ACCEPTANCE AGREEMENT RECITALS AGREEMENT EXHIBIT C SCHEDULE OF BASE RENT EXHIBIT D SIGNAGE AND TENANT IDENTIFICATION EXHIBIT E MANAGEMENT FEE EXHIBIT F MISCELLANEOUS PROVISIONS

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.3—Indemnity Agreement INDEMNITY AGREEMENT     This Indemnity Agreement is made and entered into, effective as of November 24, 1999 by and between T.J.T., INC., a Washington Corporation (the "Company"), and JOE LIGHT ("Indemnitee").     WHEREAS, Indemnitee is currently serving as a director of the Company, and the Company wishes Indemnitee to continue in such capacity;     WHEREAS, the Articles of Incorporation of the Company, as amended (the "Articles"), and the Bylaws of the Company (the "Bylaws"), each provide that the Company shall indemnify, in the manner and to the fullest extent permitted by the Washington Business Corporation Act ("WBCA"), certain persons, including directors of the Company, against specified expenses and losses arising out of certain threatened, pending or completed actions, suits or proceedings;     WHEREAS, Indemnitee has indicated that he or she may not be willing to continue to serve as a director of the Company in the absence of indemnification in addition to that provided in the Articles and Bylaws of the Company;     WHEREAS, the Company, in order to induce Indemnitee to continue to serve as a director, has agreed to provide Indemnitee with the benefits contemplated by this Indemnity Agreement and, as a result of the provision of such benefits, Indemnitee has agreed to continue to serve in such capacity; and     WHEREAS, the Articles and Bylaws of the Company each expressly recognize that the indemnification provisions of the Articles and Bylaws shall not be deemed exclusive of, and shall not affect, any other rights to which a person seeking indemnification may be entitled under any agreement, and this Indemnity Agreement is being entered into pursuant to the Articles and Bylaws of the Company as permitted by the WBCA.     NOW, THEREFORE, in consideration of the promises, conditions and representations set forth herein, including Indemnitee's continued service as a director of the Company, the Company and Indemnitee hereby agree as follows:     Section 1.  Definitions.  The following terms, as used herein, shall have the following meanings:     (a) "Covered Claim" shall mean any claim against Indemnitee based upon or arising out of any past, present or future act, omission, neglect or breach of duty, including, without limitation, any actual or alleged error, omission, misstatement or misleading statement, that Indemnitee may commit or suffer while serving in his or her capacity as a director of the Company, provided that such claim: (i)is not solely based upon and does not arise solely out of acts or omissions of Indemnitee finally adjudged to be intentional misconduct or a knowing violation of law; (ii)is not solely based upon and does not arise solely out of conduct of the Indemnitee finally adjudged to be in violation of RCW 23B.08.310; or (iii)is not based solely upon and does not arise solely out of any transaction with respect to which it was finally adjudged that Indemnitee personally received a benefit in money, property or services to which he or she was not legally entitled. 42 --------------------------------------------------------------------------------     (b) "Determination" shall mean a determination, based upon the facts known at the time, made by: (i)the Board of Directors of the Company, by the majority vote of a quorum consisting of directors who are not at the time parties to the action, suit or proceeding in question; (ii)if such a quorum is not obtainable, by a majority vote of a committee duly designated by the Board of Directors, in which designation directors who are parties may participate, consisting solely of two or more directors not at the time parties to the action, suit or proceeding in question; (iii)by special legal counsel: (A) selected by the Board of Directors or its committee in the manner prescribed in (i) or (ii) of this subsection; or (B) if a quorum of the Board of Directors cannot be obtained under (i) of this subsection and a committee cannot be designated under (ii) of this subsection, selected by a majority vote of the full Board of Directors, in which selection directors who are parties may participate; (iv)by the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the action, suit or proceeding in question may not be voted on the determination; or (v)by a court of competent jurisdiction in a final, nonappealable adjudication.     (c) "Payment" shall mean any and all amounts that Indemnitee is or becomes legally obligated to pay in connection with a Covered Claim, including, without limitation, damages, judgments, amounts paid in settlement, reasonable costs of investigation, reasonable fees of attorneys, costs of investigative, judicial or administrative proceedings or appeals, and costs of attachment or similar bonds.     Section 2.  Indemnification.  The Company shall indemnify and hold harmless Indemnitee against and from any and all Payments to the extent that:     (a) the Company shall not have advanced expenses to Indemnitee pursuant to the provisions of the Company's Articles of Incorporation or otherwise and no determination shall have been made pursuant to such Article or the WBCA that the Indemnitee is not entitled to indemnification;     (b) Indemnitee shall not already have received payment on account of such Payments pursuant to one or more valid and collectible insurance policies; and     (c) such indemnification by the Company is not unlawful.     Notwithstanding anything contained in this Agreement to the contrary, except for proceedings to enforce rights to indemnification or advancement of expenses pursuant to Section 4 hereof, the Company shall have no obligation to indemnify Indemnitee in connection with a proceeding (or part thereof) initiated by Indemnitee unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Company. Further, the Company shall have no obligation to indemnify Indemnitee under this Indemnity Agreement for any amounts paid in a settlement of any action, suit or proceeding effected without the Company's prior written consent, which consent shall not be unreasonably withheld. The Company shall not settle any claim in any manner that would impose any obligation on Indemnitee without Indemnitee's prior written consent. Indemnitee shall not unreasonably withhold his consent to any proposed settlement. 43 --------------------------------------------------------------------------------     Section 3.  Indemnification Procedure; Advancements of Costs and Expenses.       (a) Promptly after receipt by Indemnitee of notice of the commencement or threat of any action, suit or proceeding, Indemnitee shall, if indemnification with respect thereto may be sought from the Company under this Indemnity Agreement, notify the Company thereof in writing.     (b) If, at the time of receipt of such notice the Company has directors' and officers' liability insurance in effect, the Company shall give prompt notice of the commencement of such action, suit or proceeding to the insurers in accordance with the procedures set forth in the respective policies in favor of Indemnitee. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all Payments payable as a result of such action, suit or proceeding in accordance with the terms of such policies.     (c) All costs and expenses, including reasonable fees of attorneys, incurred by Indemnitee in defending or investigating such action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding; provided, however, that no such costs or expenses shall be paid by the Company if, with respect to such action, suit or proceeding, a Determination is made that: (i)Indemnitee did not act in good faith and in a manner Indemnitee reasonably believed (A) in the case of conduct in Indemnitee's official capacity with the Company, to be in best interests of the Company and (B) in all other cases, not opposed to the best interests of the Company; or (ii)in the case of any criminal action or proceeding, Indemnitee had reasonable cause to believe his or her conduct was unlawful.     Indemnitee hereby undertakes and agrees that he or she will repay the Company for any costs or expenses advanced by or on behalf of the Company pursuant to this Section 3(c) if it shall ultimately be determined by a court of competent jurisdiction in a final, nonappealable adjudication that Indemnitee is not entitled to indemnification under this Indemnity Agreement.     (d) If the Company shall advance the costs and expenses of any such action, suit or proceeding pursuant to Section 3(c) of this Indemnity Agreement, it shall be entitled to assume the defense of such action, suit or proceeding, if appropriate, with counsel reasonably satisfactory to Indemnitee, upon delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, the Company shall not be liable to Indemnitee under this Indemnity Agreement for any costs or expenses subsequently incurred by Indemnitee in connection with such defense other than reasonable cost and expenses of investigation; provided, however, that: (i)Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding provided that the fees and expenses of such counsel incurred after delivery of notice by the Company of its assumption of such defense shall be at Indemnitee's own expense; and (ii)the fees and expenses of counsel employed by Indemnitee shall be at the expense of the Company if (A) the employment of counsel by Indemnitee has previously been authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense (provided that the Company shall not be required to pay for more than one counsel to represent two or more Indemnitees where such Indemnitees have reasonably concluded that there is no conflict of interest among them in the conduct of such defense), or (C) the Company shall not, in fact, have employed counsel to assume the defense of such action, suit or proceeding. 44 --------------------------------------------------------------------------------     (e) All payments on account of the Company's advancement obligations under Section 3(c) of this Indemnity Agreement shall be made within twenty (20) days of Indemnitee's written request therefor. All other payments on account of the Company's obligations under this Indemnity Agreement shall be made within sixty (60) days of Indemnitee's written request therefor, unless a Determination is made that the claims giving rise to Indemnitee's request are not payable under this Indemnity Agreement. Each request for payment hereunder shall be accompanied by evidence reasonably satisfactory to the Company of Indemnitee's incurrence of the costs and expenses for which such payment is sought.     Section 4.  Enforcement of Indemnification; Burden of Proof.  If a claim for indemnification or advancement of costs and expenses under this Indemnity Agreement is not paid in full by or on behalf of the Company within the time period specified in Section 3(e) of this Indemnity Agreement, Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of such claim. In any such action, the Company shall have the burden of proving that indemnification is not required under this Indemnity Agreement.     Section 5.  Employee Benefit Plans.  The term "other enterprises," as used in this Indemnity Agreement, shall include employee benefit plans. All references in this Indemnity Agreement to "serving... at the Company's request" shall include any service by Indemnitee as a director, officer, employee and/or agent of the Company which imposes duties on, or involves services by, Indemnitee with respect to an employee benefit plan, its participants or beneficiaries. If Indemnitee acts in good faith and in a manner he or she reasonably believes to be in the interests of the participants and beneficiaries of an employee benefit plan, then, for purposes of Section 3(c)(i) hereof, Indemnitee shall be deemed to have acted in a manner he or she "reasonably believed to be in the best interests of the Company."     Section 6.  Rights Not Exclusive.  The rights to indemnification and advancement of costs and expenses provided hereunder shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under any charter document, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.     Section 7.  Subrogation.  In the event of payment under this Indemnity Agreement by or on behalf of the Company, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers that may be required and shall do all things that may be necessary to secure such rights, including, without limitation, the execution of such documents as may be necessary to enable the Company effectively to bring suit to enforce such rights.     Section 8.  Choice of Law.  This Indemnity Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Washington.     Section 9.  Attorneys' Fees.  If any action, suit or proceeding is commenced in connection with or related to this Indemnity Agreement, the prevailing party shall be entitled to have its costs expenses, including, without limitation, reasonable fees of attorneys and reasonable expenses of investigation, paid by the losing party.     Section 10.  Severability.  In the event that any provision of this Indemnity Agreement is determined by a court to require the Company to do or to fail to do an action that is in violation of any applicable law, such provision shall be limited or modified in its application to the minimum extent necessary to avoid a violation of law, and, as so limited or modified, such provision and the balance of this Indemnity Agreement shall be enforceable in accordance with their terms.     Section 11.  Successors and Assigns.  This Indemnity Agreement shall be binding upon all successors and assigns of the Company, including any transferee of all or substantially all of its assets and any successor by merger or otherwise by operation of law, and shall be binding upon and inure to the benefit of the heirs, executors and administrators of Indemnitee. 45 --------------------------------------------------------------------------------     Section 12.  Descriptive Headings.  The descriptive headings in this Indemnity Agreement are included for the convenience of the parties only and shall not affect the construction of this Indemnity Agreement.     Section 13.  Counterparts.  This Indemnity Agreement may be executed in two counterparts, both of which taken together shall constitute one document.     Section 14.  Amendment.  No amendment, modification, termination or cancellation of this Indemnity Agreement shall be effective unless made in writing and signed by each of the parties hereto.     IN WITNESS WHEREOF, the Company and Indemnitee have executed this Indemnity Agreement as of the day and year first above written.     T.J.T., INC.     /s/ TERRENCE J. SHELDON    -------------------------------------------------------------------------------- Terrence Sheldon, President & CEO     INDEMNITEE     /s/ JOE LIGHT    -------------------------------------------------------------------------------- Joe Light 46 -------------------------------------------------------------------------------- QuickLinks INDEMNITY AGREEMENT

EXHIBIT 10.31     AMENDMENT AND WAIVER, dated as of April 10, 2000 (this "Amendment"), among Euramax International Inc., a Delaware corporation ("Euramax U.S."), the other Loan Parties referred to below, each of the Lenders, the Swing Loan Lender and the Issuer referred to below and Paribas (formerly, Banque Paribas), as agent (in such capacity, the "Agent") for said Lenders, the Swing Loan Lender and the Issuer, to (a) the Amended and Restated Credit Agreement, dated as of July 16, 1997, as amended (said Agreement, as so amended and as the same may be further amended, supplemented or otherwise modified from time to time, being the "Credit Agreement", and the terms defined therein being used herein as therein defined unless otherwise defined herein), among Euramax U.S., the other Loan Parties party thereto, the financial institutions party thereto, as lenders (the "Lenders"), the Swing Loan Lender and the Issuer referred to therein and the Agent, and (b) the other Loan Documents referred to below. W I T N E S S E T H:     WHEREAS, pursuant to that certain Asset Purchase Agreement, dated as of March 10, 2000 (the "Gutter World Acquisition Agreement"), among Amerimax Home Products, Inc., a Delaware corporation and a direct, wholly owned subsidiary of U.S. Operating Co. ("Home Products"), Gutter World, Inc., a Georgia corporation ("Gutter World") and Global Expanded Metals, Inc., a Georgia corporation ("GEM"), Home Products proposes acquiring certain assets, and assuming certain liabilities, of each of Gutter World and GEM for a purchase price, payable in cash, of approximately $46,500,000 (which amount includes approximate costs and expenses associated with such acquisition), plus an increase (or decrease) in the purchase price based on a working capital adjustment if the working capital of Gutter World and GEM combined as of the closing date of the Gutter World Acquisition is greater than $2,600,000 (or less than $2,300,000), as the case may be (said purchase price, adjusted for actual costs and expenses and including such earn-out and working capital adjustments, being the "Gutter World Purchase Price"; and said acquisitions for the Gutter World Purchase Price being the "Gutter World Acquisition");     WHEREAS, Home Products intends to finance the Gutter World Acquisition with U.S. Dollar Term D Loans to be borrowed by U.S. Operating Co., which will (i) make a contribution to the capital of Home Products equal to $6.0 million of the principal amount of the U.S. Dollar Term D Loans and (ii) make a contribution to the capital of Amerimax Finance Company, a Delaware corporation and a wholly-owned subsidiary of U.S. Operating Co. ("AFC"), equal to $39 million of the principal amount of the U.S. Dollar Term D Loans, and AFC will, in turn, lend an amount equal to such capital contribution to Home Products;     WHEREAS, the Loan Parties have requested that the Lenders, Issuer, the Swing Loan Lender and the Agent agree to amend the Loan Documents to, among other things, (a) permit the proposed Gutter World Acquisition and (b) provide for such new U.S. Dollar Term D Loans; and     WHEREAS, the Lenders, the Issuer, the Swing Loan Lender and the Agent are willing to agree to such amendments, subject to the terms and conditions hereinafter set forth;     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto hereby agree as follows:     SECTION 1. Amendments to the Credit Agreement. Subject to the satisfaction of the condition precedent set forth in Section 2, the Credit Agreement is hereby amended as follows:     1.1. Amendments to Section 1.1. (a) Section 1.1 thereof is amended by adding thereto, in the appropriate alphabetical order, the following new definitions:     " 'AFC' has the meaning specified in the April 2000 Amendment."     " 'AFC Guaranty' means the Guaranty, dated as of the April 2000 Amendment Effective Date, in substantially the form of Exhibit J hereto, made by AFC in favor of the Guarantied Parties, as the same 2 -------------------------------------------------------------------------------- may be amended, supplemented or otherwise modified from time to time, pursuant to which AFC unconditionally guarantied its Guarantied Obligations."     " 'AFC Pledge Agreement' means the Pledge Agreement, dated as of the April 2000 Amendment Effective Date, in substantially the form of Exhibit K hereto, executed by AFC, as such agreement may be amended, supplemented or otherwise modified from time to time, pursuant to which AFC has pledged to the Agent, for the ratable benefit of the Secured Parties, the Collateral covered thereby, including the Stock of each of its Subsidiaries, to secure all Obligations and AFC's Guarantied Obligations."     " 'April 2000 Amendment' means the Amendment, dated as of April  , 2000, among the Loan Parties, the Lenders, the Swing Loan Lender and the Agent, to this Agreement and the other Loan Documents referred to therein."     " 'April 2000 Amendment Effective Date' means the date the April 2000 Amendment becomes effective pursuant to the terms thereof."     " 'April 2000 Amendment Termination Date' means April 30, 2000."     " 'GEM' has the meaning specified in the April 2000 Amendment."     " 'Gutter World' has the meaning specified in the April 2000 Amendment."     " 'Gutter World Acquisition' has the meaning specified in the April 2000 Amendment."     " 'Gutter World Acquisition Agreement' has the meaning specified in the April 2000 Amendment."     " 'Gutter World Acquisition Conditions' means each of the following conditions:     (a) Each of the statements set forth in Section 3.1(s) (other than clause (ii) thereof) shall be true and correct with respect to the Gutter World Acquisition, with references therein (i) to the 'Existing Loans and Loans being made on the Effective Date' to be deemed to be references to all outstanding Loans and the U.S. Dollar Term D Loans, (ii) to the 'Effective Date' to be deemed to be references to the date of consummation of the Gutter World Acquisition (the 'Gutter World Consummation Date' thereof), (iii) to the 'Fabral Purchase Documents', the 'Fabral Purchase Agreement' or to a 'Related Document' to be deemed to be references to the Related Documents with respect to the Gutter World Acquisition, (iv) to the 'Transactions' or to the 'Fabral Purchase' to be deemed to be references to the Gutter World Acquisition, (v) to 'Fabral Holdings' and/or 'Fabral, Inc.' to be deemed to be references to Gutter World and/or GEM and (vi) to the aggregate purchase price of the Fabral Purchase as specified in the Fabral Purchase Agreement to be references to the Gutter World Purchase Price;     (b) The Agent shall have received (i) on the Gutter World Consummation Date (A) evidence that there are no prior Liens or charges on any of the assets purchased in the Gutter World Acquisition except as permitted by Section 7.1(a); (B) executed copies of proper Financing Statements (Form UCC-1) under the Uniform Commercial Code of all jurisdictions, and evidence of completion of all recordings and other filings in all jurisdictions (including of instruments to be filed with respect to Intellectual Property Collateral), as may be necessary or, in the opinion of the Agent, desirable to perfect the Liens created by the Collateral Documents, including, without limitation, the Domestic Security Agreement entered into by Home Products; (C) copies of the U.S. Patent Security Agreement duly executed by Home Products granting to the Agent a security interest in, and a right of set off against, all of the U.S. patents, patent applications and other similar intellectual property of Home Products, including, without limitation, all of such intellectual property acquired by Home Products in the Gutter World Acquisition; (D) copies of the U.S. Trademark Security Agreement duly executed by Home Products granting to the Agent a security interest in, and a right of set off against, all of the U.S. trademarks, tradenames, service marks, trademark applications and other similar intellectual property of Home Products, including, without limitation, all of such intellectual property acquired by Home Products in the Gutter World Acquisition; (E) copies of the U.S. Copyright Security Agreement duly executed by Home Products granting to the Agent a security 3 -------------------------------------------------------------------------------- interest in, and a right of set off against, all of the U.S. copyrights, copyright applications other similar intellectual property of Home Products, including, without limitation, all of such intellectual property acquired by Home Products in the Gutter World Acquisition; (F) copies of the Domestic Consent Agreement, dated as of the Gutter World Consummation Date, duly executed by each of the Loan Parties party thereto confirming its Obligations under its Guaranty and respective Domestic Collateral Documents and/or Foreign Collateral Documents, as the case may be; (G) copies of the U.K. Consent Agreement, dated as of the Gutter World Consummation Date, duly executed by each of the Loan Parties party thereto confirming its obligations under its Guaranty and its respective Foreign Collateral Documents; (H) copies of a supplement to this Agreement in form and substance satisfactory to the Agent, pursuant to which AFC shall agree to be bound by the terms of, and for all purposes be, a Loan Party under and party to, this Agreement, and shall agree to all other matters set forth therein, the AFC Guaranty and the AFC Pledge Agreement, each duly executed by AFC; (I) copies of an amendment to the U.S. Operating Co. Pledge Agreement providing for the pledge by U.S. Operating Co. of the shares of Stock of AFC acquired by U.S. Operating Co. in connection with the Gutter World Acquisition; (J) copies of the Second Euramax Nantissement and the Second Dutch Holdings Nantissement, duly executed by Euramax and Dutch Holdings, respectively; (K) evidence of satisfactory insurance coverage as to the assets purchased from each of Gutter World and GEM and compliance with all provisions of the Loan Documents with respect to such insurance; (L) opinions of independent counsel to the Loan Parties, each dated the Gutter World Consummation Date, satisfactory in form and substance to the Agent; (M) from each of the Loan Parties, the documents referred to in Sections 3.1(b) and (c) required to be delivered by a Loan Party, in each case, dated the Gutter World Consummation Date and with references therein to (1) the 'Fabral Purchase Document' or to the 'Related Documents' to be deemed to be references to the Related Documents entered into in connection with the Gutter World Acquisition, (2) the 'Transactions' to be deemed to be references to the Gutter World Acquisition, (3) the 'Effective Date' to be deemed to be references to the Gutter World Consummation Date and (4) the 'Loan Documents' to be deemed to be references to the Loan Documents to be delivered, pursuant to this subsection (b); and (N) such financial and other information regarding each of Gutter World and GEM as the Agent or any Lender shall reasonably request and (ii) within the earlier to occur of (A) the six-month anniversary of the Gutter World Consummation Date (or such later date as agreed upon in writing by Euramax U.S. and each of its Domestic Subsidiaries and a majority of the Term D Lenders) and (B) the acquisition described in that certain Letter Agreement, dated as of December 8, 1999, by and between Euramax U.S. and the proposed seller (such date being the "2000 Mortgage Amendment Date"), duly executed and acknowledged amendments to or amendments and restatements of, as the case may be, all Domestic Mortgages to the extent necessary, in the sole discretion of the Agent, as a result of the transactions contemplated by the April 2000 Amendment, together with endorsements to the Title Insurance Policies issued on the 2000 Mortgage Amendment Date, duly executed and acknowledged, which endorsements bring the effective date of the Title Insurance Policies issued on the Closing Date or thereafter forward to the 2000 Mortgage Effective Date, together with opinions, satisfactory to the Agent, of local counsel retained by the Domestic Loan Parties with respect to the validity and enforceability of the Domestic Mortgages delivered on the 2000 Mortgage Amendment Date as such Domestic Mortgages may have been amended or amended and restated, as the case may be, and as to such other matters as may be reasonably required by the Agent or any Lender; and     (c) Each document relating to the Gutter World Acquisition shall be satisfactory in form and substance to the Agent and the Majority Lenders in their sole judgment exercised reasonably."     " 'Gutter World Consummation Date' has the meaning specified in clause (a) of the definition of Gutter World Acquisition Conditions."     " 'Gutter World Purchase Price' has the meaning specified in the April 2000 Amendment."     " 'Home Products' has the meaning specified in the April 2000 Amendment." 4 --------------------------------------------------------------------------------     " 'Second Dutch Holdings Nantissement' means the Share Pledge Agreement, dated as of the April 2000 Amendment Effective Date, executed by Dutch Holdings and the Agent, for the ratable benefit of the Secured Parties, the Collateral referred to therein, including the Stock of French Holdings held by Dutch Holdings to secure the Guarantied Obligations of Dutch Holdings."     " 'Second Euramax Nantissement' means the Share Pledge Agreement, dated as of the April 2000 Amendment Effective Date, executed by Euramax and the Agent, for the ratable benefit of the Secured Parties, the Collateral referred to therein, including the Stock of French Holdings held by Euramax to secure the Guarantied Obligations of Euramax."     " 'U.S. Dollar Term D Loan' has the meaning specified in Section 2.2."     " 'U.S. Dollar Term D Loan Commitment' has the meaning specified in Section 2.2."     " 'U.S. Dollar Term D Loan Maturity Date' means June 30, 2005."     " 'U.S. Dollar Term D Note' means a promissory note made by U.S. Operating Co. and payable to the order of any Lender in a principal amount equal to such Lender's U.S. Dollar Term D Loan Commitment, if any, as originally in effect, in substantially the same form of Exhibit A-10, evidencing the aggregate Indebtedness of U.S. Operating Co. to such Lender resulting from the U.S. Dollar Term D Loan, if any, made by such Lender to U.S. Operating Co."     (b) Section 1.1 thereof is further amended as follows:     (i) The definition therein of "Applicable Base Rate Margin" is amended by (A) deleting the word "and" after the phrase "U.S. Dollar Term B Loans," in subsection (a) thereof and inserting a comma in lieu thereof, (B) adding the phrase "and the U.S. Dollar Term D Loans" immediately after the phrase "U.S. Dollar Term C Loans" in subsection (a) thereof, (C) deleting the word "and" at the end of subsection (a) thereof, (D) deleting the period at the end of subsection (b) thereof and inserting the phrase "; and" in lieu thereof and (E) adding the following new subsection (c) thereof:     "(c) in the case of the U.S. Dollar Term D Loans, (i) 2.00% at all times during each Level I Rate Period, (ii) 1.75% at all times during each Level II Rate Period, (iii) 1.50% at all times during each Level III Rate Period, (iv) 1.25% at all times during each Level IV Rate Period and Level V Rate Period."     (ii) The definition therein of "Applicable Eurocurrency Margin" is amended by (A) deleting the word "and" after the phrase "U.S. Dollar Term B Loans," and inserting a comma in lieu thereof in subsection (a) thereof, (B) deleting the word "and" at the end of subsection (a) thereof, (C) adding the phrase "and the U.S. Dollar Term D Loans" immediately after the phrase "U.S. Dollar Term C Loans" in subsection (a) thereof, (D) deleting the period at the end of subsection (b) thereof and inserting the phrase "; and" in lieu thereof and (E) adding the following new subsection (c) thereof:     "(c) in the case of the U.S. Dollar Term D Loans, (i) 3.00% at all times during each Level I Rate Period, (ii) 2.75% at all times during each Level II Rate Period, (iii) 2.50% at all times during each Level III Rate Period, (iv) 2.25% at all times during each Level IV Rate Period and Level V Rate Period."     (iii) The definitions therein of "Commitment" and "Commitments" are amended by (A) adding the phrase "and U.S. Dollar Term D Loan Commitment, if any," immediately after the phrase "Revolving Credit Commitment, if any," and (B) adding the phrase ", U.S. Dollar Term D Loan Commitments" immediately after the phrase "Revolving Credit Commitments".     (iv) The definition of "Domestic Collateral Documents" is amended by adding the phrase "the AFC Pledge Agreement," immediately after the phrase "the Fabral Holdings Pledge Agreement,". 5 --------------------------------------------------------------------------------     (v) The definition of "Domestic Subsidiary Guaranty" is amended by adding the phrase "and the AFC Guaranty," immediately after the phrase "Domestic Amendatory Agreement,".     (vi) The definition therein of "Interest Period" is amended by (A) adding in clause (c) thereof the phrase "the U.S. Dollar Term D Loans," immediately before the phrase "the Dutch Company Term Loans", (B) deleting the word "or" after the second reference to the phrase "U.S. Dollar Term B Loans" and inserting a comma in lieu thereof and (C) adding the phrase "or U.S. Dollar Term D Loans" immediately after the second reference to the phrase "U.S. Dollar Term C Loans".     (vii) The definition therein of "Operating Company Subsidiary" is amended by (i) deleting the phrase "Amerimax Home Products, Inc. (formerly, Euramax Home Products, Inc.), a Delaware corporation and a direct, wholly owned subsidiary of U.S. Operating Co." and substituting in lieu thereof the phrase "Home Products" and (ii) by deleting the word "and" in clause (a) thereof and adding the phrase "and (vii) AFC" immediately after the phrase "(vi) Fabral, Inc.".     (viii) The definition therein of "Related Claims" is amended by adding the phrase "or (g) the U.S. Dollar Term D Loans," immediately after the phrase "and the Letter of Credit Obligations," in clause (i) thereof.     (ix) The definition therein of "Related Documents" is amended by adding to the end thereof the phrase ", and each purchase agreement, instrument and other document executed with respect to the Gutter World Acquisition".     (x) The definition therein of "Term Loan" is amended by adding the phrase "U.S. Dollar Term D Loan," immediately after the phrase "U.S. Dollar Term C Loan,".     (xi) The definition therein of "Term Loan Note" is amended by (A) deleting the word "and" immediately after the phrase "U.S. Dollar Term B Note", (B) adding a comma immediately after the phrase "a U.S. Dollar Term C Note" and (C) adding the phrase "and a U.S. Dollar Term D Note" at the end of such definition.     1.2. Amendments to Section 2.2. (a) The first section designated Section 2.2(b) thereof is amended by (i) adding the phrase "and" at the end of clause (ii) thereof, (ii) adding the following new clause immediately after such clause (ii):     "(iii) On the April 2000 Amendment Effective Date, make a loan to U.S. Operating Co. in Dollars (each a "U.S. Dollar Term D Loan") in an aggregate Dollar amount set forth opposite such Lender's name on Exhibit A to the April 2000 Amendment under the caption "U.S. Dollar Term D Loan Commitment" (such Lender's "U.S. Dollar Term D Loan");" and (iii) adding the phrase "and U.S. Dollar Term D Loans" immediately after the phrase "Additional Term Loans" in the proviso to such Section 2.2(b).     (b) The second section designated Section 2.2(b) thereof is hereby amended and corrected by re-designating it as Section 2.2(c) and such Section 2.2(c) is amended by (i) adding the phrase "U.S. Dollar Term D Loan," immediately after the phrase "U.S. Dollar Term C Loan," and (ii) adding the phrase "U.S. Dollar Term D Note," immediately after the phrase "U.S. Dollar Term C Note,".     1.3. Amendments to Section 2.3(b). (a) Section 2.3(b) thereof is amended by adding the following sentence immediately after the first sentence thereof: "The U.S. Dollar Term D Loans shall each be made upon receipt of a Notice of Borrowing, given by U.S. Operating Co. to the Agent no later than 11:00 A.M. (New York City time) on the second Business Day prior to the April 2000 Amendment Effective Date in the case of Base Rate Loans, and not later than 11:00 A.M. (New York City time) on the third Business Day prior to the April 2000 Amendment Effective Date in the case of Eurocurrency Loans." 6 --------------------------------------------------------------------------------     (b) Section 2.3(b) thereof is further amended by (i) adding the phrase "and U.S. Dollar Term D Notes" immediately after the phrase "Additional Term Loans" in the second sentence of Section 2.3(b) and (ii) adding the following sentence at the end of Section 2.3(b): "The Notice of Borrowing for the U.S. Dollar Term D Loans shall specify therein (i) the April 2000 Amendment Effective Date, (ii) the aggregate amount of U.S. Dollar Term D Loans, the amount thereof, if any, requested to be Eurocurrency Loans and the initial Interest Period or Periods therefor; provided, however, that the aggregate Eurocurrency Loans for each Interest Period must be in an amount not less then $500,000 or an integral multiple of $100,000 in excess thereof."     1.4. Amendment to Section 2.5(b). Section 2.5(b) thereof is amended by adding the following sentence at the end thereof: "On the earlier of the April 2000 Amendment Termination Date and the making of the U.S. Dollar Term D Loans on the April 2000 Amendment Effective Date, each Lender's U.S. Dollar Term D Loan Commitment shall terminate."     1.5. Amendment to Section 2.6. Section 2.6 thereof is amended by adding the following additional Section 2.6(b)(vi):     "(vi) U.S. Operating Co. shall repay the U.S. Dollar Term D Loans on the date and in the percentage amounts of the aggregate principal amount of U.S. Dollar Term D Loans outstanding on the April 2000 Amendment Effective Date (such aggregate being the "Aggregate D Amount") as are set forth below: Date: --------------------------------------------------------------------------------   Principal Payment Due: -------------------------------------------------------------------------------- June 30, 2000   0.25% of the Aggregate D Amount September 30, 2000   0.25% of the Aggregate D Amount December 31, 2000   0.25% of the Aggregate D Amount March 31, 2001   0.25% of the Aggregate D Amount June 30, 2001   0.25% of the Aggregate D Amount September 30, 2001   0.25% of the Aggregate D Amount December 31, 2001   0.25% of the Aggregate D Amount March 31, 2002   0.25% of the Aggregate D Amount June 30, 2002   0.25% of the Aggregate D Amount September 30, 2002   0.25% of the Aggregate D Amount December 31, 2002   0.25% of the Aggregate D Amount March 31, 2003   0.25% of the Aggregate D Amount June 30, 2003   0.25% of the Aggregate D Amount September 30, 2003   0.25% of the Aggregate D Amount December 31, 2003   0.25% of the Aggregate D Amount March 31, 2004   0.25% of the Aggregate D Amount June 30, 2004   0.25% of the Aggregate D Amount September 30, 2004   0.25% of the Aggregate D Amount December 31, 2004   0.25% of the Aggregate D Amount March 31, 2005   0.25% of the Aggregate D Amount June 30, 2005   95.0% of the Aggregate D Amount provided, however, that U.S. Operating Co. shall repay the entire unpaid principal amount of the U.S. Dollar Term D Loans on the U.S. Dollar Term D Loan Maturity Date. All principal payments of U.S. Dollar Term D Loans shall be accompanied by accrued interest on the principal amount being repaid to the date of repayment."     1.6. Amendments to Section 2.7. Section 2.7(d)(v) thereof is amended by (a) deleting the word "and" immediately after the phrase "U.S. Dollar Term A Loans" and substituting a comma in lieu thereof and 7 -------------------------------------------------------------------------------- (ii) adding the phrase "and U.S. Dollar Term D Loans" immediately after the phrase "U.S. Dollar Term C Loans".     1.7. Amendments to Section 2.9. (a) Section 2.9(a) thereof is amended by (i) deleting the word "and" immediately after the phrase "U.S. Dollar Term B Loans" and substituting a comma in lieu thereof and (ii) adding the phrase "and the U.S. Dollar Term D Loans" at the end of such Section 2.9(a) thereof.     (b) Section 2.9(b) thereof is amended by (i) deleting the word "and" immediately after the phrase "U.S. Dollar Term B Loans" and adding a comma in lieu thereof and (ii) adding the phrase "and the U.S. Dollar Term D Loans" at the end of such Section 2.9(b) thereof.     1.8. Amendments to Section 7.2. Section 7.2(a) thereof is amended by (i) deleting the word "and" at the end of clause (a)(xiv) thereof, (ii) deleting the period at the end of clause (a)(xv) thereof and substituting ";" in lieu thereof and (iii) and adding the following new clause (a)(xvi) thereof: "(xvi) Indebtedness of Home Products owing to AFC (x) incurred solely in connection with the Gutter World Acquisition and (y) following a capital contribution by U.S. Operating Co. to Home Products, incurred to maintain the ratio of Indebtedness to equity of Home Products at 4.00 to 1.00; provided, however, that all such Indebtedness is evidenced by promissory notes in which the Agent has a fully perfected first priority security interest."     1.9. Amendment to Section 7.6. (a) Section 7.6(g) thereof is amended by (i) deleting the word "and" immediately after the phrase "permitted by clauses (x)" and substituting "," in lieu thereof and (ii) adding the phrase "and (xvi)" immediately after the phrase "(xiii)".     (b) Section 7.6(j) thereof is amended by (i) deleting the word "and" immediately after the phrase "in the Color Clad Acquisition" and (ii) adding the phrase "and (iii) subject to the satisfaction of the Gutter World Acquisition Conditions, (A) the purchase of certain assets, and the assumption of certain liabilities, of each of Gutter World and GEM and (B) the purchase of Stock of AFC by U.S. Operating Co., each in connection with the Gutter World Acquisition".     1.10. Amendments to Section 7.10. Section 7.10(i) thereof is amended by (a) deleting the word "or" and adding a comma in lieu thereof and (b) adding the phrase "or (j)" immediately after the phrase "(g)" therein.     1.11. Amendments to Section 7.13. Section 7.13 thereof is amended by (a) deleting the word "and" at the end of clause (k) thereof and (b) adding the phrase "; and (m) following the consummation of the Gutter World Acquisition, AFC shall not own any assets except Indebtedness of Subsidiaries of U.S. Operating Co. in its favor which shall be pledged to the Agent pursuant to the AFC Pledge Agreement (including, without limitation, an intercompany note made by Home Products in AFC's favor dated the Gutter World Acquisition Date)" at the end of clause (l) thereof.     1.12. Amendment to Exhibits to Credit Agreement. The Exhibits to the Credit Agreement are amended by adding thereto, immediately after Exhibit A-9, an Exhibit A-10 in the form of Exhibit Battached hereto.     SECTION 2. Waiver. The requirement in Section 2.7(d)(iii) of the Credit Agreement that the Borrowers must prepay the Term Loans within 100 days of the last day of the Fiscal Year ending on December 31, 1999, in an amount equal to 50% of Excess Cash Flow for such Fiscal Year, together with accrued interest to the date of such prepayment on the principal amount prepaid is hereby waived.     SECTION 3. Effectiveness. This Amendment shall become effective on the date on which the Agent shall have executed a counterpart hereof and shall have received counterparts hereof executed by the Lenders, the Swing Loan Lender and each Loan Party. 8 --------------------------------------------------------------------------------     SECTION 4. Representations and Warranties. Each of the Loan Parties represents and warrants as to itself and each of its Subsidiaries as follows:     (a) The execution, delivery and performance of this Amendment has been duly authorized by all necessary corporate action, and this Amendment and the Loan Documents as amended hereby, and the transactions contemplated hereby and thereby, do not and will not (i) require any consent or approval of the stockholders of any Loan Party or any of its Subsidiaries or any third party, other than any consents or approvals that have already been obtained and which remain in full force and effect, (ii) violate any Requirement of Law, (iii) result in a breach of or constitute a default under any Contractual Obligation to which any Loan Party or any of its Subsidiaries is a party or by which any of them or their respective properties may be bound or affected, or (iv) result in, or require, the creation or imposition of any Lien of any nature upon or with respect to any of the properties now owned or hereafter acquired by any Loan Party or any of its Subsidiaries (other than pursuant to the Loan Documents).     (b) All authorizations, consents, approvals of, licenses of, or filings or registrations with, any court or Governmental Authority, required in connection with the execution, delivery and performance by any Loan Party of this Amendment and the performance by each Loan Party of the Loan Documents as amended hereby, and the consummation by each Loan Party of the transactions contemplated hereby and thereby, have been obtained, given, filed or taken and are in full force and effect.     (c) This Amendment has been duly executed and delivered by each Loan Party, and each of this Amendment and each Loan Document as amended hereby constitutes the legal, valid and binding obligation of each Loan Party thereto, enforceable against such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or law).     (d) There exists no judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon the execution, delivery and performance of this Amendment or the Loan Documents as amended hereby or upon the consummation of the transactions contemplated hereby or thereby.     (e) None of the transactions contemplated by this Amendment or the Loan Documents as amended hereby will have or could have a Material Adverse Effect, and the execution, delivery and performance of this Amendment will not and could not adversely affect the Liens of any Collateral Document.     (f) No provision of any Related Document or any other Contractual Obligation of any Loan Party would prohibit, restrict or impose any conditions on this Amendment or the Loan Documents as amended hereby, and no consent under any Related Document or other Contractual Obligation is required for the execution, delivery or performance of this Amendment, or the Loan Documents as amended hereby, or for the consummation of any of the transactions contemplated hereby, including the transactions contemplated by the amendments set forth herein except as specifically contemplated hereby.     (g) Each of the representations and warranties contained in each Loan Document are true and correct on and as of the date hereof, and no Default or Event of Default has occurred or is continuing or would result from the consummation of any transaction contemplated hereby.     SECTION 5. Costs and Expenses. The Loan Parties jointly and severally agree to pay (a) all costs and expenses of the Agent in connection with the preparation, execution and delivery of this Amendment, including the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto and (b) all costs and expenses otherwise required to be paid under Section 10.4 of the Credit Agreement.     SECTION 6. Miscellaneous.     (a) Upon the effectiveness of this Amendment each reference in any Loan Document to "this Agreement", "hereunder", "herein", or words of like import, and each reference in any other Loan 9 -------------------------------------------------------------------------------- Document to such Loan Document, shall mean and be a reference to such Loan Document as amended or waived hereby.     (b) Except as specifically amended or waived hereby, each Loan Document shall remain in full force and effect and is hereby ratified and confirmed.     (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power, or remedy of the Lenders, the Issuer, the Swing Loan Lender or the Agent under any Loan Document, nor constitute a waiver of any provision of any Loan Document.     (d) This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered, shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.     (e) THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.     (f) EACH LOAN PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AMENDMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE ISSUER, ANY LENDER OR ANY LOAN PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THIS AMENDMENT. 10 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written.     EURAMAX INTERNATIONAL INC.           By:   --------------------------------------------------------------------------------     Title:             EURAMAX INTERNATIONAL HOLDINGS LIMITED           By:   --------------------------------------------------------------------------------     Title:             EURAMAX INTERNATIONAL LIMITED           By:   --------------------------------------------------------------------------------     Title:             EURAMAX EUROPEAN HOLDINGS LIMITED           By:   --------------------------------------------------------------------------------     Title:             EURAMAX CONTINENTAL LIMITED           By:   --------------------------------------------------------------------------------     Title:             EURAMAX EUROPEAN HOLDINGS, B.V.           By:   --------------------------------------------------------------------------------     Title:             AMERIMAX FINANCE COMPANY, INC.           By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------           EURAMAX EUROPE LIMITED           By:   --------------------------------------------------------------------------------     Title:             EURAMAX NETHERLANDS B.V.           By:   --------------------------------------------------------------------------------     Title:             EURAMAX HOLDINGS LIMITED           By:   --------------------------------------------------------------------------------     Title:             EURAMAX EUROPE B.V.           By:   --------------------------------------------------------------------------------     Title:             ELLBEE LIMITED           By:   --------------------------------------------------------------------------------     Title:             EURAMAX COATED PRODUCTS LIMITED           By:   --------------------------------------------------------------------------------     Title:             EURAMAX COATED PRODUCTS B.V.           By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------           AMERIMAX HOLDINGS, INC.   AMERIMAX FABRICATED PRODUCTS, INC.   AMERIMAX BUILDING PRODUCTS, INC.   AMERIMAX COATED PRODUCTS, INC.   AMERIMAX RICHMOND COMPANY   AMERIMAX HOME PRODUCTS, INC.   AMERIMAX LAMINATED PRODUCTS, INC.           By:   --------------------------------------------------------------------------------     Title:             FABRAL HOLDINGS, INC.   (formerly, Gentek Holdings, Inc.) FABRAL, INC.   (formerly, Gentek Building Products, Inc.)           By:   --------------------------------------------------------------------------------     Title:             PARIBAS (formerly, Banque Paribas), as Agent,   as a Lender, as the Issuer and as Swing Loan   Lender           By:   --------------------------------------------------------------------------------     Title:             By:   --------------------------------------------------------------------------------     Title:             FLEET NATIONAL BANK   (formerly, BANKBOSTON, N.A.), as a Lender           By:   --------------------------------------------------------------------------------     Title:             SUNTRUST BANK, ATLANTA, as a Lender           By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------           BANK AUSTRIA CREDITANSTALT   CORPORATE FINANCE, INC., as a Lender           By:   --------------------------------------------------------------------------------     Title:             By:   --------------------------------------------------------------------------------     Title:             LASALLE BANK NATIONAL ASSOCIATION, as a Lender           By:   --------------------------------------------------------------------------------     Title:             WACHOVIA BANK, N.A., as a Lender           By:   --------------------------------------------------------------------------------     Title:             BANK ONE, NA, as a Lender           By:   --------------------------------------------------------------------------------     Title:             PPM AMERICA, INC., as attorney in fact, on   behalf of Jackson National Life Insurance   Company, as a Lender           By:   --------------------------------------------------------------------------------     Title:             DE NATIONALE INVESTERINGS BANK N.V.,   as a Lender           By:   --------------------------------------------------------------------------------     Title:             FLEET NATIONAL BANK, as a Lender           By:   --------------------------------------------------------------------------------     Title:   -------------------------------------------------------------------------------- Exhibit A U.S. Dollar Term D Loan Commitments Lender --------------------------------------------------------------------------------   Dollar Amount --------------------------------------------------------------------------------   Percentage -------------------------------------------------------------------------------- Paribas   $ 40,000,000   100% -------------------------------------------------------------------------------- Exhibit B EXHIBIT A-10 [FORM OF U.S. DOLLAR TERM D NOTE] Dated:      , 2000     FOR VALUE RECEIVED, the undersigned, AMERIMAX FABRICATED PRODUCTS, INC., a Delaware corporation, ("U.S. Operating Co."), HEREBY PROMISES TO PAY to the order of [NAME OF LENDER] (the "Lender") the unpaid principal amount of the U.S. Dollar Term D Loan (as defined in the Credit Agreement referred to below) of the Lender made to U.S. Operating Co., payable at such times, and in such amounts as are specified in the Credit Agreement.     U.S. Operating Co. promises to pay interest on the unpaid principal amount of the U.S. Dollar Term D Loan from the date hereof until such principal amount is paid in full, at such interest rates, and payable at such times as are specified in the Credit Agreement.     Both principal and interest are payable in lawful money of the United States of America to Paribas (formerly, Banque Paribas), as the Agent referred to below, at The Equitable Tower, 787 Seventh Avenue, New York, New York 10019, in immediately available funds.     This Note is one of the U.S. Dollar Term D Notes referred to in, and is entitled to the benefits of, the Amended and Restated Credit Agreement, dated as of July 16, 1997, as amended (said Agreement, as it may be amended, supplemented or otherwise modified from time to time, being the "Credit Agreement"), among U.S. Operating Co., Euramax International Inc., a Delaware corporation, Euramax Holdings Limited, a company organized under the laws of England and Wales, Euramax Netherlands B.V., a company organized under the laws of the Netherlands, and Euramax Europe B.V., a company organized under the laws of the Netherlands, as additional Borrowers, each of Euramax International plc, a company organized under the laws of England and Wales, Broomco (1922) Limited, a company organized under the laws of England and Wales, Euramax Continental Limited, a company organized under the laws of England and Wales, Euramax Europe Limited, a company organized under the laws of England and Wales, Amerimax Holdings, Inc., a Delaware corporation, Euramax European Holdings, B.V., a company organized under the laws of the Netherlands, Euramax European Holdings plc, a company organized under the laws of England and Wales, each Operating Company Subsidiary referred to in the Credit Agreement and the other Loan Parties party thereto, the Lender and the other financial institutions referred to therein (said financial institutions, together with the Lender, being the "Lenders"), the Issuer referred to therein, and Paribas (formerly, Banque Paribas), as Agent for the Lenders and said Issuer, and (b) the other Loan Documents referred to therein and entered into pursuant thereto. The Credit Agreement, among other things, (i) provides for the U.S. Dollar Term D Loan of the Lender in a principal amount not to exceed the U.S. Dollar Term D Loan Commitment of the Lender, the indebtedness of U.S. Operating Co. resulting from such U.S. Dollar Term D Loan being evidenced by this Note, and (ii) contains provisions for acceleration of the maturity of the unpaid principal amount of this Note upon the happening of certain stated events and also for prepayments on account of the principal hereof prior to the maturity hereof upon the terms and conditions therein specified.     This Note is entitled to the benefit of certain guaranties and is secured as provided in the other Loan Documents (as defined in the Credit Agreement).     Demand, presentment, protest and notice of non-payment and protest are hereby waived by U.S. Operating Co.     This Note shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. AMERIMAX FABRICATED PRODUCTS, INC. By:  --------------------------------------------------------------------------------     Title: --------------------------------------------------------------------------------

TRANSITION POWER AGREEMENT (Maryland) By and Between POTOMAC ELECTRIC POWER COMPANY and SOUTHERN COMPANY ENERGY MARKETING, L.P. Dated December 19, 2000     TABLE OF CONTENTS ARTICLE 1 DEFINITIONS 1 ARTICLE 2     2.1     2.2 TERM AND TERMINATION     Term     Termination 2 2 2 ARTICLE 3     3.1     3.2 CAPACITY RESOURCES     Capacity Resources Obligations     Capacity Resources Information Requirements 2 2 3 ARTICLE 4 ANCILLARY SERVICES 4 ARTICLE 5     5.1     5.2     5.3     5.4 ENERGY     Required Energy     Optional Energy     Determination of Energy Requirements; Losses     Renewable Energy Resources Reporting Requirements 4 4 4 5 5 ARTICLE 6     6.1     6.2 PRICING     Compensation for Services     Taxes 6 6 7 ARTICLE 7 SERVICES OBTAINED BY GENERATOR FROM PJM 7 ARTICLE 8     8.1     8.2 ALTERNATIVE SERVICES AND LIMITED LIABILITY     Alternative Services     Limitation on Liability 7 7 7 ARTICLE 9     9.1     9.2     9.3 FORCE MAJEURE     Effect of Force Majeure     Force Majeure Defined     Notification 8 8 8 8 ARTICLE 10     10.1     10.2     10.3     10.4 INDEMNIFICATION FOR THIRD PARTY CLAIMS     Generator's Indemnification     Pepco's Indemnification     Indemnification Procedures     Survival 9 9 9 9 10 ARTICLE 11     11.1     11.2 DEFAULT     Event of Default     Remedies 10 10 11 ARTICLE 12     12.1     12.2 PROJECTIONS AND OPERATING COMMITTEE     Projections     Operating Committee 11 11 11 ARTICLE 13     13.1     13.2     13.3 COST RESPONSIBILITIES AND BILLING PROCEDURES     Billing Procedures     Billing Disputes     Interest on Unpaid Balances 12 12 12 12 ARTICLE 14     14.1     14.2     14.3 CONFIDENTIALITY     Confidentiality Obligations of Pepco     Confidentiality of Audits     Remedies 13 13 13 14 ARTICLE 15     15.1     15.2 DISPUTE RESOLUTION     Disputes     Arbitration 14 14 14 ARTICLE 16     16.1     16.2 REPRESENTATIONS     Representations of Pepco     Representations of Generator 16 16 17 ARTICLE 17     17.1     17.2     17.3     17.4     17.5     17.6 ASSIGNMENT/CHANGE IN CORPORATE IDENTITY     Generally     Pepco's Assignment Rights     Generator's Assignment Rights     Mergers or Consolidations     Limitations     Successors 18 18 18 18 19 19 19 ARTICLE 18 NOTICES 19 ARTICLE 19     19.1     19.2 AMENDMENTS     Amendments     PJM Agreement Modifications 20 20 20 ARTICLE 20 AUDITS 21 ARTICLE 21     21.1     21.2     21.3     21.4     21.5     21.6     21.7     21.8     21.9     21.10     21.11 MISCELLANEOUS PROVISIONS     Waiver     No Third Party Beneficiaries     Governing Law     Counterparts     Interpretation     Jurisdiction and Enforcement     Entire Agreement     Severability     Further Assurances     Independent Contractor Status     Conflicts 21 21 22 22 22 22 23 23 23 24 24 24 SCHEDULE 1 DEFINITIONS 26 EXHIBIT A Pepco's Non-Binding Estimate for Calendar Year 2001 of Capacity Resources for the Service Load 30 EXHIBIT B Capacity Resources Plan for Contract Year 1 31 TRANSITION POWER AGREEMENT (Maryland)           This Transition Power Agreement ("Agreement") dated as of December 19, 2000 by and between Potomac Electric Power Company ("Pepco") a District of Columbia and Virginia corporation, and Southern Company Energy Marketing, L.P. ("Generator") a Delaware limited partnership. Pepco and Generator are each referred to herein as a "Party," and collectively referred to herein as the "Parties." WITNESSETH :           WHEREAS, Pepco and Southern Energy, Inc., a Delaware corporation ("SEI") have entered into an Asset Sale and Purchase Agreement (as amended from time to time, the "Asset Sale Agreement") dated June 7, 2000 for (i) the sale and purchase of certain of Pepco's generating resources and (ii) the assignment of rights and obligations under five power purchase agreements ("PPAs") or for alternative arrangements relating to such PPAs;           WHEREAS, SEI has assigned its rights and obligations under this Agreement to Generator in accordance with Section 12.5 of the Asset Sale Agreement;           WHEREAS, certain of the PPAs provide for the purchases and sale of Renewable Energy Resources;           WHEREAS, Pepco will continue to operate its transmission and distribution businesses which includes obligations to sell power to its retail customers; and           WHEREAS, the Parties have agreed in the Asset Sale Agreement to execute this Agreement in order to provide for the sale by Generator, and purchase by Pepco, of capacity, electric energy and certain ancillary services in accordance with the terms and conditions of this Agreement.           NOW THEREFORE, in consideration of the mutual representations, covenants and agreements hereinafter set forth, and intending to be legally bound hereby, the Parties hereto agree as follows: ARTICLE 1 DEFINITIONS           Unless otherwise defined herein, capitalized terms used in this Agreement shall have the meanings specified or referred to in Schedule 1 of this Agreement. ARTICLE 2 TERM AND TERMINATION           2.2   Term. This Agreement shall become effective upon the consummation of the Closing ("Effective Date"). Unless terminated sooner in accordance with the terms of this Agreement, this Agreement shall continue in full force and effect from the Effective Date through and including June 30, 2004.           2.2   Termination. The applicable provisions of this Agreement shall continue in effect after cancellation or termination hereof to the extent necessary to provide for final billings, billing adjustments and payments pertaining to liability and indemnification obligations arising from acts or events that occurred while this Agreement was in effect. ARTICLE 3 CAPACITY RESOURCES           3.1   Capacity Resources Obligations                 (a)  During the term of this Agreement, Generator shall supply to Pepco and make available within PJM on Pepco's behalf, and Pepco shall purchase from Generator, Pepco's full requirements for Capacity Resources to serve the Service Load ("Capacity Resource Requirements") at the prices set forth in Article 6 of this Agreement. Capacity Resources shall be determined, and provided by the Generator, in accordance with the PJM Reliability Agreement and other applicable PJM requirements. Capacity Resource Requirements shall mean the portion of Pepco's Accounted-For Obligation, as that term is defined and determined in accordance with the PJM Reliability Agreement and applicable PJM requirements, that is located in the State of Maryland.                 (b)  To the extent that PJM assigns to Pepco Fixed Transmission Rights for Capacity Resources contained in a Capacity Resource Plan and designated for Fixed Transmission Rights, Pepco shall transfer such Fixed Transmission Rights to Generator pursuant to PJM's procedures for assigning Fixed Transmission Rights                 (c)  Generator shall provide to the PJM System Operator or PJM Interconnection LLC, as applicable, all information and data required with respect to the Capacity Resources Requirements, with copies to Pepco, and Generator shall be responsible for any charges levied by the PJM System Operator or the PJM Interconnection LLC on Pepco or Generator due to the delayed receipt of such information and data in accordance with the PJM Reliability Agreement unless the delay is due to Pepco's delay in providing Generator with information that Pepco is required to provide.           3.2   Capacity Resources Information Requirements                 (a)  Generator shall provide in accordance with this Section 3.2 its proposed plan to satisfy its obligations hereunder to provide the Capacity Resources Requirements under this Agreement ("Capacity Resources Plan").                 (b)  Exhibit A hereto sets forth Pepco's non-binding estimate of the Capacity Resources required to supply the Service Load for each month during the 2001 calendar year. On or before April 1 preceding each Planning Period thereafter, Pepco shall provide Generator with a non-binding estimate of the Capacity Resources required to supply the Service Load for each month in the following Planning Period.                 (c)  Exhibit B hereto sets forth the Generator's Capacity Resources Plan for Contract Year 1.                 (d)  On or before May 1 preceding each Planning Period thereafter during the term of this Agreement, the Generator shall provide to the Operating Committee, for review and approval (such approval not to be unreasonably withheld or delayed), its proposed Capacity Resources Plan (including Generator's proposed designation of Capacity Resources for associated Fixed Transmission Rights) to be submitted to the PJM Interconnection LLC in accordance with Schedule 6 of the PJM Reliability Agreement for the upcoming Planning Period.                 (e)  If the Generator intends to propose any material change to a Capacity Resources Plan (including any change in a designation of Capacity Resources eligible for Fixed Transmission Rights) which has previously been approved by the Operating Committee, the Generator shall provide such proposed changes to the Operating Committee before it is submitted for approval pursuant to the PJM Reliability Agreement and such change shall be subject to the Operating Committee for review and approval (such approval not to be unreasonably withheld or delayed) if the change (1) adds a resource other than (x) capacity already certified by the PJM Interconnection LLC or PJM System Operator, as applicable, as a Capacity Resource or (y) Capacity Credits, or (2) proposes to change a designation of Capacity Resources eligible for Fixed Transmission Rights. ARTICLE 4 ANCILLARY SERVICES           During the term of this Agreement, Generator shall supply to Pepco and deliver within PJM on Pepco's behalf, and Pepco shall purchase, Pepco's full requirements for Ancillary Services for the Service Load ("Ancillary Services Requirements") at the prices set forth in Article 6 of this Agreement. Ancillary Services mean Regulation and Frequency Response Service (as defined in Schedule 3 of the PJM Tariff) and Operating Reserves (as defined in Schedules 5 and 6 of the PJM Tariff). ARTICLE 5 ENERGY           5.1   Required Energy.                 (a)  During the term of this Agreement, Generator shall supply to Pepco at the Delivery Points, and Pepco shall purchase, the following percentages of Pepco's Full Energy Requirements in the year indicated below (the "Required Energy Percent"), including the applicable Renewable Energy Percent, at the prices set forth in Article 6 of this Agreement:                 Year                Required Energy Percent                 Contract Year 1                100%                 Contract Year 2                 75%           5.2   Optional Energy                 (a)  For the duration of each of Contract Year 2, Contract Year 3 and Contract Year 4, Pepco shall have the right to purchase from Generator (the "Call Options") the percentages of the Full Energy Requirements indicated below (the Optional Energy Percent"), including the applicable Renewable Energy Percent. To the extent Pepco exercises a Call Option for a given year, Generator shall supply to Pepco at the Delivery Points the Optional Energy Percent at the price set forth in Article 6 of this Agreement.                 Year                   Optional Energy Percent                 Contract Year 2            25%                 Contract Year 3           100% (in 25% increments)                 Contract Year 4           100% (in 25% increments)           Notwithstanding the foregoing, the total of Pepco's Call Options exercised with respect to the Optional Energy Percent for Contract Year 3 and Contract Year 4, respectively, shall not exceed the percentage of the Full Energy Requirements that Pepco elected to purchase in the immediately preceding contract year.                 (b)  By each October 1 prior to the contract year in which the applicable Optional Energy Percent is deliverable ("Strike Date"), Pepco shall notify Generator in writing whether it is exercising any of its Call Options for the upcoming contract year, and if so, the percentage of its Full Energy Requirements it elects to purchase.           5.3   Determination of Energy Requirements. The amount of Full Energy Requirements shall be as determined by PJM in accordance with Schedule 1, Section 3.2 of the PJM Operating Agreement at the respective PJM load buses measured by PJM for the Service Load served by Pepco (the "Delivery Points"). Generator shall be responsible for all energy losses (including allocated PJM losses, unaccounted-for energy and distribution losses) associated with delivery of Required Energy Percent and Optional Energy Percent to the Service Load.           5.4   Renewable Energy Resources Reporting Requirements. Generator acknowledges that under Maryland law and MDPSC requirements, Pepco is required to provide the Renewable Energy Percentage to its Service Load and to satisfy MDPSC reporting requirement with respect thereto. Upon Pepco's written request, Generator shall provide to Pepco in writing no later than thirty (30) days after such request, the information and data requested by Pepco to demonstrate that Generator has provided the Renewable Energy Percent required under this Agreement and if Generator has failed to provide all of such Renewable Energy Percent, the reasons for such failure. ARTICLE 6 PRICING           6.1   Compensation for Services Subject to the terms of this Agreement, Pepco shall be obligated to make a monthly payment to Generator for the Services it provides which shall be comprised of the following components:                 (a)  For each Month during the term of the Agreement, a Capacity Payment for the Capacity Resources Requirements and Ancillary Services Requirements that Generator provides to Pepco in such Month calculated as follows:           Capacity Payment = (Capacity Price + Ancillary Services           Price) x Metered Energy Requirements           Where:                     Capacity Price = $3.50/MWh                     Ancillary Services Price = $0.50/MWh                 (b)  For each Month during the term of the Agreement, an Energy Payment for the Required Energy Percent and Optional Energy Percent, if any, that Generator delivers to Pepco at the Delivery Points in each Month calculated as follows:           Energy Payment = [Metered Energy Requirements x (Required           Energy Percent + Optional Energy Percent)] x Energy Price           Where:                     Energy Price = $40.00/MWh during a Summer Month and                     $22.20/MWh during a Winter Month.                 (c)  Pepco's monthly payment to Generator will be decreased by (i) any PJM charges for transmission congestion, allocated losses and unaccounted-for energy that Pepco incurs in connection with the Services Generator delivers to Pepco pursuant to Articles 4, 5 and 6 of this Agreement, and (ii) the amounts of any payments Generator owes to Pepco pursuant to Article 8 of this Agreement.           6.2   Taxes. Generator shall be responsible for taxes related to the sale or provision of Services hereunder. ARTICLE 7 SERVICES OBTAINED BY GENERATOR FROM PJM           Pepco shall, upon Generator's request, reasonably cooperate with Generator to facilitate its acquisition in the PJM marketplace and resale to Pepco of the Services Generator is obligated to provide to Pepco under this Agreement. Pepco shall follow Generator's instructions with respect to scheduling load in the day ahead PJM market. ARTICLE 8 ALTERNATIVE SERVICES AND LIMITATION OF LIABILITY           8.1   Alternative Services. To the extent that Generator does not provide Capacity Resources Requirements, Ancillary Services Requirements, the Required Energy and/or the Optional Energy ("Services") to Pepco as required under this Agreement, Generator, as an alternative method of performing such obligations, shall pay Pepco the positive difference between the price Pepco pays for such Services in the appropriate PJM marketplace, or if not available in the PJM market, any other market ("Alternative Services") and the price Pepco would have paid to Generator for such Services under this Agreement, plus penalties and nonperformance charges, if any, assessed on Pepco by the PJM Interconnection LLC or PJM System Operator as a result of the Generator not providing the Services. Calculation of the cost of Alternative Services hereunder shall include all reasonable direct costs associated with the procurement and delivery of Alternative Services, including legal or transactional costs and expenses; taxes, energy, demand, capacity, or reservation charges; energy losses; emergency energy; and any transmission or congestion costs but does not include the cost of PJM network service. For purposes of determining the amount of Alternative Services Pepco purchases to satisfy its energy requirements, energy requirements for any day shall be the net amount of energy Pepco purchases for the Service Load in the PJM day-ahead and second settlement markets. Notwithstanding the foregoing, Generator shall not have satisfied its obligations to provide electricity from Renewable Energy Resources under the provisions of this Section 8.1 unless Pepco acquires such electricity in the PJM market or such other market in which Pepco acquires Services.           8.2   Limitation of Liability. Except for indemnity obligations set forth in Article 10 and the damages, charges or penalties set forth in Sections 3.1(c), 5.3, 8.1 and 13.3 of this Agreement, neither Party, nor their respective officers, directors, agents, employees, Affiliates, or successors or assigns of any of them, shall be liable to the other Party or its Affiliates, officers, directors, agents, employees, successors or assigns for claims, suits, actions or causes of action for incidental, punitive, special, indirect, multiple or consequential damages (including, without limitation, lost revenues, claims of customers, attorneys' fees and litigation costs) connected with, or resulting from, performance or non-performance of this Agreement, or any actions undertaken in connection with or related to this Agreement, including, without limitation, any such damages which are based upon causes of action for breach of contract, tort (including negligence and misrepresentation), breach of warranty or strict liability. The provisions of this Section 8.2 shall apply regardless of fault and shall survive termination, cancellation, suspension, completion, or expiration of this Agreement. ARTICLE 9 FORCE MAJEURE           9.1   Effect of Force Majeure. Notwithstanding anything in this Agreement to the contrary, the Parties shall be excused from performing their respective obligations hereunder (except for the obligation to pay sums of money due and owing hereunder) and shall not be liable in damages or otherwise, to the extent that a Party is unable to perform or is prevented from performing by an event of Force Majeure and has complied with Section 9.3.           9.2   Force Majeure Defined. Force Majeure includes, without limitation, storm, flood, lightning, drought, earthquake, fire, explosion, civil disturbance, acts of God or the public enemy, civil disturbance, or any other cause beyond a Party's reasonable control but only if and to the extent that the event directly affects the availability of the transmission or distribution facilities of PJM or Pepco which are necessary to deliver capacity or energy to the Service Load. Force Majeure shall not include events affecting the availability or cost of operating any generating facility or resource.           9.3   Notification. A Party shall not be entitled to rely on the occurrence of an event of Force Majeure as a basis for being excused from performance of its obligations under this Agreement unless the Party relying on the event or condition shall: (a) provide prompt written notice of such Force Majeure event to the other Party, including an estimation of its expected duration and the probable impact on the performance of its obligations hereunder; (b) exercise all reasonable efforts to continue to perform its obligations under this Agreement; (c) expeditiously take action to correct or cure the event or condition excusing performance; (d) exercise all reasonable efforts to mitigate or limit damages to the other Party; and (e) provide prompt notice to the other Party of the cessation of the event or condition giving rise to its excuse from performance. Subject to this Section 9.3, any obligation under this Agreement shall be suspended only to the extent caused by such Force Majeure and only during the continuance of any inability of performance caused by such Force Majeure but for no longer period. ARTICLE 10 INDEMNIFICATION FOR THIRD PARTY CLAIMS           10.1  Generator's Indemnification. Generator shall indemnify, hold harmless, and defend Pepco and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between Pepco and a third party or Generator) for damage to property of unaffiliated third parties, injury to or death of any person, including Pepco's employees or any third parties, to the extent caused, by the negligence or willful misconduct of Generator's and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Generator's performance or breach of this Agreement, or the exercise by Generator of its rights hereunder.           10.2  Pepco's Indemnification. Pepco shall indemnify, hold harmless, and defend Generator and its Affiliates, as the case may be, and their respective officers, directors, employees, agents, contractors, subcontractors, invitees, successors and permitted assigns from and against any and all claims, liabilities, costs, damages, and expenses (including, without limitation, reasonable attorney and expert fees, and disbursements incurred by any of them in any action or proceeding between the Generator and a third party or Pepco) for damage to property of unaffiliated third parties, injury to or death of any person, including Generator's employees or any third parties, to the extent caused by the negligence or willful misconduct of Pepco and/or its officers, directors, employees, agents, contractors, subcontractors or invitees arising out of or connected with Pepco's performance or breach of this Agreement, or the exercise by Pepco of its rights hereunder.           10.3  Indemnification Procedures. If either Party intends to seek indemnification under this Article 10 from the other Party, the Party seeking indemnification shall give the other Party notice of such claim within ninety (90) days of the later of the commencement of, or the Party's actual knowledge of, such claim or action. Such notice shall describe the claim in reasonable detail, and shall indicate the amount (estimated if necessary) of the claim that has been, or may be sustained by, said Party. To the extent that the other Party will have been actually and materially prejudiced as a result of the failure to provide such notice, such notice will be a condition precedent to any liability of the other Party under the provisions for indemnification contained in this Agreement. Neither Party may settle or compromise any claim without the prior consent of the other Party; provided, however, said consent shall not be unreasonably withheld or delayed.           10.4  Survival. The indemnification obligations of each Party under this Article 10 shall continue in full force and effect regardless of whether this Agreement has either expired or been terminated or canceled. ARTICLE 11 DEFAULT           11.1  Event of Default. Unless excused by Force Majeure, each of the following events shall constitute an event of default (an "Event of Default") under this Agreement:                 (a)  the failure by a Party to pay any amount due within thirty (30) days after receipt of written notice of nonpayment by the other Party, unless the payment of such amount is disputed in good faith;                 (b)  a Party's breach of any material term or condition of this Agreement including any material breach of a representation, warranty or covenant made in this Agreement which, after receiving written notice of the breach from the non-breaching Party (such notice to set forth in reasonable detail the nature of the default and, where known and if applicable, the steps necessary to cure such default), (i) the breaching Party fails to cure within thirty (30) days following receipt of the notice or (ii) if such default is of such a nature that it cannot be cured within thirty (30) days following receipt of such notice, the breaching Party fails within such thirty (30) days to commence the necessary cure and fails at any time thereafter diligently and continuously to prosecute such cure to completion provided that the cure is completed no later than 180 days after the receipt of the default notice ;                 (c)  the appointment of a receiver or liquidator or trustee for either Party and such receiver, liquidator or trustee is not discharged within sixty (60) days;                 (d)  the entry of a decree adjudicating a Party as bankrupt or insolvent, and such decree is continued undischarged and unstayed for a period of sixty (60) days; or                 (e)  the filing of a voluntary or involuntary petition in bankruptcy under any provision of any federal or state bankruptcy law by a Party or against it, and, with respect to an involuntary petition in bankruptcy, such petition continues undischarged and unstayed for a period of sixty (60) days.           11.2  Remedies. Upon the occurrence of an Event of Default, the non-defaulting Party may (a) terminate this Agreement by providing sixty (60) days' prior written notice to the defaulting Party and this Agreement shall thereupon terminate upon receipt of regulatory approval for such termination, but not before the date specified in the notice, and/or (b) subject to Section 8.2 of this Agreement, exercise all such rights and remedies as may be available to it under this Agreement or at law or equity with respect to such Event of Default. ARTICLE 12 PROJECTIONS AND OPERATING COMMITTEE           12.1  Projections. No later than three (3) business days prior to each Monday during the term of this Agreement, Pepco shall provide Generator with non-binding projections of the Services to be provided by Generator to Pepco under this Agreement for the week beginning that Monday.           12.2  Operating Committee. The Parties shall establish an operating committee consisting of one representative for each Party ("Operating Committee"). The Operating Committee shall act only by unanimous agreement or consent. The Parties shall designate their respective representatives to the Operating Committee, plus an alternate by written notice. Each Party's representative on the Operating Committee is authorized to act on behalf of such Party with respect to any matter arising under this Agreement which is to be decided by the Operating Committee, however, the Operating Committee shall not have any authority to modify or otherwise alter the rights and obligations of the Parties hereunder. The Operating Committee shall develop and implement suitable policies and procedures with to coordinate the interaction of the Parties with respect to the performance of their duties and obligations under this Agreement. ARTICLE 13 COST RESPONSIBILITIES AND BILLING PROCEDURES           13.1  Billing Procedures.                 (a)  Within ten (10) days after the first day of each Month Pepco shall provide to Generator a written invoice setting forth (a) the amount Pepco owes to Generator pursuant to Article 6 of this Agreement for Services and any other payments which may be due hereunder, and (b) the amounts, if any, that Generator owes to Pepco pursuant to this Agreement. Each invoice shall (i) delineate the Month in which the Services or Alternative Services were provided or reimbursable charges were incurred, (ii) fully describe the Services or Alternative Services rendered or reimbursable charges incurred, (iii) be itemized to reflect the Services or Alternative Services performed or provided or reimbursable charges incurred, and (iv) provide reasonable detail as to the calculation of the amounts involved.                 (b)  All invoices shall be paid within fifteen (15) days after the date of issuance, but not earlier than the 25th day of the month in which the invoice is rendered. All payments shall be made by wire transfer to a bank designated in writing by such Party. Payment of invoices shall not relieve the paying Party from any responsibilities or obligations it has under this Agreement, nor shall such payment constitute a waiver of any claims arising hereunder.                 (c)  To the extent that, for any billing period, Generator is obligated to pay to Pepco amounts due and calculated pursuant to this Section 13.1, Pepco may use such amounts as a set-off against any amounts owed by Pepco to Generator.           13.2  Billing Disputes. In the event of a billing dispute between the Parties, (i) each Party shall continue to perform its obligations in accordance with the terms of this Agreement subject to the other Party's rights hereunder, and (ii) the Party required to make payments hereunder shall pay to the other Party all invoiced amounts when due, net of any set-offs permitted under Section 13.1(d), that are not in dispute. Payment of invoices by either Party shall not relieve the paying Party from any responsibilities or obligations it has under this Agreement; nor shall it constitute a waiver of any claims arising hereunder.           13.3  Interest on Unpaid Balances. Interest on any unpaid amounts shall be calculated in accordance with the methodology specified for interest on refunds in FERC regulations at 18 C.F.R. Section 35.19a(a)(2)(iii). Interest on delinquent amounts shall be calculated from the due date of the bill to the date of payment. When payments are made by mail, bills shall be considered as having been paid on the date of receipt by the other Party. ARTICLE 14 CONFIDENTIALITY           14.1  Confidentiality Obligations of Pepco. Each Party shall hold in confidence, unless compelled to disclose by judicial or administrative process or other provisions of law, all documents and information furnished by one Party to the other Party in connection with this Agreement marked "Confidential" or "Proprietary." Except to the extent that such information or documents are (i) generally available to the public other than as a result of a disclosure by a receiving Party in breach of this Agreement, (ii) available to the receiving Party on a non-confidential basis prior to disclosure by the other Party , or (iii) available to the receiving Party on a non- confidential basis from a source other than the other Party, provided that such source is not known, and by reasonable effort could not be known, by the receiving Party to be bound by a confidentiality agreement with the other Party or otherwise prohibited from transmitting the information to the receiving Party by a contractual, legal or fiduciary obligation, the receiving Party shall not release or disclose such information to any other person, except to its employees, representatives or agents on a need-to-know basis, in connection with this Agreement who has not first been advised of the confidentiality provisions of this Section 14.1 and has agreed in writing to comply with such provisions. In no event shall such information be disclosed in violation of the requirements of FERC Orders 889 and 889-A, and any successor thereto. The Party receiving confidential information from the other Party shall promptly notify the other Party if it receives notice or otherwise concludes that the production of any information subject to this Section 14.1 is being sought under any provision of law and the receiving Party shall use reasonable efforts in cooperation with the other Party to seek confidential treatment for such confidential information provided thereto.           14.2  Confidentiality of Audits. The independent auditor performing any audit, as referred to in Article 20, shall be subject to a confidentiality agreement between the auditor and the Party being audited. Such audit information shall be treated as confidential except to the extent that its disclosure is required by regulatory or judicial order, for reliability purposes pursuant to PJM requirements and pursuant to the FERC's rules and regulations. Except as provided herein, neither Party will disclose the audit information to any third party, without the other Party's prior written consent. Audit information in the hands of the Party not being audited shall be subject to all provisions of Article 20.           14.3  Remedies. The Parties agree that monetary damages would be inadequate to compensate a Party for the other Party's breach of its obligations under Sections 14.1 and 14.2. Each Party accordingly agrees, subject to Section 8.2, that the other Party shall be entitled to equitable relief, by way of injunction or otherwise, if the first Party breaches or threatens to breach its obligations under Sections 14.1 or 14.2 of this Agreement, as applicable, which equitable relief shall be granted without bond or proof of damages, and the receiving Party shall not plead in defense that there would be an adequate remedy at law. ARTICLE 15 DISPUTE RESOLUTION           15.1  Disputes. A Party with a claim or dispute under this Agreement shall submit to the Operating Committee a notification of such claim or dispute within sixty (60) days after the circumstances that gave rise to the claim or the question or issue in dispute. The notification shall be in writing and shall include a concise statement of the claim or the issue or question in dispute, a statement of the relevant facts and documentation to support the claim. In the event the Operating Committee is unable, in good faith, to resolve their disagreement in a manner satisfactory to both Parties within thirty (30) days after receipt by the Operating Committee of a notification specifying the claim, issue or question in dispute, the Parties shall refer the dispute to their respective senior management. If, after using their good faith best efforts to resolve the dispute, senior management cannot resolve the dispute within thirty (30) days, the Parties shall utilize the arbitration procedures set forth below in Section 15.2 to resolve a dispute, provided that nothing herein or therein shall prohibit a Party from at any time requesting from a court of competent jurisdiction a temporary restraining order, preliminary injunction, or other similar form of equitable relief to enforce performance of the provisions of this Agreement.           15.2  Arbitration.                 (a)  Unless the Parties otherwise mutually agree in writing to another form of dispute resolution such as dispute resolution under the PJM Agreement or the MAAC agreement, any arbitration initiated under this Agreement shall be conducted before a single neutral arbitrator appointed by the Parties within thirty (30) days of receipt by respondent of the demand for arbitration. If the Parties are unable to agree on an arbitrator, such arbitrator shall be appointed by the American Arbitration Association. Unless the Parties agree otherwise, the arbitrator shall be an attorney or retired judge with at least fifteen (15) years of experience, and shall not have any current or past substantial business or financial relationships with any Party to the arbitration. If possible, the arbitrator shall have experience in the electric utility industry. Unless otherwise agreed, the arbitration shall be conducted in accordance with the American Arbitration Association's Commercial Arbitration Rules, then in effect. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration agreement shall be governed by the Federal Arbitration Act of the United States, 9 U.S.C. Sections 1 et seq. The location of any arbitration hereunder shall be in the District of Columbia.                 (b)  The arbitration shall, if possible, be concluded not later than six (6) months after the date that it is initiated. The arbitrator shall be authorized only to interpret and apply the provisions of this Agreement or any related agreements entered into under this Agreement and shall have no power to modify or change any of the above in any manner. The arbitrator shall have no authority to award punitive or multiple damages or any damages inconsistent with this Agreement. The arbitrator shall, within thirty (30) days of the conclusion of the hearing, unless such time is extended by agreement of the Parties, notify the Parties in writing of his or her decision, stating his or her reasons for such decision and separately listing his or her findings of fact and conclusions of law. The decision of the arbitrator rendered in such a proceeding shall be final and binding on the Parties. Judgment on the award may be entered upon it in any court having jurisdiction.                 (c)  Nothing in this Agreement shall preclude, or be construed to preclude, any Party from filing a petition or complaint with FERC with respect to any arbitrable claim over which FERC has jurisdiction. In such case, the other Party may request FERC to reject or to waive jurisdiction. If FERC rejects or waives jurisdiction with respect to all or a portion of the claim, the portion of the claim not so accepted by FERC shall be resolved through arbitration, as provided in this Agreement. To the extent that FERC asserts or accepts jurisdiction over the claim, the decision, finding of fact or order of FERC shall be final and binding, subject to judicial review under the Federal Power Act, and any arbitration proceedings that may have commenced with respect to the claim prior to the assertion or acceptance of jurisdiction by FERC shall be terminated. ARTICLE 16 REPRESENTATIONS           16.1  Representations of Pepco. Pepco hereby represents and warrants to Generator as follows:                 (a)  Incorporation. Pepco is a corporation duly organized, validly existing and in good standing under the laws of the District of Columbia and the Commonwealth of Virginia, and has all requisite corporate power and authority to own, lease and operate its material assets and properties and to carry on its business as now being conducted.                 (b)  Authority. Pepco has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by Pepco of this Agreement and the consummation by Pepco of the transactions contemplated hereunder have been duly and validly authorized by the Board of Directors of Pepco or by a committee thereof to whom such authority has been delegated and no other corporate proceedings on the part of Pepco are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Pepco and, assuming that this Agreement constitutes a valid and binding agreement of Generator, constitutes a valid and binding agreement of Pepco, enforceable by Pepco in accordance with its terms.                 (c)  Consents and Approvals; No Violation.                      (i)    Neither the execution and delivery of this Agreement by Pepco nor performance by Pepco of its obligations hereunder will (A) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-laws of Pepco, (B) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement, lease or other instrument or obligation to which Pepco or any of its subsidiaries is a party or by which any of their respective assets may be bound or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Pepco, or any of its assets, except in the case of clauses (B) and (C) for such failures to obtain a necessary consent, defaults and violations which would not, individually or in the aggregate, have a material adverse effect on the ability of Pepco to discharge its obligations under this Agreement (a "Pepco Material Adverse Effect").                      (ii)   No declaration, filing or registration with, or notice to, or authorization, consent or approval of any governmental authority is necessary for performance by Pepco of its obligations hereunder, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made would not, individually or in the aggregate, have a Pepco Material Adverse Effect.           16.2  Representations of Generator. Generator hereby represents and warrants to Pepco as follows:                 (a)  Incorporation. Generator is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware, and has all requisite limited partnership power and authority to own, lease and operate its material assets and properties and to carry on its business as now being conducted.                 (b)  Authority. Generator has all necessary limited partnership power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery by the Generator of this Agreement and the consummation by Generator of the transactions contemplated hereby have been duly and validly authorized by the partnership of Generator or by a committee thereof to whom such authority has been delegated and no other limited partnership proceedings on the part of Generator are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Generator and, assuming that this Agreement constitutes a valid and binding agreement of Pepco, constitutes a valid and binding agreement of Generator, enforceable against Generator in accordance with its terms.                 (c)  Consents and Approvals.                      (i)    Neither the execution and delivery of this Agreement by Generator nor performance by Generator of its obligations hereunder will (A) conflict with or result in any breach of any provision of the Certificate of Limited Partnership or Limited Partnership Agreement or other charter documents of Generator, (B) result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, agreement, lease or other instrument or obligation to which Generator or any of its subsidiaries is a party or by which any of their respective assets may be bound or (C) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Generator, or any of its assets, except in the case of clauses (B) and (C) for such failures to obtain a necessary consent, defaults and violations which would not, individually or in the aggregate, have a material adverse effect on the ability of Generator to discharge its obligations under this Agreement (a "Generator Material Adverse Effect").                      (ii)   No declaration, filing or registration with, or notice to, or authorization, consent or approval of any Governmental Authority is necessary for performance by Generator of its obligations hereunder, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not obtained or made would not, individually or in the aggregate, have a Generator Material Adverse Effect. ARTICLE 17 ASSIGNMENT/CHANGE IN CORPORATE IDENTITY           17.1  Generally. Except as otherwise set forth in this Article 17, neither this Agreement nor any of the rights, interests, or obligations hereunder shall be assigned by either Party hereto, without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed.           17.2  Pepco's Assignment Rights. Subject to Section 17.5 below, upon ten (10) days prior written notice to Generator, Pepco may assign this Agreement, and Pepco's rights, interests and obligations hereunder, to an Affiliate of Pepco that assumes Pepco's obligations to provide Services to the Service Load.           17.3  Generator's Assignment Rights. Subject to Section 17.5 below, Generator may assign, transfer, pledge or otherwise dispose of its rights and interests hereunder to a trustee, lending institution, or other Person for the purposes of financing or refinancing the Auctioned Assets, including upon or pursuant to the exercise of remedies under such financing or refinancing, or by way of assignments, transfers, conveyances of dispositions in lieu thereof; provided, however, that no such assignment in accordance with this Section 17.3 shall relieve or in any way discharge Generator from the performance of its duties and obligations under this Agreement. Pepco agrees to execute and deliver, at Generator's expense, such documents as may be reasonably necessary to accomplish any such assignment, transfer, conveyance, pledge or disposition of rights hereunder for purposes of the financing or refinancing of the Facility, so long as Pepco's rights under this Agreement are not thereby altered, amended, diminished or otherwise impaired.           17.4  Mergers or Consolidations. Subject to Section 17.5 below, either Party may assign this Agreement to a successor to all or substantially all of the assets of such Party by way of merger, consolidation, sale or otherwise, provided such successor assumes in writing and becomes liable for all of such Party's duties and obligations hereunder.           17.5  Limitations                 (a)  No assignment, transfer, conveyance, pledge or disposition of rights, interests, duties or obligations under this Agreement by a Party shall relieve that Party from liability and financial responsibility for the performance thereof after any such transfer, assignment, conveyance, pledge or disposition unless and until (i) the transferee or assignee shall agree in writing to assume the obligations and duties of that Party under this Agreement and to impose such obligations on subsequent permitted transferees and assignees and (ii) the non-assigning Party has consented in writing to such assumption and to a release of the assigning Party from such liability, such consent not to be unreasonably withheld or delayed.                 (b)  If Generator terminates its existence as a limited partnership entity by merger, acquisition, sale, consolidation or otherwise, or if all or substantially all of Generator's assets are transferred to another person or business entity without complying with this Article 17, Pepco shall have the right, enforceable in a court of competent jurisdiction, to enjoin Generator's successor from using its assets in any manner that does not comply with the requirements of this Agreement or that impedes Pepco's ability to carry on its ongoing business operations.           17.6  Successors. This Agreement and all of the provisions hereof are binding upon, and inure to the benefit of, the Parties and their respective successors and permitted assigns. ARTICLE 18 NOTICES           Except as otherwise expressly set forth in this Agreement, all notices and other communications hereunder shall be in writing and shall be deemed given (as of the time of delivery or, in the case of a telecopied communication, of confirmation) if delivered personally, telecopied (which is confirmed) or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):                     if to Pepco, to:                     Potomac Electric Power Company                     1900 Pennsylvania Avenue, N.W.                     Washington, D.C. 20068                     Telecopier:   (202) 261-7889                     Attention:    William T. Torgerson                                   General Counsel                     if to Generator, to:                     c/o Southern Company Energy Marketing L.P.                     1155 Perimeter Center West                     Suite 130                     Atlanta, Georgia 30338                     Telecopier: (678) 579-5752                     Attention:   Sonnet Edmonds ARTICLE 19 AMENDMENTS           19.1  Amendments. Except as provided in Section 19.2, this Agreement shall not be amended, modified, or supplemented unless mutually agreed to by the Parties in writing. Except as provided in Section 19.2(b) below, the rates, terms and conditions contained in this Agreement are not subject to change under Sections 205 or 206 of the Federal Power Act absent the mutual written agreement of the Parties. It is the intent of this Section 19.1 that, except as provided in Section 19.2(b) below, the rates, terms and conditions of this Agreement shall not be subject to change except by mutual written agreement by the Parties.           19.2  PJM Agreement Modifications                 (a)  If the PJM Agreements are amended or modified so that any schedule or section references herein to such agreements is changed, such schedule or section references herein shall be deemed to automatically (and without any further action by the Parties) refer to the new or successor schedule or section in the PJM Agreements which replaces that originally referred to in this Agreement.                 (b)  If the applicable provisions of the PJM Agreements referenced herein, or any other PJM rules relating to the implementation of this Agreement, are changed materially from those in effect on May 31, 2000, the Operating Committee shall cooperate to make conforming changes to this Agreement to fulfill the purposes of this Agreement; provided that no such changes shall alter the economic benefits of this Agreement between the Parties. If the Operating Committee fails to agree on such changes within 15 days, Pepco may unilaterally make conforming changes to this Agreement to fulfill the purposes of this Agreement, and shall file such changes with the FERC on behalf of both Parties; provided that nothing herein shall prejudice the Generator's rights to protest such change. ARTICLE 20 AUDITS           The Parties shall have the right, during normal business hours, to audit each other's accounts and records pertaining to transactions under this Agreement, upon twenty (20) days prior written notice, at the offices where such accounts and records are maintained. Any such audit of a Party's accounts and records will be at the expense of the auditing Party, shall not be made more frequently than once in any twelve (12) month period, and no such audit may be made with respect to accounts and records relating to periods more than twenty- four (24) months prior to the date of the audit notice. The Party being audited will be entitled to review the audit report and any supporting materials. The Party conducting the audit shall maintain the confidentiality of all information obtained during the audit in compliance with Section 14.2 of this Agreement. To the extent that audited information includes confidential information, the auditing Party shall designate an independent auditor at its expense to perform such audit. ARTICLE 21 MISCELLANEOUS PROVISIONS           21.1  Waiver. Except as otherwise provided in this Agreement, any failure of a Party to comply with any obligation, covenant, agreement, or condition herein may be waived by the Party entitled to the benefits thereof only by a written instrument signed by the Party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement, or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.           21.2  No Third Party Beneficiaries. Nothing in this Agreement is intended to confer upon any other person except the Parties any rights or remedies hereunder or shall create any third party beneficiary rights in any person. No provision of this Agreement shall create any rights in any such persons in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement except as expressly provided for thereunder.           21.3  Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland (regardless of the laws that might otherwise govern under applicable principles of conflicts of law).           21.4  Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.           21.5  Interpretation. When a reference is made in this Agreement to an article, section, schedule or exhibit, such reference shall be to an article or section  of, or schedule or exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation" or equivalent words. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Unless otherwise expressly stated otherwise herein, the word "day" shall mean any calendar day including weekends and holidays. Any agreement, instrument, statute, regulation, rule or order defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument, statute, regulation, rule or order as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes, regulations, rules or orders) by succession of comparable successor statutes, regulations, rules or orders and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. Each Party acknowledges that it has been represented by counsel in connection with the review and execution of this Agreement, and, accordingly, there shall be no presumption that this Agreement or any provision hereof be construed against the Party that drafted this Agreement.           21.6  Jurisdiction and Enforcement. Each of the Parties irrevocably submits to the exclusive jurisdiction of the federal and state courts of the State of Maryland for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each of the Parties agrees to commence any action, suit or proceeding relating hereto either in the federal courts of the State of Maryland or, if such suit, action or proceeding may not be brought in such court for jurisdictional reasons, in the state courts of the State of Maryland. Each of the Parties further agrees that service of process, summons, notice or document by hand delivery or U.S. registered mail at the address specified for such Party in Article 18 (or such other address specified by such Party from time to time pursuant to Article 18) shall be effective service of process for any action, suit or proceeding brought against such Party in any such court. Each of the Parties irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the federal and state courts of the State of Maryland and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.           21.7  Entire Agreement. This Agreement, the Asset Sale Agreement, the Confidentiality Agreement and the Ancillary Agreements including the exhibits, schedules, documents, certificates and instruments referred to herein or therein and other contracts, agreements and instruments contemplated hereby or thereby, embody the entire agreement and understanding of the Parties in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings other than those expressly set forth or referred to herein or therein. This Agreement, the Asset Sale Agreement and the Ancillary Agreements supersede all prior agreements and understandings between the Parties with respect to the transactions contemplated by this Agreement other than the Confidentiality Agreement.           21.8  Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.           21.9  Further Assurances. The Parties hereto agree to execute and deliver promptly, at the expense of the Party requesting such action, any and all other and further instruments, documents and information which may be reasonably requested in order to effectuate the transactions contemplated hereby. Each Party agrees to cooperate with, assist and accommodate all reasonable requests made by the other Party in respect of any regulatory approval necessary for, or any regulatory proceeding relating to, the execution, delivery or performance of this Agreement. Each Party further agrees to comply in all material respects with all laws of governmental authorities relating to this Agreement and the consummation of the transactions contemplated hereby.           21.10 Independent Contractor Status. Nothing in this Agreement shall be construed as creating any relationship between Pepco and Generator other than that of independent contractors.           21.11 Conflicts. Except with respect to the amendments, indemnification, liability, default and remedies provisions contained herein or as otherwise expressly provided herein, in the event of any conflict or inconsistency between the terms of this Agreement and the terms of the Asset Sale Agreement, the terms of the Asset Sale Agreement shall prevail.           IN WITNESS WHEREOF, Pepco and Generator have caused this Transition Power Agreement (Maryland) to be signed by their respective duly authorized officers as of the date first above written.                                                               POTOMAC ELECTRIC POWER COMPANY By:      MARY-SHARPE Hayes            Name:  Mary Sharpe-Hayes       Title: Vice President [GENERATOR] By:         DAVID L. DAVIS              Name:  David L. Davis       Title: Attorney-in-Fact     SCHEDULE 1 DEFINITIONS Part A .   Capitalized terms not defined in the body of the Agreement           shall have the meaning set forth in Part A of this Schedule           1. (Part B of this Schedule 1 sets forth capitalized terms           defined within the Agreement.)             1.   " Affiliate" has the meaning set forth in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934.             2.   "Auctioned Assets" has the meaning set forth in the Asset Sale Agreement.             3.   "Capacity Credits" has the meaning set forth in the PJM Reliability Agreement.             4.   "Capacity Resources" has the meaning set forth in the PJM Reliability Agreement.             5.   Contract Year 1" means the period between the Effective Date through and including December 31, 2001.             6.    "Contract Year 2" means the period between January 1, 2002 through and including December 31, 2002.             7.   "Contract Year 3" means the period between January 1, 2003 through and including December 31, 2003.             8.   "Contract Year 4" means the period between January 1, 2004 through and including June 30, 2004.             9.   "Closing" has the meaning set forth in the Asset Sale Agreement.            10.   "Confidentiality Agreement" has the meaning set forth in the Asset Sale Agreement.            11.   FERC" means the Federal Energy Regulatory Commission or its successors.            12.   "Fixed Transmission Rights" has the meaning set forth in the PJM Operating Agreement.            13.   "Full Energy Requirements" means the full electric energy requirements of the Service Load in any hour, measured in megawatt hours at the Delivery Points.            14.   "Generator" has the meaning set forth in the preamble of this Agreement and shall include its permitted successors and assigns.            15.   "MDPSC" means the Maryland Public Services Commission or its successor.            16.   "Metered Energy Requirements" means the full electric energy requirements of the Service Load in any hour, measured in megawatt hours at the retail (customer revenue meter) level. For customers without, interval metering, Pepco will use customer or retail class profiles in accordance with the MDPSC regulations to distribute periodic metered energy usage to obtain hourly customer energy usage. When Pepco curtailable load programs are operated, customer loads which are curtailed will be increased by Pepco to reflect the hourly energy usage which would have occurred if curtailments had not taken place.            17.   "Month" means a calendar month.            18.   "Network Customer" has the meaning set forth in the PJM Tariff.            19.   "Network Load" has the meaning set forth in the PJM Tariff.            20.   "Optional Energy" means the Optional Energy Percent, as elected by Pepco through the exercise of its Call Options, of Pepco's Full Energy Requirements, including the Renewable Energy Percent.            21.   "Pepco" has the meaning set forth in the preamble of this Agreement and shall include its permitted successors or assigns.             22.   "PJM" means the Pennsylvania New Jersey-Maryland interconnected power pool operated under the PJM Operating Agreement and any successor thereto including any regional transmission organization, independent system operator, transco, or any other independent system administrator that possesses operational control or planning control over Pepco's transmission system.            23.   "PJM Agreements" means the PJM Operating Agreement, PJM Reliability Agreement, and PJM Tariff.            24.   "PJM Control Area" has the meaning set forth in the PJM Reliability Agreement.            25.   "PJM Operating Agreement" means the Amended and Restated Operating Agreement of the PJM Interconnection LLC dated as of June 2, 1997.            26.   "PJM Interconnection LLC" means the independent system operator of the PJM Control Area pursuant to the PJM Operating Agreement and the PJM Tariff..            27.    "PJM Reliability Agreement" means the PJM Reliability Assurance Agreement dated June 2, 1997, establishing obligations, standards and procedures for maintaining the reliable operation of the PJM Control Area.            28.   "PJM System Operator" means the PJM Interconnection LLC energy control center staff responsible for central dispatch as provided in the PJM Agreement.            29.   "PJM Tariff" means the PJM Open Access Transmission Tariff providing transmission service within the PJM Control Area.            30.   "Planning Period" has the meaning set forth in the PJM Reliability Agreement.            31.   "Renewable Energy Resources" means renewable energy resource as defined in md Code, public utility Companies Section 1.01(z).           32.   "Renewable Energy Percent" means electricity from Renewable Energy Resources which is equal to 0.997 percent of the Required Energy or Optional Energy, as applicable.            33.   "Required Energy" means the Required Energy Percent of Pepco's Full Energy Requirements, including the Renewable Energy Percent.            34.   "Service Load" means (i) all of Pepco's default service retail electric energy customers located in Pepco's service territory, as such territory exists on the Effective Date, in the State of Maryland and (ii) qualifying facilities to which Pepco is obligated to sell energy pursuant to the rates and terms set forth in Pepco's qualifying facilities tariff on file with the Maryland Public Service Commission which is currently designated as MD-CG-SPP.            35.   "Summer Month" means each Month during the period of May 1 through September 30.            36.   "Winter Month" means each Month during the period of October 1 through April 30. Part B.   The following terms have the meaning specified in the section           of this Agreement set forth opposite to such term: Term Agreement Reference Agreement Preamble Alternative Services Section 8.1 Ancillary Services Article 4 Ancillary Services Requirements Article 4 Asset Sale Agreement First Recital Call Options Section 5.2(a) Capacity Resources Plan Section 3.2(a) Capacity Resources Requirements Section 3.1(a) Delivery Points Section 5.3 Effective Date Section 2.1 Event of Default Section 11.1 Force Majeure Section 9.2 Generator Material Adverse Effect Section 16.2(c)(i) Operating Committee Article 12 Optional Energy Percent Section 5.2(a) Pepco Material Adverse Effect Section 16.1(c)(i) Party or Parties Preamble PPAs First Recital Required Energy Percent Section 5.1 Services Section 8.1   EXHIBIT A Pepco's Non-Binding Estimate for Calendar Year 2001 of Capacity Resources for the Service Load MW Capacity Obligation (2) w/o Migration w Migration (3) January-01 3083 2073 February-01 3083 2069 March-01 3083 2065 April-01 3083 2064 May-01 3083 2056 June-01 3130 2084 July-01 3130 2080 August-01 3130 2076 September-01 3130 2072 October-01 3130 2067 November-01 3130 2063 December-01 3130 2059 (1)    without SMECO (2)    PEPCO's current Unforced Capacity without Benning and Buzzard Point is approx. 5750 MWs. (3)    Migration estimates are based on observation of retail choice programs in other jurisdictions. Exhibit B to Transition Power Agreement (MD) Maryland Capacity Resource Plan - 2001   Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 CHALK POINT 1 174.0 174.0 174.0 174.0 174.0 174.0 174.0 174.0 174.0 174.0 174.0 174.0 CHALK POINT 2 175.0 175.0 175.0 175.0 175.0 175.0 175.0 175.0 175.0 175.0 175.0 175.0 CHALK POINT 3 332.0 332.0 332.0 332.0 332.0 333.0 333.0 333.0 333.0 333.0 333.0 333.0 CHALK POINT 4 326.0 326.0 326.0 326.0 326.0 326.0 326.0 326.0 326.0 326.0 326.0 326.0 CHALK POINT CT 1 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 CHALK POINT CT 2 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 CHALK POINT CT 3 47.0 47.0 47.0 47.0 47.0 47.0 47.0 47.0 47.0 47.0 47.0 47.0 CHALK POINT CT 4 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 46.0 CHALK POINT CT 5 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 CHALK POINT CT 6 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 59.0 DICKERSON 1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 DICKERSON 2 98.0 98.0 98.0 98.0 98.0 98.0 98.0 98.0 98.0 98.0 98.0 98.0 DICKERSON 3 99.0 99.0 99.0 99.0 99.0 99.0 99.0 99.0 99.0 99.0 99.0 99.0 DICKERSON CT 1 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 DICKERSON HCT 1 33.0 33.0 33.0 33.0 33.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 DICKERSON HCT 2 77.0 77.0 77.0 77.0 77.0 77.0 77.0 77.0 77.0 77.0 77.0 77.0 MCRRF 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 MORGANTOWN 1 313.0 313.0 313.0 313.0 313.0 313.0 313.0 313.0 313.0 313.0 313.0 313.0 MORGANTOWN 2 309.0 309.0 309.0 309.0 309.0 309.0 309.0 309.0 309.0 309.0 309.0 309.0 MORGANTOWN CT 1 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 MORGANTOWN CT 2 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 MORGANTOWN CT 3 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 MORGANTOWN CT 4 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 MORGANTOWN CT 5 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 MORGANTOWN CT 6 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 24.0 PANDA 126.0 126.0 126.0 126.0 126.0 126.0 126.0 126.0 126.0 126.0 126.0 126.0 POTOMAC RIVER 1 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 POTOMAC RIVER 2 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 POTOMAC RIVER 3 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 POTOMAC RIVER 4 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 53.0 POTOMAC RIVER 5 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 56.0 SMECO 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 42.0 OE 250.0 250.0 250.0 250.0 250.0 250.0 - - 250.0 250.0 250.0 250.0 Owned 3,076.0 3,076.0 3,076.0 3,076.0 3,076.0 3,078.0 2,828.0 2,828.0 3,078.0 3,078.0 3,078.0 3,078.0 Purchased 7.0 7.0 7.0 7.0 7.0 52.0 302.0 302.0 52.0 52.0 52.0 52.0 Total Requirements 3,083.0 3,083.0 3,083.0 3,083.0 3,083.0 3,130.0 3,130.0 3,130.0 3,130.0 3,130.0 3,130.0 3,130.0

* Material deleted pursuant to Application for Confidential Investment Exhibit 10.6 ASSIGNMENT AND AMENDMENT OF EMPLOYMENT AGREEMENT       THIS ASSIGNMENT AND AMENDMENT of employment agreement made as of the 12th day of September, 2000, by and between Stockwalk.com Group, Inc., a Minnesota corporation (“Stockwalk”), Online Brokerage Solutions, Inc. (“OBS”) and Robert J. Vosburgh (“Vosburgh”). WITNESSETH       WHEREAS, Stockwalk and Vosburgh entered into an Employment Agreement dated as of August 1, 1999, which agreement was amended by the parties on November 11, 1999 (“Agreement”); and       WHEREAS, Stockwalk has restructured its business so that its online private label business will be run in OBS and Stockwalk and Vosburgh desire to assign the Agreement to OBS and to otherwise clarify and amend the Agreement.       NOW THEREFORE, in consideration of the premises and the mutual covenants and conditions contained herein, the parties hereto agree as follows: 1.   For value received, the adequacy and receipt of which are hereby acknowledged, Stockwalk hereby sells, conveys, assigns, transfers and delivers to OBS, its successors and assigns, to have and to hold forever, all of Stockwalk’s right, title and interest in, to and under the Agreement. Vosburgh hereby consents to the assignment of the rights and obligations of Stockwalk under the Agreement by OBS. In connection with the assignment of the Agreement and effective the date of this Assignment and Amendment, Vosburgh resigns from any and all offices held by him in Stockwalk, including but not limited to Executive Vice President, Chief Operating Officer and Stockwalk hereby accepts such resignations.   2.   In connection with Stockwalk’s conveyance, assignment, transfer and delivery of the Agreement, OBS agrees to assume and pay or perform, promptly as they become due, the obligations of Stockwalk under the Agreement.   3.   All references in the Agreement to Stockwalk shall be replaced with OBS to reflect the Assignment of the Agreement to OBS.   4.   Paragraph 1 of the Agreement is replaced with the following paragraph:       Employment. Subject to the terms and conditions hereof, the Company shall employ Employee and Employee agrees to be so employed in the capacity of Chief Executive Officer until December 31, 2005. This Agreement shall automatically renew for successive one-year terms thereafter unless the Company shall have provided Employee with written notice of the Company’s intent not to renew by December 1, 2005 and by each December 1 thereafter.   5.   Section 4 of the Agreement shall be deleted in its entirety and replaced with the following paragraph:     Company shall pay Vosburgh a bonus amount on September 30, 2000 and each quarter thereafter based on the number of net new “qualifying” private label customer accounts of OBS times $10. The calculation shall cover net new qualifying accounts. A qualifying account for purposes hereof shall be defined as a private label customer account of OBS that has completed at least five (5) securities transactions on an annualized basis. No bonus will be paid where the total number of qualifying accounts at the end of a quarterly period does not exceed the greatest number of qualifying accounts in any previous period. Example Calculation: If there are 50 qualifying OBS private label customer accounts as of Q1, 3700 as of Q2, 3500 as of Q3, Exhibit 10.6-1 --------------------------------------------------------------------------------     and 3600 as of Q4 the quarterly bonus payment will be as follows:                           Number Quarter Qualifying Accounts Net Number Bonus Payment -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Q1 50 50 $ 500 Q2 3700 3650 36500 Q3 3500 -200 0 Q4 3600 +100 0       The amount of the quarterly bonus payment shall be guaranteed to equal at least Fifteen Thousand and no/100 Dollars ($15,000.00) for the first five (5) quarterly payments after the date of this Assignment and Amendment (i.e., September 30, 2000; December 31, 2000; March 30, 2001; June 30, 2001; and September 30, 2001). 6.   In the event of a change of control of the Stockwalk, Vosburgh shall be entitled to the immediate vesting of all stock options then held by him. A “change of control” shall be deemed to have occurred if at any time or from time to time after the date of this Agreement:   (i)   Any “person” or “group” is or becomes the “beneficial owner” directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities, or     (ii)   The shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company continuing to represent more than 50 percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets. 7.   The parties agree that the Company would be substantially harmed if the Employee competes with the Company or any of its affiliates (including any past, present or future affiliate of Stockwalk) during employment with the Company or after termination of employment with the Company. In exchange for benefits provided to the Employee hereunder, the Employee agrees that during his employment with the Company, and for a period of one year after termination of such employment for any reason the Employee will not directly or indirectly, without the written consent of the Company:   (i)   Engage in or begin any online securities business competitive with the Company or any of its affiliates (including any past, present or future affiliate of Stockwalk) in any product or geographic market in which the Company or any of its affiliates is then engaged in the online securities business. “Engage in” means to directly or indirectly, and whether as a principal, agent, employee, consultant, through an affiliate, or otherwise, alone or in association with any individual or any other entity, carry on, be engaged or take part in, or own, share in the earnings of, or invest more than Fifty Thousand Dollars ($50,000) in the stocks, bonds, or other securities of, any entity engaged in such businesses in such area. “Affiliates” means, as to any party, any entity with controls, or is under common control with, such party.     (ii)   Solicit or hire any person now, heretofore or hereafter employed or retained by the Company or any of its affiliates as employee, agent or independent contractor to work for or with Employee, directly or indirectly, as an employee, partner, agent, independent contractor or otherwise, in a business enterprise competitive with that of the Company or any of its past affiliates.     (iii)   Vilify, disparage or otherwise slander or defame the business or business practices of the Company or their Exhibit 10.6-2 --------------------------------------------------------------------------------         officers, directors, or employees.     Notwithstanding the foregoing, the term of this covenant not to compete shall be ninety (90) days instead of one year if and only if Employee remains employed with the Company through December 31, 2005.   8.   Provided Employee is employed on the payment date, the Company shall pay Employee a bonus amount of Twenty-Five Thousand Dollars ($25,000) upon public announcement of a letter of intent with * or an affiliate thereof. Provided Employee is employed on the payment date, the Company shall pay Employee a bonus amount of Twenty-Five Thousand Dollars ($25,000) upon execution and public announcement of a private label agreement from * to enter into a private label agreement with the Company.   9.   Except as hereinabove supplemented and amended, all of the terms, covenants and conditions of the Agreement are hereby ratified and confirmed.       Stockwalk.com Group, Inc.   By: /s/ Philip T. Colton Its: Senior Vice President & General Counsel   Online Brokerage Solutions, Inc.   By: /s/ Philip T. Colton Its: General Counsel   /s/ Robert J. Vosburgh Robert J. Vosburgh Exhibit 10.6-3

EXHIBIT 10.3g TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 30, 2000 between Harcourt General, Inc. and Catherine N. Janowski (the "Executive"). Executive is a skilled and dedicated employee who has important management responsibilities and talents which benefit the Company. The Company believes that its best interests will be served if Executive is encouraged to remain with the Company or its Subsidiaries. The Company has determined that Executive's ability to perform Executive's responsibilities and utilize Executive's talents for the benefit of the Company, and the Company's ability to retain Executive as an employee, will be significantly enhanced if Executive is provided with fair and reasonable protection from the risks of a change in control of the Company. Accordingly, the Company and Executive agree as follows: 1. Defined Terms. Unless otherwise indicated, capitalized terms used in this Agreement which are defined in Schedule A shall have the meanings set forth in Schedule A. 2. Effective Date; Term. This Agreement shall be effective as of June 30, 2000 (the "Effective Date") and shall remain in effect until June 29, 2002 (the "Term"); provided, however, that commencing with June 30, 2001 and on each anniversary thereof (each an "Extension Date"), the Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the applicable Extension Date that the Term shall not be so extended. Notwithstanding the foregoing, this Agreement shall, if in effect on the date of a Change of Control, remain in effect for two years following the Change of Control. 3. Change of Control Benefits. (i) If Executive's employment with the Company and its Subsidiaries is terminated at any time within the two years following a Change of Control by the Company and any of its Subsidiaries without Cause or by Executive for Good Reason (the effective date of either such termination hereafter referred to as the "Termination Date"), Executive shall be entitled to, and the Company shall be required to provide, subject to Executive's execution of a general release in favor of the Company substantially in the form attached hereto as Exhibit A (the "Release"), the payments and benefits provided hereafter in this Section 3 and as set forth in this Agreement. If Executive's employment by the Company and any of its Subsidiaries is terminated prior to a Change of Control by the Company and any of its Subsidiaries without Cause in connection with or in anticipation of a Change of Control, Executive shall be entitled to the benefits provided hereafter in Sections 3 and 4 and as otherwise set forth in this Agreement, but only if an anticipated Change of Control actually occurs, and Executive's Termination Date shall be deemed to have occurred immediately following the Change of Control. Notwithstanding the preceding sentence, in the event of any such termination, Executive shall continue to receive Executive's Base Salary at the annual rate in effect immediately prior to such termination (but not less than the annual rate in effect on the date of this Agreement) and any Bonus to which Executive would have been entitled had Executive remained employed until the date of the anticipated Change of Control, provided, however that such Base Salary and Bonus continuation shall end on the date of the anticipated Change of Control or the date that the agreement or other circumstance that would have resulted in the anticipated Change of Control terminates, whichever is applicable. Notice of termination without Cause or for Good Reason shall be given in accordance with Section 14, and shall indicate the specific termination provision hereunder relied upon, the relevant facts and circumstances and the Termination Date. a. Severance Payments. Within the later of (i) fifteen business days after the Termination Date or (ii) the expiration of the revocation period, if applicable, under the Release (the "Payment Period"), the Company shall pay Executive a cash lump sum equal to: (1) the Severance Multiple times the greater of Executive's Base Salary in effect (i) immediately prior to the date of the Change of Control or (ii) immediately prior to the event set forth in the notice of termination giving rise to the Termination Date; and (2) the Severance Multiple times the Target Bonus; and (3) Executive's Target Bonus multiplied by a fraction, the numerator of which shall equal the number of days Executive was employed by the Company or any of its Subsidiaries in the Company fiscal year in which the Executive's termination occurs and the denominator of which shall equal 365. b. Continuation of Active Employee Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall provide Executive and Executive's spouse and dependents (each as defined under the applicable program) with medical (including Executive Medical), dental, accidental death and dismemberment, life insurance and long-term disability coverages at the same benefit level, duration and at the same cost to Executive as provided to Executive immediately prior to the Change of Control; provided, however, that if Executive becomes employed by a new employer, (i) continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which Executive becomes enrolled and (ii) long-term disability benefits provided by the new employer shall offset long-term disability benefits provided by the Company. In addition, the period in which Executive is entitled to continued coverage under COBRA shall commence on the Termination Date. c. Payment of Earned But Unpaid Amounts. Within the Payment Period, the Company shall pay Executive any unpaid Base Salary through the Termination Date, any Bonus earned but unpaid as of the Termination Date for any previously completed fiscal year of the Company, all compensation previously deferred by Executive but not yet paid as well as the Company's matching contribution with respect to such deferred compensation and all accrued interest thereon; provided that if Executive is eligible for retirement under the terms of the applicable deferred compensation plan Executive shall receive the deferred compensation and interest pursuant to Executive's election under such plan unless Executive obtains the consent of the Company to receive the deferred compensation and interest in a lump sum or otherwise. In addition, Executive shall be entitled to prompt reimbursement of any unreimbursed expenses properly incurred by Executive in accordance with Company policies prior to the Termination Date. Executive shall also receive such other compensation (including any stock options or other equity-related payments) and benefits, if any, to which Executive may be entitled from time to time pursuant to the terms and conditions of the employee compensation, incentive, equity, benefit or fringe benefit plans, policies or programs of the Company, other than any Company severance policy (payments and benefits in this subsection (c), the "Accrued Benefits"). d. Retirement Benefits. (i) For purposes of eligibility for retirement, for early commencement or actuarial subsidies and for purposes of benefit accruals under any Company defined benefit pension plan (or any such alternative contractual arrangement that the Executive may have with the Company or any of its Subsidiaries), (i) Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that accrued as of the Termination Date, (ii) Executive will become fully vested in any defined benefit pension benefits provided by the Company and (iii) for purposes of calculating Executive's benefit, compensation shall include both Base Salary and Bonus; provided, that, (A) Base Salary applicable to any period of service deemed to occur after the Termination Date will be increased by five percent for each year of such additional service and (B) Executive's Bonus for each such year of additional service shall be based on the Target Bonus percentage; provided, further, that if any benefits afforded by this Agreement, including the benefits arising from the grant of additional service and age, are not provided under the qualified pension plan of the Company, the benefit, or its equivalent in value, shall be provided under a nonqualified pension plan of the Company or the general assets of the Company. Except for benefits payable under the qualified defined benefit pension plan of the Company (which shall be governed by the terms of such plan), the benefits payable under this Section 3(d) shall be paid to Executive by the Company and shall be determined pursuant to the terms of the Harcourt General Inc. Supplemental Executive Retirement Plan as in effect immediately prior to the Change of Control (the "SERP"), after giving effect to the provisions of this Section 3(d); provided that Executive may, if Executive obtains the consent of the Company, receive the benefits payable under this Section 3(d) in a lump sum or otherwise, within the Payment Period using the methodology set forth in Schedule B e. Retiree Medical. Following Executive's entitlement to continued activeemployee benefits pursuant to Section 3(b), if Executive is eligible for retiree medical benefits, using the eligibility criteria in effect immediately prior to the Change of Control, Executive shall be entitled to, and Company shall be required to pay, retiree medical coverage at the same benefit level and at the same cost to Executive as specified by the retiree medical plan in effect immediately prior to the Change of Control; provided, that for all purposes under this Section 3(e), Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that eligible to be taken into account under the retiree medical plan as of the Termination Date. f. Other Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall promptly pay (or, in the discretion of Executive, reimburse Executive for all reasonable expenses incurred) for (A) professional outplacement services by qualified consultants selected by Executive (but only until the date Executive first obtains full-time employment after the Termination Date) (not to exceed $25,000), and (B) subject to the terms and conditions in effect immediately prior to the Change of Control, tax preparation fees, estate planning and financial counseling (not to exceed 3% in total of the sum of the amounts payable pursuant to Section 3(a)(1) and 3(a)(2)). (ii) In the event of a Change of Control during a three-year Performance Period under the Harcourt, Inc. Performance Long-Term Cash Incentive Plan (the "Long-Term Incentive Plan"), Executives who were participants in the Long-Term Incentive Plan shall be entitled to, and the Company shall be required to pay, within the Payment Period, a lump sum cash payment equal to Executive's Equity Share (as defined in the Long-Term Incentive Plan) of a portion of the Incentive Pool (as defined in the Long-Term Incentive Plan) for each such Performance Period equal to the total Incentive Pool for the applicable three-year Performance Period multiplied by a fraction, the numerator of which shall equal the number of days that have elapsed in the Performance Period and the denominator of which shall equal 1,095. The Incentive Pool shall be calculated based on the assumption that all target performance goals were attained through the Change of Control. 4. Equity Pool. In the event of a Change of Control, Executive shall be entitled to a 4.09% interest in the Equity Pool (an "Equity Share"). Subject to Executive's continued employment with the Company or any of its Subsidiaries, the Equity Share shall be payable in a lump sum cash payment on the date which is six months following the Change of Control (the "Payment Date"); provided, however, that if (i)(A) Executive is terminated by the Company and its Subsidiaries without Cause, (B) Executive's employment terminates due to Executive's death or Permanent Disability or (C) Executive resigns with Good Reason following the Change of Control but prior to the Payment Date or (ii) Executive is terminated prior to the Change in Control, under the circumstances described in Section 3, Executive shall be entitled to the payment of the Equity Share within fifteen business days after (x) such termination of employment or (y) if later, the date of the Change of Control. The Equity Shares shall not be considered compensation under any qualified or nonqualified pension, welfare or deferred compensation plan of the Company. 5. Mitigation. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, and, subject to Section 3(b), compensation earned from such employment or otherwise shall not reduce the amounts otherwise payable under this Agreement. No amounts payable under this Agreement shall be subject to reduction or offset in respect of any claims which the Company or any of its Subsidiaries (or any other person or entity) may have against Executive. 6. Gross-Up. a. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 3(a), unless an alternative method of reduction is elected by Executive. b. All determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive's residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive's behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due ("Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. c. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. d. If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Section 6, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid. 7. Termination for Cause. Nothing in this Agreement shall be construed to prevent the Company or any of its Subsidiaries from terminating Executive's employment for Cause. If Executive is terminated for Cause, the Company shall have no obligation to make any payments under this Agreement, except for the Accrued Benefits. 8. Indemnification; Director's and Officer's Liability Insurance. (i) Executive shall retain all rights to indemnification under the Company's Certificate of Incorporation or By-Laws, and (ii) the Company shall maintain Director's and Officer's liability insurance on behalf of Executive, in both cases at the level in effect immediately prior to the Termination Date or immediately prior to the Change in Control, whichever is greater, for a number of years equal to the Severance Multiple following the Termination Date, and throughout the period of any applicable statute of limitations. 9. Arbitration. All disputes and controversies arising under or in connection with this Agreement shall be settled by arbitration conducted before one arbitrator sitting in Boston, Massachusetts, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect. The determination of the arbitrator shall be made within 30 days following the close of the hearing on any dispute or controversy and shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. 10. Costs of Proceedings. The Company shall pay all costs and expenses of the Company and, at least monthly, Executive in connection with any arbitration relating to the interpretation or enforcement of any provision of this Agreement; provided that if Executive instituted the proceeding and the arbitrator or other individual presiding over the proceeding affirmatively finds that Executive instituted the proceeding in bad faith, Executive shall reimburse the Company for all costs and expenses of Executive previously paid by the Company pursuant to this Section 10.   11. Assignment. Except as otherwise provided herein, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Company and Executive and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section 11 shall continue to apply to each subsequent employer of Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. 12. Withholding. Notwithstanding any other provision of this Agreement, the Company may, to the extent required by law, withhold applicable federal, state and local income and other taxes from any payments due to Executive hereunder. 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts of laws principles thereof. 14. Notice. For the purpose of this Agreement, any notice and all other communication provided for in this Agreement shall be in writing and shall be deemed to have been duly given when received at the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith. If to the Company: Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 Attention: General Counsel If to Executive: To the most recent address of Executive set forth in the personnel records of the Company.   15. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and, except as expressly provided herein, supersedes all other prior agreements expressly concerning the effect of a Change of Control on the relationship between the Company and the other members of the Company and Executive. Except as expressly provided herein, this Agreement shall not interfere in any way with the right of the Company to reduce Executive's compensation or other benefits or terminate Executive's employment, with or without Cause. Any rights that Executive shall have in that regard shall be as set forth in any applicable employment agreement between Executive and the Company. This Agreement may be changed only by a written agreement executed by the Company and Executive. 16. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.   IN WITNESS WHEREOF, the parties have executed this Agreement on the 30th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ Catherine N. Janowski        EXECUTIVE   Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms, when capitalized, have the meaning indicated: I. "Act" means the Securities Exchange Act of 1934, as amended. II. "Base Salary" means Executive's annual rate of base salary in effect on the date in question. III. "Board" means the board of directors of the Company. IV. "Bonus" means the amount payable to Executive under the Company's applicable annual incentive bonus plan with respect to a fiscal year of the Company. V. "Cause" means either of the following: (1) If Executive has an employment agreement, the definition contained therein; otherwise (2) (i) conviction of a felony under the laws of the United States or any state thereof, or (ii) Executive's willful malfeasance or willful misconduct in connection with Executive's duties hereunder, or Executive's repeated willful refusal to perform Executive's duties after written notice to Executive and a reasonable opportunity to cure (not including any duties in excess of Executive's duties immediately prior to the Change of Control) which, in each case, results in demonstrable harm to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates. VI. "Change of Control" means the first to occur of any of the following: (1) any "person" or "group" (as described in the Act) becomes or is the beneficial owner of 25% or more of the combined voting power of the then outstanding voting securities with respect to the election of the Board (counting each share of Class B Stock as having ten votes per share), and also holds more of such combined voting power than any group or person who is the beneficial owner, on the Effective Date, of over 20% of the combined voting power of the then outstanding voting securities with respect to the election of the Board. "Person" does not include any Company employee benefit plan, any company the shares of which are held by the Company shareholders in substantially the same proportion as such shareholders held the stock of the Company immediately prior to acquiring the shares of such company, or any testamentary trust or estate; (2) any merger, consolidation, amalgamation, plan of arrangement, reorganization or similar transaction involving the Company, other than, in the case of any of the foregoing, a transaction in which the Company shareholders immediately prior to the transaction hold immediately thereafter, in the same proportion as immediately prior to the transaction, not less than 66 2/3% of the combined voting power of the then outstanding voting securities with respect to the election of the board of directors of the resulting entity (it being understood that if the Class B Stock shall remain outstanding following such transaction, each share of Class B Stock shall be counted as having ten votes per share for purposes of such calculation); (3) any change in a majority of the Board within a 24-month period unless the change was approved by a majority of the Incumbent Directors; (4) any liquidation or sale of all or substantially all of the assets of the Company; or (5) any other transaction so denominated by the Board. VII. "Class B Stock" means Class B Stock, par value $1.00 per share, of the Company. VIII. "Code" means the Internal Revenue Code of 1986, as amended. IX. "Company" means Harcourt General, Inc. and, after a Change of Control, any successor or successors thereto. X. "Equity Pool" means the product of (i) 75,500,000 multiplied by (ii) the price per share received by shareholders in connection with the Change in Control, as determined by the Board in its sole discretion (the "Share Price") multiplied by (iii) zero if the Share Price is below $45, .55% if the Share Price is $45, .99% if the Share Price is $65 or higher and, if the Share Price is between $45 and $65, as determined by linear interpolation between .55% and .99%. XI. "Good Reason" means any of the following actions on or after a Change of Control, without Executive's express prior written approval, other than due to Executive's Permanent Disability or death: (1) any decrease in, or any failure to increase in accordance with an agreement between Executive and the Company or any of its Subsidiaries, Base Salary or Target Bonus; (2) any material diminution in the aggregate employee benefits afforded to the Executive immediately prior to the Change of Control; for this purpose employee benefits shall include, but not be limited to pension benefits, life insurance and medical and disability benefits; (3) any diminution in Executive's title or reporting relationship, or substantial diminution in duties or responsibilities (other than solely as a result of a Change of Control in which the Company immediately thereafter is no longer publicly held); (4) any relocation of Executive's principal place of business of 35 miles or more, other than normal travel consistent with past practice; or (5) Executive's notice of termination of employment within the thirty-day period following the 183rd day following the Change of Control; provided Executive's employment actually terminates within such 30 day period. Except as provided in (5) above, Executive shall have six months from the time Executive first becomes aware of the existence of Good Reason to resign for Good Reason. XII. "Incumbent Director" means a member of the Board at the beginning of the period in question, including any director who was not a member of the Board at the beginning of such period but was elected or nominated to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change of Control or engage in a proxy or other control contest). XIII. "Permanent Disability" means inability, by reason of any physical or mental impairment, to substantially perform the significant aspects of his regular duties which inability has lasted for six months and is reasonably expected to be permanent. XIV. "Publicly Traded Company" means a company whose common equity securities (including American Depositary Shares or American Depositary Receipts relating to such equity securities) are traded or quoted on a principal United States, Canadian or European stock market or trading system, and are owned by more than 1,000 shareholders. XV. "Severance Multiple" means the lesser of (i) the quotient of (A) 24 months plus one month for each full year of service with the Company or any of its Subsidiaries divided by (B) twelve and (ii) three. XVI. "Subsidiary" means a subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). XVII. "Target Bonus" means the greatest of (i) 35% of Executive's Base Salary (as determined in Section 3(a)(1)), (ii) Executive's target Bonus in effect on the date of the Change of Control or (iii) Executive's target Bonus in effect immediately prior to the event set forth in the notice of termination giving rise to the Termination Date.   Schedule B CALCULATION OF PENSION LUMP SUM AMOUNT   1. Lump Sum Amount The lump sum value of the pension benefit payable pursuant to the provisions of Section 3(d) shall be equal to the Actuarial Equivalent of the single life annuity benefit described in the Harcourt General Inc. Supplemental Executive Retirement Plan (SERP) as enhanced by Section 3(d) of this Agreement. The single life annuity amount above shall be determined at the earliest possible age the employee could retire under the Harcourt General Inc. Retirement Plan (after giving effect to the additional years of age and service granted under Section 3(d)), but not before the Executive=s age at the Termination Date plus such additional years of age. 2. Actuarial Equivalent Assumptions The Actuarial Equivalent of the benefit described in (1) above shall be calculated using the following assumptions: a. 6% interest, compounded annually b. no pre-retirement mortality, c. post-retirement mortality determined under the 1983 Group Annuity Mortality Table, weighted 50% for males and 50% for females. 3. Coordination of Agreement with existing SERP and Retirement Plan Notwithstanding any provision in the SERP or this Agreement, the benefits provided under this Agreement are intended to enhance the benefits payable under the existing SERP. Accordingly, this Agreement shall be considered an Individual Pension Agreement, which shall have the effect of superseding in full any benefits actually payable under the SERP. Exhibit A WAIVER AND RELEASE OF CLAIMS   In consideration of, and subject to, the payments to be made to me by Harcourt General, Inc., or any of its subsidiaries, or its or their successor(s) or assigns (the "Company"), pursuant to the attached Termination Protection Agreement ("TPA") dated June ____, 2000, I agree to and do release and forever discharge the Company, and its respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Act, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the TPA; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law, and certificates of incorporation and bylaws of the Company, and my rights under any directors' and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgement of my rights reserved under the second paragraph above. I acknowledge that I have been given not less than [twenty-one (21)] [forty-five (45)] days to review and consider this Waiver and Release of Claims, and that I have had the opportunity to consult with an attorney or other advisors of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. ___________________________________ Employee's Signature ___________________________________ Print Name ___________________________________ Date Signed

Exhibit 10.1 Coventry Health Care, Inc. 2000 Management Incentive Plan (MIP) Plan Objective The objective of Coventry Health Care’s (CHC) 2000 Management Incentive Plan (MIP) is to reward employees for their contribution to the achievement of company-wide, business unit, health plan, and team/individual goals. Plan Year The plan year will be consistent with CHC's fiscal year, January 1 through December 31, 2000. Eligibility The CEO of CHC will determine eligible employees prior to the beginning of the plan year. Participants in CHC’s sales incentive plans are not eligible for the MIP. Participants must be actively employed at the time incentive checks are distributed to receive an incentive payment. MIP payouts may be prorated based on hire date or the promotion date of each participant. Timing of Incentive Payouts Incentive payouts will be made as soon as possible after the close of the fiscal year and after CHC’s year-end financial results are finalized (approximately, February/March, 2001). Target Incentive Opportunity ---------------------------------------------------- --------------------------- Target Incentive % ---------------------------------------------------- --------------------------- Executive Vice Presidents 75% ---------------------------------------------------- --------------------------- Sr. Vice Presidents and Coaches 50% to 70% ---------------------------------------------------- --------------------------- Vice Presidents 30% ---------------------------------------------------- --------------------------- Directors 15% to 25% ---------------------------------------------------- --------------------------- Managers (Inclusion must be reviewed by VP Compensation and approved by the CEO of CHC) 10% to 15% ---------------------------------------------------- --------------------------- The CEO of Coventry Health Care will have discretion to increase the target incentive opportunity for a selected number of key employees. Performance Criteria Criteria for incentive payouts includes the following three factors: * CHC Financial Results * Health Plan Financial Results * Team and Individual Achievements Coventry Health Care Results The performance of CHC will be based on the achievement of its Earnings Per Share goal. ----------------------------------------------- 2000 Goal ----------------------------------------------- Earnings Per Share $0.77 ----------------------------------------------- Health Plan Results The performance of each Health Plan will be based on the achievement of its Plan Contribution and Revenue Growth goals as set forth in the 2000 Budget. The two key goals are weighted as follows: * Plan Contribution 75% * Revenue Growth 25% Incentive Pool Funding Target incentive pools will be calculated separately for each Health Plan and Corporate. The number of eligible employees, individual incentive targets and each eligible employee’s base pay will determine each budgeted target incentive pool. Actual funding of incentive pools is based on the results achieved by each Health Plan and the overall performance of Coventry Health Care, Inc. Health Plan Incentive Pool Each Health Plan’s incentive pool is funded based on the achievement of its Plan Contribution and Revenue Growth goals. Each Health Plan’s pool will be modified based on the achievement of CHC’s EPS goal. The following chart will be utilized to calculate the final incentive pool for each Health Plan. --------------------------------------- ---------------------------------------------- Level of Goal Achievement % of Target Pool Available for Payout(1) --------------------------------------- ---------------------------------------------- < = 85% 0% --------------------------------------- ---------------------------------------------- 86 to 99% Compensation & Benefits Committee Discretion --------------------------------------- ---------------------------------------------- 100% 100% --------------------------------------- ---------------------------------------------- 110% 110% --------------------------------------- ---------------------------------------------- 120% 120% --------------------------------------- ---------------------------------------------- 130% 130% --------------------------------------- ---------------------------------------------- 140% 140% --------------------------------------- ---------------------------------------------- 150% 150% --------------------------------------- ---------------------------------------------- (1) Straight-line interpolation will be used to calculate the incentive pools when performance falls between two levels. Once each Health Plan’s incentive pool is calculated, it will be modified by the achievement of CHC’s Earnings Per Share goal. The following chart displays the scale that will be used to modify each Health Plan’s incentive pool. --------------------------------------- ---------------------------------------------- Level of Goal Achievement Health Plan Incentive Pool Modifier(2) --------------------------------------- ---------------------------------------------- < = 80% 0 --------------------------------------- ---------------------------------------------- 85% .50 --------------------------------------- ---------------------------------------------- 90% .75 --------------------------------------- ---------------------------------------------- 95% .90 --------------------------------------- ---------------------------------------------- 100% 1.00 --------------------------------------- ---------------------------------------------- 110% 1.05 --------------------------------------- ---------------------------------------------- 120% 1.10 --------------------------------------- ---------------------------------------------- 130% 1.20 --------------------------------------- ---------------------------------------------- 140% 1.30 --------------------------------------- ---------------------------------------------- (2) Straight-line interpolation will be used to calculate the pool modifier when performance falls between two levels Example Incentive Pool Calculation Example 1:     The Health Plan achieves 90% of its Plan Contribution goal, which results in the target incentive pool being decreased to 50% (as determined in the discretion of the Compensation and Benefits Committee) of the budgeted target pool. CHC achieves 95% of its Earnings Per Share Goal, thus modifying the Health Plan’s pool downward by .90. The final incentive pool equals 45% of the budgeted target pool. Example 2:     The Health Plan achieves 120% of its Plan Contribution goal, which results in the target incentive pool being increased to 120% of the budgeted target pool. CHC achieves 130% of its Earnings Per Share Goal, thus modifying the Health Plan’s pool upward by 1.2. The final incentive pool equals 144% of the budgeted target pool. Corporate Incentive Pool The corporate incentive pool is funded based on the achievement of CHC's EPS goal. --------------------------------------------- -------------------------------------- Level of Target CHC Earnings Per Share Goal % of Target Pool Available for Achievement Payout(1) --------------------------------------------- -------------------------------------- < = 85% 0% --------------------------------------------- -------------------------------------- 86 to 99% Compensation & Benefits Committee Discretion --------------------------------------------- -------------------------------------- 100% 100% --------------------------------------------- -------------------------------------- 110% 110% --------------------------------------------- -------------------------------------- 120% 120% --------------------------------------------- -------------------------------------- 130% 130% --------------------------------------------- -------------------------------------- 140% 140% --------------------------------------------- -------------------------------------- 150% 150% --------------------------------------------- -------------------------------------- (1) Straight-line interpolation will be used to calculate the incentive pools when performance falls between two levels Individual Incentive Payout Calculation Individual incentive awards will be determined by the following: 1. Individual target incentive opportunity, 2. Pool funding, and 3. Achievement of pre-established financial goals and individual/team non-financials goals. Individual incentive awards can vary between 0% and 200% of their incentive target opportunity. Form of Payment Amounts < = $10,000 (Net) - 100% paid in cash. Amounts > $10,000 (Net) – first $10,000 (Net) paid in cash. Remaining net award will be paid 50% in cash and 50% in CHC stock (valued at the date of payout or such earlier date as the Compensation and Benefits Committee may determine), or in such other proportions as the CEO may determine to be appropriate. Miscellaneous Coventry Health Care reserves the right to amend or discontinue this plan at any time and/or add, reduce or limit the number of participants at any time such actions are deemed appropriate and in the best interest of CHC. This document shall not be construed as a contract with the employee and is in no way intended to limit the employment at will status of employees of Coventry Health Care, Inc. or its Health Plans.

EXHIBIT 10.27 PROMISSORY NOTE For value received on January 1, 2000, Enrique P. Fiallo (hereinafter "Executive") promises to pay to the order of Cabletron Systems, Inc., or any of its subsidiaries (hereinafter "Company" or "Cabletron"), the principal sum of $125,000 Dollars (the "Loan Amount"). The outstanding principal amount of this Note shall be payable at 35 Industrial Way, Rochester New Hampshire, 03866, on the earlier of: (i) two years from the above stated date; and (ii) as described in the following sentence. Upon any sale by the Executive of any shares of Cabletron common stock within two years following the date of this Promissory Note, the Executive shall repay Cabletron an amount equal to the net proceeds of the sale (after tax) or the total remaining unpaid principal (taking into account any forgiveness that has occurred pursuant to the following paragraph), whichever is less. Upon completion one year of continuous employment by the Executive from the date of this Promissory Note, Cabletron shall forgive the lesser of (i) 25 percent of the Loan Amount; and (ii) the remaining unpaid principal. Upon completion of two years of continuous employment by the Executive from the date of this Promissory Note, Cabletron shall forgive the lesser of (i) 75 percent of the Loan Amount; and (ii) the remaining unpaid principal. Any amount of this Note forgiven by the Company will be reported to the Executive as taxable wages. In the event: (i) the Executive's employment with Cabletron is terminated by the Company without cause, or (ii) the death of the Executive, the entire remaining unpaid principal shall be forgiven. "Cause" shall mean a criminal felony, crimes of moral turpitude, deliberate harm of Cabletron, including fraud or embezzlement, and gross and repeated failure (after written notice) to perform Executive's duties. To secure Executive's prompt, punctual and faithful performance of each of Executive's obligations under this Note, Executive hereby assigns to Cabletron all rights of Executive to property, monies and credits for which Cabletron is obligated to Executive, and which is in the possession of Cabletron or any affiliate or subsidiary at the time of default by Executive under this Note and at any time after such default, which property, monies and credits shall include, without limitations, salary, bonuses, vacation pay, and insurance proceeds. The term "Collateral" shall refer to all interest of Executive assigned to Cabletron pursuant to this paragraph. In the event of a default by Executive under this Note, Cabletron shall be permitted to apply the Collateral toward the Executive's liabilities under this Note, and Executive hereby waives notice of nonpayment, demand, presentment, protest and all forms of demand and notice. The Executive shall remain liable to Cabletron for any deficiency remaining following such applications This Note shall be in default upon the occurrence of any of the following: 1. Executive fails to pay all principal owed under this Note when due, and such failure continues uncured for fifteen (15) days. 2. The Executive shall (i) admit in writing his inability to pay his debts generally as they become due, (ii) file a petition to answer seeking reorganization or arrangement of the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof, or any other jurisdiction, (iii) make an assignment or other arrangement for the benefit of his creditors generally, (iv) consent to the appointment of a receiver of himself, or (v) have an order for relief in bankruptcy entered against or with respect to him, provided such order shall not be vacated, set aside or stayed within thirty (30) days after the date of entry thereof. If this Note is in default, the entire outstanding principal balance on this Note shall become immediately due and payable, without further notice. Should any part of the principal amount be collected after default by law or through an attorney-at-law, the Company shall be entitled to collect from the Executive, in addition to the default amount, all attorney fees, together with all other costs of collection. All rights, powers, and remedies provided for herein are cumulative and nonexclusive. The failure or delay of the holder to exercise a right, power, or remedy hereunder shall not operate as a waiver thereof of the same or any other right, power, or remedy on any future occasion. This Note, and all rights, powers, remedies and obligations arising from this Note, shall be construed according to and governed by the laws of the State of New Hampshire. IN WITNESS WHEREOF, the Executive has hereunto set his hand and seal effective the date first above written Executive Cabletron Systems, Inc. /s/Enrique P. Fiallo /s/Piyush Patel Enrique P. Fiallo Piyush Patel   CEO and President ______________________ ______________________ Date Date    

EXHIBIT 10.19 GUARANTY As of April 20, 2000, the undersigned, for value received, unconditionally and absolutely guarantee(s) to Comerica Bank ("Bank"), a Michigan banking corporation, payment when due, whether by stated maturity, demand, acceleration or otherwise, of all existing and future indebtedness ("Indebtedness") to the Bank of Manatron, Inc. ("Borrower"). Indebtedness includes without limit any and all obligations or liabilities of the Borrower to the Bank, whether absolute or contingent, direct or indirect, voluntary or involuntary, liquidated or unliquidated, joint or several, known or unknown, any and all indebtedness, obligations or liabilities for which Borrower would otherwise be liable to the Bank were it not for the invalidity, irregularity or unenforceability of them by reason of any bankruptcy, insolvency or other law or order of any kind, or for any other reason; any and all amendments, modifications, renewals and/or extensions of any of the above; and all costs of collecting Indebtedness, including, without limit, attorney fees. Any reference in this Guaranty to attorney fees shall be deemed a reference to reasonable fees, charges, costs and expenses of both in-house and outside counsel and paralegals, whether or not a suit or action is instituted, and to court costs if a suit or action is instituted, and whether attorney fees or court costs are incurred at the trial court level, on appeal, in a bankruptcy, administrative or probate proceeding or otherwise. All costs shall be payable immediately by the undersigned when incurred by the Bank, without demand, and until paid shall bear interest at the highest per annum rate applicable to any of the Indebtedness, but not in excess of the maximum rate permitted by law. 1. LIMITATION: The total obligation of the undersigned under this Guaranty is UNLIMITED unless specifically limited in the Additional Provisions of this Guaranty, and this obligation (whether unlimited or limited to the extent specified in the Additional Provisions) shall include, IN ADDITION TO any limited amount of principal guaranteed, all interest on that limited amount, and all costs incurred by the Bank in collection efforts against the Borrower and/or the undersigned or otherwise incurred by the Bank in any way relating to the Indebtedness, or this Guaranty, including without limit attorney fees. The undersigned agree(s) that (a) this limitation shall not be a limitation on the amount of Borrower's Indebtedness to the Bank; (b) any payments by the undersigned shall not reduce the maximum liability of the undersigned under this Guaranty unless written notice to that effect is actually received by the Bank at, or prior to, the time of the payment; and (c) the liability of the undersigned to the Bank shall at all times be deemed to be the aggregate liability of the undersigned under this Guaranty and any other guaranties previously or subsequently given to the Bank by the undersigned and not expressly revoked, modified or invalidated in writing.     2. NATURE OF GUARANTY: This is a continuing Guaranty of payment and not of collection and remains effective whether the Indebtedness is from time to time reduced and later increased or entirely extinguished and later reincurred. The undersigned deliver(s) this Guaranty based solely on the undersigned's independent investigation of (or decision not to investigate) the financial condition of Borrower and is (are) not relying on any information furnished by the Bank. The undersigned assume(s) full responsibility for obtaining any further information concerning the Borrower's financial condition, the status of the Indebtedness or any other matter which the undersigned may deem necessary or appropriate now or later. The undersigned knowingly accept(s) the full range of risk encompassed in this Guaranty, which risk includes, without limit, the possibility that Borrower may incur Indebtedness to the Bank after the financial condition of the Borrower, or the Borrower's ability to pay debts as they mature, has deteriorated.     3. APPLICATION OF PAYMENTS: The undersigned authorize(s) the Bank, either before or after termination of this Guaranty, without notice to or demand on the undersigned and without affecting the undersigned's liability under this Guaranty, from time to time to: (a) apply any security and direct the order or manner of sale; and (b) apply payments received by the Bank from the Borrower to any indebtedness of the Borrower to the Bank, in such order as the Bank shall determine in its sole discretion, whether or not this indebtedness is covered by this Guaranty, and the undersigned waive(s) any provision of law regarding application of payments which specifies otherwise. The undersigned agree(s) to provide to the Bank copies of the undersigned's financial statements upon request.     4. SECURITY: The undersigned grant(s) to the Bank a security interest in and the right of setoff as to any and all property of the undersigned now or later in the possession of the Bank. The undersigned further assign(s) to the Bank as collateral for the obligations of the undersigned under this Guaranty all claims of any nature that the undersigned now or later has (have) against the Borrower (other than any claim under a deed of trust or mortgage covering California real property) with full right on the part of the Bank, in its own name or in the name of the undersigned, to collect and enforce these claims. The undersigned agree(s) that no security now or later held by the Bank for the payment of any Indebtedness, whether from the Borrower, any guarantor, or otherwise, and whether in the nature of a security interest, pledge, lien, assignment, setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in any manner the unconditional obligation of the undersigned under this Guaranty, and the Bank, in its sole discretion, without notice to the undersigned, may release, exchange, enforce and otherwise deal with any security without affecting in any manner the unconditional obligation of the undersigned under this Guaranty. The undersigned acknowledge(s) and agree(s) that the Bank has no obligation to acquire or perfect any lien on or security interest in any asset(s), whether realty or personally, to secure payment of the Indebtedness, and the undersigned is (are) not relying upon any asset(s) in which the Bank has or may have a lien or security interest for payment of the Indebtedness. -------------------------------------------------------------------------------- 5. OTHER GUARANTORS: If any Indebtedness is guaranteed by two or more guarantors, the obligation of the undersigned shall be several and also joint, each with all and also each with any one or more of the others, and may be enforced at the option of the Bank against each severally, any two or more jointly, or some severally and some jointly. The Bank, in its sole discretion, may release any one or more of the guarantors for any consideration which it deems adequate, and may fail or elect not to prove a claim against the estate of any bankrupt, insolvent, incompetent or deceased guarantor, and after that, without notice to any guarantor, the Bank may extend or renew any or all Indebtedness and may permit the Borrower to incur additional Indebtedness, without affecting in any manner the unconditional obligation of the remaining guarantor(s). The undersigned acknowledge(s) that the effectiveness of this Guaranty is not conditioned on any or all of the indebtedness being guaranteed by anyone else.     6. TERMINATION: Any of the undersigned may terminate their obligation under this Guaranty as to future Indebtedness (except as provided below) by (and only by) delivering written notice of termination to an officer of the Bank and receiving from an officer of the Bank written acknowledgement of delivery; provided, however, the termination shall not be effective until the opening of business on the fifth (5th) day ("effective date") following written acknowledgement of delivery. Any termination shall not affect in any way the unconditional obligations of the remaining guarantor(s), whether or not the termination is known to the remaining guarantor(s). Any termination shall not affect in any way the unconditional obligations of the terminating guarantor(s) as to any Indebtedness existing at the effective date of termination or any Indebtedness created after that pursuant to any commitment or agreement of the Bank or pursuant to any Borrower loan with the Bank existing at the effective date of termination (whether advances or readvances by the Bank after the effective date of termination are optional or obligatory), or any modifications, extensions or renewals of any of this Indebtedness, whether in whole or in part, and as to all of this Indebtedness and modifications, extensions or renewals of it, this Guaranty shall continue effective until the same shall have been fully paid. The Bank. has no duty to give notice of termination by any guarantor(s) to any remaining guarantor(s). The undersigned shall indemnify the Bank against all claims, damages, costs and expenses, including, without limit, attorney fees, incurred by the Bank in connection with any suit, claim or action against the Bank arising out of any modification or termination of a Borrower loan or any refusal by the Bank to extend additional credit in connection with the termination of this Guaranty.     7. REINSTATEMENT: Notwithstanding any prior revocation, termination, surrender or discharge of this Guaranty (or of any lien, pledge or security interest securing this Guaranty) in whole or in part, the effectiveness of this Guaranty, and of all liens, pledges and security interests securing this Guaranty, shall automatically continue or be reinstated in the event that any payment received or credit given by the Bank in respect of the Indebtedness is returned, disgorged or rescinded under any applicable state or federal law, including, without limitation, laws pertaining to bankruptcy or insolvency, in which case this Guaranty, and all liens, pledges and security interests securing this Guaranty, shall be enforceable against the undersigned as if the returned, disgorged or rescinded payment or credit had not been received or given by the Bank, and whether or not the Bank relied upon this payment or credit or changed its position as a consequence of it. In the event of continuation or reinstatement of this Guaranty and the liens, pledges and security interests securing it, the undersigned agree(s) upon demand by the Bank, to execute and deliver to the Bank those documents which the Bank determines are appropriate to further evidence (in the public records or otherwise) this continuation or reinstatement, although the failure of the undersigned to do so shall not affect in any way the reinstatement or continuation. If the undersigned do(es) not execute and deliver to the Bank upon demand such documents, the Bank and each Bank officer is irrevocably appointed (which appointment is coupled with an interest) the true and lawful attorney of the undersigned (with full power of substitution) to execute and deliver such documents in the name and on behalf of the undersigned.     8. WAIVERS: The undersigned waive(s) any right to require the Bank to: (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held from the Borrower or any other person, or otherwise comply with the provisions of Section 9-504 of the Michigan or other applicable Uniform Commercial Code; or (c) pursue any other remedy in the Bank's power. The undersigned waive(s) notice of acceptance of this Guaranty and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment of any Indebtedness, any and all other notices to which the undersigned might otherwise be entitled, and diligence in collecting any Indebtedness, and agree(s) that the Bank may, once or any number of times, modify the terms of any Indebtedness, compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Indebtedness, or permit the Borrower to incur additional Indebtedness, all without notice to the undersigned and without affecting in any manner the unconditional obligation of the undersigned under this Guaranty.       The undersigned unconditionally and irrevocably waive(s) each and every defense and setoff of any nature which, under principles of guaranty or otherwise, would operate to impair or diminish in any way the obligation of the undersigned under this Guaranty, and acknowledge(s) that each such waiver is by this reference incorporated into each security agreement, collateral assignment, pledge and/or other document from the undersigned now or later securing this Guaranty and/or the Indebtedness, and acknowledge(s) that as of the date of this Guaranty no such defense or setoff exists.     9. WAIVER OF SUBROGATION: The undersigned waive(s) any and all rights (whether by subrogation, indemnity, reimbursement, or otherwise) to recover from the Borrower any amounts paid by the undersigned pursuant to this Guaranty. - 2 - -------------------------------------------------------------------------------- 10. SALE/ASSIGNMENT: The undersigned acknowledge(s) that the Bank has the right to sell, assign, transfer, negotiate, or grant participations in all or any part of the Indebtedness and any related obligations, including, without limit, this Guaranty, without notice to the undersigned and that the Bank may disclose any documents and information which the Bank now has or later acquires relating to the undersigned or to the Borrower in connection with such sale, assignment, transfer, negotiation, or grant. The undersigned agree(s) that the Bank may provide information relating to this Guaranty or relating to the undersigned to the Bank's parent, affiliates, subsidiaries and service providers.     11. GENERAL: This Guaranty constitutes the entire agreement of the undersigned and the Bank with respect to the subject matter of this Guaranty. No waiver, consent, modification or change of the terms of the Guaranty shall bind any of the undersigned or the Bank unless in writing and signed by the waiving party or an authorized officer of the waiving party, and then this waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given. This Guaranty shall inure to the benefit of the Bank and its successors and assigns and shall be binding on the undersigned and the undersigned's heirs, legal representatives, successors and assigns including, without limit, any debtor in possession or trustee in bankruptcy for any of the undersigned. The undersigned has (have) knowingly and voluntarily entered into this Guaranty in good faith for the purpose of inducing the Bank to extend credit or make other financial accommodations to the Borrower. If any provision of this Guaranty is unenforceable in whole or in part for any reason, the remaining provisions shall continue to be effective. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.     12. HEADINGS: Headings in this Agreement are included for the convenience of reference only and shall not constitute a part of this Agreement for any purpose.     13. ADDITIONAL PROVISIONS: None.     14. JURY TRIAL WAIVER: THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR THE INDEBTEDNESS. IN WITNESS WHEREOF, Guarantor(s) has (have) signed and delivered this Guaranty the day and year first written above. WITNESSES:   GUARANTOR(S): MANATRON PROVAL CORPORATION     GUARANTOR NAME TYPED/PRINTED       /s/ Robert W. Carpenter -------------------------------------------------------------------------------- By: /s/ Paul R. Sylvester -------------------------------------------------------------------------------- Robert W. Carpenter   SIGNATURE OF PAUL R. SYLVESTER       /s/ Joseph Zalewski -------------------------------------------------------------------------------- Its: Chief Executive Officer -------------------------------------------------------------------------------- Joseph Zalewski   TITLE (IF APPLICABLE)         GUARANTOR'S ADDRESS: 2970 South Ninth Street -------------------------------------------------------------------------------- STREET ADDRESS   Kalamazoo -------------------------------------------------------------------------------- Michigan --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- 49009 --------------------------------------------------------------------------------   CITY State   ZIP CODE - 3 -

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 THIRD AMENDMENT OF CREDIT AGREEMENT     THIS THIRD AMENDMENT OF CREDIT AGREEMENT (this "Amendment") is entered into on December 21, 2000, effective as of January 2, 2001, between PROTECTION ONE ALARM MONITORING, INC., a Delaware corporation ("Borrower"), each of the Persons which is a signatory to this Amendment (collectively, "Lenders"), and WESTAR INDUSTRIES, INC., as Administrative Agent for the Lenders (in such capacity, together with its successors in such capacity, "Administrative Agent"). R E C I T A L S      A. Borrower, Lenders and Administrative Agent entered into the Credit Agreement dated as of December 21, 1998 (as renewed, extended, modified, and amended from time to time, the "Credit Agreement"; capitalized terms used herein shall, unless otherwise indicated, have the respective meanings set forth in the Credit Agreement), providing for a revolving credit facility in the original maximum principal amount of $500,000,000.      B. Pursuant to a letter agreement dated as of September 30, 1999, Borrower reduced the Total Commitment to $250,000,000.      C. The Lenders and the Administrative Agent entered into that certain Assignment and Acceptance dated December 17, 1999 wherein the Administrative Agent and the Lenders assigned all of their rights and obligations under the Credit Agreement to Westar Industries, Inc. (f/k/a Westar Capital, Inc.).      D. Borrower, Lender and Administrative Agent entered into a Second Amendment of Credit Agreement effective as of February 29, 2000 pursuant to which certain provisions of the Credit Agreement were amended.      E. Borrower, Lender, and Administrative Agent desire to further modify certain provisions contained in the Credit Agreement, subject to the terms and conditions set forth herein.     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, Lender, and Administrative Agent agree as follows:      1. Amendments to the Credit Agreement. Section 1.1 is hereby amended to delete the definitions of "Applicable Margin" and "Termination Date" in their entirety and replace such definitions with the following:     Applicable Margin means, as of any date of determination, the interest margin over Base Rate or the Eurodollar Rate, as the case may be, that corresponds to the Leverage Ratio set forth below on such date of determination:   Level --------------------------------------------------------------------------------   Leverage Ratio --------------------------------------------------------------------------------   Applicable Margin for Base Rate Borrowings --------------------------------------------------------------------------------   Applicable Margin for Eurodollar Borrowing --------------------------------------------------------------------------------   Applicable Margin for Commitment Fees --------------------------------------------------------------------------------     1   Less than or equal to 5.00:1   3.00 % 4.00 % 0.375 %   2   Greater than 5.00:1 but less than or equal to 5.25:1   3.25 % 4.25 % 0.50  %   3   Greater than 5.25:1 but less than or equal to 5.50:1   3.75 % 4.75 % 0.50  %   4   Greater than 5.50:1   4.25 % 5.25 % 0.50  %     The Applicable Margin payable by the Borrower on the Borrowings outstanding hereunder shall be adjusted on the date of receipt by the Administrative Agent of the Financial Statements and Compliance Certificates required to be delivered pursuant to Sections 9.3(a) and (b) as tested -------------------------------------------------------------------------------- using the Leverage Ratio for the most recent fiscal quarter. If the Financial Statements and Compliance Certificates required pursuant to Section 9.3(a) or (b) are not received by the Administrative Agent by the date required, the Applicable Margin shall be determined as if the Leverage Ratio is greater than 5.50:1. From the date hereof until the Borrower's Financial Statements for the fiscal quarter ended March 31, 2001, and corresponding Compliance Certificate are delivered pursuant to Section 9.3(b), the Applicable Margin shall be determined based on Level 1.     Termination Date means the earlier of (a) March 2, 2001, and (b) the effective date of any other termination or cancellation of Lenders' commitments to lend under, and in accordance with, this Agreement.      2. Amendment of Credit Agreement and Other Loan Documents. All references in the Loan Documents to the Credit Agreement shall henceforth include references to the Credit Agreement as modified and amended by this Amendment, and as may, from time to time, be further modified, amended, restated, extended, renewed, and/or increased.      3. Ratifications. Borrower (a) ratifies and confirms all provisions of the Loan Documents as amended by this Amendment, (b) ratifies and confirms that all guaranties, assurances, and Liens, if any, granted, conveyed, or assigned to the Credit Parties under the Loan Documents are not released, reduced, or otherwise adversely affected by this Amendment and continue to guarantee, assure, and secure full payment and performance of the present and future Obligation, and (c) agrees to perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional documents, and certificates as the Credit Parties may reasonably request in order to create, perfect, preserve, and protect those guaranties, assurances, and Liens.     4.  Representations. Borrower represents and warrants to the Credit Parties that as of the date of this Amendment: (a) this Amendment has been duly authorized, executed, and delivered by Borrower and each of the other Obligors that are parties to this Amendment; (b) no action of, or filing with, any Governmental Authority is required to authorize, or is otherwise required in connection with, the execution, delivery, and performance by Borrower or any other Obligor of this Amendment; (c) the Loan Documents, as amended by this Amendment, are valid and binding upon Borrower and the other Obligors and are enforceable against Borrower and the other Obligors in accordance with their respective terms, except as limited by Debtor Relief Laws and general principles of equity; (d) the execution, delivery, and performance by Borrower and the other Obligors of this Amendment do not require the consent of any other Person and do not and will not constitute a violation of any Governmental Requirement, order of any Governmental Authority, or material agreements to which Borrower or any other Obligor is a party thereto or by which Borrower or any other Obligor is bound; (e) all representations and warranties in the Loan Documents are true and correct in all material respects on and as of the date of this Amendment, except to the extent that (i) any of them speak to a different specific date, or (ii) the facts on which any of them were based have been changed by transactions contemplated or permitted by the Credit Agreement; and (f) both before and after giving effect to this Amendment, no Potential Default or Default exists.     5.  Conditions. This Amendment shall not be effective unless and until:     (a) this Amendment has been executed by Borrower, the other Obligors, Administrative Agent, and the Required Lenders;     (b) Borrower shall have delivered to Administrative Agent such documents satisfactory to Administrative Agent evidencing the authorization and execution of this Agreement, and the other documents executed and delivered in connection herewith (collectively, the "Amendment Documents"); and 2 --------------------------------------------------------------------------------     (c) Borrower shall have paid to Administrative Agent, for the account of the Credit Parties as Administrative Agent shall determine, (i) an amendment fee in an amount equal to .25% of the Total Commitment on the effective date of this Amendment ($287,500), which shall be credited against any fee hereafter paid in connection with any long-term facility negotiated with the Lender, and (ii) the reasonable fees and expenses of Administrative Agent's counsel (including the allocated costs of internal counsel).     6.  Continued Effect. Except to the extent amended hereby or by any documents executed in connection herewith, all terms, provisions, and conditions of the Credit Agreement and the other Loan Documents, and all documents executed in connection therewith, shall continue in full force and effect and shall remain enforceable and binding in accordance with their respective terms.     7.  Miscellaneous. Unless stated otherwise (a) the singular number includes the plural and vice versa and words of any gender include each other gender, in each case, as appropriate, (b) headings and captions may not be construed in interpreting provisions, (c) this Amendment shall be construed—and its performance enforced—under Texas law, (d) if any part of this Amendment is for any reason found to be unenforceable, all other portions of it nevertheless remain enforceable, and (e) this Amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document, and all of those counterparts must be construed together to constitute the same document.     8.  Parties. This Amendment binds and inures to Borrower and the Credit Parties and their respective successors and permitted assigns.     9.  Entireties. THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED BY THIS AMENDMENT AND THE OTHER AMENDMENT DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES ABOUT THE SUBJECT MATTER OF THE CREDIT AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.     [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 3 -------------------------------------------------------------------------------- SIGNATURE PAGE TO THIRD AMENDMENT OF CREDIT AGREEMENT AMONG PROTECTION ONE ALARM MONITORING, INC., AS BORROWER, WESTAR INDUSTRIES, INC., AS ADMINISTRATIVE AGENT, AND THE LENDERS NAMED HEREIN     EXECUTED on and effective as of the dates first above written.   PROTECTION ONE ALARM MONITORING, INC., a Delaware corporation, as Borrower   By:   /s/ Anthony D. Somma --------------------------------------------------------------------------------       Name:   Anthony D. Somma --------------------------------------------------------------------------------       Title:   Chief Financial Officer -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SIGNATURE PAGE TO THIRD AMENDMENT OF CREDIT AGREEMENT AMONG PROTECTION ONE ALARM MONITORING, INC., AS BORROWER, WESTAR INDUSTRIES, INC., AS ADMINISTRATIVE AGENT, AND THE LENDERS NAMED HEREIN     EXECUTED on and effective as of the dates first above written.   WESTAR INDUSTRIES, INC. as Administrative Agent and a Lender   By:   /s/ Paul R. Geist --------------------------------------------------------------------------------       Name:   Paul R. Geist --------------------------------------------------------------------------------       Title:   President -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     To induce the Credit Parties to enter into this Amendment, each of the undersigned (a) consents and agrees to the Amendment Documents' execution and delivery, (b) ratifies and confirms that all guaranties, assurances, and Liens, if any, granted, conveyed, or assigned to the Credit Parties under the Loan Documents are not released, diminished, impaired, reduced, or otherwise adversely affected by the Amendment Documents and continue to guarantee, assure, and secure the full payment and performance of all present and future Obligations (except to the extent specifically limited by the terms of such guaranties, assurances, or Liens), (c) agrees to perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional guaranties, assignments, security agreements, deeds of trust, mortgages, and other agreements, documents, instruments, and certificates as the Credit Parties may reasonably deem necessary or appropriate in order to create, perfect, preserve, and protect those guaranties, assurances, and Liens, and (d) waives notice of acceptance of this consent and agreement, which consent and agreement binds the undersigned and its successors and permitted assigns and inures to the Credit Parties and their respective successors and permitted assigns.     EXECUTED on and effective as of the dates first above written.   PROTECTION ONE, INC., a Delaware corporation   By:   /s/ Anthony D. Somma --------------------------------------------------------------------------------       Name:   Anthony D. Somma --------------------------------------------------------------------------------       Title:   Chief Financial Officer --------------------------------------------------------------------------------   NETWORK MULTI-FAMILY SECURITY CORPORATION, a Delaware corporation   By:   /s/ Anthony D. Somma --------------------------------------------------------------------------------       Name:   Anthony D. Somma --------------------------------------------------------------------------------       Title:   Assistant Secretary and Assistant Treasurer -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QuickLinks THIRD AMENDMENT OF CREDIT AGREEMENT R E C I T A L S SIGNATURE PAGE TO THIRD AMENDMENT OF CREDIT AGREEMENT AMONG PROTECTION ONE ALARM MONITORING, INC., AS BORROWER, WESTAR INDUSTRIES, INC., AS ADMINISTRATIVE AGENT, AND THE LENDERS NAMED HEREIN SIGNATURE PAGE TO THIRD AMENDMENT OF CREDIT AGREEMENT AMONG PROTECTION ONE ALARM MONITORING, INC., AS BORROWER, WESTAR INDUSTRIES, INC., AS ADMINISTRATIVE AGENT, AND THE LENDERS NAMED HEREIN

EXHIBIT (10) (i) SEVERANCE AGREEMENT             SEVERANCE AGREEMENT (the "Agreement") dated October 5, 2000 ("Effective Date") between Gary M. Rich ("Employee") and Brown Shoe Company, Inc., a New York corporation (as further defined in Section 13, the "Company").             WHEREAS, in order to accomplish its objectives, the Company believes it is essential that members of its Operating Committee, such as Employee, be encouraged to remain with the Company during management transition and thereafter and in the event there is any change in corporate structure which results in a Change in Control.             WHEREAS, Employee wishes to have the protection provided for in this Agreement and, in exchange for such protection, is willing to give to the Company, under certain circumstances, his covenant not to compete.             WHEREAS, the Company and Employee desire to amend and restate the Severance Agreement dated July 27, 1998.             NOW, THEREFORE, the parties amend and restate the Severance Agreement dated July 27, 1998, hereto agree as follows:             1. Definitions.         a. "Cause" means (i) engaging by Employee in willful misconduct which is materially injurious to the Company; (ii) conviction of the Employee of a felony; (iii) engaging by Employee in fraud, material dishonesty or gross misconduct in connection with the business of the Company; (iv) engaging by Employee in any act of moral turpitude reasonably likely to materially and adversely affect the Company or its business; or (v) habitual use by Employee of narcotics or alcohol.         b. "Change of Control" means (i) any person other than the Company acquiring more than 25 percent of the Company's Common Stock through a tender offer, exchange offer or otherwise; (ii) the liquidation or dissolution of the Company following the sale of all or substantially all of its assets; or (iii) the Company not being the surviving parent corporation resulting from any merger or consolidation to which it has been a party.         c. "Competitor" shall mean any person, firm, corporation, partnership or other entity which in its prior fiscal year had annual gross sales volume or revenues of shoes of more than $20,000,000 or is reasonably expected to have such sales or revenues in either the current fiscal year or the next following fiscal year.   --------------------------------------------------------------------------------           d. "Confidential Information" shall have the meaning set forth in Section 10.         e. "Customer" shall mean any wholesale customer of the Company which either purchased from the Company during the one (1) year immediately preceding the Termination Date, or is reasonably expected by the Company to purchase from the Company in the one (1) period immediately following the Termination Date, more than $1,000,000 in shoes.          f. "Good Reason," when used with reference to a voluntary termination by Employee of his employment with the Company, shall mean (i) a reduction in Employee's base salary as in effect on the date hereof, or as the same may be increased from time to time; (ii) a reduction in Employee's status, position, responsibilities or duties; or (iii) notice of termination of this Agreement by the Company pursuant to Section 1.g. below, provided Employee terminates employment with the Company within six (6) months of the expiration of the Term.         g. "Term" means the period commencing on the Effective Date and terminating one year after the Effective Date; provided, however, that the Term shall automatically be extended for successive additional one year periods unless either party to this Agreement provides the other party with notice of termination of this Agreement at least ninety days prior to the expiration of the original one-year period or any one-year period thereafter.         h. "Termination Date" shall mean the effective date as provided hereunder of the termination of Employee's employment.             2. Termination During Term -- Change in Control Severance Inapplicable.         a. Employee's employment may be terminated by the Company for Cause at any time, effective upon the giving to Employee of a written notice of termination specifying in detail the particulars of the conduct of Employee deemed by the Company to justify such termination for Cause.         b. Employee's employment may be terminated by the Company without Cause at any time, effective upon the giving to Employee of a written notice of termination specifying that such termination is without Cause.         c. Employee may terminate his employment with the Company at any time.   2 --------------------------------------------------------------------------------         d. Upon a termination by the Company of Employee's employment for Cause during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, Employee shall be entitled only to the payments specified in Section 3.a. below. Upon a termination by the Company of Employee's employment without Cause during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, Employee shall be entitled to all of the payments and benefits specified in Section 3 below.         e. If Employee voluntarily terminates his employment during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, he shall notify Employer in writing if he believes the termination is for Good Reason. Employee shall set forth in reasonable detail why Employee believes there is Good Reason. If such termination is for Good Reason, Employee shall be entitled to all of the payments and benefits specified in Section 3 below. If such voluntary termination is for other than Good Reason, then Employee shall be entitled only to the payments specified in Section 3.a. below.             3. Payments and Benefits Upon Termination During Term -- Change in Control Severance Inapplicable. To the extent provided in Section 2 above, upon termination of his employment during the Term, but prior to a Change in Control or more than 24 months after a Change in Control, Employee shall receive the following payments and benefits:         a. The Company shall pay to Employee on the Termination Date (i) the full base salary earned by employee through the Termination Date and unpaid at the Termination Date, plus (ii) credit for any vacation earned by Employee but not taken at the Termination Date, plus (iii) all other amounts earned by Employee and unpaid as of the Termination Date.         b. The Company shall continue to pay to Employee his base monthly salary at the highest rate in effect at any time during the twelve months immediately preceding the Termination Date (including his targeted bonus in the current year) for the twelve months succeeding his Termination Date. Such amounts shall be paid in accordance with the Company's regular pay period policy for its employees.         c. The Company, at its expense, shall provide to Employee for a period of twelve months after the Termination Date medical and/or dental coverage under the medical and dental plans maintained by the Company. Upon Employee's re-employment during such period, to the extent covered by the new Employer's Plan, coverage under the Company's plan shall lapse. Additionally, the Company shall make a cash lump sum payment in an amount equal to the sum of (i) and (ii) below:   3 --------------------------------------------------------------------------------             (i) The fair market value (determined as of the Termination Date) of that number of shares of non-vested restricted stock of the Company held by the Employee which would have vested within the twelve-month period following the Employee's Termination Date had the Employee remained employed with the Company; plus             (ii) With respect to each non-vested option to purchase Company stock held by the Employee which would have vested within the twelve-month period following the Employee's Termination Date had the Employee remained employed with the Company, the excess, if any, of the fair market value (determined as of the Termination Date) of the Company stock subject to such option over the exercise price of such option..   Employee's participation in and/or coverage under all other employee benefit plans, programs or arrangements sponsored or maintained by the Company shall cease effective as of the Termination Date.         d. The Company shall pay the reasonable costs of outplacement services selected by the Company.         e. For purposes of determining Employee's benefit under the Brown Group, Inc. Supplemental Employment Retirement Plan, an additional one year of Credited Service shall be credited to the Employee's actual or deemed Credited Service.             4. Termination Within 24 Months After a Change in Control Which Occurs During the Term.         a. Employee's employment may be terminated by the Company for Cause at any time, effective upon the giving to Employee of written notice of termination specifying in detail the particulars of the conduct of Employee deemed by the Company to justify such termination for Cause.         b. Employee's employment may be terminated by the Company without Cause at any time, effective upon the giving to Employee of a written notice of termination specifying that such termination is without Cause.         c. Employee may terminate his employment with the Company at any time.         d. Upon a termination by the Company of Employee's employment for Cause within 24 months after a Change in Control which occurs during the Term, Employee shall be entitled only to the payments specified in Section 5.a. below. Upon a termination by the Company of Employee's employment without   4 -------------------------------------------------------------------------------- Cause within 24 months after a Change in Control which occurs during the Term, Employee shall be entitled to all of the payments and benefits specified in Section 5 below.         e. If Employee voluntarily terminates his employment within 24 months after a Change in Control which occurs during the Term, he shall notify the Company in writing if he believes the termination is for Good Reason. Employee shall set forth in reasonable detail why Employee believes there is Good Reason. If such termination is for Good Reason, Employee shall be entitled to all of the payments and benefits specified in Section 5 below. If such voluntary termination is for other than Good Reason, then Employee shall be entitled only to the payments specified in Section 5.a. below.             5. Payments and Benefits Upon Termination Within 24 Months after a Change in Control Which Occurs During Term. To the extent provided in 4 above, upon termination of his employment within 24 months after a Change in Control which occurs during the Term, Employee shall receive the following payments and benefits:         a. The Company shall pay to Employee on the Termination Date (i) the full base salary earned by employee through the Termination Date and unpaid at the Termination Date, plus (ii) credit for any vacation earned by Employee but not taken at the Termination Date, plus (iii) all other amounts earned by Employee and unpaid as of the Termination Date.         b. The Company shall pay to Employee in a lump sum not later than 30 days after his Termination Date an amount equal to 300 percent of the sum of (i) his base annual salary at the highest rate in effect at any time during the twelve months immediately preceding the Termination Date, and (ii) his targeted bonus for the current year. In addition, the Company shall pay to Employee his targeted bonus payment for the year of termination prorated to the Termination Date.         c. The Company, at its expense, shall provide to Employee for a period of thirty-six months after the Termination Date medical and/or dental coverage under the medical and dental plans maintained by the Company. Upon Employee's re-employment during such period, to the extent covered by the new employer's plan, coverage under the Company's plan shall lapse. Employee's participation in and/or coverage under all other employee benefit plans, programs or arrangements sponsored or maintained by the Company shall cease effective as of the Termination Date.         d. The Company shall pay the reasonable costs of outplacement services selected by the Company.         e. For purposes of determining Employee's benefit under the Brown Group, Inc. Supplemental Employment Retirement Plan, an additional three years of Credited Service shall be credited to the Employee's actual or deemed Credited Service.   5 --------------------------------------------------------------------------------             6. Mitigation or Reduction of Benefits. Employee shall not be required to mitigate the amount of any payment provided for in Section 3 or Section 5 by seeking other employment or otherwise. Except as otherwise specifically set forth herein, the amount of any payment or benefits provided in Section 3 or Section 5 shall not be reduced by any compensation or benefits or other amounts paid to or earned by Employee as the result of employment by another employer after the Termination Date or otherwise.             7. Employee Expenses After Change in Control. If Employee's employment is terminated by the Company within 24 months after a Change in Control which occurs during the Term and there is a dispute with respect to this Agreement, then all Employee's costs and expenses (including reasonable legal and accounting fees) incurred by Employee (a) to defend the validity of this Agreement, (b) if Employee's employment has been terminated for Cause, to contest such termination, (c) to contest any determinations by the Company concerning the amounts payable by the Company under this Agreement, or (d) to otherwise obtain or enforce any right or benefit provided to Employee by this Agreement, shall be paid by the Company if Employee is the prevailing party.             8. Release. Notwithstanding anything to the contrary stated in this Agreement, no benefits will be paid pursuant to Sections 3 and 5 except under Sections 3.a. and 5.a. prior to execution by Employee of a release to the Company in the form attached as Exhibit A.             9. Covenant Not to Compete. Benefits payable pursuant to Sections 3.b, 3.c, and 3.e are subject to the following restrictions.                 a. Post-Termination Restrictions.             i. Employee acknowledges that (i) the Company has spent substantial money, time and effort over the years in developing and solidifying its relationships with its customers throughout the world and in developing its Confidential Information; (ii) under this Agreement, the Company is agreeing to provide Employee with certain benefits based upon Employee's assurances and promises contained herein not to divert the Company's customers' goodwill or to put himself in a position following his employment with Company in which the confidentiality of Company's Confidential Information might somehow be compromised.             ii. Accordingly, Employee agrees that, for twelve (12) months after a Termination Date described in the second sentence of Section 2.d, Employee will not, directly or indirectly, on Employee's own behalf or on behalf   6 -------------------------------------------------------------------------------- of any other person, firm, corporation or entity (whether as owner, partner, consultant, employee or otherwise):               A. provide any executive- or managerial-level services in the shoe industry in the United States in competition with the Company, for any Competitor;             B. hold any executive- or managerial-level position with any Competitor in the United States;             C. engage in any research and development activities or efforts for a Competitor, whether as an employee, consultant, independent contractor or otherwise, to assist the Competitor in competing in the shoe industry in the United States;             D. cause or attempt to cause any Customer to divert, terminate, limit, modify or fail to enter into any existing or potential relationship with the Company;             E. cause or attempt to cause any shoe supplier or manufacturer of the Company to divert, terminate, limit, modify or fail to enter into any existing or potential relationship with the Company; and             F. solicit, entice, employ or seek to employ, in the shoe industry, any executive- or managerial-level employee of, or any consultant or advisor to, the Company.           b. Acknowledgment Regarding Restrictions. Employee recognizes and agrees that the restraints contained in Section 9.a. (both separately and in total) are reasonable and should be fully enforceable in view of the high-level positions Employee has had with the Company, the national and international nature of both the Company's business and competition in the shoe industry, and the Company's legitimate interests in protecting its Confidential Information and its customer goodwill and relationships. Employee specifically hereby acknowledges and confirms that he is willing and intends to, and will, abide fully by the terms of Section 9.a. of this Agreement. Employee further agrees that the Company would not have adequate protection if Employee were permitted to work for its competitors in violation of the terms of this Agreement since the Company would be unable to verify whether (i) its Confidential Information was being disclosed and/or misused, and (ii) Employee was involved in diverting or helping to divert the Company's customers and/or its customer goodwill.         c. Company's Right to Injunctive Relief. In the event of a breach or threatened breach of any of Employee's duties and obligations under the terms and provisions of Section 9.a. of this Agreement, the Company shall be entitled,   7 --------------------------------------------------------------------------------   in addition to any other legal or equitable remedies it may have in connection therewith (including any right to damages that it may suffer), to temporary, preliminary and permanent injunctive relief restraining such breach or threatened breach. Employee hereby expressly acknowledges that the harm which might result to Company's business as a result of noncompliance by Employee with any of the provisions of Section 9.a. would be largely irreparable. Employee specifically agrees that if there is a question as to the enforceability of any of the provisions of Section 9.a. hereof, Employee will not engage in any conduct inconsistent with or contrary to such Section until after the question has been resolved by a final judgment of a court of competent jurisdiction. Employee undertakes and agrees that if Employee breaches or threatens to breach the Agreement, Employee shall be liable for any attorneys' fees and costs incurred by Company in enforcing its rights hereunder.         d. Employee Agreement to Disclose this Agreement. Employee agrees to disclose, during the twelve-month period following a Termination Date described in the second sentence of Section 2.d, the terms of this Section 9 to any potential future employer.             10. Confidential Information. The Employee acknowledges and confirms that certain data and other information (whether in human or machine readable form) that comes into his possession or knowledge (whether before or after the date of this Employment Agreement) and which was obtained from the Company, or obtained by the Employee for or on behalf of the Company, and which is identified herein is the secret, confidential property of the Company (the "Confidential Information"). This Confidential Information includes, but is not limited to:         a. lists or other identification of customers or prospective customers of the Company (and key individuals employed or engaged by such parties);         b. lists or other identification of sources or prospective sources of the Company's products or components thereof (and key individuals employed or engaged by such parties);         c. all compilations of information, correspondence, designs, drawings, files, formulae, lists, machines, maps, methods, models, notes or other writings, plans, records, regulatory compliance procedures, reports, specialized or technical data, schematics, source code, object code, documentation, and software used in connection with the development, manufacture, fabrication, assembly, marketing and sale of the Company's products;         d. financial, sales and marketing data relating to the Company or to the industry or other areas pertaining to the Company's activities and contemplated activities (including, without limitation, manufacturing, transportation, distribution and sales costs and non-public pricing information);     8 --------------------------------------------------------------------------------         e. equipment, materials, procedures, processes, and techniques used in, or related to, the development, manufacture, assembly, fabrication or other production and quality control of the Company's products and services;         f. the Company's relations with its customers, prospective customers, suppliers and prospective suppliers and the nature and type of products or services rendered to such customers (or proposed to be rendered to prospective customers);         g. the Company's relations with its employees (including, without limitation, salaries, job classifications and skill levels); and         h. any other information designated by the Company to be confidential, secret and/or proprietary (including without limitation, information provided by customers or suppliers of the Company). Notwithstanding the foregoing, the term "Confidential Information" shall not consist of any data or other information which has been made publicly available or otherwise placed in the public domain other than by the Employee in violation of this Employment Agreement.             11. Certain Additional Payments by the Company.         a. Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 11.a., if it shall be determined that the Employee is entitled to a Gross-Up Payment, but that the Payments do not exceed 110 percent of the greatest amount (the "Reduced Amount") that could be paid to the Employee such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made   9 --------------------------------------------------------------------------------   to the Employee, and the Payments, in the aggregate, shall be reduced to the Reduced Amount.         b. Subject to the provisions of Section 11.c., all determinations required to be made under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young or such other certified public accounting firm as may be designated by the Employee (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 11, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 11.c. and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee.         c. The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which the Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall:               i. give the Company any information reasonably requested by the Company relating to such claim,   10 --------------------------------------------------------------------------------               ii. take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,             iii. cooperate with the Company in good faith in order to effectively contest such claim, and             iv. permit the Company to participate in any proceedings relating to such claim;   provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 11.c., the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.         d. If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 11.c., the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 11.c.) promptly pay to the Company the amount of such refund (together with any interest paid or   11 -------------------------------------------------------------------------------- credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 11.c., a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.             12. Notice. All notices hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered personally or by courier, or (b) on the third business day following the mailing thereof by registered or certified mail, postage prepaid, or (c) on the first business day following the mailing thereof by overnight delivery service, in each case addressed as set forth below:                                 a. If to the Company:                                     Brown Shoe Company, Inc.                                     8300 Maryland Avenue                                     St. Louis, Missouri 63166-0029                                     Attention: Chief Executive Officer                                 b. If to Employee:                                     Gary M. Rich                                     442 Sheffield Estates Drive                                     St. Louis, MO 63141 Any party may change the address to which notices are to be addressed by giving the other party written notice in the manner herein set forth.             13. Successors; Binding Agreement.         a. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, upon or prior to such succession, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. A copy of such assumption and agreement shall be delivered to Employee promptly after its execution by the successor. Failure of the Company to obtain such agreement upon or prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Employee to benefits from the Company in the same amounts and on the same terms as Employee would be entitled hereunder if Employee terminated his employment for Good Reason. For purposes of the preceding sentence, the date on which any such succession becomes effective shall be deemed the Termination   12 -------------------------------------------------------------------------------- Date. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 13.a. or which otherwise becomes bound by the terms and provisions of this Agreement by operation of law.         b. This Agreement is personal to Employee and Employee may not assign or delegate any part of his rights or duties hereunder to any other person, except that this Agreement shall inure to the benefit of and be enforceable by Employee's legal representatives, executors, administrators, heirs and beneficiaries.             14. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this Agreement and the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.             15. Headings. The headings in this Agreement are inserted for convenience of reference only and shall not in any way affect the meaning or interpretation of this Agreement.             16. Counterparts. This Agreement may be executed in one or more identical counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.             17. Waiver. Neither any course of dealing nor any failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of such right, power or privilege or of any other right, power or privilege or of the same right, power or privilege in any other instance. Without limiting the generality of the foregoing, Employee's continued employment without objection shall not constitute Employee's consent to, or a waiver of Employee's rights with respect to, any circumstances constituting Good Reason. All waivers by either party hereto must be contained in a written instrument signed by the party to be charged therewith, and, in the case of the Company, by its duly authorized officer.             18. Entire Agreement. This instrument constitutes the entire agreement of the parties in this matter and shall supersede any other agreement (including, but not limited to, the Severance Agreement dated July 27, 1998) between the parties, oral or written, concerning the same subject matter.             19. Amendment. This Agreement may be amended only by a writing which makes express reference to this Agreement as the subject of such amendment and which is signed by Employee and by a duly authorized officer of the Company.   13 --------------------------------------------------------------------------------         20. Governing Law. In light of Company's and Employee's substantial contacts with the State of Missouri, the facts that the Company is headquartered in Missouri and Employee resides in and/or reports to Company management in Missouri, the parties' interests in ensuring that disputes regarding the interpretation, validity and enforceability of this Agreement are resolved on a uniform basis, and Company's execution of, and the making of, this Agreement in Missouri, the parties agree that: (i) any litigation involving any noncompliance with or breach of the Agreement, or regarding the interpretation, validity and/or enforceability of the Agreement, shall be filed and conducted exclusively in the state or federal courts in St. Louis City or County, Missouri; and (ii) the Agreement shall be interpreted in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles.         IN WITNESS WHEREOF, Employee and the Company have executed this Agreement as of the day and year first above written.                                                                                           BROWN SHOE COMPANY, INC.                                                                                             By: /s/ Jeffery E. Struve                                                                                               EMPLOYEE                                                                                             By: /s/ Gary M. Rich                     Gary M. Rich 14 --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.3 CORILLIAN CORPORATION 1997 Stock Option Plan (As Amended and Restated October 24, 2000) 1.  Establishment, Purpose and Definitions.     (a) The Corillian Corporation 1997 Stock Option Plan (the "Plan") was adopted as of October 1, 1997, amended and restated on April 15, 1999 and amended on March 2, 2000, subject to shareholder approval.     (b) The purpose of the Plan is to give employees, directors, officers, consultants and advisors of Corillian Corporation (the "Company") and its affiliates an opportunity to purchase shares of the Common Stock of the Company (the "Stock"). It is intended that some of the options granted to employees of the Company will qualify as "incentive stock options" under Section 422 of the Internal Revenue Code as it is now in effect or as it may hereafter be amended (the "Code"). The Plan is adopted in the belief that providing employees, directors, officers, consultants and advisors of the Company with a stake in the Company's successful operation will act as an incentive to them to expand and improve the profit position of the Company and will materially aid the Company in obtaining and retaining such persons.     (c) The term "affiliates" means parent or subsidiary corporations as defined in Code Section 425, including parents or subsidiaries which become such after adoption of the Plan. 2.  Shares Subject to the Plan.     (a) Options may be granted under the Plan to purchase an aggregate of not more than five million one hundred fifty-two thousand seven hundred eighty-nine (5,152,789) shares of Stock. Shares subject to the unexercised portion of an option which expires, is surrendered or for any other reason ceases to be exercisable may again be made subject to option under the Plan.     (b) If there is any change in the Stock through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend or other change in the corporate structure of the Company (other than a Corporate Transaction as set forth below), appropriate adjustments shall be made by the Plan Administrator in the aggregate number of shares subject to the Plan and the number of shares and the price per share subject to outstanding options, to preserve, but not to increase, the benefits of the optionees.(c) In the event of a Corporate Transaction, except as otherwise provided in the instrument evidencing an Option and except as provided in subsection (b) below, each outstanding Option shall be assumed or an equivalent option or right substituted by the surviving corporation, the successor corporation or its parent corporation, as applicable (the "Successor Corporation").     (d) If in the event of a Corporate Transaction the Successor Corporation refuses to assume or substitute for an Option, then each such outstanding Option shall become fully vested and exercisable with respect to 100% of the unvested portion of the Option. In such case, the Plan Administrator shall notify the Participant in writing or electronically that the unvested portion of the Option specified above shall be fully vested and exercisable for a specified time period. At the expiration of the time period, the Option shall terminate, provided that the Corporate Transaction is consummated.     (e) For the purposes of this Section 12.3, the Option shall be considered assumed or substituted for if following the Corporate Transaction the option or right confers the right to purchase or receive, for each share of Common Stock subject to the Option immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Corporate Transaction is not solely common stock of the Successor Corporation, the Plan Administrator may, with the consent of the Successor Corporation, provide for the consideration to be -------------------------------------------------------------------------------- received upon the exercise of the Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Corporation substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Corporate Transaction. The determination of such substantial equality of value of consideration shall be made by the Plan Administrator and its determination shall be conclusive and binding.     "Corporate Transaction" means any of the following events:      (i) Consummation of any merger or consolidation of the Company with or into another corporation; or     (ii) Consummation of any sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all the Company's outstanding securities or substantially all the Company's assets other than a transfer of the Company's assets to a majority-owned subsidiary corporation (as defined in Section 422 of the Code) of the Company; or     (iii) Acquisition by a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date of adoption of this provision of the Plan) of the Exchange Act of a majority or more of the Company's outstanding voting securities (whether directly or indirectly, beneficially or of record). Ownership of voting securities shall take into account and shall include ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the date of adoption of this provision of the Plan) under the Exchange Act.     "Related Party Transaction" means (a) a merger of the Company in which the holders of shares of Common Stock immediately prior to the merger hold at least a majority of the shares of Common Stock in the surviving corporation immediately after the merger, (b) a mere reincorporation of the Company or (c) a transaction undertaken for the sole purpose of creating a holding company. 3.  Eligibility.     (a) The Plan Administrator shall designate those employees, directors, officers, consultants and advisors of the Company who shall be eligible to have granted to them the options provided for by the Plan. The Plan Administrator shall also determine, at the time of grant, which options granted to employees of the Company shall be treated as incentive stock options.     (b) The aggregate fair market value (determined at the times the options are granted) of the shares of Stock with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year (under all incentive stock option plans of the Company and its affiliates) shall not exceed One Hundred Thousand Dollars ($100,000). 4.  Administration of the Plan.     The Plan shall be administered by the Plan Administrator. The Plan Administrator shall be the Board of Directors and/or a committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of, the Board of Directors. The Plan Administrator shall have full power to grant options, construe and interpret the Plan, prescribe, amend and rescind rules and regulations relating to the Plan and make all other determinations necessary or advisable for administration of the Plan. The Plan Administrator shall exercise its powers with respect to incentive stock options only in a manner consistent with the meaning of Code Section 422. All decisions, determinations and interpretations of the Plan Administrator shall be binding on all optionees. 5.  Terms and Conditions of Options.     (a) Each option granted pursuant to the Plan shall be evidenced by a written agreement (the "Option Agreement") executed by the Company and the optionee, which shall contain terms and conditions consistent with the terms of the Plan as determined by the Plan Administrator.     (b) An option shall be exercisable, during the lifetime of the optionee, only by the optionee and only during the option period set forth in the Option Agreement. The option period for an incentive -------------------------------------------------------------------------------- stock option shall not extend for more than ten (10) years from the date such option is granted; if, however, the optionee currently holds more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, such option period shall not extend for more than five (5) years from the date such incentive stock option is granted.     (c) The exercise price of an option shall be not less than the fair market value of the Stock covered by such option on the date such option is granted. However, if the optionee currently holds more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, the purchase price of an incentive stock option shall be not less than one hundred ten percent (110%) of the fair market value of the Stock covered by such incentive stock option on the date such option is granted.     (d) Options are not transferable otherwise than by will or the laws of descent and distribution, as set forth in the Option Agreement. 6.  Use of Proceeds.     Proceeds realized from the sale of Stock upon exercise of options granted under the Plan shall constitute general funds of the Company. 7.  Suspension, Termination or Amendment of the Plan.     The Plan Administrator may suspend, terminate or amend the Plan. No action of the Plan Administrator to amend the Plan in any of the following respects shall be effective without prior shareholder approval:     (a) to increase the maximum number of shares subject to the Plan (except as provided in Subsection 2(b)); or     (b) to make any change in the Plan the effect of which would be to disqualify incentive stock options granted under the Plan from favorable tax treatment as "incentive stock options" under the Code.     The Plan shall terminate automatically on September 29, 2007, unless terminated prior to such date. No option may be granted during any suspension or after the termination of the Plan, and no such amendment, suspension or termination of the Plan shall, without the optionee's consent, alter or impair any rights or obligations under any option previously granted under the Plan. -------------------------------------------------------------------------------- QUICKLINKS CORILLIAN CORPORATION 1997 Stock Option Plan (As Amended and Restated October 24, 2000)

INCENTIVE STOCK OPTION PLAN FOR OFFICERS AND KEY EMPLOYEES ADOPTED JUNE 10, 1982 (As Amended August 9, 1990)   1. Purpose.         The purposes of this Plan are to attract, retain and motivate key employees of Carpenter Technology Corporation and its wholly owned subsidiaries ("the Corporation"), to encourage stock ownership by such employees by providing them with a means to acquire a proprietary interest or to increase their proprietary interest in the Corporation's success and to provide a greater community of interest between such employees and the Corporation's stockholders. 2. Administration.         The Board of Directors ("the Board") shall be responsible for the operation of the Plan. It shall be authorized, subject to the provisions of the Plan, from time to time to establish such rules and regulations and to appoint such agents as it deems appropriate for the proper administration of the Plan, and to make such determinations under, and such interpretations of, and to take such steps in connection with, the Plan or the options granted hereunder as it deems necessary or advisable. Any questions of interpretation as determined by the Board shall be final and binding upon all persons. The Board may delegate these powers to the Compensation and Stock Option Committee of the Board, consisting of at least three Directors not participating in the Plan. 3. Participants.         The class of employees eligible to receive options under the Plan shall be limited to officers and key employees of the Corporation. Participants in the Plan will consist of such officers or key employees as the Board in its sole discretion may, from time to time, designate. The Board's designation of a participant at any time to receive benefits under the Plan shall not obligate it to designate such person to receive benefits at any other time. The Board shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of options granted hereunder. 4. Types of Benefits.         Benefits under the Plan will be granted in stock options ("options" or individually an "option") which are intended to be options qualifying under Section 422A of the Internal Revenue Code as described below. 5. Shares Reserved Under the Plan.         Subject to the provisions of Section 7, the maximum aggregate number of shares which may be made available for options under this Plan is 400,000 shares of common stock of the Corporation. The shares involved in the unexercised portion of any terminated or expired option under the Plan may again be subject to options under the Plan. Such shares may be either authorized and unissued shares, or issued shares reacquired by the Corporation. 6. Options.         Options may be granted by the Board from time to time, subject to the following provisions:         (a)      Each option granted under this Plan shall become exercisable by the optionee only after the optionee has completed one year of employment immediately following the date the option is granted, as determined by the Board (the "date of grant"). Each option granted prior to August 9, 1990, shall expire five years from the date of grant. All other options shall expire ten years from the date of grant provided, however, that if the stockholders fail to approve a ten year term, all such other options shall expire five years from the date of grant.         (b)      The option price per share of an option shall be determined by the Board but shall not be less than the fair market value of a share of the Corporation's stock on the date of grant unless the recipient of the option at the time of such grant owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Corporation in which case the option price shall not be less than one hundred ten percent (110%) of such fair market value. For the purpose of this Plan, the term "fair market value" shall mean the closing price of Carpenter Technology Corporation common stock on the New York Stock Exchange on the date in question, or, in the absence of a closing price on such date, then the closing price on the last trading day preceding the date of grant, as reflected on the consolidated tape of New York Stock Exchange-Composite Transactions.         (c)      No option under this Plan may be transferable by the optionee except by will or the laws of descent and distribution and no option may be exercised during the lifetime of an optionee, except by that optionee. In the event of the death of the optionee more than one year after the date of grant and not more than three months after the termination of the optionee's employment by the Corporation, the option may be transferred to the optionee's personal representative, heirs or legatees ("transferee") and may be exercised by the transferee before the earlier of (i) the expiration of one year from the date of the death of the optionee or (ii) (A) with respect to options granted prior to August 9, 1990, the expiration of five years from the date of grant and (B) with respect to all other options, the expiration of ten years from the date of grant provided, however, that if the stockholders fail to approve a ten year term, the expiration of five years from the date of grant. In the event of an optionee's retirement, an option may be exercised prior to its expiration during the five year period (one year period in the event of a retirement due to "disability" (within the meaning of Section 105(d)(4) of the Internal Revenue Code)) beginning with the date of retirement; provided, however, that in the event of a retiree's death during such five year period (one year period in the event of a retirement due to "disability"), unexercised options may be exercised by the transferee before the earlier of either items (i) or (ii) of this Section 6(c). In all other cases of termination of employment of an optionee, the option, if otherwise exercisable by the optionee at the time of such termination, may only be exercised within three months after such termination. Notwithstanding anything in the Plan to the contrary, in the event an optionee's employment with the Corporation is terminated for "cause", the Board (or if the Board has delegated its authority, the Compensation and Stock Option Committee) may, in its sole discretion, cancel each unexercised option awarded on or after August 9, 1990, to such terminated optionee effective upon the termination. For purposes of this Section, a termination for "cause" shall mean termination of an optionee's employment with the Corporation which results from either (a) the optionee committing an Intolerable Offense (as defined in the Corporation's Personnel Practices and Policies as in effect on the date of termination) or (b) the operation of the Corporation's Corrective Performance System (as set forth in the Corporation's Personnel Practices and Policies as in effect on the date of termination).         (d)      Each option shall be exercisable for the full amount or any part thereof, including a partial exercise from time to time; provided, however, that in no event shall any stock option granted after December 31, 1986 become first exercisable in any one year in excess of $100,000 of the fair market value (determined as of the time the option is granted). All shares purchased under option shall be paid for in full at the time of purchase. Exercised options may be paid for with cash or stock of the Corporation, the value of which shall be the fair market value on the date of the exercise of the options, as determined in Section 6(b) of this Plan, provided, however, that no option granted on or after August 9, 1990, may be exercised utilizing stock of the Corporation unless such shares have been held by an optionee for a period of at least six months. 7. Adjustment Provisions.         If the Corporation shall at any time change the number of issued shares of common stock without new consideration to the Corporation (such as by stock dividends, stock splits, stock combinations, stock exchanges or recapitalization), the total number of shares reserved for issuance under this Plan and the number of shares covered by each outstanding option shall be adjusted so that the aggregate consideration payable to the Corporation and the value of each option shall not be changed. In the event of a merger, reorganization, acquisition, consolidation, divestiture, sale or exchange of assets of the Corporation, or similar event, the Board shall make such adjustments with respect to options or take such other action as it determines to be appropriate and such determination shall be conclusive. 8. Change in Control         (a)      Notwithstanding anything in this Plan to the contrary, in the event of a Change in Control of the Corporation, the rights under Section 6(a) shall become immediately exercisable.         (b)      For purposes of this Plan, a "Change in Control of the Corporation" shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Corporation's then outstanding securities; or (B) during any period of two consecutive years (not including any period prior to the date this Section was adopted as an amendment to the Plan), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clauses (A), (C) or (D) of this Subsection) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation, or (D) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all the Corporation's assets. 9. Amendment, Modification and Termination of the Plan.         The Board, at any time, may terminate, and at any time and from time to time, and in any respect, may amend or modify, the Plan; provided, however, that no such action by the Board, without approval of the stockholders, may (a) increase the total amount of common stock which may be purchased under options granted under the Plan or the maximum number of shares of common stock for which options may be granted under the Plan to any one individual, except as contemplated in Section 7, (b) permit options to be granted at less than fair market value, or (c) permit any person while a member of the committee contemplated in Section 2 to be eligible to receive or hold an option under the Plan. The Plan shall automatically terminate ten years after the earlier of (i) the date the Plan is adopted, or (ii) the date the Plan is approved by Stockholders. 10. Effective Date of the Plan.         The Plan shall become effective upon approval by the Board; provided, however, that the Plan shall be submitted for ratification by the stockholders at the Annual Meeting to be held on November 1, 1982, and if not ratified shall be of no force and effect and all options previously granted hereunder shall be null and void.   STK7.10A

Exhibit 10.1 EXECUTION COPY     AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT AMENDMENT NO. 2, dated as of October 1, 2000, to the Receivables Purchase Agreement, dated as of April 30, 1993, between HOUSEHOLD BANK (SB), NATIONAL ASSOCIATION, a national banking association, as successor in interest to Household Bank, f.s.b. (the "Bank"), and HOUSEHOLD AFFINITY FUNDING CORPORATION, a Delaware corporation and a subsidiary of the Bank ("Funding"). RECITALS: 1. The Bank, as sucessor in interest to Household Bank, f.s.b., and Funding have entered into a Receivables Purchase Agreement, dated as of April 30, 1993 (as previously amended, the "RPA", and as amended from time to time hereafter, including by this Amendment, the "Amended RPA"). 2. Capitalized terms used herein (and not otherwise defined herein) shall have the respective meanings ascribed thereto in the RPA. 3. The parties to the RPA are hereby amending the RPA by execution of this Amendment in accordance with Section 9.1 of the RPA. 4. Pursuant to Section 9.1 of the RPA, Funding has provided to the Bank (a) an Officers Certificate to the effect that Funding reasonably believes that such amendment will not have an Adverse Effect, and (b) an Opinion of Counsel, addressed and delivered to the Bank, dated the date of this amendment, to the effect that the conditions precedent to this amendment have been satisfied. SECTION 1. Amendments to RPA. 1. Section 1.1 of the RPA is hereby amended by adding the following definitions: "Additional Cut-Off Date" shall have the meaning specified in the Supplemental Conveyance.   "Eligible Receivable" shall have the meaning set forth in the Pooling and Servicing Agreement, except that "the Bank" shall be substituted for each occurrence of "the Seller" and "Funding" shall be substituted for each occurrence of "the Trust" and all references to "Receivables Seller", "Certificates", and "Certificateholders" shall be ignored.   "Trust Collateral" shall have the meaning set forth in Section 2.1.   Section 1.1 of the RPA is hereby amended by deleting the definition of "Account" and inserting in lieu thereof the following: "Account" shall mean (a) each MasterCard and VISA account established pursuant to a Credit Card Agreement between the Bank and any Person, which account is identified in the computer file or microfiche list delivered pursuant to this Agreement, (b) each Additional Account, (c) each Related Account, (d) any account originated as a replacement of an Account in connection with the upgrade of such Account to premium status (provided that such a replacement account can be traced or identified by reference to, or by way of, the applicable computer file or microfiche list previously filed pursuant hereto), (e) each account into which an Account shall be transferred (a "Transferred Account") provided that (i) such transfer was made in accordance with the Credit Card Guidelines and (ii) such account can be traced or identified as an account into which an Account has been transferred, and (f) each surviving account resulting from the combination, in accordance with the Credit Card Guidelines, of two or more of the Accounts but shall exclude (g) any Account all the Receivables in which are either: (i) reassigned to the Bank pursuant to Section 6.1, or (ii) assigned and transferred to the Servicer pursuant to Section 3.03 of the Pooling and Servicing Agreement.   Section 1.1 of the RPA is hereby amended by deleting the definition of "Addition Date" and inserting in lieu thereof the following: "Addition Date" shall mean (a) with respect to Aggregate Addition Accounts, the date from and after which such Aggregate Addition Accounts are to be included as Accounts pursuant to Section 2.2 and (b) with respect to New Accounts, the first Distribution Date following the calendar month in which the later of the dates on which such New Accounts are originated or designated pursuant to Section 2.3 occurs.   Section 1.1 of the RPA is hereby amended by deleting the definition of "Portfolio Reassignment Price". Section 2.1(d) of the RPA is hereby amended by deleting Section 2.1(d) and replacing it with the following: (d) The parties hereto intend that the conveyance of the Banks rights, title and interest in and to the Purchased Assets shall constitute a sale, conveying good title free and clear of any liens, claims, encumbrances or rights of others from the Bank to Funding and that the Purchased Assets shall not be part of the Banks estate in the event of the insolvency of the Bank or a conservatorship, receivership or similar event with respect to the Bank. It is the intention of the parties hereto that the arrangements with respect to the Purchased Assets shall constitute a purchase and sale of such Purchased Assets and not a loan. In the event, however, that a court of competent jurisdiction were to hold that the transactions evidenced hereby constitute a loan and not a purchase and sale, it is the intention of the parties hereto that this Agreement shall constitute a security agreement under applicable law, and that the Bank shall be deemed to have granted and does hereby grant to Funding a first priority perfected security interest in all of the Banks right, title and interest in, to and under the Receivables and other Purchased Assets.   Section 2.1 of the RPA is hereby amended by adding the following to Section 2.1: (e) To the extent that the Bank retains any interest in the Purchased Assets, the Bank hereby grants to the Trustee for the benefit of the Certificateholders a security interest in all of the Banks right, title, and interest, whether now owned or hereafter acquired, in, to, and under the Receivables and other Purchased Assets (collectively, the "Trust Collateral"), to secure the performance of all of the obligations of the Bank under this Agreement and any other agreement or document related to the Pooling and Servicing Agreement. With respect to the Trust Collateral, the Trustee shall have all of the rights that it has under the Pooling and Servicing Agreement and all of the rights of a secured creditor under the UCC.   Section 5.1(b) of the RPA is amended by inserting "(arising through or under the Bank)" in the third line of Section 5.1(b) immediately following the words "assume or suffer to exist any Liens". Section 5.1(h) of the RPA is amended by deleting "Credit Card Guidelines" in the third line of Section 5.1(h) and replacing it with "applicable Credit Card Guidelines of the Bank". Section 6.1(b) of the RPA is hereby deleting Section 6.1(b) and replacing it with the following: (b) The Bank shall accept reassignment of any Ineligible Receivables and any related Purchased Assets previously sold by the Bank to Funding from Funding on or prior to the end of the Due Period in which such reassignment obligation arises, and shall pay for such reassigned Ineligible Receivables and any related Purchased Assets by treating such Ineligible Receivables and any related Purchased Assets as if they were subject to a reversal of the entire unpaid principal balance thereof plus accrued and unpaid finance charges at the annual percentage rate applicable to such Receivables from the last date billed through the end of such Due Period and by adjusting the purchase price of future Receivables purchased as provided in Section 3.2 (the "Repurchase Price"). Upon reassignment of such Ineligible Receivables and any related Purchased Assets, Funding shall automatically and without further action be deemed to sell, transfer, assign, set-over and otherwise convey to the Bank, without recourse, representation or warranty, all the right, title and interest of Funding in and to such Ineligible Receivables and any related Purchased Assets; and such reassigned Ineligible Receivables and any related Purchased Assets shall be treated by Funding as collected in full as of the date on which they were transferred. Funding shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Bank to effect the conveyance of such Ineligible Receivables and any related Purchased Assets pursuant to this subsection.   Section 6.2 of the RPA is hereby amended by (i) deleting "Reassignment of Certificatesholders Interest in Trust Portfolio" and replacing it with "Reassignment of the Trust Portfolio" and (ii) deleting the second paragraph of Section 6.2 replacing it with the following: The Bank shall pay to Funding by depositing in the Collection Account in same-day funds, not later than 1:00 p.m. New York City time, on the Distribution Date following the Due Period in which such reassignment obligation arises, in payment for such reassignment, an amount equal to the Repurchase Price. Upon reassignment of such Receivables and any related Purchased Assets, Funding shall automatically and without further action be deemed to sell, transfer, assign, set-over and otherwise convey to the Bank, without recourse, representation or warranty, all the right, title and interest of Funding in and to such Receivables and any related Purchased Assets; and such reassigned Receivables and any related Purchased Assets shall be treated by Funding as collected in full as of the date on which they were transferred. Funding shall execute such documents and instruments of transfer or assignment and take such other actions as shall reasonably be requested by the Bank to effect the conveyance of such Receivables and any related Purchased Assets pursuant to this subsection.   Section 9.5 of the RPA is hereby amended by deleting Section 9.5 in its entirety and by replacing it with the following: Section 9.5 . Assignment. Notwithstanding anything to the contrary contained herein, other than Fundings assignment of its rights, title, and interest in, to, and under this Agreement to the Trustee for the benefit of the Certificateholders as contemplated by the Pooling and Servicing Agreement and Section 9.6 hereof, the Accounts, this Agreement, all other Conveyance Papers, and all Receivables purchased pursuant to this Agreement by Funding pursuant to this Agreement may not be assigned by the parties hereto; provided, however, that Funding shall have the right to assign its rights, title and interest in, to, and under this Agreement and the Conveyance Papers, including without limitation, all of Fundings rights, title, and interest in and to the Receivables purchased pursuant to this Agreement and the Conveyance Papers, to any entity provided that all conditions precedent for such assignment contained in the Pooling and Servicing Agreement and the Collateral Agreement, dated as of March 27, 1997, and the Collateral Agreement, dated as of September 29, 1998, each between the Trustee, the Bank, Funding and the other signatories thereto, have been satisfied; provided further, that the Bank shall have the right to assign its rights, title and interest, in, to and under the Accounts and this Agreement to (i) any successor by merger assuming this Agreement (ii) any affiliate owned directly or indirectly by Household International, Inc. which assumes the obligations of this Agreement or (iii) to any entity provided that the Rating Agency Condition has been satisfied.   SECTION 2. Amendments to Exhibit A of the RPA (the "Form of Supplemental Conveyance"). 1. The second WHEREAS clause is hereby amended by deleting the words "(as such term is defined in the Receivables Purchase Agreement)". 2. Section 1 of the Form of Supplemental Conveyance is hereby amended by adding the following definition: "Additional Cut-Off Date" shall mean _________________."   3. Section 2 of the Form of Supplemental Conveyance is hereby amended by adding the words "designated hereby (the "Aggregate Addition Accounts")" immediately following the words "complete schedule identifying all such Aggregate Addition Accounts". 4. Section 3 of the Form of Supplemental Conveyance is hereby amended by adding the following paragraph immediately following paragraph (c): (d) The parties hereto intend that the conveyance described in Section 3(a) constitute an absolute sale consistent with the intent expressed in Section 2.1(d) of the Receivables Purchase Agreement. In the event, however, that notwithstanding such intent a court of competent jurisdiction were to hold that the transactions evidenced hereby constitute a loan and not a purchase and sale, it is the intention of the parties hereto that this Supplemental Conveyance shall constitute a security agreement under applicable law, and that the Bank shall be deemed to have granted, and the Bank does hereby grant, to Funding a first priority perfected security interest in all of the Banks right, title and interest, whether now owned or hereafter acquired, in, to and under the Receivables generated by such Aggregate Addition Accounts, now existing and hereafter created, all monies due or to become due and all amounts received with respect thereto and all "proceeds" (including without limitation, "proceeds" as defined in Article 9 of the UCC as in effect in the State of California) thereof. 5. The Form of Supplemental Conveyance is hereby amended by inserting the following as Section 9 9. Governing Law. THIS SUPPLEMENTAL CONVEYANCE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.   SECTION 3. Effective Date. This Amendment shall be effective upon the execution hereof by the parties hereto. SECTION 4. Effect of Amendment. The RPA is hereby amended by providing that all references therein to the "Receivables Purchase Agreement", to "this Agreement", "hereby", "hereof" and "herein" shall be deemed from and after the effective date of this Amendment to be a reference to the Amended RPA. Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions of the RPA shall remain unamended and shall continue to be, and shall remain, in full force and effect in accordance with its terms and except as expressly provided herein, this Amendment shall not constitute or be deemed to constitute a waiver of compliance with or consent to non-compliance with any term or provision of the RPA. SECTION 5. Counterparts. This Amendment may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICTS OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.   IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers on the date first above written. HOUSEHOLD BANK (SB), NATIONAL ASSOCIATION     By: /s/ Margaret A. Sprude Name: Margaret A. Sprude Title: Executive Vice President and Chief Financial Officer       HOUSEHOLD AFFINITY FUNDING CORPORATION     By: /s/ Phil L. Krupowicz Name: Phil L. Krupowicz Title: Vice President and Assistant Treasurer                      

Exhibit 10.4.b.1 SECOND AMENDMENT OF FMC CORPORATION EMPLOYEES' RETIREMENT PROGRAM PART II UNION HOURLY EMPLOYEES' RETIREMENT PLAN (As Amended and Restated Effective January 1, 1999)           WHEREAS, FMC Corporation (the "Company") maintains the FMC Corporation Employees' Retirement Program Part II Union Hourly Employees' Retirement Plan (the "Plan"); and           WHEREAS, amendment of the Plan is now considered desirable;           NOW, THEREFORE, by virtue and in exercise of the powers reserved to the Company under Section 11.1 Plan Amendment or Termination of the Plan, and pursuant to authority delegated to the undersigned officer of the Company by resolution of its Board of Directors, the Plan is hereby amended, effective as of the dates specified below, in the following respects:           1.       Effective January 1, 1999, in Article I, the definition of Period of Service is revised for purposes of clarification by deleting the second sentence thereof in its entirety and inserting the following in lieu thereof: "Notwithstanding the foregoing, if an Employee incurs a One-Year Period of Severance at a time when he or she has no vested interest under the Plan and the Employee does not perform an Hour of Service within 5 years after the beginning of the One-Year Period of Severance, the Period of Vesting Service prior to such One-Year Period of Severance shall not be aggregated."           2.       Effective January 1, 1999, Section 4.1 Amount of Termination Benefit is hereby amended to correct a scrivener's error by changing the term "Years of Credited Service" to the term "Years of Vesting Service" in each place it appears in such section.           3.       Effective January 1, 1999, Supplement 1 - Industrial Chemical Division, Green River Wyoming, is hereby amended for purposes of clarification by deleting the text of Section 1-3 Earnings in its entirety, and inserting the following in lieu thereof: >           "Earnings means the total compensation paid by the Company or a > Participating Employer to an Eligible Employee for each Plan Year that is > currently includible in gross income for federal income tax purposes; plus the > Employee's Pre-Tax Contributions and amounts contributed to a plan described > in Code Section 125 or 132. > >           The annual amount of Compensation taken into account for a > Participant must not exceed $160,000 (as adjusted by Internal Revenue Service > for cost-of-living increases in accordance with Code Section 401(a)(17)(B)). > >           A Participant's Compensation will be conclusively determined > according to the Company's records."           4.       Effective July 1, 2000, Supplement 1 - Industrial Chemical Division, Green River, Wyoming, is hereby amended by adding the following to the end of Section 1-6 Amount of Normal Retirement Benefit: >           "Effective as of June 30, 2000, each Participant's benefit accrued > under the formula described above shall be calculated and maintained as a > frozen benefit ("Compensation-Based Accrued Benefit"). For periods beginning > on and after July 1, 2000, a Participant's Normal Retirement Benefit shall be > equal to the greater of the Compensation-Based Accrued Benefit, if any, and > the product of the benefit rate determined under the following schedule in > effect at the termination of the Participant's Years of Credited Service > multiplied by the Participant's Years of Credited Service: Termination Date Benefit Rate On or after July 1, 2000 $70.00 On or after July 1, 2001 $73.00 On or after July 1, 2002 $74.00 On or after July 1, 2003 $74.00 On or after July 1, 2004 $76.00"           5.       Effective as of July 1, 2000, and continuing through July 1, 2005, Supplement 1 - Industrial Chemical Division, Green River, Wyoming, is hereby amended by adding the following as Section 1-13 Pension Supplement:                   "1-13 Pension Supplement >           A Participant who retires on or after July 1, 2000, but on or before > July 1, 2005 after reaching age 60 or later shall receive a supplemental > pension payment of $300.00 per month through the month of the Participant's > 65th birthday."           6.       Effective as of July 1, 2000, Supplement 1 - Industrial Chemical Division, Green River, Wyoming, is hereby amended by adding the words "Effective for periods prior to July 1, 2000" to the beginning of the first sentence of words Section 1-11 Disability Retirement, and by adding the following immediately after the first sentence: "For periods beginning on or after July 1, 2000, the Disability Retirement Benefit is eliminated in accordance with the collective bargaining agreement with the union to provide a long-term disability plan benefit instead of the Disability Retirement Benefit."           7.       Effective October 9, 2000, Supplement 2 - Jetway Systems Division, Ogden, Utah is hereby amended by adding the following to the end of Section 2-6 Normal Retirement Benefit: >           "Effective October 8, 2000, each Participant's monthly Normal > Retirement Benefit accrued under the formula described above shall be > calculated and maintained as a frozen benefit ("Prior Formula Accrued > Benefit"). For periods beginning on or after October 9, 2000, a Participant's > Normal Retirement Benefit shall be equal to the greater of the Prior Formula > Accrued Benefit, if any, and the product of the benefit rate of $30.00 > multiplied by the Participant's Years of Credited Service."           8.       Effective June 1, 2000, Supplement 8 - Agricultural Chemical Division, Baltimore, Maryland is hereby amended by adding the following to end of Section 8-5 Normal Retirement Benefit: "Termination Date Benefit Rate On or after June 1, 2000 $28.50 On or after June 1, 2001 $29.50 On or after June 1, 2002 $30.50"           9.       Effective June 1, 2000, Supplement 8 - Agricultural Chemical Division, Baltimore, Maryland is hereby amended by adding the following as Section 8-10 Pension Supplement:                   "8-10 Pension Supplement >           A Participant who retires on or after June 1, 2000 after reaching > age 62 but before age 65 shall receive a supplemental monthly pension payment > equal to the amount of early retirement reduction the Participant is subject > to under Section 8-6 Early Retirement Reduction Factor per month through the > month of Participant's 65th birthday."           10.       Effective June 28, 2000, Supplement 9 - Organic Chemical Division, Tonowanda, New York is hereby amended by adding the following to Section 8-5 Normal Retirement Benefit immediately after the words "On or after July 15, 1999 $30.00": "On or after July 15, 2000 $32.00 On or after July 15, 2001 $34.00 On or after July 15, 2002 $36.00 On or after July 15, 2003 $38.00"           11.       Effective May 1, 2000, Supplement 10 - Industrial Chemicals Division, Carteret, New Jersey is hereby amended by deleting the text of Section 10-1 Eligible Employees in its entirety, and by inserting the following in lieu thereof: > "The terms of this Supplement apply only to individuals participating in the > Plan, who worked in Carteret, New Jersey, and who were covered by the > Collective Bargaining Agreement between the Company and the International > Chemical Workers Union, Local No. 144 on or before April 30, 2000 who have not > yet received a full distribution of their benefit from the Plan > ("Participant")."           12.       Effective December 1, 1999, Supplement 12 Food Processing Machinery Division, Hoopeston, Illinois is hereby amended by adding the following text to the end of Section 12-5 Normal Retirement Benefit: "On or after December 1, 1999 $30.00"           13.       Effective May 1, 2000, Supplement 13 - Kemmerer Coke Plant, Kemmerer, Wyoming is hereby amended by deleting the text of Section 13-1 Eligible Employees in its entirety, and by inserting the following in lieu thereof: > "The terms of this Supplement apply only to individuals participating in the > Plan who worked in Kemmerer Wyoming and who were covered by the Collective > Bargaining Agreement between the Company and the International Union, United > Mine Workers of America on or before April 30, 2000 who have not yet received > a full distribution of their benefit from the Plan ("Participant")."           14.       Effective May 1, 2000, Supplement 14 - Industrial Chemical Division, Lawrence, Kansas is hereby amended by deleting the text of Section 14-1 Eligible Employees in its entirety, and by inserting the following in lieu thereof: > "The terms of this Supplement apply only to individuals participating in the > Plan who worked in Lawrence, Kansas and who were covered by the Collective > Bargaining Agreement between the Company and the International Chemical > Workers Union, Local No. 605 on or before April 30, 2000 who have not yet > received a full distribution of their benefit from the Plan ("Participant")."           15.       Effective June 1, 1999, Supplement 16 - Industrial Chemical Division, Newark, California is hereby amended by adding the following text to the end of Section 16-5 Normal Retirement Benefit: >           "Effective June 1, 1999, a Participant's monthly Normal Retirement > Benefit shall be determined by multiplying the fixed rate of $30.00 by the > number of Participant's Years of Credited Service."           16.       Effective January 1, 1999, Supplement 16 - Industrial Chemical Division, Newark, California is hereby amended to clarify a scrivener's error by deleting the text of Section 16-6 Early Retirement Reduction Factor in its entirety and inserting the following in lieu thereof: > "If a Participant's Early Retirement Benefit commences prior to age 62, the > Participant's Early Retirement Benefit shall be reduced according to the > following table: Percentage of Normal Retirement Basic Benefit Payable Upon Commencement of Early Retirement Benefit Based on Age MONTHS Years 0 1 2 3 4 5 6 7 8 9 10 11 55 74.00 74.33 74.67 75.00 75.33 75.67 76.00 76.33 76.67 77.00 77.33 77.67 56 78.00 78.33 78.67 79.00 79.33 79.67 80.00 80.33 80.67 81.00 81.33 81.67 57 82.00 82.33 82.67 83.00 83.33 83.67 84.00 84.33 84.67 85.00 85.33 85.67 58 86.00 86.33 86.67 87.00 87.33 87.67 88.00 88.33 88.67 89.00 89.33 89.67 59 90.00 90.33 90.67 91.00 91.33 91.67 92.00 92.33 92.67 93.00 93.33 93.67 60 94.00 94.25 94.50 94.75 95.00 95.25 95.50 95.75 96.00 96.25 96.50 96.75 61 97.00 97.25 97.50 97.75 98.00 98.25 98.50 98.75 99.00 99.25 99.50 99.75"           17.       Effective January 1, 1999, the following Section 16-9 Termination Benefits Reduction Factor is added to the end of Supplement 16, Industrial Chemical Division, Newark, California for purposes of clarification:           "16-9 Termination Benefits Reduction Factor >           If a Participant's Termination Benefit commences prior to age 65, > the Participant's Termination Benefit shall be reduced by ½ of 1% for each > month between the Participant's Annuity Starting Date and the Participant's > 65th birthday."           18.       Effective October 2, 1999, Supplement 17 - Food and Pharmaceutical Products Division, Newark, Delaware, is hereby amended by deleting the name of the Supplement and inserting the following in lieu thereof: BioPolymer Division, Newark, Delaware, and by adding the following to the end of Section 17-5 Normal Retirement Benefit:           "For Participants who retire on or after October 1, 1999, but before October 1, 2000: Years of Credited Service Service Segment Multiplier 1-10 years $25.50 11-20 years $26.50 21+ years $27.50           For Participants who retire on or after October 1, 2000, but before October 1, 2001: Years of Credited Service Service Segment Multiplier 1-10 years $27.50 11-20 years $28.50 21+ years $29.50           For Participants who retire on or after October 1, 2001: Years of Credited Service Service Segment Multiplier 1-10 years $29.50 11-20 years $30.50 21+ years $31.50"           19.       Effective July 31, 1999, Supplement 18 - Industrial Chemical Division, Nitro, West Virginia is hereby amended by deleting the text of Section 18-1 Eligible Employees in its entirety, and by inserting the following in lieu thereof: > "The terms of this Supplement apply only to individuals participating in the > Plan who worked in Nitro, West Virginia and who were covered by the Collective > Bargaining Agreement between the Company and the United Steelworkers of > America District No. 8 on behalf of Local Union 12757 on or before July 31, > 1999. On July 31, 1999 the Company sold assets to Great Lakes Chemical Company > ("GLCC") relating to the business in Nitro, West Virginia. GLCC agreed to > accept a transfer of assets and liabilities from the Trust for the benefit of > the employees it hired. Such transfer shall include only assets and > liabilities from the Trust, shall exclude the annuitized benefits provided for > under annuity contracts of the Plan, and shall take place as soon as > practicable after the Company's receipt of a favorable determination letter on > the Plan from the Internal Revenue Service."           20.       Effective May 1, 2000, Supplement 19 - Industrial Chemical Division, Pocatello, Idaho is hereby amended by deleting the text of Section 19-1 Eligible Employee in its entirety, and by inserting the following in lieu thereof: > "The terms of this Supplement apply only to individuals participating in the > Plan who worked in Pocatello, Idaho and who were covered by the Collective > Bargaining Agreement between the Company and the International Association of > Machinists (AFL-CIO) Gate City Mechanics Lodge No. 1933 on or before April 30, > 2000 who have not yet received a full distribution of their benefit from the > Plan ("Participant")."           21.       Effective May 22, 2000, Supplement 20 - Industrial Chemical Group, Spring Hill Plant, South Charleston, West Virginia is hereby amended by adding the following to the end of Section 20-5 Normal Retirement Benefit:           "For Participants who retire on or after May 19, 2000 but before May 19, 2001: Years of Credited Service Service Segment Multiplier 1-10 years $35.50 11-20 years $36.50 21+ years $37.50           For Participants who retire on or after May 19, 2001 but before May 19, 2002: Years of Credited Service Service Segment Multiplier 1-10 years $37.50 11-20 years $38.50 21+ years $39.50           For Participants who retire on or after May 19, 2002: Years of Credited Service Service Segment Multiplier 1-10 years $38.50 11-20 years $39.50 21+ years $40.50"           IN WITNESS WHEREOF, the Company has caused this amendment to be executed by a duly authorized representative this 19th day of September, 2000.   FMC CORPORATION                   By:     /s/ Stephen F. Gates --------------------------------------------------------------------------------   Member, Employee Welfare Benefits Plan Committee

EXHIBIT 10.3b TERMINATION PROTECTION AGREEMENT   AGREEMENT effective June 28, 2000 between Harcourt General, Inc. and John R. Cook (the "Executive"). Executive is a skilled and dedicated employee who has important management responsibilities and talents which benefit the Company. The Company believes that its best interests will be served if Executive is encouraged to remain with the Company or its Subsidiaries. The Company has determined that Executive's ability to perform Executive's responsibilities and utilize Executive's talents for the benefit of the Company, and the Company's ability to retain Executive as an employee, will be significantly enhanced if Executive is provided with fair and reasonable protection from the risks of a change in control of the Company. Accordingly, the Company and Executive agree as follows: 1. Defined Terms. Unless otherwise indicated, capitalized terms used in this Agreement which are defined in Schedule A shall have the meanings set forth in Schedule A. 2. Effective Date; Term. This Agreement shall be effective as of June 28, 2000 (the "Effective Date") and shall remain in effect until June 27, 2002 (the "Term"); provided, however, that commencing with June 28, 2001 and on each anniversary thereof (each an "Extension Date"), the Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto 60 days prior written notice before the applicable Extension Date that the Term shall not be so extended. Notwithstanding the foregoing, this Agreement shall, if in effect on the date of a Change of Control, remain in effect for two years following the Change of Control. 3. Change of Control Benefits. (i) If Executive's employment with the Company and its Subsidiaries is terminated at any time within the two years following a Change of Control by the Company and any of its Subsidiaries without Cause or by Executive for Good Reason (the effective date of either such termination hereafter referred to as the "Termination Date"), Executive shall be entitled to, and the Company shall be required to provide, subject to Executive's execution of a general release in favor of the Company substantially in the form attached hereto as Exhibit A (the "Release"), the payments and benefits provided hereafter in this Section 3 and as set forth in this Agreement. If Executive's employment by the Company and any of its Subsidiaries is terminated prior to a Change of Control by the Company and any of its Subsidiaries without Cause in connection with or in anticipation of a Change of Control, Executive shall be entitled to the benefits provided hereafter in Sections 3 and 4 and as otherwise set forth in this Agreement, but only if an anticipated Change of Control actually occurs, and Executive's Termination Date shall be deemed to have occurred immediately following the Change of Control. Notwithstanding the preceding sentence, in the event of any such termination, Executive shall continue to receive Executive's Base Salary at the annual rate in effect immediately prior to such termination (but not less than the annual rate in effect on the date of this Agreement) and any Bonus to which Executive would have been entitled had Executive remained employed until the date of the anticipated Change of Control, provided, however that such Base Salary and Bonus continuation shall end on the date of the anticipated Change of Control or the date that the agreement or other circumstance that would have resulted in the anticipated Change of Control terminates, whichever is applicable. Notice of termination without Cause or for Good Reason shall be given in accordance with Section 14, and shall indicate the specific termination provision hereunder relied upon, the relevant facts and circumstances and the Termination Date. a. Severance Payments. Within the later of (i) fifteen business days after the Termination Date or (ii) the expiration of the revocation period, if applicable, under the Release (the "Payment Period"), the Company shall pay Executive a cash lump sum equal to: (1) the Severance Multiple times the greater of Executive's Base Salary in effect (i) immediately prior to the date of the Change of Control or (ii) immediately prior to the event set forth in the notice of termination giving rise to the Termination Date; and (2) the Severance Multiple times the Target Bonus; and (3) Executive's Target Bonus multiplied by a fraction, the numerator of which shall equal the number of days Executive was employed by the Company or any of its Subsidiaries in the Company fiscal year in which the Executive's termination occurs and the denominator of which shall equal 365. b. Continuation of Active Employee Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall provide Executive and Executive's spouse and dependents (each as defined under the applicable program) with medical (including Executive Medical), dental, accidental death and dismemberment, life insurance and long-term disability coverages at the same benefit level, duration and at the same cost to Executive as provided to Executive immediately prior to the Change of Control; provided, however, that, following such period (but in no event after Executive has reached 65), the Company shall continue to provide Executive and Executive's spouse and dependents, medical and life insurance coverage (excluding Executive Medical) comparable to the Company's medical and life insurance coverage provided to Executive and at the same cost to Executive as during the period of years following the Termination Date; provided, further, that if Executive becomes employed by a new employer, (i) continuing medical and dental coverage from the Company will become secondary to any coverage afforded by the new employer in which Executive becomes enrolled and (ii) long-term disability benefits provided by the new employer shall offset long-term disability benefits provided by the Company. In addition, the period in which Executive is entitled to continued coverage under COBRA shall commence on the Termination Date. c. Payment of Earned But Unpaid Amounts. Within the Payment Period, the Company shall pay Executive any unpaid Base Salary through the Termination Date, any Bonus earned but unpaid as of the Termination Date for any previously completed fiscal year of the Company, all compensation previously deferred by Executive but not yet paid as well as the Company's matching contribution with respect to such deferred compensation and all accrued interest thereon; provided that if Executive is eligible for retirement under the terms of the applicable deferred compensation plan Executive shall receive the deferred compensation and interest pursuant to Executive's election under such plan unless Executive obtains the consent of the Company to receive the deferred compensation and interest in a lump sum or otherwise. In addition, Executive shall be entitled to prompt reimbursement of any unreimbursed expenses properly incurred by Executive in accordance with Company policies prior to the Termination Date. Executive shall also receive such other compensation (including any stock options or other equity-related payments) and benefits, if any, to which Executive may be entitled from time to time pursuant to the terms and conditions of the employee compensation, incentive, equity, benefit or fringe benefit plans, policies or programs of the Company, other than any Company severance policy (payments and benefits in this subsection (c), the "Accrued Benefits"). d. Retirement Benefits. (i) For purposes of eligibility for retirement, for early commencement or actuarial subsidies and for purposes of benefit accruals under any Company defined benefit pension plan (or any such alternative contractual arrangement that the Executive may have with the Company or any of its Subsidiaries), (i) Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that accrued as of the Termination Date, (ii) Executive will become fully vested in any defined benefit pension benefits provided by the Company and (iii) for purposes of calculating Executive's benefit, compensation shall include both Base Salary and Bonus; provided, that, (A) Base Salary applicable to any period of service deemed to occur after the Termination Date will be increased by five percent for each year of such additional service and (B) Executive's Bonus for each such year of additional service shall be based on the Target Bonus percentage; provided, further, that if any benefits afforded by this Agreement, including the benefits arising from the grant of additional service and age, are not provided under the qualified pension plan of the Company, the benefit, or its equivalent in value, shall be provided under a nonqualified pension plan of the Company or the general assets of the Company. Except for benefits payable under the qualified defined benefit pension plan of the Company (which shall be governed by the terms of such plan), the benefits payable under this Section 3(d) shall be paid to Executive by the Company and shall be determined pursuant to the terms of the Harcourt General Inc. Supplemental Executive Retirement Plan as in effect immediately prior to the Change of Control (the "SERP"), after giving effect to the provisions of this Section 3(d); provided that Executive may, if Executive obtains the consent of the Company, receive the benefits payable under this Section 3(d) in a lump sum or otherwise, within the Payment Period using the methodology set forth in Schedule B. e. Retiree Medical. Following Executive's entitlement to continued active employee benefits pursuant to Section 3(b), if Executive is eligible for retiree medical benefits, using the eligibility criteria in effect immediately prior to the Change of Control, Executive shall be entitled to, and Company shall be required to pay, retiree medical coverage at the same benefit level and at the same cost to Executive as specified by the retiree medical plan in effect immediately prior to the Change of Control; provided, that for all purposes under this Section 3(e), Executive will be credited with an additional number of years of service and age equal to the Severance Multiple beyond that eligible to be taken into account under the retiree medical plan as of the Termination Date. f. Other Benefits. For a period of years following the Termination Date equal to the Severance Multiple, the Company shall promptly pay (or, in the discretion of Executive, reimburse Executive for all reasonable expenses incurred) for (A) professional outplacement services by qualified consultants selected by Executive (but only until the date Executive first obtains full-time employment after the Termination Date) (not to exceed $25,000), and (B) subject to the terms and conditions in effect immediately prior to the Change of Control, tax preparation fees, estate planning and financial counseling (not to exceed 3% in total of the sum of the amounts payable pursuant to Section 3(a)(1) and 3(a)(2)). (ii) In the event of a Change of Control during a three-year Performance Period under the Harcourt, Inc. Performance Long-Term Cash Incentive Plan (the "Long-Term Incentive Plan"), Executives who were participants in the Long-Term Incentive Plan shall be entitled to, and the Company shall be required to pay, within the Payment Period, a lump sum cash payment equal to Executive's Equity Share (as defined in the Long-Term Incentive Plan) of a portion of the Incentive Pool (as defined in the Long-Term Incentive Plan) for each such Performance Period equal to the total Incentive Pool for the applicable three-year Performance Period multiplied by a fraction, the numerator of which shall equal the number of days that have elapsed in the Performance Period and the denominator of which shall equal 1,095. The Incentive Pool shall be calculated based on the assumption that all target performance goals were attained through the Change of Control. 4. Equity Pool. In the event of a Change of Control, Executive shall be entitled to a 8.18% interest in the Equity Pool (an "Equity Share"). Subject to Executive's continued employment with the Company or any of its Subsidiaries, the Equity Share shall be payable in a lump sum cash payment on the date which is six months following the Change of Control (the "Payment Date"); provided, however, that if (i)(A) Executive is terminated by the Company and its Subsidiaries without Cause, (B) Executive's employment terminates due to Executive's death or Permanent Disability or (C) Executive resigns with Good Reason following the Change of Control but prior to the Payment Date or (ii) Executive is terminated prior to the Change in Control, under the circumstances described in Section 3, Executive shall be entitled to the payment of the Equity Share within fifteen business days after (x) such termination of employment or (y) if later, the date of the Change of Control. The Equity Shares shall not be considered compensation under any qualified or nonqualified pension, welfare or deferred compensation plan of the Company. 5. Mitigation. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, and, subject to Section 3(b), compensation earned from such employment or otherwise shall not reduce the amounts otherwise payable under this Agreement. No amounts payable under this Agreement shall be subject to reduction or offset in respect of any claims which the Company or any of its Subsidiaries (or any other person or entity) may have against Executive. 6. Gross-Up. a. In the event it shall be determined that any payment, benefit or distribution (or combination thereof) by the Company, any of its affiliates, or one or more trusts established by the Company for the benefit of its employees, to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise) (a "Payment") is subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, hereinafter collectively referred to as the "Excise Tax"), Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 6(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that the Payment does not exceed 110% of the greatest amount that could be paid to Executive without giving rise to any Excise Tax (the "Safe Harbor Amount"), then no Gross-Up Payment shall be made to Executive and the amounts payable under this Agreement shall be reduced so that the Payment, in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 3(a), unless an alternative method of reduction is elected by Executive. b. All determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and Executive within ten business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such Gross-Up Payment is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of Executive's residence or place of employment in the calendar year in which any such Gross-Up Payment is to be made, net of the maximum reduction in federal income taxes that can be obtained from deduction of such state and local taxes, taking into account limitations applicable to individuals subject to federal income tax at the highest marginal rates. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the Company to Executive (or to the appropriate taxing authority on Executive's behalf) when due. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall so indicate to Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code, it is possible that the amount of the Gross-Up Payment determined by the Accounting Firm to be due to (or on behalf of) Executive was lower than the amount actually due ("Underpayment"). In the event that the Company exhausts its remedies pursuant to Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. c. Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the thirty day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order to effectively contest such claim and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 6(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, further, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; provided, further, that if Executive is required to extend the statute of limitations to enable the Company to contest such claim, Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. d. If, after the receipt by Executive of an amount paid or advanced by the Company pursuant to this Section 6, Executive becomes entitled to receive any refund with respect to a Gross-Up Payment, Executive shall (subject to the Company's complying with the requirements of Section 6(c)) promptly pay to the Company the amount of such refund received (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(c), a determination is made that Executive shall not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.   7. Termination for Cause. Nothing in this Agreement shall be construed to prevent the Company or any of its Subsidiaries from terminating Executive's employment for Cause. If Executive is terminated for Cause, the Company shall have no obligation to make any payments under this Agreement, except for the Accrued Benefits. 8. Indemnification; Director's and Officer's Liability Insurance. (i) Executive shall retain all rights to indemnification under the Company's Certificate of Incorporation or By-Laws, and (ii) the Company shall maintain Director's and Officer's liability insurance on behalf of Executive, in both cases at the level in effect immediately prior to the Termination Date or immediately prior to the Change in Control, whichever is greater, for a number of years equal to the Severance Multiple following the Termination Date, and throughout the period of any applicable statute of limitations. 9. Arbitration. All disputes and controversies arising under or in connection with this Agreement shall be settled by arbitration conducted before one arbitrator sitting in Boston, Massachusetts, or such other location agreed by the parties hereto, in accordance with the rules for expedited resolution of employment disputes of the American Arbitration Association then in effect. The determination of the arbitrator shall be made within 30 days following the close of the hearing on any dispute or controversy and shall be final and binding on the parties. Judgment may be entered on the award of the arbitrator in any court having proper jurisdiction. 10. Costs of Proceedings. The Company shall pay all costs and expenses of the Company and, at least monthly, Executive in connection with any arbitration relating to the interpretation or enforcement of any provision of this Agreement; provided that if Executive instituted the proceeding and the arbitrator or other individual presiding over the proceeding affirmatively finds that Executive instituted the proceeding in bad faith, Executive shall reimburse the Company for all costs and expenses of Executive previously paid by the Company pursuant to this Section 10. 11. Assignment. Except as otherwise provided herein, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the Company and Executive and their respective heirs, legal representatives, successors and assigns. If the Company shall be merged into or consolidated with another entity, the provisions of this Agreement shall be binding upon and inure to the benefit of the entity surviving such merger or resulting from such consolidation. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The provisions of this Section 11 shall continue to apply to each subsequent employer of Executive hereunder in the event of any subsequent merger, consolidation or transfer of assets of such subsequent employer. 12. Withholding. Notwithstanding any other provision of this Agreement, the Company may, to the extent required by law, withhold applicable federal, state and local income and other taxes from any payments due to Executive hereunder. 13. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts of laws principles thereof. 14. Notice. For the purpose of this Agreement, any notice and all other communication provided for in this Agreement shall be in writing and shall be deemed to have been duly given when received at the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith. If to the Company: Harcourt General, Inc. 27 Boylston Street Chestnut Hill, MA 02467 Attention: General Counsel If to Executive: To the most recent address of Executive set forth in the personnel records of the Company.   15. Entire Agreement; Modification. This Agreement constitutes the entire agreement between the parties and, except as expressly provided herein, supersedes all other prior agreements expressly concerning the effect of a Change of Control on the relationship between the Company and the other members of the Company and Executive. Except as expressly provided herein, this Agreement shall not interfere in any way with the right of the Company to reduce Executive's compensation or other benefits or terminate Executive's employment, with or without Cause. Any rights that Executive shall have in that regard shall be as set forth in any applicable employment agreement between Executive and the Company. This Agreement may be changed only by a written agreement executed by the Company and Executive.       16. Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.   IN WITNESS WHEREOF, the parties have executed this Agreement on the 28th day of June, 2000. HARCOURT GENERAL, INC. /s/ Richard A. Smith             By: Richard A. Smith Title: Chairman of the Board /s/ John R. Cook                EXECUTIVE Schedule A CERTAIN DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms, when capitalized, have the meaning indicated: I. "Act" means the Securities Exchange Act of 1934, as amended. II. "Base Salary" means Executive's annual rate of base salary in effect on the date in question. III. "Board" means the board of directors of the Company. IV. "Bonus" means the amount payable to Executive under the Company's applicable annual incentive bonus plan with respect to a fiscal year of the Company. V. "Cause" means either of the following: (1) If Executive has an employment agreement, the definition contained therein; otherwise (2) (i) conviction of a felony under the laws of the United States or any state thereof, or (ii) Executive's willful malfeasance or willful misconduct in connection with Executive's duties hereunder, or Executive's repeated willful refusal to perform Executive's duties after written notice to Executive and a reasonable opportunity to cure (not including any duties in excess of Executive's duties immediately prior to the Change of Control) which, in each case, results in demonstrable harm to the financial condition or business reputation of the Company or any of its subsidiaries or affiliates. VI. "Change of Control" means the first to occur of any of the following: (1) any "person" or "group" (as described in the Act) becomes or is the beneficial owner of 25% or more of the combined voting power of the then outstanding voting securities with respect to the election of the Board (counting each share of Class B Stock as having ten votes per share), and also holds more of such combined voting power than any group or person who is the beneficial owner, on the Effective Date, of over 20% of the combined voting power of the then outstanding voting securities with respect to the election of the Board. "Person" does not include any Company employee benefit plan, any company the shares of which are held by the Company shareholders in substantially the same proportion as such shareholders held the stock of the Company immediately prior to acquiring the shares of such company, or any testamentary trust or estate; (2) any merger, consolidation, amalgamation, plan of arrangement, reorganization or similar transaction involving the Company, other than, in the case of any of the foregoing, a transaction in which the Company shareholders immediately prior to the transaction hold immediately thereafter, in the same proportion as immediately prior to the transaction, not less than 66 2/3% of the combined voting power of the then outstanding voting securities with respect to the election of the board of directors of the resulting entity (it being understood that if the Class B Stock shall remain outstanding following such transaction, each share of Class B Stock shall be counted as having ten votes per share for purposes of such calculation); (3) any change in a majority of the Board within a 24-month period unless the change was approved by a majority of the Incumbent Directors; (4) any liquidation or sale of all or substantially all of the assets of the Company; or (5) any other transaction so denominated by the Board. VII. "Class B Stock" means Class B Stock, par value $1.00 per share, of the Company. VIII. "Code" means the Internal Revenue Code of 1986, as amended. IX. "Company" means Harcourt General, Inc. and, after a Change of Control, any successor or successors thereto. X. "Equity Pool" means the product of (i) 75,500,000 multiplied by (ii) the price per share received by shareholders in connection with the Change in Control, as determined by the Board in its sole discretion (the "Share Price") multiplied by (iii) zero if the Share Price is below $45, .55% if the Share Price is $45, .99% if the Share Price is $65 or higher and, if the Share Price is between $45 and $65, as determined by linear interpolation between .55% and .99%. XI. "Good Reason" means any of the following actions on or after a Change of Control, without Executive's express prior written approval, other than due to Executive's Permanent Disability or death: (1) any decrease in, or any failure to increase in accordance with an agreement between Executive and the Company or any of its Subsidiaries, Base Salary or Target Bonus; (2) any material diminution in the aggregate employee benefits afforded to the Executive immediately prior to the Change of Control; for this purpose employee benefits shall include, but not be limited to pension benefits, life insurance and medical and disability benefits; (3) any diminution in Executive's title or reporting relationship, or substantial diminution in duties or responsibilities (other than solely as a result of a Change of Control in which the Company immediately thereafter is no longer publicly held); (4) any relocation of Executive's principal place of business of 35 miles or more, other than normal travel consistent with past practice; or (5) Executive's notice of termination of employment within the thirty-day period following the 183rd day following the Change of Control; provided Executive's employment actually terminates within such 30 day period. Except as provided in (5) above, Executive shall have six months from the time Executive first becomes aware of the existence of Good Reason to resign for Good Reason. XII. "Incumbent Director" means a member of the Board at the beginning of the period in question, including any director who was not a member of the Board at the beginning of such period but was elected or nominated to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has expressed an intent to effect a Change of Control or engage in a proxy or other control contest). XIII. "Permanent Disability" means inability, by reason of any physical or mental impairment, to substantially perform the significant aspects of his regular duties which inability has lasted for six months and is reasonably expected to be permanent. XIV. "Publicly Traded Company" means a company whose common equity securities (including American Depositary Shares or American Depositary Receipts relating to such equity securities) are traded or quoted on a principal United States, Canadian or European stock market or trading system, and are owned by more than 1,000 shareholders. XV. "Severance Multiple" means three. XVI. "Subsidiary" means a subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). XVII. "Target Bonus" means the greatest of (i) 50% of Executive's Base Salary (as determined in Section 3(a)(1)), (ii) Executive's target Bonus in effect on the date of the Change of Control or (iii) Executive's target Bonus in effect immediately prior to the event set forth in the notice of termination giving rise to the Termination Date.   Schedule B CALCULATION OF PENSION LUMP SUM AMOUNT   1.     Lump Sum Amount The lump sum value of the pension benefit payable pursuant to the provisions of Section 3(d) shall be equal to the Actuarial Equivalent of the single life annuity benefit described in the Harcourt General Inc. Supplemental Executive Retirement Plan (SERP) as enhanced by Section 3(d) of this Agreement. The single life annuity amount above shall be determined at the earliest possible age the employee could retire under the Harcourt General Inc. Retirement Plan (after giving effect to the additional years of age and service granted under Section 3(d)), but not before the Executive's age at the Termination Date plus such additional years of age. 2. Actuarial Equivalent Assumptions The Actuarial Equivalent of the benefit described in (1) above shall be calculated using the following assumptions: a. 6% interest, compounded annually b. no pre-retirement mortality, c. post-retirement mortality determined under the 1983 Group Annuity Mortality Table, weighted 50% for males and 50% for females.   3. Coordination of Agreement with existing SERP and Retirement Plan Notwithstanding any provision in the SERP or this Agreement, the benefits provided under this Agreement are intended to enhance the benefits payable under the existing SERP. Accordingly, this Agreement shall be considered an Individual Pension Agreement, which shall have the effect of superseding in full any benefits actually payable under the SERP. Exhibit A WAIVER AND RELEASE OF CLAIMS   In consideration of, and subject to, the payments to be made to me by Harcourt General, Inc., or any of its subsidiaries, or its or their successor(s) or assigns (the "Company"), pursuant to the attached Termination Protection Agreement ("TPA") dated June ____, 2000, I agree to and do release and forever discharge the Company, and its respective past and present officers, directors, shareholders, employees and agents from any and all claims and causes of action, known or unknown, arising out of or relating to my employment with the Company or the termination thereof, including, but not limited to, wrongful discharge, breach of contract, tort, fraud, the Civil Rights Act, Age Discrimination in Employment Act, Employee Retirement Income Security Act, Americans with Disabilities Act, or any other federal, state or local legislation or common law relating to employment or discrimination in employment. Notwithstanding the foregoing or any other provision hereof, nothing in this Waiver and Release of Claims shall adversely affect (i) my rights under the TPA; (ii) my rights to benefits other than severance benefits under plans, programs and arrangements of the Company which are accrued but unpaid as of the date of my termination; or (iii) my rights to indemnification under any indemnification agreement, applicable law, and certificates of incorporation and bylaws of the Company, and my rights under any directors' and officers' liability insurance policy covering me. I acknowledge that I have signed this Waiver and Release of Claims voluntarily, knowingly, of my own free will and without reservation or duress, and that no promises or representations have been made to me by any person to induce me to do so other than the promise of payment set forth in the first paragraph above and the Company's acknowledgement of my rights reserved under the second paragraph above. I acknowledge that I have been given not less than [twenty-one (21)] [forty-five (45)] days to review and consider this Waiver and Release of Claims, and that I have had the opportunity to consult with an attorney or other advisors of my choice and have been advised by the Company to do so if I choose. I may revoke this Waiver and Release of Claims seven days or less after its execution by providing written notice to the Company. Finally, I acknowledge that I have read this Waiver and Release of Claims and understand all of its terms. ___________________________________ Employee's Signature ___________________________________ Print Name ___________________________________ Date Signed

AMENDED AND RESTATED 1999 EQUITY PARTICIPATION PLAN OF WILSHIRE FINANCIAL SERVICES GROUP INC. Participation Plan of Wilshire Financial Services Group Inc. (the "Plan"), effective September 30, 1999 and duly amended on December 2, 1999 and June 22, 2000, for the benefit of its eligible employees and directors. The purposes of the Plan are as follows: (1) To provide an additional incentive for directors and key Employees (as such terms are defined below) to further the growth, development and financial success of the Company by personally benefiting through the ownership of Company stock and/or rights which recognize such growth, development and financial success. (2) To enable the Company to obtain and retain the services of directors and key Employees considered essential to the long range success of the Company by offering them an opportunity to own stock in the Company and/or rights which will reflect the growth, development and financial success of the Company. ARTICLE I. DEFINITIONS 1.1. General. Wherever the following terms are used in the Plan they shall have the ------- meanings specified below, unless the context clearly indicates otherwise. 1.2. Administrator. "Administrator" shall mean the entity that conducts the general ------------- administration of the Plan as provided herein. With reference to the administration of the Plan with respect to Options granted to Independent Directors, the term "Administrator" shall refer to the Board. With reference to the administration of the Plan with respect to any other Award, the term "Administrator" shall refer to the Committee unless the Board has assumed the authority for administration of the Plan generally as provided in Section 10.1. 1.3. Award. "Award" shall mean an Option, a Restricted Stock award, a Performance Award ----- or a Stock Payment award which may be awarded or granted under the Plan (collectively, "Awards"). 1.4. Award Agreement. "Award Agreement" shall mean a written agreement executed by an --------------- authorized officer of the Company and the Holder which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan. 1.5. Award Limit. "Award Limit" shall mean 1,000,000 shares of Common Stock, as adjusted ----------- pursuant to Section 10.3 of the Plan. 1.6. Board. "Board" shall mean the Board of Directors of the Company. ----- 1.7. Change in Control. shall mean a change in ownership or control of the Company ----------------- effected through any of the following transactions: (a) any person or related group of persons (other than the Company or a person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities possessing more than ninety percent (90%) of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders which the Board does not recommend such stockholders to accept; or (b) there is a change in the composition of the Board over a period of thirty-six (36) consecutive months (or less) such that a majority of the Board members (rounded up to the nearest whole number) ceases, by reason of one or more proxy contests for the election of Board members, to be comprised of individuals who either (i) have been Board members continuously since the beginning of such period or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board; or (c) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation (or other entity), other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66-2/3% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 25% of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control; or (d) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 1.8. Code. "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- 1.9. Committee. "Committee" shall mean the Compensation Committee of the Board, or another --------- committee or subcommittee of the Board, appointed as provided in Section 9.1. 1.10. Common Stock. "Common Stock" shall mean the common stock of the Company, par value ------------ $0.01 per share, and any equity security of the Company issued or authorized to be issued in the future, but excluding any preferred stock and any warrants, options or other rights to purchase Common Stock. 1.11. Company. "Company" shall mean Wilshire Financial Services Group Inc., a Delaware ------- corporation. 1.12. Director. "Director" shall mean a member of the Board or an FBBH Director, as the -------- context may require. 1.13. DRO. "DRO" shall mean a domestic relations order as defined by the Code or Title I of --- the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. 1.14. Employee. "Employee" shall mean any officer or other employee (as defined in -------- accordance with Section 3401(c) of the Code) of the Company, or of any corporation which is a Subsidiary. 1.15. Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended. 1.16. Fair Market Value. "Fair Market Value" of a share of Common Stock as of a given date ----------------- shall be (a) the price of a share of Common Stock on the principal exchange on which shares of Common Stock are then trading, if any (or as reported on any composite index which includes such principal exchange) (calculated using the trailing average of the listed high and low trading price for the preceding trading days), or (b) if Common Stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, the mean between the closing representative bid and asked prices for the Common Stock on the trading day previous to such date as reported by NASDAQ or such successor quotation system; or (c) if Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the Fair Market Value of a share of Common Stock as established by the Administrator acting in good faith. 1.17. FBBH. "FBBH" shall mean First Bank of Beverly Hills, N.A., a Subsidiary of the ---- Company. 1.18. FBBH Director. "FBBH Director" shall mean a member of the board of directors of FBBH. ------------- 1.19. Holder. "Holder" shall mean a person who has been granted or awarded an Award. ------ 1.20. Incentive Stock Option. "Incentive Stock Option" shall mean an option which conforms ---------------------- to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Administrator. 1.21. Independent Company Director. "Independent Company Director" shall mean a member of ---------------------------- the Board who is not an Employee of the Company. 1.22. Independent Director. "Independent Director" shall mean an Independent Company -------------------- Director or an Independent FBBH Director, as the context may require. 1.23. Independent FBBH Director. "Independent FBBH Director" shall mean a member of the ------------------------- board of directors of FBBH who is neither an Employee nor an Independent Company Director. 1.24. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean an Option which -------------------------- is not designated as an Incentive Stock Option by the Administrator. 1.25. Option. "Option" shall mean a stock option granted under Article IV of the Plan. An ------ Option granted under the Plan shall, as determined by the Administrator, be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Independent Directors shall be -------- ------- Non-Qualified Stock Options. 1.26. Performance Award. "Performance Award" shall mean a stock bonus or other performance ----------------- or incentive award that is paid in Common Stock or a combination of cash and Common Stock, awarded under Article VIII of the Plan. 1.27. Performance Criteria. "Performance Criteria" shall mean the following business -------------------- criteria with respect to the Company, any Subsidiary or any division or operating unit: (a) net income, (b) pre-tax income, (c) operating income, (d) cash flow, (e) earnings per share, (f) return on equity, (g) return on invested capital or assets, (h) cost reductions or savings, (i) funds from operations, (j) appreciation in the fair market value of Common Stock and (k) earnings before any one or more of the following items: interest, taxes, depreciation or amortization. 1.28. Plan. "Plan" shall mean The 1999 Equity Participation Plan of Wilshire Financial ---- Services Group Inc. 1.29. Reorganization. "Reorganization" shall mean the prepackaged plan of reorganization -------------- filed with the Bankruptcy Court for the State of Delaware on March 3, 1999. 1.30. Restricted Stock. "Restricted Stock" shall mean Common Stock awarded under Article ---------------- VII of the Plan. 1.31. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, ---------- as such Rule may be amended from time to time. 1.32. Section 162(m) Participant. "Section 162(m) Participant" shall mean any key Employee -------------------------- designated by the Administrator as a key Employee whose compensation for the fiscal year in which the key Employee is so designated or a future fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. 1.33. Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended. -------------- 1.34. Stock Payment. "Stock Payment" shall mean (a) a payment in the form of shares of ------------- Common Stock, or (b) an option or other right to purchase shares of Common Stock, as part of a deferred compensation arrangement, made in lieu of all or any portion of the compensation, including without limitation, salary, bonuses and commissions, that would otherwise become payable to a key Employee in cash, awarded under Article VIII of the Plan. 1.35. Subsidiary. "Subsidiary" shall mean any corporation in an unbroken chain of ---------- corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 1.36. Substitute Award. "Substitute Award" shall mean an Option granted under this Plan upon ---------------- the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term "Substitute Award" be construed to refer to -------- ------- an award made in connection with the cancellation and repricing of an Option. 1.37. Termination of Directorship. "Termination of Directorship" shall mean the time when a --------------------------- Holder who is an Independent Director ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors. 1.38. Termination of Employment. "Termination of Employment" shall mean the time when the ------------------------- employee-employer relationship between a Holder and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (a) terminations where there is a simultaneous reemployment or continuing employment of a Holder by the Company or any Subsidiary, (b) at the discretion of the Administrator, terminations which result in a temporary severance of the employee-employer relationship, and (c) at the discretion of the Administrator, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former employee. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Employment; provided, -------- however, that, with respect to Incentive Stock Options, unless otherwise determined by the Administrator in its ------- discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. ARTICLE II. SHARES SUBJECT TO PLAN 2.1. Shares Subject to Plan. ---------------------- (a) The shares of stock subject to Awards shall initially be shares of the Company's Common Stock, par value $0.01 per share. The aggregate number of such shares which may be issued upon exercise of such Options or rights or upon any such awards under the Plan shall not exceed Four Million (4,000,000) of which no more than Five Hundred Thousand (500,000) shares may be issued as Restricted Stock or Performance Awards. The shares of Common Stock issuable upon exercise of such Options or rights or upon any such awards may be either previously authorized but unissued shares or treasury shares. (b) The maximum number of shares which may be subject to Awards, granted under the Plan to any individual in any fiscal year shall not exceed the Award Limit. To the extent required by Section 162(m) of the Code, shares subject to Options which are canceled continue to be counted against the Award Limit. 2.2. Add-back of Options and Other Rights. If any Option, or other right to acquire shares ------------------------------------ of Common Stock under any other Award under the Plan, expires or is canceled without having been fully exercised, or is exercised in whole or in part for cash as permitted by the Plan, the number of shares subject to such Option or other right but as to which such Option or other right was not exercised prior to its expiration, cancellation or exercise may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Furthermore, any shares subject to Awards which are adjusted pursuant to Section 10.3 and become exercisable with respect to shares of stock of another corporation shall be considered canceled and may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Shares of Common Stock which are delivered by the Holder or withheld by the Company upon the exercise of any Award under the Plan, in payment of the exercise price thereof or tax withholding thereon, may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. If any shares of Restricted Stock are surrendered by the Holder or repurchased by the Company pursuant to Section 7.4 or 7.5 hereof, such shares may again be optioned, granted or awarded hereunder, subject to the limitations of Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an incentive stock option under Section 422 of the Code. ARTICLE III. GRANTING OF AWARDS 3.1. Award Agreement. Each Award shall be evidenced by an Award Agreement. Award --------------- Agreements evidencing Awards intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. 3.2. Provisions Applicable to Section 162(m) Participants. ---------------------------------------------------- (a) The Committee, in its discretion, may determine whether an Award is to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code. (b) Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to a Section 162(m) Participant, including Restricted Stock the restrictions with respect to which lapse upon the attainment of performance goals which are related to one or more of the Performance Criteria and any performance or incentive award described in Article VIII that vests or becomes exercisable or payable upon the attainment of performance goals which are related to one or more of the Performance Criteria. (c) To the extent necessary to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles VII and VIII which may be granted to one or more Section 162(m) Participants, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (i) designate one or more Section 162(m) Participants, (ii) select the Performance Criteria applicable to the fiscal year or other designated fiscal period or period of service, (iii) establish the various performance targets, in terms of an objective formula or standard, and amounts of such Awards, as applicable, which may be earned for such fiscal year or other designated fiscal period or period of service and (iv) specify the relationship between Performance Criteria and the performance targets and the amounts of such Awards, as applicable, to be earned by each Section 162(m) Participant for such fiscal year or other designated fiscal period or period of service. Following the completion of each fiscal year or other designated fiscal period or period of service, the Committee shall certify in writing whether the applicable performance targets have been achieved for such fiscal year or other designated fiscal period or period of service. In determining the amount earned by a Section 162(m) Participant, the Committee shall have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the fiscal year or other designated fiscal period or period of service. (d) Furthermore, notwithstanding any other provision of the Plan or any Award which is granted to a Section 162(m) Participant and is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements. 3.3. Limitations Applicable to Section 16 Persons. Notwithstanding any other -------------------------------------------- provision of the Plan, the Plan, and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 3.4. Consideration. In consideration of the granting of an Award under the Plan, ------------- the Holder shall agree, in the Award Agreement, to remain in the employ of (or to consult for or to serve as an Independent Director of, as applicable) the Company or any Subsidiary for a period of at least one year (or such shorter period as may be fixed in the Award Agreement or by action of the Administrator following grant of the Award) after the Award is granted (or, in the case of an Independent Director, until the next annual meeting of stockholders of the Company). 3.5. At-Will Employment. Nothing in the Plan or in any Award Agreement hereunder ------------------ shall confer upon any Holder any right to continue in the employ of the Company or any Subsidiary, or as a director of the Company, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written employment agreement between the Holder and the Company and any Subsidiary. ARTICLE IV. GRANTING OF OPTIONS TO EMPLOYEES AND INDEPENDENT DIRECTORS 4.1. Eligibility. Any Employee selected by the Committee pursuant to Section 4.4(a)(i) ----------- shall be eligible to be granted an Option. Each Independent Director of the Company shall be eligible to be granted Options at the times and in the manner set forth in Section 4.5. 4.2. Disqualification for Stock Ownership. No person may be granted an Incentive Stock ------------------------------------ Option under the Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any then existing Subsidiary or parent corporation (within the meaning of Section 422 of the Code) unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. 4.3. Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted ---------------------------------------- to any person who is not an Employee. 4.4. Granting of Options to Employees. -------------------------------- (a) The Committee shall from time to time, in its absolute discretion, and subject to applicable limitations of the Plan: (i) Determine which Employees are key Employees and select from among the key Employees (including Employees who have previously received Awards under the Plan) such of them as in its opinion should be granted Options; (ii) Subject to the Award Limit, determine the number of shares to be subject to such Options granted to the selected key Employees; (iii) Subject to Section 4.3, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options and whether such Options are to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code; and (iv) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that the terms and conditions of Options -------- ------- intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. (b) Upon the selection of a key Employee to be granted an Option, the Committee shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate. (c) Any Incentive Stock Option granted under the Plan may be modified by the Committee, with the consent of the Holder, to disqualify such Option from treatment as an "incentive stock option" under Section 422 of the Code. 4.5. Granting of Options to Independent Directors. -------------------------------------------- (a) Each person who is an Independent Company Director as of or following the date of the confirmation of the Reorganization automatically shall be granted (i) an Option to purchase thirty thousand (30,000) shares of Common Stock (subject to adjustment as provided in Section 10.3) on the date of the commencement of such directorship and (ii) an Option to purchase ten thousand (10,000) shares of Common Stock (subject to adjustment as provided in Section 10.3) on the date of each annual meeting of stockholders at which the Independent Company Director is reelected to the Board. Members of the Board who are employees of the Company who subsequently retire from the Company and remain on the Board will not receive an initial Option grant pursuant to clause (i) of the preceding sentence, but to the extent that they are otherwise eligible, will receive, after retirement from employment with the Company, Options as described in clause (ii) of the preceding sentence. (b) Each person who is an Independent FBBH Director as of or following the date of the confirmation of the Reorganization automatically shall be granted (i) an Option to purchase ten thousand (10,000) shares of Common Stock (subject to adjustment as provided in Section 10.3) on the date of the commencement of such directorship and (ii) an Option to purchase five thousand (5,000) shares of Common Stock (subject to adjustment as provided in Section 10.3) on the date of each annual meeting of the Company's stockholders. Members of the FBBH Board who are Employees who subsequently retire from the Company and remain on the FBBH Board will not receive an initial Option grant pursuant to clause (i) of the preceding sentence, but to the extent that they are otherwise eligible, will receive, after retirement from employment with the Company or any Subsidiary, Options as described in clause (ii) of the preceding sentence. (c) All the foregoing Option grants authorized by this Section 4.5 are subject to stockholder approval of the Plan. 4.6. Options in Lieu of Cash Compensation. Options may be granted under the Plan to ------------------------------------ Employees in lieu of cash bonuses which would otherwise be payable to such Employees and to Independent Directors in lieu of directors' fees which would otherwise be payable to such Independent Directors, pursuant to such policies which may be adopted by the Administrator from time to time. ARTICLE V. TERMS OF OPTIONS 5.1. Option Price. Subject to Section 5.6, the price per share of the shares subject to ------------ each Option granted to Employees shall be set by the Committee; provided, however, that such price shall be no -------- ------- less than the par value of a share of Common Stock, unless otherwise permitted by applicable state law and: (a) in the case of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code, such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted; (b) in the case of Incentive Stock Options such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code); (c) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code), such price shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). 5.2. Option Term. The term of an Option granted to an Employee shall be set by the ----------- Committee in its discretion; provided, however, that, in the case of Incentive Stock Options, the term shall not -------- ------- be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from the date the Incentive Stock Option is granted if the Incentive Stock Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Except as limited by requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options, the Committee may extend the term of any outstanding Option in connection with any Termination of Employment of the Holder, or amend any other term or condition of such Option relating to such a termination. 5.3. Option Vesting -------------- (a) The period during which the right to exercise, in whole or in part, an Option granted to an Employee vests in the Holder shall be set by the Committee and the Committee may determine that an Option may not be exercised in whole or in part for a specified period after it is granted; provided, however, that, unless the Committee otherwise provides in the terms of the Award Agreement or -------- ------- otherwise, no Option shall be exercisable by any Holder who is then subject to Section 16 of the Exchange Act within the period ending six months and one day after the date the Option is granted. At any time after grant of an Option, the Committee may, in its sole and absolute discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option granted to an Employee vests. (b) No portion of an Option granted to an Employee which is unexercisable at Termination of Employment shall thereafter become exercisable, except as may be otherwise provided by the Committee either in the Award Agreement or by action of the Committee following the grant of the Option. (c) To the extent that the aggregate Fair Market Value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year (under the Plan and all other incentive stock option plans of the Company and any parent or subsidiary corporation, within the meaning of Section 422 of the Code) of the Company, exceeds $100,000, such Options shall be treated as Non-Qualified Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 5.3(c), the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted. (d) Notwithstanding any other provision of this Plan, in the event of a Change in Control as defined in Section 1.7(c) that is or is to be accounted for as a "pooling of interests", each outstanding Option shall, immediately prior to the effective date of the Change in Control, automatically become fully exercisable for all of the shares of Common Stock at the time subject to such rights and may be exercised for any or all of those shares as fully-vested shares of Common Stock. 5.4. Terms of Options Granted to Independent Directors. ------------------------------------------------- (a) Subject to Section 5.6, the price per share of the shares subject to each Option granted to an Independent Director shall equal 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted; provided, however, that the price of each share subject to each Option granted to -------- ------- Independent Directors on the date of the confirmation of the Reorganization shall equal the price per share of Common Stock calculated using the trailing average of the listed high and low trading price for the following twenty trading days. Options granted to Independent Directors shall become exercisable in cumulative annual installments of 33.3% on each of the first, second and third anniversaries of the date of Option grant and, subject to Section 6.6, the term of each Option granted to an Independent Director shall be ten (10) years from the date the Option is granted, except that any Option granted to an Independent Director may by its terms become immediately exercisable in full upon the retirement of the Independent Director in accordance with the Company's retirement policy applicable to directors. No portion of an Option which is unexercisable at Termination of Directorship shall thereafter become exercisable. (b) Notwithstanding any other provision of this Plan, in the event of a Change in Control, each outstanding Award to an Independent Director shall, immediately prior to the effective date of the Change in Control, automatically become fully exercisable for all of the shares of Common Stock at the time subject to such rights and may be exercised for any or all of those shares as fully-vested shares of Common Stock. 5.5. Substitute Awards. ----------------- Notwithstanding the foregoing provisions of this Article V to the contrary, in the case of an Option that is a Substitute Award, the price per share of the shares subject to such Option may be less than the Fair Market Value per share on the date of grant, provided, that the excess of: -------- (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award; over (b) the aggregate exercise price thereof; does not exceed the excess of; (c) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company; over (d) the aggregate exercise price of such shares. 5.6. Repricing. Notwithstanding anything herein to the contrary, no Option may be --------- cancelled and reissued in any transaction or series of related transactions for the purpose of modifying the price per share of the shares subject to such Option. ARTICLE VI. EXERCISE OF OPTIONS 6.1. Partial Exercise. An exercisable Option may be exercised in whole or in part. ---------------- However, an Option shall not be exercisable with respect to fractional shares and the Administrator may require that, by the terms of the Option, a partial exercise be with respect to a minimum number of shares. 6.2. Manner of Exercise. All or a portion of an exercisable Option shall be deemed ------------------ exercised upon delivery of all of the following to the Secretary of the Company or his office: (a) A written notice complying with the applicable rules established by the Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option; (b) Such representations and documents as the Administrator, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Administrator may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; (c) In the event that the Option shall be exercised pursuant to Section 10.1 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option; and (d) Full cash payment to the Secretary of the Company for the shares with respect to which the Option, or portion thereof, is exercised. However, the Administrator, may in its discretion (i) allow a delay in payment up to thirty (30) days from the date the Option, or portion thereof, is exercised; (ii) allow payment, in whole or in part, through the delivery of shares of Common Stock which have been owned by the Holder for at least six months, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (iii) allow payment, in whole or in part, through the surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof; (iv) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (v) allow payment, in whole or in part, through the delivery of a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Administrator; (vi) allow payment, in whole or in part, through the delivery of a notice that the Holder has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price, provided that payment -------- of such proceeds is then made to the Company upon settlement of such sale; or (vii) allow payment through any combination of the consideration provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory note, the Administrator may also prescribe the form of such note and the security to be given for such note. The Option may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law. 6.3. Conditions to Issuance of Stock Certificates. The Company shall not be required to -------------------------------------------- issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; (b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Administrator shall, in its absolute discretion, deem necessary or advisable; (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; (d) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may establish from time to time for reasons of administrative convenience; and (e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which in the discretion of the Administrator may be in the form of consideration used by the Holder to pay for such shares under Section 6.2(d). 6.4. Rights as Stockholders. Holders shall not be, nor have any of the rights or ---------------------- privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such Holders. 6.5. Ownership and Transfer Restrictions. The Administrator, in its absolute discretion, ----------------------------------- may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Award Agreement and may be referred to on the certificates evidencing such shares. The Holder shall give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within (a) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder or (b) one year after the transfer of such shares to such Holder. 6.6. Limitations on Exercise of Options Granted to Independent Directors. No Option ------------------------------------------------------------------- granted to an Independent Director may be exercised to any extent by anyone after the first to occur of the following events: (a) The expiration of twelve (12) months from the date of the Holder's death; (b) the expiration of twelve (12) months from the date of the Holder's Termination of Directorship by reason of his permanent and total disability (within the meaning of Section 22(e)(3) of the Code); (c) the expiration of three (3) months from the date of the Holder's Termination of Directorship for any reason other than such Holder's death or his permanent and total disability, unless the Holder dies within said three-month period; or (d) The expiration of ten (10) years from the date the Option was granted. 6.7. Additional Limitations on Exercise of Options. Holders may be required to comply with --------------------------------------------- any timing or other restrictions with respect to the settlement or exercise of an Option, including a window-period limitation, as may be imposed in the discretion of the Administrator. ARTICLE VII. AWARD OF RESTRICTED STOCK 7.1. Eligibility. Subject to the Award Limit, Restricted Stock may be awarded to any ----------- Employee who the Committee determines is a key Employee. 7.2. Award of Restricted Stock ------------------------- (a) The Committee may from time to time, in its absolute discretion: (i) Determine which Employees are key Employees and select from among the key Employees (including Employees who have previously received other awards under the Plan) such of them as in its opinion should be awarded Restricted Stock; and (ii) Determine the purchase price, if any, and other terms and conditions applicable to such Restricted Stock, consistent with the Plan. (b) The Committee shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that such purchase price shall be no less than the par value of -------- ------- the Common Stock to be purchased, unless otherwise permitted by applicable state law. In all cases, legal consideration shall be required for each issuance of Restricted Stock. (c) Upon the selection of a key Employee to be awarded Restricted Stock, the Committee shall instruct the Secretary of the Company to issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. 7.3. Rights as Stockholders. Subject to Section 7.4, upon delivery of the shares of ---------------------- Restricted Stock to the escrow holder pursuant to Section 7.6, the Holder shall have, unless otherwise provided by the Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions in his Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that in the discretion of the Committee, any extraordinary distributions with -------- ------- respect to the Common Stock shall be subject to the restrictions set forth in Section 7.4. 7.4. Restriction. All shares of Restricted Stock issued under the Plan (including any ----------- shares received by holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Award Agreement, be subject to such restrictions as the Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights and transferability and restrictions based on duration of employment with the Company, Company performance and individual performance; provided, however, that, unless the Committee -------- ------- otherwise provides in the terms of the Award Agreement or otherwise, no share of Restricted Stock granted to a person subject to Section 16 of the Exchange Act shall be sold, assigned or otherwise transferred until at least six months and one day have elapsed from the date on which the Restricted Stock was issued, and provided, -------- further, that, except with respect to shares of Restricted Stock granted to Section 162(m) Participants, by action taken after the Restricted Stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire. If no consideration was paid by the Holder upon issuance, a Holder's rights in unvested Restricted Stock shall lapse, and such Restricted Stock shall be surrendered to the Company without consideration, upon Termination of Employment with the Company; provided, however, that except with respect to shares of Restricted Stock granted to Section 162(m) Participants, -------- ------- the Committee in its sole and absolute discretion may provide that no such lapse or surrender shall occur in the event of a Termination of Employment without cause or following any Change in Control of the Company or because of the Holder's retirement, death, disability or otherwise. Notwithstanding anything to the contrary in this Section 7.4, in the event of and immediately prior to a Change in Control as defined in Section 1.7(c) that is to be accounted for as a "pooling of interests", all unvested shares of Restricted Stock shall immediately vest such that no such lapse or surrender shall occur following such Change in Control. 7.5. Repurchase of Restricted Stock. The Committee shall provide in the terms of each ------------------------------ individual Award Agreement that the Company shall have the right to repurchase from the Holder the Restricted Stock then subject to restrictions under the Award Agreement immediately upon a Termination of Employment between the Holder and the Company, at a cash price per share equal to the price paid by the Holder for such Restricted Stock; provided, however, that, except with respect to shares of Restricted Stock granted to Section 162(m) -------- ------- Participants, the Committee in its sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment without cause or following any Change in Control of the Company or because of the Holder's retirement, death, disability or otherwise. Notwithstanding anything to the contrary in this Section 7.5, in the event of and immediately prior to a Change in Control as defined in Section 1.7(c) that is to be accounted for as a "pooling of interests", any such repurchase rights shall expire. 7.6. Escrow. The Secretary of the Company or such other escrow holder as the Committee may ------ appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions imposed under the Award Agreement with respect to the shares evidenced by such certificate expire or shall have been removed. 7.7. Legend. In order to enforce the restrictions imposed upon shares of Restricted Stock ------ hereunder, the Committee shall cause a legend or legends to be placed on certificates representing all shares of Restricted Stock that are still subject to restrictions under Award Agreements, which legend or legends shall make appropriate reference to the conditions imposed thereby. 7.8. Section 83(b) Election. If a Holder makes an election under Section 83(b) of the ---------------------- Code, or any successor section thereto, to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service. ARTICLE VIII. PERFORMANCE AWARDS and STOCK PAYMENTS 8.1. Eligibility. Subject to the Award Limit, one or more Performance Awards and/or Stock ----------- Payments may be granted to any Employee whom the Committee determines is a key Employee. 8.2. Performance Awards. Any key Employee selected by the Committee may be granted one or ------------------ more Performance Awards. The value of such Performance Awards may be linked to any one or more of the Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined by the Committee. In making such determinations, the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular key Employee. 8.3. Stock Payments. Any key Employee selected by the Committee may receive Stock Payments -------------- in the manner determined from time to time by the Committee. The number of shares shall be determined by the Committee and may be based upon the Performance Criteria or other specific performance criteria determined appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter. 8.4. Term. The term of a Performance Award and/or Stock Payment shall be set by the ---- Committee in its discretion. 8.5. Exercise or Purchase Price. The Committee may establish the exercise or purchase -------------------------- price of a Performance Award or shares received as a Stock Payment; provided, however, that such price shall not -------- ------- be less than the par value for a share of Common Stock, unless otherwise permitted by applicable state law. 8.6. Exercise Upon Termination of Employment. A Performance Award, and/or Stock Payment is --------------------------------------- exercisable or payable only while the Holder is an Employee; provided, however, that except with respect to -------- ------- Performance Awards granted to Section 162(m) Participants, the Administrator in its sole and absolute discretion may provide that Performance Awards may be exercised or paid following a Termination of Employment without cause, or following a Change in Control of the Company, or because of the Holder's retirement, death or disability, or otherwise. Notwithstanding anything to the contrary in this Article 8, in the event of a Change in Control as defined in Section 1.7(c) that is or is to be accounted for as a "pooling of interests", all outstanding Performance Awards and Stock Payments shall be immediately exercisable or payable following such Change in Control. 8.7. Form of Payment. Payment of the amount determined under Section 8.2 or 8.3 above --------------- shall be in cash, in Common Stock or a combination of both, as determined by the Committee. To the extent any payment under this Article VIII is effected in Common Stock, it shall be made subject to satisfaction of all provisions of Section 6.3. ARTICLE X. ADMINISTRATION 9.1. Compensation Committee. The Compensation Committee (or another committee or a ---------------------- subcommittee of the Board assuming the functions of the Committee under the Plan) shall consist solely of two or more Independent Company Directors appointed by and holding office at the pleasure of the Board, each of whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. 9.2. Duties and Powers of Committee. It shall be the duty of the Committee to conduct the ------------------------------ general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Award Agreements, and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith, to interpret, amend or revoke any such rules and to amend any Award Agreement provided that the rights or obligations of the Holder of the Award that is the subject of any such Award Agreement are not affected adversely. Any such grant or award under the Plan need not be the same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Options granted to Independent Directors. 9.3. Majority Rule; Unanimous Written Consent. The Committee shall act by a majority of ---------------------------------------- its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 9.4. Compensation; Professional Assistance; Good Faith Actions. Members of the Committee --------------------------------------------------------- shall receive such compensation, if any, for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company's officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee or the Board in good faith shall be final and binding upon all Holders, the Company and all other interested persons. No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or Awards, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action, determination or interpretation. 9.5. Delegation of Authority to Grant Awards. The Committee may, but need not, delegate --------------------------------------- from time to time some or all of its authority to grant Awards under the Plan to a committee consisting of one or more members of the Committee or of one or more officers of the Company; provided, however, that the Committee may not delegate its authority to grant Awards to individuals (i) who are subject on the date of the grant to the reporting rules under Section 16(a) of the Exchange Act, (ii) who are Section 162(m) Participants or (iii) who are officers of the Company who are delegated authority by the Committee hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation of authority and may be rescinded at any time by the Committee. At all times, any committee appointed under this Section 9.5 shall serve in such capacity at the pleasure of the Committee. ARTICLE XI. MISCELLANEOUS PROVISIONS 10.1. Not Transferable. No Award under the Plan may be sold, pledged, assigned or ---------------- transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until such Award has been exercised, or the shares underlying such Award have been issued, and all restrictions applicable to such shares have lapsed. No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. During the lifetime of the Holder, only he may exercise an Option or other Award (or any portion thereof) granted to him under the Plan, unless it has been disposed of with the consent of the Administrator pursuant to a DRO. After the death of the Holder, any exercisable portion of an Option or other Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Holder's will or under the then applicable laws of descent and distribution. Notwithstanding the foregoing provisions of this Section 10.1, the Administrator, in its sole discretion, may determine to grant to any Holder an Award which, by its terms as set forth in the applicable Award Agreement, may be transferred by the Holder, in writing and with prior written notice to the Administrator, by gift, without the receipt of any consideration, to a member of the Holder's immediate family, as defined in Rule 16a-1 under the Exchange Act, or to a trust for the exclusive benefit of, or any other entity owned solely by, such members, provided, that an Award that has been so transferred shall continue to be subject to all of the terms and conditions of the Award as applicable to the original Holder, and the transferee shall execute any and all such documents requested by the Administrator in connection with the transfer, including without limitation to evidence the transfer and to satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws. 10.2. Amendment, Suspension or Termination of the Plan. Except as otherwise provided in ------------------------------------------------ this Section 10.2, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator. However, without approval of the Company's stockholders given within twelve months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 10.3, increase the limits imposed in Section 10.3 on the maximum number of shares which may be issued under the Plan. No amendment, suspension or termination of the Plan shall, without the consent of the Holder alter or impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan, and in no event may any Incentive Stock Option be granted under the Plan after the first to occur of the following events: (a) The expiration of ten years from the date the Plan is adopted by the Board; or (b) The expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 10.4. 10.3. Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the ----------------------------------------------------------------------------------- Company and Other Corporate Events. ---------------------------------- (a) Subject to Section 10.3 (d), in the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Administrator's sole discretion, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Common Stock (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to, adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued and adjustments of the Award Limit), (ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards, and (iii) the grant or exercise price with respect to any Award. (b) Subject to Sections 5.3(d), 5.4(b) and 10.3(d), in the event of any transaction or event described in Section 10.3(a) or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations, or accounting principles, the Administrator, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder's request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles: (i) To provide for either the purchase of any such Award for an amount of cash equal to the amount that could have been attained upon the exercise of such Award or realization of the Holder's rights had such Award been currently exercisable or payable or fully vested or the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; (ii) To provide that the Award cannot vest, be exercised or become payable after such event; (iii) To provide that such Award shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the provisions of such Award; (iv) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; (v) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and awards and options, rights and awards which may be granted in the future; (vi) To provide that, for a specified period of time prior to such event, the restrictions imposed under an Award Agreement upon some or all shares of Restricted Stock may be terminated, and, in the case of Restricted Stock, some or all shares of such Restricted Stock may cease to be subject to repurchase under Section 7.5 or forfeiture under Section 7.4 after such event (vii) To provide that, in the event of a Change in Control, each outstanding Award shall, immediately prior to the effective date of the Change in Control, automatically become fully exercisable for all of the shares of Common Stock at the time subject to such rights and may be exercised for any or all of those shares as fully-vested shares of Common Stock; and (viii) To provide that, in the event of any transaction described in Section 10.3(a), each outstanding Award shall, immediately prior to the effective date of such transaction, automatically become fully exercisable for all of the shares of Common Stock at the time subject to such rights or fully vested, as applicable, and may be exercised for any or all of those shares as fully-vested shares of Common Stock. However, an outstanding right shall not so accelerate if and to the extent: (i) such right is, in connection with such transaction, either to be assumed by the successor or survivor corporation (or parent thereof) or to be replaced with a comparable right with respect to shares of the capital stock of the successor or survivor corporation (or parent thereof) or (ii) the acceleration of exercisability of such right is subject to other limitations imposed by the Administrator at the time of grant. The determination of comparability of rights under clause (i) above shall be made by the Administrator, and its determination shall be final, binding and conclusive (c) Subject to Sections 3.2, 3.3, 5.3(d), 5.4(b), 7.4, 7.5, 8.6 and 10.3(d), the Administrator may, in its discretion, include such further provisions and limitations in any Award, agreement or certificate, as it may deem equitable and in the best interests of the Company. (d) With respect to Awards which are granted to Section 162(m) Participants and are intended to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action described in this Section 10.3 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify under Section 162(m)(4)(C), or any successor provisions thereto. No adjustment or action described in this Section 10.3 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions. The number of shares of Common Stock subject to any Award shall always be rounded to the next whole number. (e) Notwithstanding the foregoing, in the event that the Company becomes a party to a transaction that is intended to qualify for "pooling of interests" accounting treatment and, but for one or more of the provisions of this Plan or any Award Agreement would so qualify, then this Plan and any Award Agreement shall be interpreted so as to preserve such accounting treatment, and to the extent that any provision of the Plan or any Award Agreement would disqualify the transaction from pooling of interests accounting treatment (including, if applicable, an entire Award Agreement), then such provision shall be null and void. All determinations to be made in connection with the preceding sentence shall be made by the independent accounting firm whose opinion with respect to "pooling of interests" treatment is required as a condition to the Company's consummation of such transaction. (f) The existence of the Plan, the Award Agreement and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 10.4. Approval of Plan by Stockholders. The Plan will be submitted for the approval of the -------------------------------- Company's stockholders within twelve months after the date of the Board's initial adoption of the Plan. Awards may be granted or awarded prior to such stockholder approval, provided that such Awards shall not be exercisable nor shall such Awards vest prior to the time when the Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve-month period, all Awards previously granted or awarded under the Plan shall thereupon be canceled and become null and void. In addition, if the Board determines that Awards other than Options which may be granted to Section 162(m) Participants should continue to be eligible to qualify as performance-based compensation under Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to and approved by the Company's stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which the Company's stockholders previously approved the Performance Criteria. 10.5. Tax Withholding. The Company shall be entitled to require payment in cash or --------------- deduction from other compensation payable to each Holder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting, exercise or payment of any Award. The Administrator may in its discretion and in satisfaction of the foregoing requirement allow such Holder to elect to have the Company withhold shares of Common Stock otherwise issuable under such Award (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld. 10.6. Loans. The Committee may, in its discretion, extend one or more loans to key ----- Employees in connection with the exercise or receipt of an Award granted or awarded under the Plan, or the issuance of Restricted Stock awarded under the Plan. The terms and conditions of any such loan shall be set by the Committee. 10.7. Forfeiture Provisions. Pursuant to its general authority to determine the terms and --------------------- conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in the terms of Awards made under the Plan, or to require a Holder to agree by separate written instrument, that (a) (i) any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Common Stock underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (b)(i) a Termination of Employment or Termination of Directorship occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, or (ii) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator or (iii) the Holder incurs a Termination of Employment or Termination of Directorship for cause. 10.8. Effect of Plan Upon Options and Compensation Plans. The adoption of the Plan shall -------------------------------------------------- not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company (a) to establish any other forms of incentives or compensation for Employees or Directors of the Company or any Subsidiary or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association. 10.9. Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and -------------------- the issuance and delivery of shares of Common Stock and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. 10.10. Titles. Titles are provided herein for convenience only and are not to serve as a ------ basis for interpretation or construction of the Plan. 10.11. Governing Law. The Plan and any agreements hereunder shall be administered, ------------- interpreted and enforced under the internal laws of the State of Oregon without regard to conflicts of laws thereof. * * * I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Wilshire Financial Services Group Inc. Executed on this ____ day of August 2000. By: -------------------- Secretary

QuickLinks -- Click here to rapidly navigate through this document ADC TELECOMMUNICATIONS, INC. NONEMPLOYEE DIRECTOR STOCK OPTION PLAN (As Amended through February 22, 2000) Section 1. Purpose.     This plan shall be known as the "ADC Telecommunications, Inc. Nonemployee Director Stock Option Plan" and is hereinafter referred to as the "Plan." The purpose of the Plan is to promote the interests of ADC Telecommunications, Inc., a Minnesota corporation (the "Company"), by enhancing its ability to attract and retain the services of experienced and knowledgeable outside directors and by providing additional incentive for such directors to increase their interest in the Company's long-term success and progress. Section 2. Administration.     The Plan shall be administered by a committee (the "Committee") of three or more persons appointed by the Board of Directors of the Company. Grants of stock options under the Plan and the amount and nature of the awards to be granted shall be automatic as described in Section 6. However, all questions of interpretation of the Plan or of any options issued under it shall be determined by the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. Section 3. Participation in the Plan.     Each director of the Company shall be eligible to participate in the Plan unless such director is an employee of the Company or any subsidiary of the Company. Section 4. Stock Subject to the Plan.     Subject to the provisions of Section 11 hereof, the stock to be subject to options under the Plan shall be authorized but unissued shares of the Company's common stock, par value $.20 per share (the "Common Stock"). Subject to adjustment as provided in Section 11 hereof, the maximum number of shares with respect to which options may be exercised under this Plan shall be 840,000 shares. If an option under the Plan expires, or for any reason is terminated, any shares that have not been purchased upon exercise of the option prior to the expiration or termination date shall again be available for options thereafter granted during the term of the Plan. Section 5. Nonqualified Stock Options.     All options granted under the Plan shall be nonqualified stock options which do not qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. Section 6. Terms and Conditions of Options.     Each option granted under this Plan shall be evidenced by a written agreement in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the following terms and conditions:     (a) Initial Option Grants. An option to purchase 24,000 shares of Common Stock shall be granted automatically on the first business day immediately following each meeting of the Company's shareholders or Board of Directors during the term of the Plan to each eligible director, if any, who is elected to the Board of Directors for the first time at such meeting. 1 --------------------------------------------------------------------------------     (b) Annual Option Grants. Subject to Section 6(c) hereof, an option to purchase 12,000 shares of Common Stock shall be granted automatically on the first business day immediately following each annual meeting of the Company's shareholders held during the term of the Plan beginning with the 2000 annual meeting of shareholders (the "Annual Option Grant Date") to each eligible director in office on such Annual Option Grant Date who prior to such Annual Option Grant Date has received an option pursuant to Section 6(a) hereof; provided, however, that, in the event that a director has attended less than 75% of the total meetings of the Board of Directors held in the calendar year immediately preceding such Annual Option Grant Date, such director shall be granted an option to purchase 9,000 shares of Common Stock pursuant to this Section 6(b).     (c) Return on Equity Requirement. No options shall be granted pursuant to Section 6(b) hereof on any Annual Option Grant Date if the Company's "return on equity" (as hereinafter defined) for the fiscal year ended immediately preceding such Annual Option Grant Date was less than 10%. "Return on equity" shall mean the percentage determined by dividing (i) the net income of the Company for such fiscal year by (ii) the total stockholders' investment in the Company as of the end of the next preceding fiscal year. Net income and total stockholders' investment shall be determined by reference to the Company's audited financial statements. If the Company does not have net income for any fiscal year, the return on equity for such fiscal year shall be deemed to be less than 10%.     (d) Options Non-Transferable. No option granted under the Plan shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution as provided in Section 6(g) hereof; provided, however, that an optionee may, in the manner established by the Committee, transfer an option to any member of such optionee's immediate family (which, for purposes of this clause (d) shall mean such optionee's children, grandchildren, or current spouse) or to one or more trusts established for the exclusive benefit of one or more such immediate family members or one or more partnerships in which the Participant or such immediate family members are the only partners, and provided further that (1) there is no consideration for such transfer, and (2) the options held by such transferees continue to be subject to the same terms and conditions (including restrictions on subsequent transfers) as were applicable to such options immediately prior to their transfer. During the lifetime of the optionee, the options shall be exercisable only by such optionee. No option or interest therein may be transferred, assigned, pledged or hypothecated by the optionee during such optionee's lifetime, except as set forth at this section (d), whether by operation of law or otherwise, or be made subject to execution, attachment or similar process.     (e) Period of Options. Options shall terminate upon the expiration of 10 years from the date on which they were granted.     (f)  Exercise of Options.     (i)  Options granted under the Plan shall not be exercisable for a period of one year after the date on which they were granted, but thereafter will be exercisable in full at any time or from time to time during the term of the option.     (ii) The exercise of any option granted hereunder shall only be effective at such time as counsel to the Company shall have determined that the issuance and delivery of Common Stock pursuant to such exercise will not violate any federal or state securities or other laws. An optionee desiring to exercise an option may be required by the Company, as a condition of the effectiveness of any exercise of an option granted hereunder, to agree in writing that all Common Stock to be acquired pursuant to such exercise shall be held for his or her own account without a view to any distribution thereof, that the certificates for such shares shall bear an appropriate legend to that effect and that such shares will not be transferred or disposed of except in compliance with applicable federal and state securities laws. 2 --------------------------------------------------------------------------------     (iii) An optionee electing to exercise an option shall give written notice to the Company of such election and of the number of shares subject to such exercise. The full purchase price of such shares shall be tendered with such notice of exercise. Payment shall be made to the Company in cash (including check, bank draft or money order).     (g) Effect of Death. If the optionee shall die prior to the time the option is fully exercised, such option may be exercised at any time within two years after his or her death by the personal representatives or administrators of the optionee or by any person or persons to whom the option is transferred by will or the applicable laws of descent and distribution, to the extent of the full number of shares the optionee was entitled to purchase under the option on the date of death and subject to the condition that no option shall be exercisable after the expiration of the term of the option. Section 6A. One-Time Grant     On April 1, 1997, benefits accrued pursuant to the Company's Directors' Supplemental Retirement Plan prior to its termination, shall be converted to options for the purchase of the Company's Common Stock to be issued pursuant to the Plan, in accordance with the following schedule: Length of Service 12/96 --------------------------------------------------------------------------------   No. of Option Shares -------------------------------------------------------------------------------- <1 year   900 2 to 3 years   2,750 3 to 4 years   3,650 5 to 6 years   5,450 6 to 7 years   6,350 10 + years   9,100     Each such option shall have an exercise price equal to the market price of a share of the Common Stock as of the close of trading on April 1, 1997, and each such option shall be exercisable on the earlier of the date on which a participant no longer is a member of the Board of Directors of the Company or 9.5 years from April 1, 1997, and each unexercised option shall expire ten years from April 1, 1997. Section 7. Option Exercise Price.     The option exercise price per share for the shares covered by each option shall be equal to the "fair market value" of a share of Common Stock as of the date on which the option is granted, as determined pursuant to Section 9 hereof. Section 8. Time for Granting Options.     Unless the Plan shall have been discontinued as provided in Section 13 hereof, the Plan shall terminate upon the expiration of 10 years from the date upon which it takes effect as provided in Section 12 hereof. No option may be granted after such termination, but termination of the Plan shall not, without the consent of the optionee, alter or impair any rights or obligations under any option theretofore granted. Section 9. Fair Market Value of Common Stock.     For purposes of the Plan, the fair market value of the Common Stock on a given date shall be (i) the last sale price of the Common Stock as reported on the NASDAQ National Market System on such date, if the Common Stock is then quoted on the NASDAQ National Market System, or (ii) the closing price of the Common Stock on such date on a national securities exchange, if the Common Stock is then being traded on a national securities exchange. If on the date as of which the fair market value is being determined the Common Stock is not publicly traded, the Committee shall make a good faith attempt to 3 -------------------------------------------------------------------------------- determine such fair market value and, in connection therewith, shall take such actions and consider such factors as it deems necessary or advisable. Section 10. Limitation of Rights.     (a) No Right to Continue as a Director. Neither the Plan, nor the granting of an option nor any other action taken pursuant to the Plan, shall constitute, or be evidence of, any agreement or understanding, express or implied, that the Company will retain a director for any period of time, or at any particular rate of compensation.     (b) No Shareholder Rights for Options. An optionee shall have no rights as a shareholder with respect to the shares covered by options until the date of the issuance to such optionee of a stock certificate therefor, and no adjustment will be made for cash dividends or other rights for which the record date is prior to the date such certificate is issued. Section 11. Adjustments to Common Stock.     If there shall be any change in the Common Stock through merger, consolidation, reorganization, recapitalization, stock dividend (of whatever amount), stock split or other change in the corporate structure, appropriate adjustments in the Plan and outstanding options shall be made. In the event of any such changes, adjustments shall include, where appropriate, changes in the aggregate number of shares subject to the Plan, the number of shares subject to outstanding options and the option exercise prices thereof in order to prevent dilution or enlargement of option rights. Section 12. Effective Date of the Plan.     The Plan shall take effect immediately upon its approval by the affirmative vote of the holders of a majority of the shares present in person or by proxy and voted at a duly held meeting of shareholders of the Company. Section 13. Amendment of the Plan.     The Board may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that without approval of the shareholders of the Company no revision or amendment shall be made that (a) absent such shareholder approval, would cause Rule 16b-3, as promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or any successor rule or regulation thereto, to become unavailable with respect to the Plan or (b) requires the approval of the Company's shareholders under any rules or regulations of the National Association of Securities Dealers, Inc. or any securities exchange that are applicable to the Company. The Board shall not alter or impair any option theretofore granted under the Plan without the consent of the holder of the option. Section 14. Governing Law.     The Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State of Minnesota and construed accordingly. 4 -------------------------------------------------------------------------------- QUICKLINKS ADC TELECOMMUNICATIONS, INC. NONEMPLOYEE DIRECTOR STOCK OPTION PLAN (As Amended through February 22, 2000)

EXHIBIT 10.2 EMPLOYMENT AGREEMENT MEMORANDUM OF AGREEMENT entered into at Stamford, Connecticut, this 28th day of June, 2000. BY AND BETWEEN: REPAP ENTERPRISES INC. , a company duly incorporated under the laws of Canada, having its executive offices at 300 Atlantic Street, Suite 200, Stamford, Connecticut, 06901, herein acting and represented by Stephen C. Larson and Harold (Hap) Stephen, duly authorized to act hereunder for the purposes of the present Agreement as they so declare;   (hereinafter the "Corporation") AND MICHELLE A. CORMIER , business executive, having her address for the purposes of the present Agreement at 45 Whitney Glen Drive, Westport, Connecticut, 06880;   (hereinafter the "Executive") THE PARTIES DECLARE AS FOLLOWS: WHEREAS the Corporation wishes to retain the Executive's services as Vice President and Chief Financial Officer and the Executive wishes to continue to offer her services to the Corporation in that capacity, the whole in accordance with the conditions stipulated in the present Agreement; WHEREAS the Corporation considers the continuous maintenance of sound and vital management to be essential to protecting and enhancing the best interests of the Corporation and its shareholders; WHEREAS the Corporation recognizes that the possibility of a Change in Control or other circumstances may exist and that such possibility, and the uncertainty and questions which it may raise among the Corporation's management, may result in the departure or distraction of management personnel to the detriment of the Corporation and its shareholders; WHEREAS the Corporation's Board of Directors has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation's management employees to their assigned duties; NOW, THEREFORE , in consideration of the mutual promises and covenants herein contained, the parties agree as follows:   ARTICLE 1 PREAMBLE 1.1 The preamble forms an integral part of this Agreement. ARTICLE 2 DEFINITIONS 2.1 Definitions. For the purpose of this Agreement, or for the purposes of any notice or communication required hereunder, the words and expressions set out in Schedule A shall have the respective meanings set out therein, except where the context dictates otherwise. 2.2 Gender. Any reference in this Agreement to any gender shall include all genders and words used herein importing the singular number only shall include the plural and vice versa. 2.3 Headings. The insertion of headings is for convenience of reference only and shall not affect or be utilized in the construction or interpretation hereof. 2.4 Entire Agreement. This Agreement together with any instruments to be delivered pursuant hereto constitute the entire Agreement between the parties pertaining to the subject matter hereof and supersede all prior agreements, understandings, negotiations, and discussions, whether oral or written, by or among the said parties in respect of such subject matter. 2.5 Amendment. No amendment hereto shall be binding unless expressly provided for in an instrument duly executed by both parties. 2.6 Waiver. No waiver by any party hereto, whether by conduct or otherwise, of any of the provisions of this Agreement shall be deemed to constitute a waiver by such party of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver hereof, unless otherwise expressly provided in an instrument duly executed by the party or parties to be bound thereby. 2.7 Governing Law. This Agreement shall be governed by, interpreted and construed in accordance with the laws of New York. 2.8 Currency. Unless otherwise particularly indicated herein, all dollar amounts set forth in this Agreement shall be in U.S. dollars. ARTICLE 3 DURATION 3.1 This Agreement is hereby concluded for an indefinite term, effective as of the date hereof.   ARTICLE 4 ACCEPTANCE, POSITION AND DUTIES 4.1 The Executive hereby accepts such employment and agrees faithfully to render the services described below to the best of her ability and knowledge and to devote her full time, attention, skill and talents to the performance of her duties hereunder in the best interests of the Corporation. 4.2 During the term of this Agreement, the Executive will serve as Vice President and Chief Financial Officer. In this capacity, the Executive shall have duties and responsibilities that are consistent with the Executive's position as Chief Financial Officer including but not limited to developing and maintaining banking, investment banking, investor and other financial relationships, ensuring adequate internal control systems, reporting to the Audit Committee and Board of Directors of the Corporation on all financial related matters pertinent to the executive strategic and financial objectives, reviewing internal financial reports and analyses, preparing and reviewing all financial reporting for external purposes and participating from time to time in investor/bondholder conferences. 4.3 The Executive hereby agrees to execute such additional tasks as may be assigned to her by the Corporation from time to time, the whole in accordance with the directives of the CEO of the Corporation. ARTICLE 5 LOYALTY 5.1 The Executive shall devote the whole of her working time, attention, skills and competence to the Corporation. The Executive shall act with diligence, loyalty and honesty and shall make all necessary efforts to promote the Corporation's legitimate interests for the duration of this Agreement. 5.2 The Executive shall not, during the term of this Agreement, on the Executive's own behalf or on behalf of any Person, whether directly or indirectly, in any capacity whatsoever, alone, through or in connection with any Person, carry on or be engaged in or have any financial or other interest in or be otherwise commercially involved in any endeavor, activity or business that is the same as, substantially similar to or in competition with the activities of the Corporation. 5.3 The Executive shall not be in default under this Article 5 by virtue of the Executive holding, strictly for portfolio purposes and as a passive investor, no more than five percent (5 percent) of the issued and outstanding shares of any corporation which is listed on a recognized stock exchange, the business of which corporation is the same, substantially similar to or in competition with the activities of the Corporation. ARTICLE 6 PLACE OF WORK 6.1 The Executive's duties shall be carried out and performed at or from the Corporation's establishment located in the city of Stamford, Connecticut, although the Executive may be required by the Corporation to travel elsewhere from time to time. ARTICLE 7 OTHER DUTIES 7.1 The Executive shall not engage in duties other than those provided for in this Agreement, nor be employed with respect, or in relation, to any Person other than the Corporation without the prior written consent of the Corporation. 7.2 Nothing herein shall prevent the Executive from undertaking charitable, community or recreational activities which are not in conflict with obligations hereunder and for which the Executive is not remunerated. ARTICLE 8 CONFIDENTIALITY 8.1 General. During the term of this Agreement and at any time thereafter, the Executive agrees not to use, sell, circulate or otherwise distribute to any Person, or in any way disclose to any Person or to the public, any Confidential Information. 8.2 Permitted Uses. Notwithstanding the above, the Executive shall have the right to make use of Confidential Information as required in the performance of her duties with the Corporation provided the Executive shall at all times take necessary, useful and desirable measures to prevent the non-authorized use or disclosure of Confidential Information. Reproduction of Confidential Information shall be governed by the same principles. 8.3 Works. Any document or work assembled or composed by the Executive or the Corporation which contains Confidential Information shall constitute and be treated as Confidential Information. The Executive shall not publish or allow the publication of any material containing Confidential Information without the prior written consent of the CEO of the Corporation. 8.4 Property. Confidential Information and the documents, works, instruments or other medium containing Confidential Information shall remain the property of the Corporation and be returned to the Corporation upon request or at the latest immediately upon termination of the Executive's employment. 8.5 Governmental Request. Nothing in this Agreement shall prevent the disclosure of Confidential Information where such disclosure must be made in response to the formal request of a governmental body, agency or a court of law but the Executive shall inform the Corporation of such request immediately and prior to disclosure in order to allow the Corporation to take the appropriate measures to contest such request for disclosure if it so decides. The Executive shall fully cooperate with the Corporation in its efforts to contest such request for disclosure. ARTICLE 9 SALARY 9.1 As Vice President and Chief Financial Officer of the Corporation, the Executive shall receive an annual base compensation of gross $230,000 ("Base Salary") to be paid in equal monthly installments, less the applicable deductions at source. Such compensation shall be reviewed annually by the Board of Directors of the Corporation in accordance with its internal policies in effect from time to time, but shall never be less than the amount stipulated herein. ARTICLE 10 INCENTIVE PLANS 10.1 In addition to the Base Salary, the Executive shall be eligible to receive an annual payment pursuant to all bonus and incentive compensation plans in force and offered to key executives of the Corporation at the time, as may be modified by the Corporation at its sole discretion from time to time, in accordance with such plans, including but not limited to participation in Tier 1 of the Key Management Bonus Plan. Such bonus will be prorated for any calendar year during which the Executive was employed for less than twelve (12) months. The Corporation agrees that during the term of this Agreement, the Executive cannot be removed as a member of the Bonus Plan. ARTICLE 11 STOCK OPTIONS 11.1 The parties recognize that the Corporation has granted to the Executive options to purchase five million (5,000,000) common shares of the Corporation, which are fully vested, (the "Stock Options") at a price equal to Cdn $0.13 per share. 11.2 The parties recognize that the Corporation has, subject to all regulatory approvals and filings, granted to the Executive an additional two million (2,000,000) Stock Options of the Corporation at an exercise price of Cdn $0.13 per option as follows: Date of Vesting February 28, 2000 February 28, 2001 February 28, 2002 February 28, 2003 February 28, 2004 Options to Acquire 400,000 common shares 400,000 common shares 400,000 common shares 400,000 common shares 400,000 common shares Expiry Date February 28, 2010 February 28, 2010 February 28, 2010 February 28, 2010 February 28, 2010 11.3 The Stock Options have been granted subject to the terms and conditions set forth in the Corporation's applicable Stock Option Plan, the Share Option Agreement of February 28, 2000, and the Share Option Agreement and amendments of May 4, 2000, and the Share Option Repricing Agreement of May 4, 2000. 11.4 Unless otherwise terminated and expired in accordance with the terms hereof, the Stock Options under Article 11.1 (5,000,000) shall expire and terminate at the close of business on August 30, 2007, and the Stock Options under Article 11.2 (2,000,000) shall expire and terminate at the close of business on February 28, 2010, as to such of the optioned shares in respect of which the options granted have not then been exercised, and thereafter the Executive shall have no further rights in respect thereof. 11.5 The Stock Options shall be exercised by delivering to the Secretary of the Corporation: i. a written notice signed by the Executive ("Option Notice") setting forth the number of Optioned Shares to be purchased (which shall not be greater than the number of Optioned Shares with respect to which the Executive is entitled to exercise options in accordance with the provisions of subparagraph 11.1 and 11.2); ii. a certified cheque in the amount of the purchase price thereof. 11.6 Any such Option Notice must be received by the Secretary of the Corporation prior to the close of business on the Expiry Date mentioned in section 11.1 and 11.2 above. ARTICLE 12 BENEFITS AND VACATION 12.1 The Senior Executive shall continue to participate in all benefit programs and/or plans granted to key executives of the Corporation, the whole in accordance with the actual programs or plans that the Corporation may institute from time to time or as may otherwise be paid under any applicable law. The Executive is entitled to five (5) weeks paid vacation annually in accordance with the Corporation's existing policy as amended from time to time as well as banked vacation days in accordance with the Corporation's policy on banked vacation. 12.2 The benefit programs in place at the time of this Agreement are outlined in Articles 12.1, 12.3, 13 and 14 of this Agreement. 12.3 Insurance Related Benefits: (a) The Executive is entitled to participate in the Corporation's Group Life Insurance Plan (Union) in the case of death and the Executive is also entitled to an individual life insurance policy (N.W. Life) for CDN $450,000. All premiums are paid by the Corporation. Upon any termination of the Executive's employment (other than Executive's termination for Cause or the death of the Executive) the Executive shall have the right to convert the N.W. Life policy into an individual life insurance policy where the Executive becomes the owner of such policy at no additional cost to the Executive, other than the payment of premiums following the said conversion in accordance with the terms and conditions of Article 18.1. (b) The Executive is entitled to participate in the Corporation's Group Disability Insurance which pays a monthly benefit equal to the lesser of 60 percent of Base Salary or $10,000. The Corporation also supplements the Group Disability Insurance with individual Supplemental Long Term Disability Insurance, such policy being currently underwritten by The Guardian Insurance Company and providing an additional benefit of $3,250 per month. It is understood that the amount of the benefit may change from time to time, in accordance with the Base Salary of the Executive. (c) The Executive is entitled to participate in the Corporation's Health, Dental and Vision Plans which may change from time to time in accordance with the Corporation's policies. All premiums on health and dental are paid by the Corporation. ARTICLE 13 PENSION BENEFITS 13.1 The Executive is eligible to enroll in the Corporation 401(K) Plan and the Top Executive Supplemental Retirement Plan (the "Supplemental Plan"), the whole in accordance with the terms and conditions of any such plans. 13.2 The Corporation recognizes that the Executive has been credited with ten (10) years and five (5) months of service under the Supplemental Plan as at December 31, 1999. 13.3 The Executive is entitled to participate in the Corporation's 401(K) Plan, the terms of which require the Corporation to match employee contributions equal to 4 percent of earnings up to a maximum of $6,800 per year, as at January 1, 2000. ARTICLE 14 AUTOMOBILE AND OTHER     14.1 A company car of the Executive's choice shall continue to be provided to the Executive for her personal and professional use and all reasonable and direct expenses relating thereto shall be reimbursed to the Executive by the Corporation, upon presentation of all receipts and other documentation in support thereof; the make and model of the said car shall first be approved by the CEO of the Corporation. 14.2 The Company will reimburse up to $5,000 per year to the Executive for annual accounting, financial planning and tax preparation fees upon presentation of receipts and other documentation in support thereof. 14.3 The Executive shall be entitled to $36,000 annually in rent offset expenses. 14.4 The Corporation shall pay the costs incurred by the Executive to join one business club and one sport club. 14.5 The Corporation shall reimburse the Executive for two round trips per month (coach class) between New York City and Montreal. 14.6 The Executive shall be reimbursed for all reasonable out-of-pocket expenses actually and properly incurred by her in the performance of her duties hereunder, upon presentation of expense statements, vouchers, receipts or other such supporting documentation as the Corporation may reasonably require. ARTICLE 15 TERMINATION OF THE AGREEMENT 15.1 The parties hereto acknowledge and expressly agree that the employment of the Executive by the Corporation may be terminated upon any one of the following eventualities: (a) at any time, for Cause, upon simple written notice from the Corporation to the Executive, the whole without other notice or pay in lieu of notice or any indemnity whatsoever, except for accrued but unpaid vacation pay; or (b) upon thirty (30) days notice in writing from the Executive to the Corporation, specifying the intention of the Executive to resign effective at the end of such notice period, in which event, the Corporation shall pay to the Executive her Base Salary up to the end of the notice period and any accrued and unpaid vacation pay and earned but unpaid bonuses, as well as the amounts and benefits provided under Article 18, and the Corporation shall have no further obligations hereunder in the event of such resignation of the Executive; or (c) at any time, without Cause, upon thirty (30) days notice in writing from the Corporation to the Executive, in which event the Corporation shall pay to the Executive her Base Salary to the end of the notice period, her banked vacation pay, earned but unpaid bonuses, as well as the amounts and applicable termination benefits provided under Article 18; or (d) in accordance with Article 16.1, or (e) upon the death or Incapacity of the Executive. In any of these circumstances, the Executive's spouse or estate shall to the extent applicable, be entitled to the amounts and applicable benefits under Article 18. 15.2 The Executive hereby recognizes and accepts that the Corporation shall not, in any case, be responsible for any additional amount, indemnity in lieu of notice, severance pay or other damages arising from the termination of this Agreement, above and beyond those specifically provided for in this Agreement; 15.3 If the Board of Directors is satisfied that doing so will not prejudice the Corporation or materially increase the cost to the Corporation, the Corporation shall accede to a request by the Executive to vary the nature, manner and timing of payments to be made to the Executive pursuant to this Agreement in order to optimize the Executive's financial planning. 15.4 It shall be a condition precedent of any payment to the Executive or for the Executive's benefit on termination, other than Base Salary and vacation pay, that the Executive sign and deliver to the Corporation a full and satisfactory release of all claims against the Corporation other than for the payments and benefits provided for in this Agreement. ARTICLE 16 CHANGE IN CONTROL 16.1 In the event that a Change in Control occurs after the date hereof and during the term of the Executive's employment with the Corporation, and the Executive's employment is thereafter terminated either: (a) within the period of twelve (12) months following the Change of Control, by the Corporation without Cause, other than for death, disability or voluntary retirement at normal retirement age; or (b) within the period of two hundred and sixty-five (265) days that follow the first one hundred (100) days following the Change in Control, by the Executive for any reason whatsoever,   the Executive shall be entitled to a lump sum payment of gross $230,000, less applicable deductions, payable within five (5) business days following the Executive's last day of work. ARTICLE 17 TRANSACTION BONUS 17.1 The parties recognize that it may be in the Corporation's best interest for the parties to actively seek a Strategic Corporate Transaction for the Corporation. 17.2 In the event that during the term of the Executive's employment with the Corporation, a Strategic Corporate Transaction is completed, the Executive shall be entitled to receive as a bonus, in one lump sum payment payable to the Executive within five (5) business days of the completion of the said transaction, the applicable one of the following gross amounts: (a) $250,000, less applicable deductions, in the event that the aggregate of the cash consideration and the cash equivalent value of the non-cash consideration payable on completion of the Strategic Corporate Transaction is less than Canadian $0.19 per outstanding common share of the Corporation; or (b) $500,000, less applicable deductions, in the event that the aggregate of the cash consideration and the cash equivalent value of the non-cash consideration payable on completion of the Strategic Corporate Transaction is equal to or greater than Canadian $0.19 per outstanding common share of the Corporation. 17.3 For the purpose of determining the cash equivalent value of any non-cash consideration payable in connection with a Strategic Corporate Transaction if such non-cash consideration consists of shares of a publicly traded company, the weighted average trading price at which such shares have traded, on the principal stock exchange on which they are listed or posted for trading, on the ten trading days preceding the date on which such transaction was completed shall be used. ARTICLE 18 OTHER TERMINATION BENEFITS 18.1 In addition to any amounts that may be owed to the Executive pursuant to Articles 15.1 or 16.1, the Corporation shall remit to the Executive upon the termination of the Executive's employment for any reason other than Cause, the amount of $230,000, less applicable deductions, which amount has been fully accrued in the Corporation's 1998 audited financial statements, plus the following benefits: (i) a lump sum payment equal to the present value, as of the date of termination, of the Corporation's cost of providing coverage under the non-group portion of the Executive's life insurance policies owned by the Corporation on the Executive's life in force immediately prior to the date of termination for a period of three (3) years from the date of termination; (ii) entitlement, for a period of three (3) years following the date of termination, to the Corporation's medical, dental, drug and other health benefits and thereafter, at the election of the Executive and upon payment of all premiums associated therewith from time to time by the Executive, to continue to be entitled to the benefits of the Corporation's medical, dental, drug and other health programs; (iii) not later than the thirtieth day following the date of termination, the Corporation shall transfer to the Executive if the Executive so elects the automobile, if any, placed at her disposal, at the date of termination, at no cost to the Executive, other than such income tax as she may be required to pay; (iv) if the Executive incurs legal or other fees and expenses in an effort to establish entitlement to compensation and benefits under this Agreement or otherwise enforce the terms of this Agreement and is successful in her efforts, the Company shall reimburse to the Executive such fees and expenses incurred subject to and within ten (10) days of the receipt by the Corporation of proper documentation therefor; (v) for the purpose of the Corporation's Head Office Top Executives Supplementary Pension Plan only, a credit of two (2) years past service in addition to the period of past service to which the Executive is otherwise entitled as per Article 13.2, and the Executive shall be fully vested in any pension accrued hereunder; (vi) subject to her obligations pursuant to Article 8 above, the Executive shall, at no cost, retain possession of and acquire title to the personal computer in her possession at the date of her cessation of employment; (vii) if the Executive's employment ceases, and the Executive relocates to Canada within six (6) months from such cessation, the Corporation shall pay for all reasonable moving costs related to such relocation; 18.2 The benefits set out in clause 18.1 shall be provided at the time and in the manner therein set out in clause 18.1 and the payments of money shall be made in one lump sum, less applicable deductions, no later than five (5) days following the date of termination of the Executive's employment. ARTICLE 19 PROPERTY OF THE CORPORATION 19.1 The Executive hereby agrees to return to the Corporation, immediately upon termination of this Agreement and without making copies or disclosing information relating thereto, any and all documents, reproductions thereof, equipment, including but not limited to, printers and telecopiers if any, and other property belonging to the Corporation. ARTICLE 20 COOPERATION WITH EMPLOYER AFTER TERMINATION OF THE AGREEMENT 20.1 The Executive hereby undertakes, after the termination of this Agreement (except in the case of termination for Cause) to cooperate with the Corporation in all matters related to the conclusion of ongoing work or projects and to facilitate an orderly transfer of responsibilities or functions and duties hereunder to such other employees as may be designated by the Corporation. 20.2 Notwithstanding any provision to the contrary in any unanimous shareholders' agreement between the parties, the Executive hereby undertakes to resign as Director and Officer of the Corporation and subsidiaries or affiliated companies, upon termination of her employment for any reason whatsoever. ARTICLE 21 CONFIDENTIALITY OF AGREEMENT 21.1 The Executive hereby agrees to keep strictly confidential all information concerning the present Agreement except as required by regulatory disclosure requirements. ARTICLE 22 GENERAL 22.1 Further Assurances. The parties hereby agree in their own name and on behalf of, as the case may be, their respective heirs, legatees, successors, trustees and beneficiaries, testamentary executors and permitted assigns, to sign all documents and to take all necessary or desirable measures to fulfill the terms and intent of this Agreement. 22.2 Notice. Any offer, notice, direction or other instrument required or permitted to be given hereunder shall be in writing and given by registered mail, by delivery or sent by telecopier or similar telecommunications device and addressed to the other party at the address of such party first mentioned in this Agreement. Any notice, direction or other instrument given as aforesaid shall be deemed to have been effectively given and received, if by registered mail then on the date of delivery thereof, if sent by telecopier or similar telecommunications device on the next business day following such transmission or, if delivered, to have been given and received on the date of such a delivery. Any address for service may be changed by written notice given as aforesaid. 22.3 Assignment. Except as otherwise expressly provided for herein, this Agreement, and the rights granted and the obligations incurred hereunder, are not assignable, whether in whole or in part, by the Executive without the prior written consent of the Corporation. IN WITNESS WHEREOF this Agreement has been executed by the parties hereto on the date and at the place first hereinabove mentioned.     REPAP ENTERPRISES INC. "Michelle A. Cormier" Michelle A. Cormier Date: June 28, 2000   Per: "Harold (Hap) Stephen" Harold (Hap) Stephen Chairman of the Board of Directors Date: June 28, 2000     Per: "Stephen C. Larson" Stephen C. Larson President & CEO Date: June 28, 2000 SCHEDULE A   "Agreement" shall mean this Employment Agreement and all instruments supplemental hereto or in amendment or confirmation hereof; "herein", "hereof", "hereto", "hereunder" and similar expressions mean and refer to this Agreement and not to any particular Article, Section, Subsection or other subdivision; "Article", "Section", "Subsection" or other subdivision of this Agreement means and refers to the specified Article, Section, Subsection or other subdivision of this Agreement. "Cause" shall mean any of the following circumstances: (1) the Executive shall have been convicted of any act constituting a felony; (2) the Executive shall have habitually abused any substance (such as alcohol or narcotics, other than as prescribed by a physician); or (3) the Executive shall have engaged in acts of fraud, material dishonesty or gross negligence in connection with the business of the Company, or (4) a willful failure or refusal by the Executive to perform her customary duties or services or any other conduct that negatively affects the reputation of the Corporation. "Change in Control" shall mean the occurrence of any of the following events after the date hereof: (a) the purchase of at least twenty-five percent (25 percent) of the outstanding common shares of the Corporation or of Repap New Brunswick Inc. by a buyer who is a forest products industry participant; or (b) the purchase of at least thirty-three percent (33 percent) of the outstanding common shares of the Corporation or of Repap New Brunswick Inc. by a buyer other than a buyer who is described in sub-paragraph (a) of this definition; or (c) the sale of substantially all of the assets of Repap New Brunswick Inc.; or (d) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Corporation or Repap New Brunswick Inc. (a "Business Combination"), unless immediately following such Business Combination: more than 66 percent of the total voting power of (x) the Corporation resulting from such Business Combination (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100 percent of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by the common shares of the Corporation or of Repap New Brunswick, Inc., as applicable, that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such common shares were converted pursuant to such Business Combination). "Confidential Information" shall mean all information, howsoever received by the Executive from, through or relating to the Corporation, and in whatever form (whether oral, written, machine readable or otherwise), which pertains to the Corporation; provided, however, that the phrase "Confidential Information" shall not include information which: (a) is in the public domain, without any fault or responsibility on the Executive's part; (b) is properly within the legitimate possession of the Executive prior to its disclosure hereunder and without any obligation of confidence attaching thereto; (c) after disclosure, is lawfully received by the Executive from another Person who is lawfully in possession of such Confidential Information and such other Person was not restricted from disclosing the said information to the Executive; (d) is approved by the Corporation for disclosure prior to its actual disclosure. "Governmental Body" shall mean: (a) any domestic or foreign national, federal, provincial, state, municipal or other government body; (b) any subdivision, ministry, department, secretariat, bureau, agency, commission, board, instrumentality or authority of any of the foregoing governments or bodies; (c) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing governments or bodies; or (d) any domestic or foreign judicial, quasi-judicial, arbitration or administrative court, grand jury, commission, board or panel. "Incapacity" shall mean any medical condition whatsoever, which leads to the Executive's absence from job function for a continuous period of six (6) months, without the Executive being able to resume functions on a full time basis at the expiration of such period and unsuccessful attempts to return to work for periods under fifteen (15) days shall not interrupt the calculation of the said six (6) month period. "Person" shall mean any individual or other entity possessed of juridical personality, including, without limitation, a corporation, company, cooperative, partnership, trust, unincorporated association or Governmental Body; and pronouns when they refer to a Person shall have a similarly extended meaning. "Strategic Corporate Transaction" shall mean a major transaction that provides value to the holders of common shares of the Corporation and includes a takeover bid with respect to all of the common shares of the Corporation, amalgamation, merger, sale of substantially all of the Corporation's or of Repap New Brunswick Inc.'s assets, plan of arrangement, reorganization, recapitalization, other business combination or similar transaction involving the Corporation or Repap New Brunswick Inc. or any other manner which would be in the best interests of the Corporation's shareholders and which may or may not adversely affect the Executive's employment with the Corporation subsequent to such transaction. Provided that, for the purposes hereof, a Strategic Corporate Transaction shall not include any action taken or notice given by or against the Corporation or Repap New Brunswick Inc. with a view to the winding-up, liquidation, reorganization, relief or protection from creditors of the Corporation or of Repap New Brunswick Inc. including under the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or similar legislation in the United States or any other jurisdiction; nor shall a Strategic Corporate Transaction include an amalgamation, merger, plan of arrangement, reorganization, recapitalization or similar form of corporate transaction involving the Corporation or Repap New Brunswick Inc. unless immediately following such transaction, less than 50 percent of the total voting power of (x) the Corporation resulting from such transaction (the "Surviving Corporation"), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of 100 percent of the voting securities eligible to elect directors of the Surviving Corporation (the "Parent Corporation"), is represented by the common shares of the Corporation or of Repap New Brunswick, Inc., as applicable, that were outstanding immediately prior to such transaction (or, if applicable, is represented by shares into which such common shares were converted pursuant to such transaction).  

EXHIBIT 10(n) -------------------------------------------------------------------------------- $1,500,000,000 364-DAY SECOND AMENDED AND RESTATED COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY among DELPHI AUTOMOTIVE SYSTEMS CORPORATION, The Several Lenders from Time to Time Parties Hereto BANK OF AMERICA, NATIONAL ASSOCIATION, BANK ONE, N.A., BARCLAYS BANK PLC, CITIBANK, N.A., DEUTSCHE BANK AG NEW YORK BRANCH, and DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Syndication Agents and THE CHASE MANHATTAN BANK, as Administrative Agent Dated as of June 23, 2000 -------------------------------------------------------------------------------- CHASE SECURITIES INC., as Lead Arranger and Book Manager --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- TABLE OF CONTENTS               Page -------------------------------------------------------------------------------- SECTION 1. DEFINITIONS 1 1.1 Defined Terms 1 1.2 Other Definitional Provisions 12 SECTION 2. AMOUNT AND TERMS OF THE FACILITIES 12 2.1 Revolving Credit Commitments 12 2.2 Procedure for Revolving Credit Borrowing 13 2.3 Competitive Borrowings 13 2.4 Termination or Reduction of Commitments 16 2.5 Prepayments 17 2.6 Conversion and Continuation Options 17 2.7 Minimum Amounts of Eurodollar Borrowings 17 2.8 Repayment of Loans; Evidence of Debt 18 2.9 Interest Rates and Payment Dates 18 2.10 Facility Fee 20 2.11 Computation of Interest and Fees 20 2.12 Inability to Determine Interest Rate 20 2.13 Pro Rata Treatment and Payments 21 2.14 Illegality 22 2.15 Increased Costs 22 2.16 Taxes 23 2.17 Indemnity 25 2.18 Notice of Amounts Payable; Relocation of Lending Office; Mandatory Assignment 25 2.19 Commitment Increases 26 SECTION 3. REPRESENTATIONS AND WARRANTIES 28 3.1 Financial Condition 28 3.2 Corporate Existence; Compliance with Law 28 3.3 Corporate Power; Authorization; Enforceable Obligations 28 3.4 No Legal Bar; No Default 29 3.5 No Material Litigation 29 3.6 Federal Regulations 29 3.7 Investment Company Act 29 3.8 ERISA 29 3.9 No Material Misstatements 29 3.10 Environmental Matters 30 3.11 Subsidiaries 30 3.12 Purpose of Loans 30 SECTION 4. CONDITIONS PRECEDENT 30 4.1 Conditions to Initial Loans 30 4.2 Conditions to Each Loan 31 SECTION 5. AFFIRMATIVE COVENANTS 32 5.1 Financial Statements 32 –i– --------------------------------------------------------------------------------               Page -------------------------------------------------------------------------------- 5.2 Certificates; Other Information 32 5.3 Notices 33 5.4 Conduct of Business and Maintenance of Existence 33 5.5 Books and Records 33 5.6 Environmental Laws 33 SECTION 6. NEGATIVE COVENANTS 34 6.1 Consolidated Leverage Ratio 34 6.2 Indebtedness 34 6.3 Liens 34 6.4 Sale-Leasebacks 34 6.5 Merger, Consolidation, etc. 35 SECTION 7. EVENTS OF DEFAULT 35 SECTION 8. THE ADMINISTRATIVE AGENT 37 8.1 Appointment 37 8.2 Delegation of Duties 37 8.3 Exculpatory Provisions 37 8.4 Reliance by Administrative Agent 38 8.5 Notice of Default 38 8.6 Non-Reliance on Administrative Agent and Other Lenders 39 8.7 Indemnification 39 8.8 Administrative Agent in Its Individual Capacity 40 8.9 Successor Administrative Agent 40 8.10 Syndication Agents and Documentation Agent 40 SECTION 9. MISCELLANEOUS 40 9.1 Amendments and Waivers 40 9.2 Notices 41 9.3 No Waiver; Cumulative Remedies 42 9.4 Survival of Representations and Warranties 42 9.5 Payment of Expenses and Taxes 42 9.6 Successors and Assigns; Participations and Assignments 43 9.7 Adjustments 45 9.8 Counterparts 45 9.9 Severability 46 9.10 GOVERNING LAW 47 9.11 WAIVERS OF JURY TRIAL 47 9.12 Confidentiality 48 –ii– --------------------------------------------------------------------------------       SCHEDULES I Commitments; Competitive Bid Lenders II Addresses for Notices 3.11 Subsidiaries EXHIBITS A Competitive Bid Request B Invitation for Competitive Bids C Competitive Bid D Competitive Bid Accept/Reject Letter E Assignment and Acceptance F-1 Opinion of Drinker Biddle & Reath LLP, counsel for the Borrower F-2 Opinion of Simpson Thacher & Bartlett G Promissory Note for Revolving Credit Loans H Commitment Increase Supplement I Additional Lender Supplement –iii– -------------------------------------------------------------------------------- SECOND AMENDED AND RESTATED COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY, dated as of June 23, 2000 (amending and restating the Amended and Restated Competitive Advance and Revolving Credit Facility dated as of January 3, 2000, which in turn amended and restated the Competitive Advance and Revolving Credit Facility dated as of January 4, 1999), among DELPHI AUTOMOTIVE SYSTEMS CORPORATION, a Delaware corporation (the “Borrower”), the several banks and other financial institutions from time to time parties to this Agreement (the “Lenders”), BANK OF AMERICA, NATIONAL ASSOCIATION, BANK ONE, N.A., BARCLAYS BANK PLC, CITIBANK, N.A., DEUTSCHE BANK AG NEW YORK BRANCH and DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as syndication agents (collectively, the “Syndication Agents”), and THE CHASE MANHATTAN BANK, as administrative agent for the Lenders hereunder (in such capacity, the “Administrative Agent”).         The parties hereto hereby agree as follows: SECTION 1. DEFINITIONS              1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings:         “ABR”: for any day, a rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1%. If for any reason the Administrative Agent shall have determined (which determination shall be conclusive absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, the ABR shall be determined without regard to clause (b) of the first sentence of this definition until the circumstances giving rise to such inability no longer exist. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.         “ABR Loans”: Loans the rate of interest applicable to which is based upon the ABR.         “Additional Lender”: as defined in subsection 2.19(b).           “Additional Lender Supplement”: as defined in subsection 2.19(b).           “Aggregate Commitment”: the aggregate amount of the Lenders’ Commitments.         “Agreement”: this Agreement, as amended, supplemented or otherwise modified from time to time.         “Applicable Margin”: as defined in subsection 2.9(e).   --------------------------------------------------------------------------------         “Assignee”: as defined in subsection 9.6(c).         “Available Commitment”: as to any Lender at any time, the excess, if any, of such Lender’s Commitment over such Lender’s Revolving Credit Loans.         “Board”: the Board of Governors of the Federal Reserve System of the United States (or any successor).         “Borrowing”: a group of Loans of a single Type made by the Lenders (or, in the case of a Competitive Borrowing, by the Lender or Lenders whose Competitive Bids have been accepted pursuant to subsection 2.3) on a single date and as to which a single Interest Period is in effect.         “Business Day”: a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided that when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.         “Chase”: The Chase Manhattan Bank.         “Closing Date”: the date hereof, provided that each of the conditions precedent set forth in subsection 4.1 shall have been satisfied.         “Code”: the Internal Revenue Code of 1986, as amended from time to time.         “Commitment”: as to any Lender, the obligation of such Lender to make Revolving Credit Loans to the Borrower hereunder in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule I, as such amount may be increased or reduced from time to time in accordance with the provisions of this Agreement.         “Commitment Increase Supplement”: as defined in subsection 2.19(b).         “Commitment Percentage”: as to any Lender at any time, the percentage which such Lender’s Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender’s Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding).         “Commitment Period”: the period from and including the date hereof to but not including the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. 2 --------------------------------------------------------------------------------         “Competitive Bid”: an offer by a Lender to make a Competitive Loan pursuant to subsection 2.3.         “Competitive Bid Accept/Reject Letter”: a notification made by the Borrower pursuant to subsection 2.3(f) in the form of Exhibit D.         “Competitive Bid Lenders”: the Lenders specified on Schedule I, as such Schedule is modified from time to time to add additional Competitive Bid Lenders with the consent of the Borrower, as being “Competitive Bid Lenders.”         “Competitive Bid Rate”: as to any Competitive Bid made by a Lender pursuant to subsection 2.3, (i) in the case of a Eurodollar Competitive Loan, the Eurodollar Rate plus (or minus) the Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest offered by the Lender making such Competitive Bid.         “Competitive Bid Request”: a request made pursuant to subsection 2.3(b) in the form of Exhibit A.         “Competitive Borrowing”: a Borrowing consisting of a Competitive Loan or concurrent Competitive Loans from the Lender or Lenders whose Competitive Bids for such Borrowing have been accepted by a Borrower under the bidding procedure described in subsection 2.3.         “Competitive Loan”: a Loan (which shall be a Eurodollar Competitive Loan or a Fixed Rate Loan) made by a Lender pursuant to the bidding procedure described in subsection 2.3.         “Confidential Information Memorandum”: the Confidential Information Memorandum dated May 2000 and furnished to the Lenders.         “Consolidated EBITDA”: for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense (other than interest expense or discount during such period attributable to Permitted Receivables Financing with an aggregate principal amount not in excess of $1,500,000,000), (c) amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (d) depreciation and amortization expense, (e) amortization of intangibles (including, but not limited to, goodwill) and organization costs and (f) any extraordinary, unusual or non-recurring non-cash expenses or losses, and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income and (b) any extraordinary, unusual or non-recurring income or gains, all as determined on a consolidated basis. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “Reference Period”) pursuant to any determination of the Consolidated Leverage Ratio, if 3 --------------------------------------------------------------------------------         during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period may, at the option of the Borrower, be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. As used in this paragraph, “Material Acquisition” means any acquisition of property or series of related acquisitions of property that involves the payment of consideration (including, without limitation, the assumption of debt) by the Borrower and its Subsidiaries in excess of $10,000,000.         “Consolidated Leverage Ratio”: as at the end of any fiscal quarter, the ratio of (a) Consolidated Total Debt on such day (other than any Permitted Receivables Financing outstanding on such date in an aggregate principal amount not to exceed $1,500,000,000 and any other Non-Recourse Debt not related to accounts receivable of the Borrower or any of its Subsidiaries) to (b) Consolidated EBITDA for the four fiscal quarter period ending on such day.         “Consolidated Net Income”: for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.         “Consolidated Total Assets”: at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption “total assets” (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date.         “Consolidated Total Debt”: at any date and without duplication, (i) the aggregate principal amount of (i) all Indebtedness of the Borrower and its Subsidiaries on a consolidated basis and (ii) all guarantees by the Borrower or any of its Subsidiaries of Indebtedness on a consolidated basis of any other Person (other than the Borrower or a Subsidiary) at such date.         “Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.         “Default”: any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.         “Dollars” and “$”: dollars in lawful currency of the United States of America.         “ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to time.         “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, 4 --------------------------------------------------------------------------------   promulgated or entered into by any Governmental Authority, relating to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters relating to the environment.         “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.         “Eurocurrency Liabilities”: for any day, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.         “Eurodollar Borrowing”: a Borrowing comprised of Eurodollar Loans.         “Eurodollar Competitive Loan”: any Competitive Loan bearing interest at a rate determined by reference to the Eurodollar Rate.         “Eurodollar Loan”: any Eurodollar Competitive Loan or Eurodollar Revolving Credit Loan.         “Eurodollar Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate of interest determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Dow Jones Markets Page as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Dow Jones Markets Page (or otherwise on such service), the “Eurodollar Rate” shall be determined by reference to such other publicly available service for displaying eurodollar rates as may be agreed upon by the Administrative Agent and the Borrower or, in the absence of such agreement, the “Eurodollar Rate” shall instead be the rate per annum equal to the average (rounded upward to the nearest 1/100th of 1%) of the respective rates notified to the Administrative Agent by each of the Reference Lenders as the rate at which such Reference Lender is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar 5 --------------------------------------------------------------------------------   Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period.         “Eurodollar Reserve Rate”: with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Rate -------------------------------------------------------------------------------- 1.00 — Eurocurrency Liabilities         “Eurodollar Revolving Credit Loan”: any Revolving Credit Loan bearing interest at a rate determined by reference to the Eurodollar Rate.         “Event of Default”: any of the events specified in Section 7; provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied.         “Federal Funds Effective Rate” shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day of such rates on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it.         “Financial Officer”: with respect to any Person, the chief financial officer, principal accounting officer, a financial vice president, treasurer or assistant treasurer of such Person.         “Fixed Rate Borrowing”: a Borrowing comprised of Fixed Rate Loans.         “Fixed Rate Loan”: any Competitive Loan bearing interest at a fixed percentage rate per annum specified by the Lender making such Loan in its Competitive Bid.         “GAAP”: generally accepted accounting principles in the United States of America as in effect from time to time and as applied by the Borrower in the preparation of its most recent financial statements delivered pursuant to subsection 3.1(b); provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Majority Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied 6 --------------------------------------------------------------------------------   immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.         “Governmental Authority”: any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of government.         “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.         “Increasing Lender”: as defined in subsection 2.19(b).         “Indebtedness”: of any Person at any date, the amount outstanding on such date under notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (including, without limitation, indebtedness for borrowed money evidenced by a loan account).         “Intercompany Sale-Leasebacks”: Sale-Leasebacks involving leases between the Borrower and a Subsidiary or between Subsidiaries.         “Interest Payment Date”: (a) as to any ABR Loan, the last day of each March, June, September and December to occur while such Loan is outstanding and on the date such Loan is paid in full, (b) as to any Eurodollar Loan or Fixed Rate Loan, the last day of the Interest Period applicable thereto and (c) as to any Eurodollar Loan or Fixed Rate Loan, having an Interest Period longer than three months or 90 days, as the case may be, each day which is three months or 90 days, as the case may be, and any multiple thereof, after the first day of the Interest Period applicable thereto; provided that, in addition to the foregoing, each of (x) the date upon which both the Commitments have been terminated and the Loans have been paid in full and (y) the Termination Date shall be deemed to be an “Interest Payment Date” with respect to any interest which is then accrued hereunder.         “Interest Period”: (a) with respect to any Eurodollar Loan:         (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six (or if available to all the Lenders (or, in the case of Eurodollar Competitive Loans, the Lender making such Loans) nine or twelve) months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and           (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or 7 --------------------------------------------------------------------------------   six (or if available to all the Lenders (or, in the case of Eurodollar Competitive Loans, the Lender making such Loans) nine or twelve) months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; and         (b) with respect to any Fixed Rate Loan, the period commencing on the borrowing date with respect to such Fixed Rate Loan and ending such number of days thereafter (which shall be not less than seven days or more than 180 days after the date of such borrowing) as selected by the Borrower in its Competitive Bid Request given with respect thereto.   provided that all of the foregoing provisions relating to Interest Periods are subject to the following:         (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of an Interest Period pertaining to a Eurodollar Loan, the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; and         (2) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.   Notwithstanding anything to the contrary contained in this Agreement, no Interest Period shall be selected by the Borrower which ends on a date after the Termination Date.         “Invitation for Competitive Bids”: an invitation made by the Borrower pursuant to subsection 2.3(c) in the form of Exhibit B.         “Level I Status”: exists at any date if, at such date, the Borrower has senior unsecured long-term debt outstanding, without third-party credit enhancement, which is either rated A- or better by S&P or A3 or better by Moody’s (it being understood that the higher rating prevails); provided that if either S&P or Moody’s shall cease to issue ratings of debt securities generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency (and to correlate the system of ratings of such substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other such rating agency and (b) after such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other rating agency or such substitute rating agency. 8 --------------------------------------------------------------------------------         “Level II Status”: exists at any date if, at such date, Level I Status does not exist and the Borrower has senior unsecured long-term debt outstanding, without third-party credit enhancement, which is either rated BBB+ or better by S&P or Baa1 or better by Moody’s (it being understood that the higher rating prevails); provided that if either S&P or Moody’s shall cease to issue ratings of debt securities generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency (and to correlate the system of ratings of such substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other such rating agency and (b) after such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other rating agency or such substitute rating agency.         “Level III Status”: exists at any date if, at such date, neither Level I Status nor Level II Status exists and the Borrower has senior unsecured long-term debt outstanding, without third party credit enhancement, which is either rated BBB or better by S&P or Baa2 or better by Moody’s (it being understood that the higher rating prevails); provided that if either S&P or Moody’s shall cease to issue ratings of debt securities generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency (and to correlate the system of ratings of such substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other such rating agency and (b) after such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other rating agency or such substitute rating agency.         “Level IV Status”: exists at any date if, at such date, none of Level I Status, Level II Status or Level III Status exists and the Borrower has senior unsecured long-term debt outstanding, without third party credit enhancement, which is either rated BBB- or better by S&P or Baa3 or better by Moody’s (it being understood that the higher rating prevails); provided that if either S&P or Moody’s shall cease to issue ratings of debt securities generally, then the Administrative Agent and the Borrower shall negotiate in good faith to agree upon a substitute rating agency (and to correlate the system of ratings of such substitute rating agency with that of the rating agency for which it is substituting) and (a) until such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other such rating agency and (b) after such substitute rating agency is agreed upon, the foregoing test may be satisfied on the basis of the rating assigned by the other rating agency or such substitute rating agency.         “Level V Status”: exists at any date if, at such date, none of Level I Status, Level II Status, Level III Status or Level IV Status exists.         “Lien”: any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance. 9 --------------------------------------------------------------------------------         “Loan”: a Competitive Loan or a Revolving Credit Loan, as the context shall require; collectively, the “Loans.”         “Majority Lenders”: at any time, Lenders whose Commitment Percentages represent greater than 50% of the aggregate Commitments or, if the Commitments are terminated or for purposes of acceleration pursuant to Section 7, Lenders holding Loans representing greater than 50% of the aggregate principal amount of all Loans outstanding.         “Margin”: as to any Eurodollar Competitive Loan, the margin to be added to or subtracted from the Eurodollar Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan.         “Material Adverse Effect”: a material adverse effect on (a) the financial condition of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or the rights or remedies of the Administrative Agent and the Lenders hereunder.         “Material Agreements”: the material contracts of the Borrower, as such term is defined in Item 601 of SEC Regulation S-K (excluding agreements with officers and directors) and included in Borrower’s most recently filed Form 10-K.         “Moody’s”: Moody’s Investors Service, Inc. and its successors.         “Non-Recourse Debt”: all Indebtedness which, in accordance with GAAP, is not required to be recognized on a consolidated balance sheet of the Borrower as a liability.         “Note”: a promissory note, executed and delivered by the relevant Borrower with respect to its Revolving Credit Loans, substantially in the form of Exhibit G.         “Original Closing Date”: January 4, 1999.           “Other Lender”: as defined in subsection 2.19(a).           “Participant”: as defined in subsection 9.6(b).         “Permitted Receivables Financing”: at any date of determination, the aggregate amount of any Non-Recourse Debt outstanding on such date relating to securitizations or other similar off-balance sheet financings of accounts receivable of the Borrower or any of its Subsidiaries.         “Person”: an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. 10 --------------------------------------------------------------------------------         “Prime Rate”: the rate of interest per annum equal to the prime rate publicly announced by the majority of the Reference Lenders as its prime rate (or similar base rate) in effect at its principal office.         “Reference Lenders”: The Chase Manhattan Bank, Bank of America, National Association, Citibank, N.A., Morgan Guaranty Trust Company and the Bank of New York.         “Register”: as defined in subsection 9.6(d).         “Requirement of Law”: as to any Person, any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.         “Revolving Credit Loans”: as defined in subsection 2.1(a) and shall in any event include any Loans that remain outstanding after the Termination Date pursuant to subsection 2.8.         “Sale-Leasebacks”: as defined in subsection 6.4.           “S&P”: Standard & Poor’s Ratings Services and its successors.         “Significant Subsidiary”: as defined in Rule 1-02 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission and included in the Borrower’s most recently filed Form 10-K.         “Status”: as to the Borrower, the existence of Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status, as the case may be.         “Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned by such Person, or by one or more Subsidiaries, or by such Person and one or more Subsidiaries. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.         “Termination Date”: June 22, 2001.           “Transferee”: as defined in subsection 9.6(f). 11 --------------------------------------------------------------------------------         “Type”: as to any Revolving Credit Loan, its nature as an ABR Loan or a Eurodollar Loan, and as to any Competitive Loan, its nature as a Eurodollar Competitive Loan or a Fixed Rate Loan.         “Utilization”: as of the last day of any fiscal quarter of the Borrower, the percentage equivalent of a fraction (i) the numerator of which is the average daily principal amount of Loans outstanding (after giving effect to any borrowing or payment on such date) during such quarter and (ii) the denominator of which is the average daily amount of the aggregate Commitments of all Lenders during such quarter, after giving effect to any reduction of the Commitments on such day. For purposes of subsection 2.9(e), if for any reason any Loans remain outstanding after termination of the Commitments, the Utilization for each day on or after the date of such termination shall be deemed to be greater than 33%.       1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto.       (b) As used herein, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP.       (c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified.       (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF THE FACILITIES       2.1 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans (“Revolving Credit Loans”) to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding which does not exceed the amount of such Lender’s Commitment. During the Commitment Period, the Borrower may use the Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. Notwithstanding anything to the contrary contained in this Agreement, in no event (after giving effect to the use of proceeds of any Borrowing) shall (i) the amount of any Lender’s Commitment Percentage of a Borrowing of Revolving Credit Loans exceed such Lender’s Available Commitment at the time of such 12 -------------------------------------------------------------------------------- Borrowing or (ii) the aggregate amount of Revolving Credit Loans and Competitive Loans at any one time outstanding exceed the aggregate Commitments then in effect of all Lenders.       (b) The Revolving Credit Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 2.6.       2.2 Procedure for Revolving Credit Borrowing. The Borrower may borrow Revolving Credit Loans under the Commitments during the Commitment Period on any Business Day; provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested borrowing date, if all or any part of the requested Revolving Credit Loans are to be Eurodollar Loans, or (b) one Business Day prior to the requested borrowing date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested borrowing date, (iii) whether the Borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the Borrowing is to be entirely or partly of Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor. Each Borrowing under the Commitments shall be in an amount equal to $10,000,000 or a multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each Borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in subsection 9.2 prior to 11:00 A.M., New York City time, on the borrowing date requested by the Borrower in funds immediately available to the Administrative Agent. Such Borrowing will then immediately be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent.       2.3 Competitive Borrowings.       (a) The Competitive Bid Option. In addition to the Revolving Credit Loans which may be made available pursuant to subsection 2.1, the Borrower may, as set forth in this subsection 2.3, request the Lenders to make offers to make Competitive Loans to the Borrower during the Commitment Period. The Lenders may, but shall have no obligation to, make such offers, and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this subsection 2.3.       (b) Competitive Bid Request. When the Borrower wishes to request offers to make Competitive Loans under this subsection 2.3, it shall transmit to the Administrative Agent a Competitive Bid Request to be received no later than 12:00 Noon (New York City time) on (x) the fourth Business Day prior to the date of Borrowing proposed therein, in the case of a Borrowing of Eurodollar Competitive Loans or (y) the Business Day immediately preceding the date of Borrowing proposed therein, in the case of a Fixed Rate Borrowing, specifying: 13 --------------------------------------------------------------------------------         (i) the proposed date of Borrowing, which shall be a Business Day,         (ii) the aggregate principal amount of such Borrowing, which shall be $5,000,000 or a multiple of $1,000,000 in excess thereof,         (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period contained in subsection 1.1, and         (iv) whether the Borrowing then being requested is to be of Eurodollar Competitive Loans or Fixed Rate Loans. A Competitive Bid Request that does not conform substantially to the format of Exhibit A may be rejected by the Administrative Agent in its sole discretion, and the Administrative Agent shall promptly notify the Borrower of such rejection. The Borrower may request offers to make Competitive Loans for more than one Interest Period in a single Competitive Bid Request. No Competitive Bid Request shall be given within three Business Days of any other Competitive Bid Request pursuant to which the Borrower has made a Competitive Borrowing.       (c) Invitation for Competitive Bids. Promptly after its receipt of a Competitive Bid Request (but, in any event, no later than 3:00 P.M., New York City time, on the date of such receipt) conforming to the requirements of paragraph (b) above, the Administrative Agent shall send to each of the Competitive Bid Lenders an Invitation for Competitive Bids which shall constitute an invitation by the Borrower to each such Lender to bid, on the terms and conditions of this Agreement, to make Competitive Loans pursuant to the Competitive Bid Request.       (d) Submission and Contents of Competitive Bids. (i) Each Lender to which an Invitation for Competitive Bids is sent may submit a Competitive Bid containing an offer or offers to make Competitive Loans in response to such Invitation for Competitive Bids. Each Competitive Bid must comply with the requirements of this paragraph (d) and must be submitted to the Administrative Agent at its offices specified in subsection 9.2 not later than (x) 9:30 A.M. (New York City time) on the third Business Day prior to the proposed date of Borrowing, in the case of a Borrowing of Eurodollar Competitive Loans or (y) 9:30 A.M. (New York City time) on the date of the proposed Borrowing, in the case of a Fixed Rate Borrowing; provided that any Competitive Bids submitted by the Administrative Agent in the capacity of a Lender may only be submitted if the Administrative Agent notifies the Borrower of the terms of the offer or offers contained therein not later than fifteen minutes prior to the deadline for the other Lenders. A Competitive Bid submitted by a Lender pursuant to this paragraph (d) shall be irrevocable.       (ii) Each Competitive Bid shall be in substantially the form of Exhibit C and shall specify:         (A) the date of the proposed Borrowing,         (B) the principal amount of the Competitive Loan for which each such offer is being made, which principal amount (w) may be greater than, equal to or less than the 14 --------------------------------------------------------------------------------   Commitment of the quoting Lender, (x) must be in a minimum principal amount of $5,000,000 or a multiple of $1,000,000 in excess thereof, (y) may not exceed the principal amount of Competitive Loans for which offers were requested and (z) may be subject to a limitation as to the maximum aggregate principal amount of Competitive Loans for which offers being made by such quoting Lender may be accepted,         (C) in the case of a Borrowing of Eurodollar Competitive Loans, the Margin offered for each such Competitive Loan, expressed as a percentage (specified in increments of 1/10,000th of 1%) to be added to or subtracted from such base rate,         (D) in the case of a Fixed Rate Borrowing, the rate of interest per annum (specified in increments of 1/10,000th of 1%) offered for each such Competitive Loan, and         (E) the identity of the quoting Lender. A Competitive Bid may set forth up to five separate offers by the quoting Lender with respect to each Interest Period specified in the related Invitation for Competitive Bids. Any Competitive Bid shall be disregarded by the Administrative Agent if the Administrative Agent determines that it: (A) is not substantially in the form of Exhibit C or does not specify all of the information required by subsection 2.3(d)(ii); (B) contains qualifying, conditional or similar language (except for a limitation on the maximum principal amount which may be accepted); (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bids or (D) arrives after the time set forth in subsection 2.3(d)(i).       (e) Notice to Borrower. The Administrative Agent shall promptly (and, in any event, by 10:00 A.M., New York City time) notify the Borrower, by telecopy, of all the Competitive Bids made (including all disregarded bids), the Competitive Bid Rate and the principal amount of each Competitive Loan in respect of which a Competitive Bid was made and the identity of the Lender that made each bid. The Administrative Agent shall send a copy of all Competitive Bids (including all disregarded bids) to the Borrower for its records as soon as practicable after completion of the bidding process set forth in this subsection 2.3.       (f) Acceptance and Notice by Borrower. The Borrower may in its sole discretion, subject only to the provisions of this paragraph (f), accept or reject any Competitive Bid (other than any disregarded bid) referred to in paragraph (e) above. The Borrower shall notify the Administrative Agent by telephone, confirmed immediately thereafter by telecopy in the form of a Competitive Bid Accept/Reject Letter, whether and to what extent it wishes to accept any or all of the bids referred to in paragraph (e) above not later than (x) 10:30 A.M. (New York City time) on the third Business Day prior to the proposed date of Borrowing, in the case of a Competitive Eurodollar Borrowing or (y) 10:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of a Fixed Rate Borrowing; provided that:         (i) the failure by the Borrower to give such notice shall be deemed to be a rejection of all the bids referred to in paragraph (e) above; 15 --------------------------------------------------------------------------------         (ii) the aggregate principal amount of the Competitive Bids accepted by the Borrower may not exceed the lesser of (A) the principal amount set forth in the related Competitive Bid Request and (B) the excess, if any, of the aggregate Commitments of all Lenders then in effect over the aggregate principal amount of all Loans outstanding immediately prior to the making of such Competitive Loans (and after giving effect to the use of proceeds thereof),         (iii) the principal amount of each Competitive Borrowing must be $5,000,000 or a multiple of $1,000,000 in excess thereof,         (iv) unless there are any limitations contained in a quoting Lender’s Competitive Bid, the Borrower may not accept a Competitive Bid made at a particular Competitive Bid Rate if it has decided to reject any portion of a bid made at a lower Competitive Bid Rate for the same Interest Period, and         (v) the Borrower may not accept any Competitive Bid that is disregarded by the Administrative Agent pursuant to subsection 2.3(d)(ii) or that otherwise fails to comply with the requirements of this Agreement. A notice given by the Borrower pursuant to this paragraph (f) shall be irrevocable.       (g) Allocation by Administrative Agent. If offers are made by two or more Lenders with the same Competitive Bid Rates for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Competitive Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Lenders as nearly as possible (in integral multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers.       (h) Notification of Acceptance. The Administrative Agent shall promptly (and, in any event, by 11:00 A.M., New York City time) notify each bidding Lender whether or not its Competitive Bid has been accepted (and if so, in what amount and at what Competitive Bid Rate), and each successful bidder will thereupon become bound, subject to the other applicable conditions hereof, to make the Competitive Loan in respect of which its bid has been accepted.       2.4 Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days’ notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the Commitments; provided that any termination or reduction of the Commitments that would reduce the Commitments below the aggregate amount of the Loans then outstanding, shall be accompanied by a concurrent prepayment of the Loans which may be made on a non-pro rata basis among the Lenders in the amount necessary to reduce such Loans to an amount that does not exceed the Commitments as so reduced. Any such reduction shall be in an amount equal to $10,000,000 or a multiple of $1,000,000 in excess thereof (or if the Commitments are less than $10,000,000, such lesser amount) and shall reduce permanently the Commitments then in effect. Termination and reduction of the Commitments 16 -------------------------------------------------------------------------------- may be made on a non-pro rata basis among the Lenders; provided, that (a) after giving effect to such termination or reduction, no Lender shall have a Commitment hereunder in excess of 15% of the aggregate Commitments (as so reduced), (b) no Default or an Event of Default has occurred and is continuing and (c) the Loans outstanding shall not exceed the amount of the reduced amount of the Commitments.       2.5 Prepayments. The Borrower may, at any time and from time to time, prepay the Revolving Credit Loans, in whole or in part, without premium or penalty (but subject to the provisions of subsection 2.17), upon at least two Business Days’ irrevocable notice to the Administrative Agent, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Revolving Credit Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to subsection 2.17. Partial prepayments shall be in an aggregate principal amount of $10,000,000 or a multiple of $1,000,000 in excess thereof.       2.6 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Revolving Credit Loans to ABR Loans by giving the Administrative Agent at least one Business Day’s prior irrevocable notice of such election; provided that any such conversion of Eurodollar Revolving Credit Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert ABR Loans to Eurodollar Revolving Credit Loans by giving the Administrative Agent at least three Business Days’ prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Revolving Credit Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Revolving Credit Loans and ABR Loans may be converted as provided herein; provided that (i) no Loan may be converted into a Eurodollar Revolving Credit Loan when any Event of Default has occurred and is continuing and (ii) no Loan may be converted into a Eurodollar Revolving Credit Loan after the date that is one month prior to the Termination Date.       (b) Any Eurodollar Revolving Credit Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term “Interest Period” set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans; provided that no Eurodollar Revolving Credit Loan may be continued as such (i) when any Event of Default has occurred and is continuing or (ii) after the date that is one month prior to the Termination Date and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Eurodollar Revolving Credit Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. 17 --------------------------------------------------------------------------------       2.7 Minimum Amounts of Eurodollar Borrowings. All borrowings, conversions and continuations of Revolving Credit Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Revolving Credit Loans comprising each Eurodollar Borrowing shall be equal to $10,000,000 or a multiple of $1,000,000 in excess thereof and so that there shall not be more than 20 Eurodollar Borrowings outstanding at any one time.       2.8 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to each Lender (i) on the Termination Date (or such earlier date as the Loans become due and payable pursuant to Section 7 or subsection 2.5), the unpaid principal amount of each Loan made by such Lender; provided, that, at the Borrower’s option any Loans outstanding on the Termination Date shall be due and payable in full on the date which is two years following the Termination Date (or such earlier date as the Loans become due and payable pursuant to Section 7 or subsection 2.5) and (ii) on the last day of the applicable Interest Period, the unpaid principal amount of each Competitive Loan made by such Lender. The Borrower hereby further agrees to pay interest in immediately available funds at the office of the Administrative Agent on the unpaid principal amount of such Loans from time to time from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 2.9.       (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to the appropriate lending office of such Lender resulting from each Loan made by such lending office of such Lender from time to time, including the amounts of principal and interest payable and paid to such lending office of such Lender from time to time under this Agreement.       (c) The Administrative Agent shall maintain the Register pursuant to subsection 9.6(d), and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount of each Loan made hereunder, the Type of each Loan made and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof.       (d) The entries made in the Register and accounts maintained pursuant to paragraphs (b) and (c) of this subsection 2.8 shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement.       2.9 Interest Rates and Payment Dates. (a) Each ABR Loan shall bear interest at a rate per annum equal to the ABR. 18 --------------------------------------------------------------------------------       (b) The Loans comprising each Eurodollar Borrowing shall bear interest at a rate per annum equal to (i) in the case of each Eurodollar Revolving Credit Loan, the Eurodollar Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin and (ii) in the case of each Eurodollar Competitive Loan, the Eurodollar Rate for the Interest Period in effect for such Borrowing plus (or minus, as the case may be) the Margin offered by the Lender making such Loan and accepted by the Borrower pursuant to subsection 2.3.       (c) Each Fixed Rate Loan shall bear interest at a rate per annum equal to the fixed rate of interest offered by the Lender making such Loan and accepted by the Borrower pursuant to subsection 2.3.       (d) Subject to the provisions of the following sentence, interest shall be payable in arrears on each Interest Payment Date; provided that interest accruing pursuant to paragraph (f) of this subsection 2.9 shall be payable from time to time on demand. The amount of interest on Revolving Credit Loans to be paid on any Interest Payment Date shall be the amount which would be due and payable if the Utilization for the period for which such interest is paid was less than 33%. On the first Business Day following the last day of each fiscal quarter of the Borrower and on the Termination Date (or, if earlier, on the date upon which both the Commitments are terminated and the Loans are paid in full), the Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders, an additional amount of interest equal to the difference (if any) between (i) the amount of interest which would have been payable during such fiscal quarter (or, in the case of the payment due on the Termination Date, the portion thereof ending on such date) after giving effect to the actual Utilization during such period and (ii) the amount of interest which actually was paid during such period.       (e) The “Applicable Margin” with respect to each Revolving Credit Loan at any date shall be the applicable percentage amount set forth in the table below based upon the Type of such Loan and the Utilization and Status on such date:                                             Level I Level II Level III Level IV Level V Status Status Status Status Status -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- If Utilization is less than 33%: Eurodollar Loans 0.3200 % 0.3850 % 0.4500 % 0.6250 % 0.7000 % ABR Loans 0 % 0 % 0 % 0 % 0 % If Utilization is equal to or greater than 33%: Eurodollar Loans 0.4450 % 0.5100 % 0.5750 % 0.6250 % 0.7000 % ABR Loans 0 % 0 % 0 % 0 % 0 %       (f) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any facility fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall 19 -------------------------------------------------------------------------------- bear interest at a rate per annum which is (x) in the case of overdue principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection 2.9 plus 2% or (y) in the case of overdue interest, facility fee or other amount, the rate described in paragraph (a) of this subsection 2.9 plus 2%, in each case from the date of such non-payment until such amount is paid in full (as well after as before judgment). For purposes of this Agreement, principal shall be “overdue” only if not paid in accordance with the provisions of subsection 2.8.       2.10 Facility Fee. The Borrower shall pay to the Administrative Agent, for the ratable account of the Lenders, a facility fee at the rate per annum equal to (a) for each day that the Borrower has Level I Status, 0.0800% of the aggregate Commitments prior to the Termination Date and 0.0800% of the aggregate outstanding principal amount of the Loans thereafter on such day, (b) for each day that the Borrower has Level II Status, 0.0900% of the aggregate Commitments prior to the Termination Date and 0.0900% of the aggregate outstanding principal amount of the Loans thereafter, (c) for each day that the Borrower has Level III Status, 0.1000% of the aggregate Commitments prior to the Termination Date and 0.1000% of the aggregate outstanding principal amount of the Loans thereafter, (d) for each day that the Borrower has Level IV Status, 0.1250% of the aggregate Commitments prior to the Termination Date and 0.1250% of the aggregate outstanding principal amount of the Loans thereafter and (e) for each day that the Borrower has Level V Status, 0.1750% of the aggregate Commitments prior to the Termination Date and 0.1750% of the aggregate outstanding principal amount of the Loans thereafter. On the first Business Day following the last day of each fiscal quarter of the Borrower and on the Termination Date (or, if earlier, on the date upon which both the Commitments are terminated and the Loans are paid in full), the Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders, the portion of such facility fee which accrued during the fiscal quarter most recently ended (or, in the case of the payment due on the Termination Date, the portion thereof ending on such date). Such facility fee shall be based upon the aggregate Commitments of the Lenders from time to time, regardless of the Utilization from time to time thereunder.       2.11 Computation of Interest and Fees. (a) Interest on all Loans shall be computed on the basis of the actual number of days elapsed over a year of 360 days or, on any date when the ABR is determined by reference to the Prime Rate, a year of 365 or 366 days as appropriate (in each case including the first day but excluding the last day). Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. All fees shall be computed on the basis of a year composed of twelve 30-day months. At any time and from time to time upon request of the Borrower, the Administrative Agent shall deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate applicable to Revolving Credit Loans pursuant to this Agreement. Each change in the Applicable Margin applicable to Loans or the Facility Fee as a result of a change in the Borrower’s Status shall become effective on the date upon which such change in Status occurs. 20 --------------------------------------------------------------------------------       (b) If any Reference Lender shall for any reason no longer have a Commitment, such Reference Lender shall thereupon cease to be a Reference Lender, and if, as a result thereof, there shall only be one Reference Lender remaining, the Borrower and the Administrative Agent (after consultation with the Lenders) shall, by notice to the Lenders, designate another Lender as a Reference Lender so that there shall at all times be at least two Reference Lenders.       (c) Each Reference Lender shall use its best efforts to furnish quotations of rates to the Administrative Agent as contemplated hereby. If any of the Reference Lenders shall be unable or shall otherwise fail to supply such rates to the Administrative Agent upon its request, the rate of interest shall, subject to the provisions of subsection 2.12, be determined on the basis of the quotations of the remaining Reference Lenders.       2.12 Inability to Determine Interest Rate. If the Eurodollar Rate cannot be determined by the Administrative Agent in the manner specified in the definition of the term “Eurodollar Rate” contained in subsection 1.1 of this Agreement, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. Until such time as the Eurodollar Rate can be determined by the Administrative Agent in the manner specified in the definition of such term contained in said subsection 1.1, no further Eurodollar Loans shall be continued as such at the end of the then current Interest Period or (other than any Eurodollar Loans previously requested and with respect to which the Eurodollar Rate previously was determined) shall be made, nor shall the Borrower have the right to convert ABR Loans to Eurodollar Loans.       2.13 Pro Rata Treatment and Payments. (a) Each borrowing of Revolving Credit Loans from the Lenders hereunder, each payment by the Borrower on account of any facility fee hereunder shall be made pro rata according to the respective Commitment Percentages of the Lenders. Reduction of the Commitments of the Lenders may be made pro rata according to the respective Commitment Percentages of the Lenders or on a non-pro rata basis subject to the requirements of subsection 2.4, at the option of the Borrower. Except as contemplated by subsections 2.4 and 2.18(c), each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Credit Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Credit Loans then held by the Lenders. Each payment by the Borrower on account of principal of and interest on any Borrowing of Competitive Loans shall be made pro rata among the Lenders participating in such Borrowing according to the respective principal amounts of their outstanding Competitive Loans comprising such Borrowing.       (b) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set-off or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders, at the Agent’s office specified in subsection 9.2, in Dollars and in immediately available funds. Notwithstanding the foregoing, the failure by the Borrower to make a payment (or prepayment) prior to 12:00 Noon on the due date thereof shall not constitute a Default or Event of Default if such payment is made on such due date; provided, however, that any payment (or prepayment) made after such time on 21 -------------------------------------------------------------------------------- such due date shall be deemed made on the next Business Day for the purposes of interest and reimbursement calculations. The Administrative Agent shall distribute such payments to the relevant Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day.       (c) Unless the Administrative Agent shall have been notified in writing by any Lender prior to the deadline for funding a Borrowing that such Lender will not make the amount that would constitute its Commitment Percentage of such Borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the borrowing date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection 2.13 shall be conclusive in the absence of manifest error. If such Lender’s Commitment Percentage of such Borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such borrowing date, the Administrative Agent shall be entitled to recover such amount with interest thereon at the Federal Funds Effective Rate, on demand, from the Borrower.       2.14 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, such Lender shall give notice thereof to the Administrative Agent and the Borrower describing the relevant provisions of such Requirement of Law (and, if the Borrower shall so request, provide the Borrower with a memorandum or opinion of counsel of recognized standing (as selected by such Lender) as to such illegality), following which (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender’s Loans then outstanding as Eurodollar Loans (including, without limitation, such Lender’s Eurodollar Competitive Loans in the case of clause (ii) below), if any, shall be converted automatically to ABR Loans (i) on the respective last days of the then current Interest Periods with respect to such Loans or (ii) within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 2.17. 22 --------------------------------------------------------------------------------       2.15 Increased Costs. (a) If (i) there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining any Loans or (ii) any reduction in any amount receivable in respect thereof, and such increased cost or reduced amount receivable is due to either:         (x) the introduction of or any change in or in the interpretation of any law or regulation after the date hereof; or         (y) the compliance with any guideline or request made after the date hereof from any central bank or other Governmental Authority (whether or not having the force of law), then (subject to the provisions of subsection 2.18) the Borrower shall from time to time, upon demand by such Lender pay such Lender additional amounts sufficient to compensate such Lender for such increased cost or reduced amount receivable.       (b) If any Lender shall have reasonably determined that (i) the applicability of any law, rule, regulation or guideline adopted after the date hereof pursuant to or arising out of the July 1988 paper of the Basle Committee on Banking Regulations and Supervisory Practices entitled “International Convergence of Capital Measurement and Capital Standards,” or (ii) the adoption after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy affecting such Lender, or (iii) any change arising after the date hereof in the foregoing or in the interpretation or administration of any of the foregoing by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or (iv) compliance by such Lender (or any lending office of such Lender), or any holding company for such Lender which is subject to any of the capital requirements described above, with any request or directive of general application issued after the date hereof regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of any such holding company as a direct consequence of such Lender’s obligations hereunder to a level below that which such Lender or any such holding company could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s policies and the policies of such holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then (subject to the provisions of subsection 2.17) from time to time such Lender may request the Borrower to pay to such Lender such additional amounts as will compensate such Lender or any such holding company for any such reduction suffered, net of the savings (if any) which may be reasonably projected to be associated with such increased capital requirement. Any certificate as to such amounts which is delivered pursuant to subsection 2.18(a) shall, in addition to any items required by subsection 2.18(a), include the calculation of the savings (if any) which may be reasonably projected to be associated with such increased capital requirement; provided that in no event shall any Lender be obligated to pay or refund any amounts to the Borrower on account of such savings.       (c) In the event that any Governmental Authority shall impose any Eurocurrency Liabilities which increase the cost to any Lender of making or maintaining Eurodollar Loans, 23 -------------------------------------------------------------------------------- then (subject to the provisions of subsection 2.18) the Borrower shall thereafter pay in respect of the Eurodollar Loans of such Lender a rate of interest based upon the Eurodollar Reserve Rate (rather than upon the Eurodollar Rate). From and after the delivery to the Borrower of the certificate required by subsection 2.18(a), all references contained in this Agreement to the Eurodollar Rate shall be deemed to be references to the Eurodollar Reserve Rate with respect to each such affected Lender.       2.16 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes or any other tax based upon net income imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement). If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings (“Non-Excluded Taxes”) are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in or pursuant to this Agreement; provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of paragraph (b) of this subsection 2.16. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this subsection 2.16 shall survive the termination of this Agreement and the payment of all other amounts payable hereunder.         (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall:         (i) deliver to the Borrower and the Administrative Agent (A) two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, or successor applicable form, as the case may be, and (B) an Internal Revenue Service Form W-8BEN, or successor applicable form, as the case may be; 24 --------------------------------------------------------------------------------         (ii) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and         (iii) obtain such extensions of time for filing and completing such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Such Lender shall certify (i) in the case of a Form W- 8BEN or W-8ECI, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8BEN, that it is entitled to an exemption from United States backup withholding tax. Each Person not incorporated under the laws of the United States of America or a state thereof that is an Assignee hereunder pursuant to subsection 9.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection 2.16.       2.17 Indemnity. Subject to the provisions of subsection 2.18(a), the Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or reasonable expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of any Loan hereunder after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans or Fixed Rate Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification shall be in an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding the Applicable Margin or Margin included therein) over (ii) the amount of interest (as determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of all other amounts payable hereunder.       2.18 Notice of Amounts Payable; Relocation of Lending Office; Mandatory Assignment. (a) In the event that any Lender becomes aware that any amounts are or will be owed to it pursuant to subsection 2.14, 2.15, 2.16(a) or 2.17, then it shall promptly notify the Borrower thereof and, as soon as possible thereafter, such Lender shall submit to the Borrower a 25 -------------------------------------------------------------------------------- certificate indicating the amount owing to it and the calculation thereof. The amounts set forth in such certificate shall be prima facie evidence of the obligations of the Borrower hereunder; provided, however, that the failure of the Borrower to pay any amount owing to any Lender pursuant to subsection 2.14, 2.15, 2.16(a) or 2.17 shall not be deemed to constitute a Default or an Event of Default hereunder to the extent that the Borrower is contesting in good faith its obligation to pay such amount by ongoing discussions diligently pursued with such Lender or by appropriate proceedings.       (b) If a Lender claims any additional amounts payable pursuant to subsection 2.14, 2.15 or 2.16(a), it shall use its reasonable efforts (consistent with legal and regulatory restrictions) to avoid the need for paying such additional amounts, including changing the jurisdiction of its applicable lending office, provided that the taking of any such action would not, in the reasonable judgment of the Lender, be disadvantageous to such Lender.       (c) In the event that any Lender delivers to the Borrower a certificate in accordance with subsection 2.18(a) (other than a certificate as to amounts payable pursuant to subsection 2.17), or the Borrower is required to pay any additional amounts or other payments in accordance with subsection 2.14, 2.15 or 2.16(a), the Borrower may, at its own expense and in its sole discretion, (i) require such Lender to transfer or assign, in whole or in part, without recourse (in accordance with subsection 9.6), all or part of its interests, rights and obligations under this Agreement (other than any outstanding Competitive Loans) to another Person (provided that the Borrower, with the full cooperation of such Lender, can identify a Person who is ready, willing and able to be an Assignee with respect to thereto) which shall assume such assigned obligations (which Assignee may be another Lender, if such Assignee Lender accepts such assignment) or (ii) during such time as no Default or Event of Default has occurred and is continuing, terminate the Commitment of such Lender and prepay all outstanding Loans (other than Competitive Loans) of such Lender; provided that (x) the Borrower or the Assignee, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Loans (other than Competitive Loans) made by it hereunder and (subject to subsection 2.17) all other amounts owed to it hereunder and (y) such assignment or termination of the Commitment of such Lender and prepayment of Loans does not conflict with any law, rule or regulation or order of any court or Governmental Authority.       2.19 Commitment Increases. (a) Notwithstanding anything to the contrary contained in this Agreement, the Borrower may request from time to time that the Aggregate Commitments be increased by an amount not less than $50,000,000 or a whole multiple of $10,000,000 in excess thereof, provided that the Borrower may only request such an increase once in any six-month period and in no event shall the Aggregate Commitments exceed $2,000,000,000. Such increase in the Aggregate Commitments shall be effected as follows: the Borrower may (i) request one or more of the Lenders to increase the amount of its Commitment (which request shall be in writing and sent to the Administrative Agent to forward to such Lender or Lenders) and/or (ii) arrange for one or more financial institutions not a party hereto (an “Other Lender”) to become parties to and Lenders under this Agreement, provided that (x) the Administrative Agent shall have approved such Other Lender, which approval shall not be unreasonably withheld, and (y) after giving effect to such increase, no Lender shall have a 26 -------------------------------------------------------------------------------- Commitment hereunder which exceeds an amount equal to 15% of the Aggregate Commitments. In no event may any Lender’s Commitment be increased without the prior written consent of such Lender, and the failure of any Lender to respond to the Borrower’s request for an increase shall be deemed a rejection by such Lender of the Borrower’s request. The Aggregate Commitments may not be increased if, at the time of any proposed increase hereunder, a Default or Event of Default has occurred and is continuing. Upon any request by the Borrower to increase the Aggregate Commitments hereunder, the Borrower shall be deemed to have represented and warranted on and as of the date of such request that no Default or Event of Default has occurred and is continuing. Notwithstanding anything contained in this Agreement to the contrary, no Lender shall have any obligation whatsoever to increase the amount of its Commitment, and each Lender may at its option, unconditionally and without cause, decline to increase its Commitment.       (b) If any Lender is willing, in its sole and absolute discretion, to increase the amount of its Commitment hereunder (such a Lender hereinafter referred to as an “Increasing Lender”), it shall enter into a written agreement to that effect with the Borrower and the Administrative Agent, substantially in the form of Exhibit H (a “Commitment Increase Supplement”), which agreement shall specify, among other things, the amount of the increased Commitment of such Increasing Lender. Upon the effectiveness of such Increasing Lender’s increase in Commitment, Schedule I hereto shall, without further action, be deemed to have been amended as appropriate to reflect the increased Commitment of such Increasing Lender. Any Other Lender which, with the consent of the Borrower and the Administrative Agent (which consent, in the case of the Administrative Agent, shall not be unreasonably withheld), is willing to become a party hereto and a Lender hereunder, shall enter into a written agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit I (an “Additional Lender Supplement”), which agreement shall specify, among other things, its Commitment hereunder. When such Other Lender becomes a Lender hereunder as set forth in the Additional Lender Supplement, Schedule I shall, without further action, be deemed to have been amended as appropriate to reflect the Commitment of such Other Lender. Upon the execution by the Administrative Agent, the Borrower and such Other Lender of such Additional Lender Supplement, such Other Lender shall become and be deemed a party hereto and a “Lender” hereunder for all purposes hereof and shall enjoy all rights and assume all obligations on the part of the Lenders set forth in this Agreement, and its Commitment shall be the amount specified in its Additional Lender Supplement. Each Other Lender which executes and delivers an Additional Lender Supplement and becomes a party hereto and a “Lender” hereunder pursuant to such Additional Lender Supplement is hereinafter referred to as an “Additional Lender.”       (c) In no event shall an increase in a Lender’s Commitment or the Commitment of an Other Lender become effective until the Administrative Agent shall have received a certificate from the Borrower, to the effect that the representations and warranties shall be true and correct in all material respects and no Default or Event of Default shall have occurred and be continuing after giving effect to the increase in the Aggregate Commitments resulting from the increase in such Lender’s Commitment or the extension of a Commitment by such Other Lender. In no event shall an increase in a Lender’s Commitment or the Commitment of an Other Lender which results in the Aggregate Commitments exceeding the amount which is authorized at such time in resolutions previously delivered to the Administrative Agent become effective until the 27 -------------------------------------------------------------------------------- Administrative Agent shall have received a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors or the Executive Committee of the Board of Directors of the Borrower authorizing the borrowings contemplated pursuant to such increase, certified by the Secretary or an Assistant Secretary of the Borrower. Concurrently with the execution by an Increasing Lender of a Commitment Increase Supplement or by an Additional Lender of an Additional Lender Supplement, the Borrower shall make such borrowing from such Increasing Lender or Additional Lender, and/or shall make such prepayment of outstanding Revolving Credit Loans, as shall be required to cause the aggregate outstanding principal amount of Revolving Credit Loans owing to each Lender (including each such Increasing Lender and Additional Lender) to be proportional to such Lender’s share of the Aggregate Commitments after giving effect to any increase thereof. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense incurred as a result of any such prepayment in accordance with subsection 2.17, as applicable.       (d) Upon any Lender entering into a Commitment Increase Supplement or any Additional Lender becoming a party hereto, the Administrative Agent shall notify each other Lender thereof and shall deliver to each Lender a copy of the Additional Lender Supplement executed by such Additional Lender and the Commitment Increase Supplement executed by such Increasing Lender. SECTION 3. REPRESENTATIONS AND WARRANTIES       To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that:       3.1 Financial Condition. The Borrower has heretofore furnished to each Lender a copy of the audited consolidated financial statements of the Borrower for the fiscal years ended December 31, 1998 and December 31, 1999 and unaudited consolidated financial statements of the Borrower for the quarterly period ended March 31, 2000. Such financial statements present fairly the financial condition and results of operations of the Borrower and its consolidated Subsidiaries as of, and for the fiscal years and fiscal quarters ended on, such dates in accordance with GAAP (subject, in the case of such quarterly statements, to normal year-end audit adjustments). Other than as disclosed in the Borrower’s 10-K dated February 9, 2000, or in the Confidential Information Memorandum, between December 31, 1999 and the Closing Date, there has been no development or event which has had a Material Adverse Effect.       3.2 Corporate Existence; Compliance with Law. The Borrower (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that all failures to be duly qualified and 28 -------------------------------------------------------------------------------- in good standing could not, in the aggregate, have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.       3.3 Corporate Power; Authorization; Enforceable Obligations. The Borrower has the corporate power and authority, and the legal right, to make, deliver and perform this Agreement and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of this Agreement. No consent or authorization of any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement. This Agreement has been duly executed and delivered on behalf of the Borrower. This Agreement constitutes a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).       3.4 No Legal Bar; No Default. The execution, delivery and performance of this Agreement, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Borrower and will not result in, or require, the creation or imposition of any Lien on any of its properties or revenues pursuant to any such Requirement of Law or Contractual Obligation, except to the extent that all such violations and creation or imposition of Liens could not, in the aggregate, have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.       3.5 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues as of the Closing Date (a) with respect to this Agreement or any of the actions contemplated hereby, or (b) which involves a probable risk of an adverse decision which would materially restrict the ability of the Borrower to comply with its obligations under this Agreement.       3.6 Federal Regulations. No part of the proceeds of any Loans will be used for “buying,” “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or for any purpose which violates the provisions of the Regulations of such Board of Governors.       3.7 Investment Company Act. The Borrower is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended. 29 --------------------------------------------------------------------------------       3.8 ERISA. The Borrower is in compliance with all material provisions of ERISA, except to the extent that all failures to be in compliance could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.       3.9 No Material Misstatements. No report, financial statement or other written information furnished by or on behalf of such Borrower to the Administrative Agent or any Lender pursuant to subsection 3.1 or subsection 5.1(a) contains or will contain any material misstatement of fact or omits or will omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were, are or will be made, not misleading, except to the extent that the facts (whether misstated or omitted) do not result in a Material Adverse Effect. No report, financial statement or other written information furnished by or on behalf of the Borrower for inclusion in the Confidential Information Memorandum contained as of the Closing Date any material misstatement of fact or omitted to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except to the extent that the facts (whether misstated or omitted) do not result in a Material Adverse Effect. Any forward-looking information contained in the Confidential Information Memorandum is based upon good faith judgment believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such information may differ from the projected results set forth therein by a material amount.       3.10 Environmental Matters. Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.       3.11 Subsidiaries. The Subsidiaries listed on Schedule 3.11 constitute all the Subsidiaries of the Borrower on the date hereof which are “significant subsidiaries” within the meaning of Regulation S-X of the U.S. Securities and Exchange Commission (other than as set forth in such schedule).       3.12 Purpose of Loans. The proceeds of the Loans shall be used by the Borrower for its general corporate purposes including transactions with its Subsidiaries. SECTION 4. CONDITIONS PRECEDENT       4.1 Conditions to Initial Loans. The agreement of each Lender to make the initial Loan to be made by it is subject to the satisfaction, prior to or concurrently with the making of such Loan, of the following conditions precedent: 30 --------------------------------------------------------------------------------         (a) Credit Agreement. The Administrative Agent shall have received this Agreement, executed and delivered (including, without limitation, by way of a telecopied signature page) by a duly authorized officer of the Borrower and each Lender.         (b) Secretary’s Certificate. The Administrative Agent shall have received a certificate of the Secretary or Assistant Secretary of the Borrower, in form and substance satisfactory to the Administrative Agent, which certificate shall (i) certify as to the incumbency and signature of the officers of the Borrower executing this Agreement (with the President or a Vice President of the Borrower attesting to the incumbency and signature of the Secretary or Assistant Secretary providing such certificate), (ii) have attached to it a true, complete and correct copy of each of the certificate of incorporation and by-laws of the Borrower or a statement that there have been no changes since those previously delivered in connection with the Original Closing Date, (iii) have attached to it a true and correct copy of the resolutions of the Board of Directors of the Borrower or a duly authorized committee thereof or a duly authorized officer thereof, which resolutions shall authorize the execution, delivery and performance of this Agreement and the borrowings by the Borrower hereunder and (iv) certify that, as of the date of such certificate (which shall not be earlier than the date hereof), none of such certificate of incorporation, by-laws or resolutions shall have been amended, supplemented, modified, revoked or rescinded.         (c) Fees. All fees payable by the Borrower to Chase Securities Inc., the Administrative Agent or any Lender on the Closing Date and all expenses payable under subsection 9.5 for which invoices have been received before the Closing Date shall have been paid.         (d) Legal Opinions. The Administrative Agent shall have received, (i) the executed legal opinion of Drinker Biddle & Reath LLP, counsel to the Borrower, substantially in the form of Exhibit F-1 and (ii) the executed legal opinion of Simpson Thacher & Bartlett, counsel to the Administrative Agent, substantially in the form of Exhibit F-2. The Borrower hereby instructs the counsel referenced in clause (i) to deliver its opinion for the benefit of the Administrative Agent and each of the Lenders.         (e) No Material Adverse Effect. Other than as disclosed in the Borrower’s 10-K dated February 9, 2000 or in the Confidential Information Memorandum, since December 31, 1999, no development or event shall have occurred that has had or could reasonably be expected to have a Material Adverse Effect. The Administrative Agent shall notify the Borrower and each Lender promptly after the satisfaction of the foregoing conditions.       4.2 Conditions to Each Loan. The agreement of each Lender to make any Loan requested to be made by it on any date (including, without limitation, its initial Loan and any Competitive Loan to be made by it) is subject to the satisfaction of the following conditions: 31 --------------------------------------------------------------------------------         (a) Notice of Borrowing. The Administrative Agent shall have received a notice of borrowing, as required by subsection 2.2 or 2.3, as the case may be.         (b) Representations and Warranties. Each of the representations and warranties made by the Borrower in or pursuant to this Agreement shall be true and correct in all material respects on and as of such date as if made on and as of such date, except to the extent any such representation and warranty specifically relates to an earlier date, in which case such representation and warranty shall have been true and correct as of such earlier date.         (c) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date. Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such Loan that the conditions contained in this subsection 4.2 have been satisfied. SECTION 5. AFFIRMATIVE COVENANTS       The Borrower hereby agrees that, so long as the Commitments remain in effect, or any amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall:       5.1 Financial Statements. Furnish to each Lender:         (a) as soon as available, but in any event within 110 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year; and         (b) as soon as available, but in any event not later than 60 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year; all such financial statements shall be complete and correct in all material respects and shall be prepared in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 32 --------------------------------------------------------------------------------       5.2 Certificates; Other Information. Furnish to:         (a) each Lender, concurrently with the delivery of the financial statements referred to in subsections 5.1(a) and 5.1(b), a certificate of a Financial Officer (i) stating that, to the best of such Officer’s knowledge, (A) such financial statements present fairly the financial condition and results of operations of the Borrower and its Subsidiaries for the period referred to therein (subject, in the case of interim statements, to normal year- end audit adjustments) and (B) during such period the Borrower has performed all of its covenants and other agreements contained in this Agreement to be performed by it, and that no Default or Event of Default has occurred, except as specified in such certificate, and (ii) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the provisions of subsection 6.1 on the date of such financial statements;         (b) each Lender, within 15 days after the same become public, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority;         (c) the Administrative Agent, within ten Business Days after the occurrence thereof, written notice of any change in Status; provided that the failure to provide such notice shall not delay or otherwise affect any change in the Applicable Margin or other amount payable hereunder which is to occur upon a change in Status pursuant to the terms of this Agreement; and         (d) the Administrative Agent, promptly, such additional financial and other information as the Administrative Agent, on behalf of any Lender, may from time to time reasonably request and that is reasonably related to such Lender’s credit analysis of the Borrower and which request does not impose an unreasonable burden on the Borrower to satisfy.       5.3 Notices. Promptly give notice to the Administrative Agent and each Lender of (a) the occurrence of any Default or Event of Default, accompanied by a statement of a Financial Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto and (b) so long as the Borrower is not subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, (i) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any affiliate thereof that could reasonably be expected to result in a Material Adverse Effect and (ii) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.       5.4 Conduct of Business and Maintenance of Existence. (a) Continue to engage in its principal line of business as now conducted by it, (b) preserve, renew and keep in full force and effect its corporate existence and (c) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its principal line of 33 -------------------------------------------------------------------------------- business, except, in any such case, as otherwise permitted pursuant to subsection 6.5 or to the extent that failure to do so would not have a Material Adverse Effect.       5.5 Books and Records. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities.       5.6 Environmental Laws. Except as could not in the aggregate reasonably be expected to result in a Material Adverse Effect:         (a) comply with all applicable Environmental Laws, and obtain and comply with and maintain any and all permits, licenses or other approvals required by applicable Environmental Laws; and         (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws. SECTION 6. NEGATIVE COVENANTS       The Borrower hereby agrees that, so long as the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder:       6.1 Consolidated Leverage Ratio. The Borrower shall not, directly or indirectly, permit the Consolidated Leverage Ratio to exceed 3.25 to 1.0 at the end of any fiscal quarter.       6.2 Indebtedness. The Borrower shall not, directly or indirectly, permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness or any guarantee of Indebtedness (other than Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Permitted Receivables Financings), except Indebtedness and guarantees in an aggregate principal amount at any one time outstanding, which when combined with (but without duplication) (i) the aggregate outstanding principal amount of obligations secured by a Lien upon any of the property or revenues of the Borrower or any of its Subsidiaries at such time (other than Liens securing Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Liens securing Permitted Receivables Financings) and (ii) the aggregate amount of Sale-Leasebacks consummated since the Original Closing Date and which are outstanding on the relevant date of determination (other than Sale-Leasebacks to the extent the proceeds thereof are used to refinance any Sale-Leaseback which was in existence on the Original Closing Date and other than Intercompany Sale-Leasebacks), shall not exceed 15% of Consolidated Total Assets as reflected in the most recent annual audited consolidated financial statements of the Borrower delivered pursuant to subsection 5.1(a). 34 --------------------------------------------------------------------------------       6.3 Liens. The Borrower shall not nor shall it permit any Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired (other than Liens securing Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Liens securing Permitted Receivables Financings), except Liens at any one time outstanding with respect to which the aggregate outstanding principal amount of the obligations secured thereby, which when combined with (but without duplication) (i) the aggregate principal amount of Indebtedness and guarantees of Indebtedness of any Subsidiary outstanding at such time (other than Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Permitted Receivables Financings) and (ii) the aggregate amount of Sale-Leasebacks consummated since the Original Closing Date and which are outstanding on the relevant date of determination (other than Sale-Leasebacks to the extent the proceeds thereof are used to refinance any Sale-Leaseback which was in existence on the Original Closing Date and other than Intercompany Sale-Leasebacks), shall not exceed 15% of Consolidated Total Assets as reflected in the most recent annual audited consolidated financial statements of the Borrower delivered pursuant to subsection 5.1(a).       6.4 Sale-Leasebacks. The Borrower shall not nor shall it permit any Subsidiary to, directly or indirectly, enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of any property owned by the Borrower or any Subsidiary (except for Intercompany Sale-Leasebacks), which property has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person (“Sale-Leasebacks”), except for Sale-Leasebacks consummated since the Original Closing Date and which are outstanding on the relevant date of determination (other than Sale-Leasebacks to the extent the proceeds thereof are used to refinance any Sale-Leaseback which was in existence on the Original Closing Date) in an aggregate amount, which when combined with (but without duplication) (i) the aggregate outstanding principal amount of obligations secured by a Lien upon any of the property or revenues of the Borrower or any of its Subsidiaries at the time of entering into any such Sale- Leaseback (other than Liens securing Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Liens securing Permitted Receivables Financings) and (ii) the aggregate principal amount of Indebtedness and guarantees of Indebtedness of any Subsidiary outstanding at such time (other than Indebtedness of any Subsidiary to the Borrower or to any other Subsidiary and other than Permitted Receivables Financings), shall not exceed 15% of Consolidated Total Assets as reflected in the most recent annual audited consolidated financial statements of the Borrower delivered pursuant to subsection 5.1(a).       6.5 Merger, Consolidation, etc. The Borrower shall not, directly or indirectly, merge or consolidate with any other Person, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) or sell or convey all or substantially all of its assets to any Person unless, in the case of mergers and consolidations, (a) the Borrower shall be the continuing corporation and (b) immediately before and immediately after giving effect to such merger or consolidation, no Default or Event of Default shall have occurred and be continuing. 35 -------------------------------------------------------------------------------- SECTION 7. EVENTS OF DEFAULT         If any of the following events shall occur and be continuing:         (a) The Borrower shall (i) fail to pay any principal of any Loan when due in accordance with the terms hereof or (ii) fail to pay any interest on any Loan or any other amount which is payable hereunder and (in the case of this clause (ii) only) such failure shall continue unremedied for more than five Business Days after written notice thereof has been given to the Borrower by the Administrative Agent or the Majority Lenders; or         (b) Any representation or warranty made or deemed made by the Borrower in Section 3 or any certified statement furnished pursuant to subsection 5.2(b) shall prove to have been incorrect on or as of the date made or deemed made or certified if the facts or circumstances incorrectly represented or certified result in a Material Adverse Effect; or         (c) The Borrower shall default in the observance of the agreement contained in subsection 5.3(a) or subsection 5.4(a) or (b) or Section 6; or         (d) The Borrower shall default in the observance or performance of any other agreement contained in this Agreement (other than as provided in paragraphs (a), (b) and (c) of this Section 7), and such default shall continue unremedied for a period of 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or the Majority Lenders; or         (e) The Borrower or any Significant Subsidiary shall default in any payment of $50,000,000 or more of principal of or interest on any Indebtedness or in the payment of $50,000,000 or more on account of any guarantee in respect of Indebtedness, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or guarantee was created; or         (f) Any event or condition occurs that results in any Indebtedness or any guarantee of Indebtedness of the Borrower or any of its Significant Subsidiaries of an aggregate principal amount of $50,000,000 or more becoming due in full or payable in full prior to the scheduled maturity of such Indebtedness or guarantee or that requires the prepayment, repurchase, redemption or defeasance thereof in full, prior to the scheduled maturity of such Indebtedness or guarantee (other than pursuant to any voluntary prepayments, customary due-on-sale clause or any provision requiring prepayment of such Indebtedness based on excess cash flow, permitted asset sales or permitted debt or equity issuances, in each case contained in the terms of such Indebtedness); provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; or         (g) (i) The Borrower or any of its Significant Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, 36 --------------------------------------------------------------------------------   winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Significant Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Significant Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 90 days; or (iii) there shall be commenced against the Borrower or any of its Significant Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 90 days from the entry thereof; or         (h) One or more judgments or decrees shall (i) be entered against the Borrower, (ii) not have been vacated, discharged, satisfied, stayed or bonded pending appeal within 60 days from the entry thereof and (iii) involve a liability (not paid or fully covered by insurance) of either (A) $40,000,000 or more, in the case of any single judgment or decree or (B) $100,000,000 or more in the aggregate, in the case of all such judgments and decrees; or         (i) The Borrower or any of its Significant Subsidiaries shall default in the performance of any of its obligations under, or otherwise fail to observe or perform any covenant, condition or agreement contained in, any of the Material Agreements, to the extent the consequences of any such default or failure could reasonably be expected to result in a Material Adverse Effect; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (g) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section 7, presentment, demand, protest and all other notices of any kind are hereby expressly waived. 37 -------------------------------------------------------------------------------- SECTION 8. THE ADMINISTRATIVE AGENT       8.1 Appointment. Each Lender hereby irrevocably designates and appoints Chase as the Administrative Agent of such Lender under this Agreement, and each such Lender irrevocably authorizes Chase, as the Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent.       8.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.       8.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement (except for its or such Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or for any failure of the Borrower to perform its obligations hereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrower.       8.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the Lender specified in the Register with respect to any amount owing hereunder as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first 38 -------------------------------------------------------------------------------- receive such advice or concurrence of the Majority Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Lenders (or, to the extent that this Agreement expressly requires a higher percentage of Lenders, such higher percentage), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the obligations owing by the Borrower hereunder.       8.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall promptly notify the Borrower (unless the Borrower shall have delivered such notice to the Administrative Agent) and then give notice thereof to the Lenders (provided that the failure to notify the Borrower shall not impair any of the rights of the Administrative Agent and the Lenders with respect to the events and circumstances specified in such notice). The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.       8.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower which may 39 -------------------------------------------------------------------------------- come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.       8.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought under this subsection 8.7 (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their Commitment Percentages immediately prior to such date of payment in full), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the amounts owing hereunder) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct. The Administrative Agent shall have the right to deduct any amount owed to it by any Lender under this subsection 8.7 from any payment made by it to such Lender hereunder and shall provide notice of such calculation to such Lender. The agreements in this subsection 8.7 shall survive the payment of the Loans and all other amounts payable hereunder.       8.8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not the Administrative Agent hereunder. With respect to its Loans made or renewed by it, the Administrative Agent shall have the same rights and powers under this Agreement as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include the Administrative Agent in its individual capacity.       8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 90 days’ notice to the Lenders and the Borrower and following the appointment of a successor Administrative Agent in accordance with the provisions of this subsection 8.9. If the Administrative Agent shall resign as Administrative Agent under this Agreement, then the Majority Lenders shall appoint from among the Lenders willing to serve as Administrative Agent a successor Administrative Agent for the Lenders, which successor Administrative Agent shall be approved by the Borrower (which approval shall not be unreasonably withheld), whereupon such successor Administrative Agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent” shall mean such successor Administrative Agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative 40 -------------------------------------------------------------------------------- Agent or any of the parties to this Agreement or any holders of the obligations owing hereunder. If no successor agent has accepted appointment as Administrative Agent by the date that is 90 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Majority Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement.       8.10 Syndication Agents and Documentation Agent. Neither of the Syndication Agents nor the Documentation Agent shall have any duties or responsibilities hereunder in their capacities as such. SECTION 9. MISCELLANEOUS       9.1 Amendments and Waivers. Neither this Agreement, nor any terms hereof may be amended, supplemented or modified except in accordance with the provisions of this subsection 9.1. The Majority Lenders may, or, with the written consent of the Majority Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights of the Lenders or of the Borrower hereunder or (b) waive, on such terms and conditions as the Majority Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the principal amount of any Loan, or reduce the stated rate of any interest or fee payable hereunder, or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender’s Commitment, in each case without the consent of each Lender directly affected thereby, or (ii) amend, modify or waive any provision of this subsection 9.1 or reduce the percentage specified in the definition of Majority Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement, in each case without the written consent of all the Lenders, or (iii) amend, modify or waive any provision of Section 8 or any other provision of this Agreement governing the rights or obligations of the Administrative Agent without the written consent of the then Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the obligations owing hereunder. In the case of any waiver, the Borrower, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 41 --------------------------------------------------------------------------------       9.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or four days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in Schedule II in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the obligations owing hereunder:       The Borrower: Delphi Automotive Systems Corporation 5725 Delphi Drive Troy, Michigan 48098 Attention: Treasurer Telecopy: (248) 813-2590 Telephone: (248) 813-2592   The Administrative Agent: The Chase Manhattan Bank The Loan and Agency Services Group One Chase Manhattan Plaza 8th Floor New York, New York 10081 Attention: Lenora Kiernan Telecopy: (212) 552-5650 Telephone: (212) 552-7309   with a copy to: The Chase Manhattan Bank 270 Park Avenue 47(th) Floor New York, New York 10017 Attention: Richard Duker Telecopy: (212) 972-9854 Telephone: (212) 270-3057 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsection 2.2, 2.3, 2.4, 2.5 and 2.6 shall not be effective until received.       9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 42 --------------------------------------------------------------------------------       9.4 Survival of Representations and Warranties. All representations and warranties made hereunder and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.       9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses reasonably incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees, disbursements and other reasonable charges of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all its reasonable costs and expenses reasonably incurred in connection with the enforcement of any rights under this Agreement, including, without limitation, the reasonable fees, disbursements and other reasonable charges of counsel to the Administrative Agent and to the several Lenders (other than those incurred in connection with the compliance by the relevant Lender with the provisions of subsection 2.18(a)), and (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay by the Borrower in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind or nature whatsoever (it being understood that this shall not include the fees and disbursements of counsel to any of the Lenders (other than Chase) in connection with (i) their review of this Agreement prior to the Closing Date or (ii) prior to the occurrence of a Default or an Event of Default, any amendment or waiver to this Agreement or any assignment to another Lender pursuant to the terms hereof) with respect to the execution, delivery, enforcement, performance and administration of this Agreement (all the foregoing in this clause (d), collectively, the “indemnified liabilities”); provided that the Borrower shall have no obligation hereunder to the Administrative Agent or any Lender with respect to indemnified liabilities arising from the gross negligence or willful misconduct of the Administrative Agent or any such Lender. The agreements in this subsection 9.5 shall survive repayment of the Loans and all other amounts payable hereunder.       9.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders of the obligations owing hereunder and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender.       (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities 43 -------------------------------------------------------------------------------- (“Participants”) participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder; provided that such Lender shall have given prior written notice to the Borrower of the identity of such Participant. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any obligation owing to it hereunder for all purposes under this Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of this Agreement, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, the Loans or any fees payable hereunder, or postpone the date of the final maturity of the Loans, in each case to the extent subject to such participation. The Borrower hereby agrees that each Participant shall be entitled to the benefits of subsections 2.15, 2.16 and 2.17 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred.       (c) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof (other to an affiliate of a Lender, if such assignment would result in increased costs to the Borrower) or, with the consent of the Borrower (which shall not be unreasonably withheld) and the Administrative Agent, to an additional bank or financial institution (an “Assignee”) all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit E, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower and the Administrative Agent) and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that, unless the Borrower and the Administrative Agent otherwise consent, any such assignment to an Assignee which is not a Lender (before giving effect to such assignment) or an affiliate thereof shall be in a minimum amount of $5,000,000. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of (and be) a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding anything to the contrary contained herein, any Lender may sell, transfer, assign or grant participations in all or any part of the Competitive Loans made by it. 44 --------------------------------------------------------------------------------       (d) The Administrative Agent shall maintain at its address referred to in subsection 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection and copying by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall provide a copy of the Register to the Borrower on a monthly basis.       (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Borrower and the Administrative Agent) together with payment by the Lender to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the assigning Lender, its Assignee and the Borrower.       (f) The Borrower authorizes each Lender to disclose to any prospective Participant, any Participant or any prospective Assignee (each, a “Transferee”) any and all financial information in such Lender’s possession concerning the Borrower and its affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to all Lenders by or on behalf of the Borrower in connection with their respective credit evaluations of the Borrower and its affiliates prior to becoming a party to this Agreement; provided that (i) such Transferee has executed and delivered to the Borrower a written confidentiality agreement substantially in the form of that which has been executed and delivered by each Lender prior to the date hereof and (ii) in the case of any information other than that contained in the Confidential Information Memorandum, the Borrower has been informed of the identity of such Transferee and has consented to the disclosure of such information thereto. Nothing contained in this subsection 9.6(f) shall be deemed to prohibit the delivery to any Transferee of any financial information which is otherwise publicly available.       (g) Nothing herein shall prohibit any Lender from pledging or assigning all or any portion of its Loans to any Federal Reserve Bank in accordance with applicable law. In order to facilitate such pledge or assignment, the Borrower hereby agrees that, upon request of any Lender at any time and from time to time after the Borrower has made its initial borrowing hereunder, the Borrower shall provide to such Lender, at the Borrower’s own expense, a Note evidencing the Revolving Credit Loans owing to such Lender.       9.7 Adjustments. If any Lender (a “benefitted Lender”) shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect 45 -------------------------------------------------------------------------------- thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(g), or otherwise), such that it has received aggregate payments or collateral on account of its Loans in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender’s Loans which are then due and payable, or interest thereon, such benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender’s Loans, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.       9.8 Counterparts. (a) This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.       (b) By its signature hereto, each Lender hereby agrees that this Agreement shall become effective immediately upon the execution and delivery on June 23, 2000 by the Borrower and the Administrative Agent of this Agreement. In the event that this Agreement has not been duly executed and delivered by each Person listed on the signature pages hereto (other than the Borrower and the Administrative Agent, with respect to which the execution and delivery of this Agreement shall be a condition precedent to its effectiveness) on or before the date upon which this Agreement becomes effective in accordance with the immediately preceding sentence, this Agreement shall nevertheless become effective with respect to those Persons who have executed and delivered it on or before such effective date and those Persons who have not executed and delivered it (such Persons, the “Non-Executing Banks”) shall be deemed not to be Lenders hereunder.       (c) On the date of effectiveness of this Agreement, the Borrower may (after consultation with the Administrative Agent) designate one or more Lenders (the “Designated Lenders”) to assume the Commitments which would have been held by the Non-Executing Banks and, if the Designated Lenders agree to assume such Commitments, (i) Schedules I and II shall be deemed to be amended to reflect such increase in the respective Commitment of each Designated Lender and the omission of each Non-Executing Bank as a Lender hereunder and (ii) the respective Commitment of each Designated Lender shall be deemed to be such increased amount for all purposes hereunder.       (d) Notwithstanding anything to the contrary contained herein, (i) the Commitment of a Lender shall not be increased (without the prior written consent of such Lender) as a result of the failure of any other Person to execute and deliver this Agreement or otherwise and (ii) in no event shall the aggregate Commitments of all Lenders exceed $2,000,000,000. 46 --------------------------------------------------------------------------------       9.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.       9.10 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.       9.11 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.       9.12 Confidentiality. Each of the Administrative Agent, the Issuing Lender and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent required by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this subsection, to any Assignee of or Participant in, or any prospective Assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this subsection or (ii) becomes available to the Administrative Agent, the Issuing Lender or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to the Administrative Agent, the Issuing Lender or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this subsection shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. 47 --------------------------------------------------------------------------------       IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.   DELPHI AUTOMOTIVE SYSTEMS CORPORATION   By: --------------------------------------------------------------------------------      Name:      Title:   THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender   By: --------------------------------------------------------------------------------      Name:      Title:   BANK OF AMERICA, NATIONAL ASSOCIATION, as Syndication Agent and as a Lender   By: --------------------------------------------------------------------------------      Name:      Title:   BANK ONE, N.A., as Syndication Agent and as a Lender   By: --------------------------------------------------------------------------------      Name:      Title:   BARCLAYS BANK PLC, as Syndication Agent and as a Lender   By: --------------------------------------------------------------------------------      Name:      Title:   CITIBANK, N.A., as Syndication Agent and as a Lender   By: --------------------------------------------------------------------------------      Name:      Title: --------------------------------------------------------------------------------   DEUTSCHE BANK AG NEW YORK BRANCH, as Syndication Agent   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH, as a Lender   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Syndication Agent and as a Lender   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED   By: --------------------------------------------------------------------------------      Name:      Title:   BANCA COMMERCIALE ITALIANA - NEW YORK BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title: --------------------------------------------------------------------------------   BANCA DI ROMA   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   FLEETBOSTON, N.A   By: --------------------------------------------------------------------------------      Name:      Title:   THE BANK OF NEW YORK   By: --------------------------------------------------------------------------------      Name:      Title:   THE BANK OF NOVA SCOTIA   By: --------------------------------------------------------------------------------      Name:      Title:   BANK OF TOKYO - MITSUIBISHI TRUST COMPANY   By: --------------------------------------------------------------------------------      Name:      Title:   BAYERISCHE LANDESBANK GIROZENTRALE CAYMAN ISLANDS BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title: --------------------------------------------------------------------------------   CREDIT INDUSTRIEL ET COMMERCIAL   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   COMERICA BANK   By: --------------------------------------------------------------------------------      Name:      Title:   COMMERZBANK AG NEW YORK AND GRAND CAYMAN BRANCHES   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   CREDIT LYONNAIS, CHICAGO BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   DAI ICHI KANGYO BANK LTD   By: --------------------------------------------------------------------------------      Name:      Title:   FIRST UNION NATIONAL BANK   By: --------------------------------------------------------------------------------      Name:      Title: --------------------------------------------------------------------------------   BAYERISCHE HYPO-UND VEREINSBANK AG NEW YORK BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   INDUSTRIAL BANK OF JAPAN, LIMITED, NEW YORK BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   KBC BANK N.V   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   KEYBANK NATIONAL ASSOCIATION   By: --------------------------------------------------------------------------------      Name:      Title:   HSBC BANK USA   By: --------------------------------------------------------------------------------      Name:      Title:   HSBC BANK PLC   By: --------------------------------------------------------------------------------      Name:      Title: --------------------------------------------------------------------------------   NATIONAL WESTMINSTER BANK PLC NEW YORK BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   NATIONAL WESTMINSTER BANK PLC NASSAU BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   THE NORTHERN TRUST COMPANY   By: --------------------------------------------------------------------------------      Name:      Title:   THE SANWA BANK, LTD NEW YORK BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   SOCIETE GENERALE   By: --------------------------------------------------------------------------------      Name:      Title:   TORONTO DOMINION (TEXAS), INC   By: --------------------------------------------------------------------------------      Name:      Title:   ABN AMRO BANK N.V   By: --------------------------------------------------------------------------------      Name:      Title:   By: --------------------------------------------------------------------------------      Name:      Title:   ARAB BANKING CORPORATION (B.S.C.) NEW YORK BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:   THE NORINCHUKIN BANK, NEW YORK BRANCH   By: --------------------------------------------------------------------------------      Name:      Title:

EXECUTION COPY FIFTH AMENDMENT TO CREDIT AGREEMENT     This FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), made and entered into as of July 31, 2000, is by and between Health Risk Management, Inc., a Minnesota corporation (the "Borrower"), and U.S. Bank National Association, a national banking association (the "Lender"). RECITALS     1.  The Bank and the Borrower entered into a Credit Agreement dated as of May 1, 1998 as amended by a First Amendment dated as of January 27, 1999, a Second Amendment dated as of June 30, 1999, a Third Amendment dated as of December 21, 1999 and a Fourth Amendment dated as of April 10, 2000 (as amended, the "Credit Agreement"); and     2.  The Borrower desires to amend certain provisions of the Credit Agreement, and the Bank has agreed to make such amendments, subject to the terms and conditions set forth in this Amendment. AGREEMENT     NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby covenant and agree to be bound as follows:     Section 1.  Capitalized Terms.  Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement, unless the context shall otherwise require.     Section 2.  Amendments.  The Credit Agreement is hereby amended as follows:     2.1  Definitions.  The definition of "Revolving Credit Commitment" contained in Section 1.1 of the Credit Agreement is amended to read in its entirety as follows:     "Revolving Credit Commitment": The maximum unpaid principal amount of Revolving Loans which may from time to time be outstanding hereunder, being initially $2,900,000, as the same may be reduced from time to time pursuant to Section 4.3 and, as the context may require, the agreement of the Bank to make Revolving Loans to the Borrower subject to the terms and conditions of this Agreement     2.2  Mandatory Prepayments.  The Credit Agreement is amended to add the following Section 4.5(c):     (c) Within ten Business Days prior to (A) the issuance of any equity securities of the Borrower or any Subsidiary or (B) the incurrence of any subordinated debt by the Borrower or any Subsidiary which is subordinated in right of payment to the payment of the Borrower's obligations under the Credit Agreement in a manner and to an extent that the Bank has approved in writing ("Subordinated Debt"), the Borrower shall give the Bank written notice of (i) such issuance of equity securities or incurrence of Subordinated Debt and (ii) the amount of the net proceeds which the Borrower expects to receive in connection with such issuance of equity securities or incurrence of Subordinated Debt. Immediately following the receipt of any proceeds in connection with such issuance of equity securities or incurrence of Subordinated Debt, the Borrower shall pay to the Bank such portion of such proceeds designated by the Bank in its sole discretion, net of the actual cash expenses paid by the Borrower or any Subsidiary in connection with such issuance or incurrence. Any payments to the Bank under this Section will be applied first to the installments scheduled under the Term Note (in inverse order of their maturities), and then to amounts outstanding under the Revolving Note. --------------------------------------------------------------------------------     2.3  Required Refinancing and Equity Investment.  The Credit Agreement is amended to add the following Section 7.14:     Section 7.14  Required Refinancing and Equity Investment. By not later than August 31, 2000, the Borrower will (i) complete the refinancing of not less than $1,500,000 of trade payables from the Borrower to its trade creditors by converting said payables into stock of the Borrower, and (ii) raise net proceeds of not less than $2,000,000 in the form of an equity investment from an existing shareholder or shareholders of the Borrower. The Borrower will furnish to the Bank written notice of completion of such events.     2.4  New Revolving Note.  Exhibit A to the Credit Agreement is hereby amended to read as set forth on Exhibit A attached to this Amendment.     Section 3.  Effectiveness of Amendments.  The amendments contained in this Amendment shall become effective upon delivery by the Borrower of, and compliance by the Borrower with, the following:     3.1 This Amendment and the Third Amended and Restated Revolving Note in the form of Exhibit A hereto (the "Note"), each duly executed by the Borrower.     3.2 A copy of the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Amendment and the Note certified as true and accurate by its Secretary or Assistant Secretary, along with a certification by such Secretary or Assistant Secretary (i) certifying that there has been no amendment to the Articles of Incorporation or Bylaws of the Borrower since true and accurate copies of the same were previously delivered to the Bank, and (ii) identifying each officer of the Borrower authorized to execute this Amendment, the Note and any other instrument or agreement executed by the Borrower in connection with this Amendment (collectively, the "Amendment Documents"), and certifying as to specimens of such officer's signature and such officer's incumbency in such offices as such officer holds.     3.3 Certified copies of all documents evidencing any necessary corporate action, consent or governmental or regulatory approval (if any) with respect to this Amendment.     3.4 A reaffirmation of the Security Agreement in the form of Exhibits B-1 through B-3 attached to this Amendment, duly executed by each of Health Resource Management, Ltd., HRM Claim Management, Inc., and Institute for Healthcare Quality, Inc..     3.5 The Borrower shall have paid an Amendment and Waiver Fee of $5,000.     3.6 The Borrower shall have satisfied such other conditions as specified by the Bank, including payment of all unpaid legal fees and expenses incurred by the Bank through the date of this Amendment in connection with the Credit Agreement and the Amendment Documents.     Section 4.  Defaults and Waivers.       4.1  Events of Default and Unmatured Events of Default.  The Borrower defaulted under Section 8.18 of the Credit Agreement by (i) permitting its Consolidated Net Income to be less than $500,000 as at March 31, 2000 for the fiscal quarter ended on that date, and (ii) permitting its Consolidated Net Income to be less than $750,000 as at June 30, 2000 for the fiscal quarter ended on that date.     4.2  Waiver.  Upon the date on which this Amendment becomes effective, the Bank hereby waives the Borrower's Defaults and Events of Default described in the preceding Section 4.1 (the "Existing Defaults"). The waiver of the Existing Defaults set forth above is limited to the express terms thereof, and nothing herein shall be deemed a waiver by the Bank of any other term, condition, representation or covenant applicable to the Borrower under the Credit Agreement 2 -------------------------------------------------------------------------------- (including but not limited to any future occurrence similar to the Existing Defaults) or any of the other agreements, documents or instruments executed and delivered in connection therewith, or of the covenants described therein. The waivers set forth herein shall not constitute a waiver by the Bank of any other Default or Event of Default, if any, under the Credit Agreement, and shall not be, and shall not be deemed to be, a course of action with respect thereto upon which the Borrower may rely in the future, and the Borrower hereby expressly waives any claim to such effect.     Section 5.  Representations, Warranties, Authority, No Adverse Claim.       5.1  Reassertion of Representations and Warranties, No Default.  The Borrower hereby represents that on and as of the date hereof and after giving effect to this Amendment (a) all of the representations and warranties contained in the Credit Agreement are true, correct and complete in all respects as of the date hereof as though made on and as of such date, except for changes permitted by the terms of the Credit Agreement, and (b) there will exist no Default or Event of Default under the Credit Agreement as amended by this Amendment on such date which has not been waived by the Bank.     5.2  Authority, No Conflict, No Consent Required.  The Borrower represents and warrants that the Borrower has the power and legal right and authority to enter into the Amendment Documents and has duly authorized as appropriate the execution and delivery of the Amendment Documents and other agreements and documents executed and delivered by the Borrower in connection herewith or therewith by proper corporate, and none of the Amendment Documents nor the agreements contained herein or therein contravenes or constitutes a default under any agreement, instrument or indenture to which the Borrower is a party or a signatory or a provision of the Borrower's Articles of Incorporation, Bylaws or any other agreement or requirement of law, or result in the imposition of any Lien on any of its property under any agreement binding on or applicable to the Borrower or any of its property except, if any, in favor of the Bank. The Borrower represents and warrants that no consent, approval or authorization of or registration or declaration with any Person, including but not limited to any governmental authority, is required in connection with the execution and delivery by the Borrower of the Amendment Documents or other agreements and documents executed and delivered by the Borrower in connection therewith or the performance of obligations of the Borrower therein described, except for those which the Borrower has obtained or provided and as to which the Borrower has delivered certified copies of documents evidencing each such action to the Bank.     5.3  No Adverse Claim.  The Borrower warrants, acknowledges and agrees that no events have been taken place and no circumstances exist at the date hereof which would give the Borrower a basis to assert a defense, offset or counterclaim to any claim of the Bank with respect to the Borrower's obligations under the Credit Agreement as amended by this Amendment.     Section 6.  Affirmation of Credit Agreement, Further References.  The Bank and the Borrower each acknowledge and affirm that the Credit Agreement, as hereby amended, is hereby ratified and confirmed in all respects and all terms, conditions and provisions of the Credit Agreement, except as amended by this Amendment, shall remain unmodified and in full force and effect. All references in any document or instrument to the Credit Agreement are hereby amended and shall refer to the Credit Agreement as amended by this Amendment. The Borrower confirms to the Bank that the Borrower's obligations under the Credit Agreement, as amended by this Amendment are and continue to be secured by the security interest granted by the Borrower in favor of the Bank under the Security Agreement, and all of the terms, conditions, provisions, agreements, requirements, promises, obligations, duties, covenants and representations of the Borrower under such documents and any and all other documents and agreements entered into with respect to the obligations under the Credit 3 -------------------------------------------------------------------------------- Agreement are incorporated herein by reference and are hereby ratified and affirmed in all respects by the Borrower.     Section 7.  Merger and Integration, Superseding Effect.  This Amendment, from and after the date hereof, embodies the entire agreement and understanding between the parties hereto and supersedes and has merged into this Amendment all prior oral and written agreements on the same subjects by and between the parties hereto with the effect that this Amendment, shall control with respect to the specific subjects hereof and thereof.     Section 8.  Severability.  Whenever possible, each provision of this Amendment and the other Amendment Documents and any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be interpreted in such manner as to be effective, valid and enforceable under the applicable law of any jurisdiction, but, if any provision of this Amendment, the other Amendment Documents or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be held to be prohibited, invalid or unenforceable under the applicable law, such provision shall be ineffective in such jurisdiction only to the extent of such prohibition, invalidity or unenforceability, without invalidating or rendering unenforceable the remainder of such provision or the remaining provisions of this Amendment, the other Amendment Documents or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto in such jurisdiction, or affecting the effectiveness, validity or enforceability of such provision in any other jurisdiction.     Section 9.  Successors.  The Amendment Documents shall be binding upon the Borrower and the Bank and their respective successors and assigns, and shall inure to the benefit of the Borrower and the Bank and the successors and assigns of the Bank.     Section 10.  Legal Expenses.  As provided in Section 10.2 of the Credit Agreement, the Borrower agrees to reimburse the Bank, upon execution of this Amendment, for all reasonable out-of-pocket expenses (including attorneys' fees and legal expenses of Dorsey & Whitney LLP, counsel for the Bank) incurred in connection with the Credit Agreement, including in connection with the negotiation, preparation and execution of the Amendment Documents and all other documents negotiated, prepared and executed in connection with the Amendment Documents, and in enforcing the obligations of the Borrower under the Amendment Documents, and to pay and save the Bank harmless from all liability for, any stamp or other taxes which may be payable with respect to the execution or delivery of the Amendment Documents, which obligations of the Borrower shall survive any termination of the Credit Agreement.     Section 11.  Headings.  The headings of various sections of this Amendment have been inserted for reference only and shall not be deemed to be a part of this Amendment.     Section 12.  Counterparts.  The Amendment Documents may be executed in several counterparts as deemed necessary or convenient, each of which, when so executed, shall be deemed an original, provided that all such counterparts shall be regarded as one and the same document, and either party to the Amendment Documents may execute any such agreement by executing a counterpart of such agreement.     Section 13.  Governing Law.  THE AMENDMENT DOCUMENTS SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAW PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS, THEIR HOLDING COMPANIES AND THEIR AFFILIATES. 4 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date and year first above written. BORROWER:   HEALTH RISK MANAGEMENT, INC.           By:                 --------------------------------------------------------------------------------           Title:                 --------------------------------------------------------------------------------   BANK:       U.S. BANK NATIONAL ASSOCIATION           By:                 --------------------------------------------------------------------------------           Title:                 -------------------------------------------------------------------------------- 5 --------------------------------------------------------------------------------

EXHIBIT 10.11 DEMAND PROMISSORY NOTE $                                                               Memphis, Tennessee                _________, 1999 Amount                                                            City, State                                 Date             FOR VALUE RECEIVED, the Undersigned acknowledges that he is indebted to the Lender in the amount stated herein and promises to pay on demand to the order of AUTOZONE, INC., a Nevada corporation, with its principal place of business at 123 South Front Street, Memphis, Tennessee (the "Lender"), the principal sum of ______________________ ($_____________) together with interest thereon from the date hereof to maturity at an annual interest rate of 6%, compounded annually.         Said principal sum is due on demand, and in the absence of any demand is due five years from the date hereof. All installments, prepayments, and other payments of principal and interest are payable to Lender at 123 South Front Street, Memphis, Tennessee 38103, or at such other place as the Lender or holder may hereafter and from time to time designate in writing. Should the Undersigned cease to be employed by Lender prior to this Note being paid in full, the Undersigned hereby authorizes Lender to apply any and all amounts of his final payroll check, or any other amounts owed by Lender to Undersigned or held by Lender for the benefit of the Undersigned, including, but not limited to, stock options, to be applied to this indebtedness.         This Note may be prepaid, in whole or in part, without penalty at anytime. At maturity, or upon demand or default or failure to pay any installment of principal and interest required herein, the entire balance shall be immediately due and payable. Any remedy of Lender or holder upon default of the Undersigned shall be cumulative and not exclusive and choice of remedy shall be at the sole election of Lender or holder. The Undersigned agrees to pay all costs of collection, including reasonable attorney's fees, whether or not any suit, civil action, or other proceeding at law or in equity, is commenced. The Undersigned waives demand, presentment for payment, protest and notice of protest and nonpayment of this Note and expressly agrees to remain bound for the payment of principal, interest and other sums provided for by the terms of this Note, notwithstanding any extension or extensions of the time of, or for the payment of, said principal. No delay or omission on the part of the Lender or holder in exercising any rights shall operate as a waiver of such right. This Note shall be governed by the laws of the State of Tennessee, and each party hereto agrees to venue and jurisdiction in the federal and state courts located in Shelby County, Tennessee. Executed on_______________.                                                                                        UNDERSIGNED:                                                                                      ______________________________                                                                                      Printed Name: ___________________                                                                                      ______________________________                                                                                      Social Security Number WITNESS: ______________________________ Printed Name ______________________________ Signature -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SCHEDULE I Name of Officer                Date of Promissory Note            Amount of Promissory Note John C. Adams, Jr.             March 2, 2000                              $   57,000.00 Robert D. Olsen                 May 24, 2000                               $ 270,500.00 Michael E. Longo               October 12 ,2000                         $ 146,965.00

EX-10.21 3 bishop.htm WILLIAM BISHOP EMPLOYMENT AGREEMENT Employment Agreement EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement"), is entered into as of October 2, 2000 (the "Commencement Date"), by MarketWatch.com, Inc. (the "Company") and William Bishop (the "Executive"). 1. Term of Employment: The term of employment of Executive by the Company hereunder shall commence on the Commencement Date and shall continue thereafter on the same terms and conditions for a period of three years unless earlier terminated pursuant to Sections 6 or 7 (such term being hereinafter referred to as the "Employment Period"). The Employment Period shall be extended automatically without further action by either party as of the third anniversary of the Commencement Date for a period of one year, unless prior to such date the Company or the Executive shall notify the other in writing of its or his intention not to renew the Agreement, in which case the Agreement shall terminate at the end of the original term. If the Employment Period is extended, it shall thereafter be referred to as the Employment Period. 2. Title; Duties: The Executive shall serve as Executive Vice President, Business Development of the Company. Executive shall perform those duties and responsibilities inherent in such position including responsibilities as the Chief Executive Officer shall assign. The Executive agrees to devote his full time and best efforts, attention and energies to the business and interests of the Company. Executive shall serve the Company faithfully and to the best of his ability in such capacities, devoting his full business time, attention, knowledge, energy and skills to such employment; provided, however, the Company acknowledges that Executive may serve on the board(s) of directors or board(s) of advisors of other companies with the prior approval of the Company's Board of Directors (the "Board"), which approval shall not be unreasonably withheld. In addition, this paragraph shall not be interpreted to prohibit Executive from acquiring or holding publicly traded equity securities of an entity so long as such securities constitute no more than 5% of the outstanding equity securities of such entity. Executive shall travel as reasonably required in connection with the performance of his duties hereunder. 3. Compensation: The Company shall pay and Executive shall accept as full consideration for his services hereunder, compensation consisting of the following: Base Salary . $170,500 per year base salary during the first year of the term of this Agreement and subject to increase by the Board during successive years of the term of this Agreement. "Base Salary" shall mean the base salary provided for in this Section 3.1. Base Salary is payable in installments in accordance with the Company's normal payroll practices, less such deductions or withholdings as are required by law. Bonus . Annual target bonus at the rate and in accordance with the specifications on Exhibit A attached hereto. 4. Benefits: Subject to all applicable eligibility requirements, and legal limitations, Executive will be able to participate in any and all 401(k), vacation, medical, dental, life and long-term disability insurance and/or other benefit plans which from time to time may be established for other employees of the Company. 5. Reimbursement of Expenses: The Company will reimburse Executive for all reasonable travel, entertainment and other expenses incurred or paid by the Executive in connection with, or related to, the performance of his duties, responsibilities or services under this Agreement subject to review by the Board or its compensation committee, if applicable. Benefit Upon Termination of Employment Period . 6.1 Disability. In the event of the permanent disability (as hereinafter defined) of Executive during the Employment Period, the Company shall have the right, upon written notice to Executive, to terminate Executive's employment hereunder, effective upon the 30th calendar day following the giving of such notice (or such later day as shall be specified in such notice). Upon the effectiveness of such termination, (i) the Company shall have no further obligations hereunder, except to pay and provide, subject to applicable withholding, (A) all amounts of Base Salary accrued, but unpaid, at the effective date of termination, (B) the pro-rata portion of Executive's target bonus for the current year and any amounts of target bonus owed for the previous year(s), and (C) all reasonable unreimbursed business-related expenses,. (ii)  Executive's stock options shall immediately vest and become exercisable to the extent of one additional year of vesting and shall remain exercisable for the periods specified in the stock option. and (iii) Executive shall have no further obligations hereunder other than those provided for in Sections 9 and 10 hereof. All amounts payable to Executive pursuant to this Section 6.1 shall be payable within 30 days following the effectiveness of the termination of Executive's employment or as soon as calculable. For purposes of this Agreement, "permanent disability" shall be defined as any physical or mental disability or incapacitywhich that renders Executive incapablein any material respect of performing essential functions of his position the services required of him in accordance with his obligations under Section 2 for a period of 180 consecutive days, or for 180 days in any 360-day period. 6.2 Death. In the event of the death of Executive during the Employment Period, this Agreement shall automatically terminate and the Company shall have no further obligations hereunder, except to pay and provide to Executive's beneficiary or other legal representative, subject to applicable withholding, (iA) all amounts of Base Salary and bonus accrued but unpaid, at the date of death, and (iiB) all reasonable unreimbursed business-related expenses. All amounts payable to Executive pursuant to this Section 6.2 shall be payable within 30 days following the date of death. 6.3 Termination Without Cause. In the event of the termination of Executive's employment by the Company without Cause (as defined below) or upon the Executive's voluntary termination of his employment for Good Reason (as defined below), (iA) all amounts of Base Salary and bonus accrued but unpaid on the date of termination shall be paid by the Company on the date of termination. (B) any accrued but unpaid bonus amounts shall be paid within 30 days following the date of termination or as soon thereafter as the amounts may be calculated, (iiC) an amount equal to Executive's Base Salary on the date of termination for a period of twelve months shall be paid by the Company in twelve equal installments, and (iiiD) the Executive's stock options shall immediately vest and become exercisable in full and shall remain exercisable for the periods specified in the stock options. 6.4 Circumstances Under Which Termination Benefits Would Not Be Paid. The Company shall only be obligated to pay the amounts of Base Salary and bonus accrued but unpaid on the date of termination, and shall not be obligated to pay Executive the termination benefits or continue the stock option vesting described in subparagraphs 6.1 through 6.3 above if the Employment Period is terminated for Cause or if Executive voluntarily terminates his employment other than for Good Reason (as defined below). For purposes of this Agreement, "Cause" shall be limited to: (A) Willful or repeated failure by Executive to substantially perform his duties hereunder, other than a failure resulting from his complete or partial incapacity due to physical or mental illness or impairment; (B) A material and willful violation of a federal or state law or regulation applicable to the business of the Company or that adversely affects the image of the Company; (C) Commission of a willful act by Executive which constitutes gross misconduct and is injurious to the Company; or (D) A willful breach of a material provision of this Agreement. 6.5 Constructive Termination. Notwithstanding anything in Section 3 or in this Section 6 to the contrary, for purposes of this Agreement the Employment Period will be deemed to have been terminated and Executive will be deemed to have Good Reason for voluntary termination of the Employment Period ("Good Reason"), if there should occur: A material adverse change in Executive's position causing it to be of materially less stature or responsibility without Executive's written consent; A material reduction, without Executive's written consent, in his level of base compensation (including base salary and fringe benefits) by more than ten percent (10%); or (C) A relocation of Executive's principal place of employment outside the San Francisco Bay Area without Executive's consent. Change in Control Benefits : Should there occur a Change in Control (as defined below), then the following provisions shall become applicable: (A) During the period (if any) following a Change in Control that Executive shall continue to remain employed, then the terms and provisions of this Agreement shall continue in full force and effect, and the stock option shall continue to vest and become and remain exercisable in accordance with the terms of the stock option; or (B) In the event of (i) a termination of the Executive's employment by the Company or its successor other than for Cause within twelve (12) months after a Change in Control or (ii) Executive voluntarily terminates his employment for Good Reason within twelve (12) months after a Change in Control: (i) The Company shall pay to Executive an amount equal to (A) all amounts of bonus accrued to the date of termination, (B) 100% of Executive's Base Salary for a period of one year and (C) Executive's target bonus of 40% for a period of one year, in one lump sum amount on or before the fifth business day following the effective date of Executive's termination; and (ii) The unvested portion of the stock options held by Executive on the date of such Change in Control shall immediately vest and become exercisable in full and the stock option shall remain exercisable for the periods specified in the stock option. For purposes of this Section 7, the term "Change in Control" shall mean: (x) The sale, lease, conveyance, liquidation or other disposition of all or substantially all of the Company's assets as an entirety or substantially as an entirety to any person, entity or group of persons acting in concert other than in the ordinary course of business; or (y) Any transaction or series of related transactions (as a result of a tender offer, merger, consolidation or otherwise) that results in any Person (as defined in Section 13(h)(8)(E) under the Securities Exchange Act of 1934) becoming the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of more than 50% of the aggregate voting power of all classes of common equity securities of the Company, except if such Person is (A) a subsidiary of the Company, (B) an employee stock ownership plan for employees of the Company, or (C) a company formed to hold the Company's common equity securities and whose shareholders constituted, at the time such company became such holding company, substantially all the equity owners or shareholders of the Company. In the event that the severance and other benefits provided to Executive pursuant to Section 6 of this Agreement (i) constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and (ii) but for this Section 7, such severance and benefits would be subject to the excise tax imposed by Section 4999 of the Code, then Executive's severance benefits under this Section 7 shall be payable either: (a) in full, or (b) as to such lesser amount which would result in no portion of such severance and other benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits under this Agreement. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 7 shall be made in writing by independent public accountants agreed to by the Company and Executive (the "Accountants"), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 7, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 7. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 7. 8. Dispute Resolution: The Company and Executive agree that any dispute regarding the interpretation or enforcement of this Agreement shall be decided by confidential, final and binding arbitration conducted by Judicial Arbitration and Mediation Services ("JAMS") under the then-existing JAMS rules, rather than by litigation in court, trial by jury, administrative proceeding, or in any other forum. Claims that are filed with or are being processed by the U.S. Equal Employment Opportunity Commission ("EEOC") are excluded from this agreement to arbitrate. 9. Cooperation with the Company After Termination of the Employment Period: Following termination of the Employment Period by Executive, Executive shall fully cooperate with the Company in all matters relating to the winding up of his pending work on behalf of the Company and the orderly transfer of any such pending work to other employees of the Company as may be designated by the Company. Confidentiality; Return of Property; NonSolicitation : (A) The Executive acknowledges that during the Employment Period he will receive confidential information from the Company and subsidiaries of the Company (each a "Relevant Entity"). Accordingly, the Executive agrees that during the Employment Period (as it may be extended from time to time) and thereafter for a period of two years, the Executive and his affiliates shall not, except in the performance of his obligations to the Company hereunder or as may otherwise be approved in advance by the Company, directly or indirectly, disclose or use (except for the direct benefit of the Company) any confidential information that he may learn or has learned by reason of his association with any Relevant Entity. Upon termination of this Agreement, the Executive shall promptly return to the Company any and all properties, records or papers of any Relevant Entity, that may have been in his possession at the time of termination, whether prepared by the Executive or others, including, but not limited to, confidential information and keys. For purposes of this Agreement, "confidential information" includes all data, analyses, reports, interpretations, forecasts, documents and information concerning a Relevant Entity and its affairs, including, without limitation with respect to clients, products, policies, procedures, methodologies, trade secrets and other intellectual property, systems, personnel, confidential reports, technical information, financial information, business transactions, business plans, prospects or opportunities, (i) that the Company reasonably believes are confidential or (ii) the disclosure of which could be injurious to a Relevant Entity or beneficial to competitors of a Relevant Entity, but shall exclude any information that (x) the Executive is required to disclose under any applicable laws, regulations or directives of any government agency, tribunal or authority having jurisdiction in the matter or under subpoena or other process of law, (y) is or becomes publicly available prior to the Executive's disclosure or use of the information in a manner violative of the second sentence of this Section 10(a), or (z) is rightfully received by Executive without restriction or disclosure from a third party legally entitled to possess and to disclose such information without restriction (other than information that he may learn or has learned by reason of his association with any Relevant Entity). For purposes of this Agreement, "affiliate" means any entity that, directly or indirectly, is controlled by, or under common control with, the Executive. For purposes of this definition, the terms "controlled" and "under common control with" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting stock, by contract or otherwise. (B) For a period of one (1) year following the termination of Executive's employment with the Company for any reason, he will not, without the Company' express written consent, either on his own behalf or on behalf of another, solicit employees of the Company or any subsidiary of the Company for the purpose of hiring them. General employment advertising shall not be deemed to be a solicitation. 11. General: 11.1 Indemnification. In the event Executive is made, or threatened to be made, a party to any legal action or proceeding, whether civil or criminal, by reason of the fact that Executive is or was a director or officer of the Company or serves or served any othercorporation fifty percent (50%) or more owned or controlled by the Company in any capacity at the Company' request, Company affiliate, Executive shall be indemnified by the Company, and the Company shall pay Executive's related expenses when and as incurred, all to the fullest extent permitted by law. 11.2 Waiver. Neither party shall, by mere lapse of time, without giving notice or taking other action hereunder, be deemed to have waived any breach by the other party of any of the provisions of this Agreement. Further, the waiver by either party of a particular breach of this Agreement by the other shall neither be construed as, nor constitute a, continuing waiver of such breach or of other breaches by the same or any other provision of this Agreement. 11.3 Severability. If for any reason a court of competent jurisdiction or arbitrator finds any provision of this Agreement to be unenforceable, the provision shall be deemed amended as necessary to conform to applicable laws or regulations, or if it cannot be so amended without materially altering the intention of the parties, the remainder of the Agreement shall continue in full force and effect as if the offending provision were not contained herein. 11.4 Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be considered effective upon personal service or upon transmission of a facsimile or the deposit with Federal Express or in Express Mail and addressed to the Chairman of the Board of the Company at its principal corporate address, and to Executive at his most recent address shown on the Company's corporate records, or at any other address which he may specify in any appropriate notice to the Company. 11.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together constitutes one and the same instrument and in making proof hereof it shall not be necessary to produce or account for more than one such counterpart. 11.6 Entire Agreement. The parties hereto acknowledge that each has read this Agreement, understands it, and agrees to be bound by its terms. The parties further agree that this Agreement shall constitute the complete and exclusive statement of the agreement between the parties and supersedes all proposals (oral or written), understandings, representations, conditions, covenants, and all other communications between the parties relating to the subject matter hereof. 11.7 Governing Law. This Agreement shall be governed by the law of the State of California. 11.8 Assignment and Successors. The rights and obligations of the Company under this Agreement shall inure to the benefit and shall be binding upon the successors and assigns of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.   Marketwatch.com, INC. Larry Kramer, Chief Executive Officer   EXECUTIVE William Bishop   Exhibit A TARGET BONUS AND SPECIFICATIONS Annual Target Bonus Rate : forty percent (40%) of the then-applicable base salary actually paid in a given year. For example, if the base salary actually paid in the second year of the term of this Agreement is $170,500, the maximum target bonus would be $68,200 ($170,500 multiplied by 40%) for that year. Specifications : two components. Discretionary Component : Board may decide when, and if to grant this component. This component shall be 20% of the then- applicable base salary actually paid in a given year. Achievement of Financial Objectives Component : Target Bonus of 20% is payable upon the Company's achievement of the financial objectives, determined annually by the Board.  

EXHIBIT 10.2.11 EMPLOYMENT AGREEMENT         This EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of July 10, 2000, (the “Effective Date”) by and between CONDOR SYSTEMS, INC., a California corporation (the “Company”), and Robert P. Eisenberg (the “Employee”).         WHEREAS, the Company wishes to assure that it will have the benefit of the knowledge and experience of Employee, and Employee is willing and able to provide such knowledge of offer, and         WHEREAS, Employee is willing to enter into an agreement to such end upon the terms and conditions set forth in this Agreement;         NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein contained, the parties hereto agree as follows:         1.  Employment. The Company hereby employs the Employee, and the Employee hereby accepts such employment with the Company, upon the terms and conditions hereinafter set forth.         2.  Term of Employment. Unless earlier terminated as provided in Section 5, the Company shall employ the Employee under this Agreement commencing on the Effective Date and ending on the second anniversary of the Effective Date (the “Employment Period”). On the second and each succeeding anniversary of the Effective Date, the Employment Period shall automatically be extended for one additional year unless, not later than 30 days prior to such anniversary, the Employee or the Company shall have given notice of his or its intention not to extend the Employment Period. This Agreement will have no force and effect until or unless the stockholders of the Company shall have approved this Agreement pursuant to Section 8 of this Agreement.         3.  Title and Duties.               (a) The Employee shall have the title and position of Chief Operating Officer of the Company. In addition to the foregoing, the Company’s Board of Directors (the “Board”) may, in the exercise of its business judgment, elect the Employee to such other office or offices as it may determine during the Employment Period.               (b) In such capacities, Employee shall report to the Chief Executive Officer of the Company. Employee’s duties and responsibilities shall be as specified by the Board or the Chief Executive Officer, but, in general, the Employee shall have such authority and such responsibilities as are consistent with the foregoing positions.               (c) Throughout the Employment Period, the Employee shall devote substantially all of his time, energy, skill and best efforts to the performance of his duties hereunder in a manner that will faithfully and diligently further the business and interests of the Company. Subject to the preceding sentence, the Employee may serve, or continue to serve, on the boards of directors of other entities and may engage in appropriate civic or charitable activities as long as such activities do not interfere or conflict with the performance of the Employee’s duties pursuant to this Agreement and his responsibilities to the Company under this Agreement, and provided that any board of directors position is disclosed to the Board in writing at least 10 days in advance of Employee’s election to such board of directors position.         4. Compensation.               (a) Base Salary. The Company shall pay the Employee as compensation a salary at the beginning rate of $210,000 per year (the “Base Salary”), payable in accordance with the ordinary compensation practices of the Company. The Compensation Committee of the Board shall annually review the Base Salary for possible increase, in its sole discretion.               (b) Bonus. Employee shall be eligible to receive an annual bonus (the “Bonus”) of up to 100% of Base Salary for each calendar year in accordance with the following:                      (A) If EBITDA, as hereunder defined, for any calendar year is less than the Floor EBITDA for such year, the Company will pay the Employee no bonus. 1 --------------------------------------------------------------------------------                      (B) If EBITDA for any calendar year is equal to the Target EBITDA for such year, the Company shall pay the Employee a bonus of 50% of the actual Base Salary paid to the Employee during such calendar year;                      (C) If EBITDA for any calendar year is equal to or greater than the Ceiling EBITDA for such year; the Company shall pay the Employee a bonus of 100% of the actual Base Salary paid to the Employee during such calendar year;                      (D) If EBITDA for any calendar year is greater than the Floor EBITDA for such year but is less than the Target EBITDA for such year, the Company will pay the Employee a bonus calculated by linear interpolation, as described in Attachment I. If EBITDA for any calendar year is greater than the Target EBITDA for such year but is less than the Ceiling EBITDA for such year, the Company will pay the Employee a bonus calculated by linear interpolation, as described in Attachment I;               (c) Definitions. For purposes of this Section 4:                      (A) “EBITDA” means, for each calendar year, the EBITDA number achieved by the Company, as determined annually for purposes of this Agreement by the Compensation Committee of the Board.                      (B) “Floor EBITDA” means, for any applicable calendar year, a projected EBITDA established annually for purposes of this Agreement by the Compensation Committee of the Board, together with the Employee; provided that the 2000 Floor EBITDA shall be $16,100,000.                      (C) “Target EBITDA” means, for any applicable calendar year, a projected EBITDA established annually for purposes of this Agreement by the Compensation Committee of the Board, together with the Employee; provided that the 2000 Target EBITDA shall be $17,600,000.                      (D) “Ceiling EBITDA” means, for any applicable calendar year, a projected EBITDA established annually for purposes of this Agreement by the Compensation Committee of the Board, together with the Employee; provided that the 2000 Ceiling EBITDA shall be $18,700,000.               (d) Reimbursement of Expenses. The Company shall pay or reimburse the Employee for all reasonable travel and other expenses incurred by the Employee in the performance of his obligations under this Agreement, provided that the Employee properly accounts for such expenses in accordance with the policies and procedures of the Company.               (e) Vacation. The Employee shall be entitled to a number of paid vacation days in each calendar year as determined by the Company from time to time for its employees in accordance with Company policy (prorated for any calendar year in which the Employee is employed under this Agreement for less than the entire year).               (f) Fringe Benefits and Perquisites. During the Employment Period, Employee shall be eligible for employee benefits (including fringe benefits, vacation, automobile allowance of $500 per month, pension and life, health, accident and disability insurance).               (g) Withholding. All payments under this Agreement shall be subject to withholding for applicable taxes.               (h) Relocation Expenses. The Company will pay all costs associated with the relocation of the Employee in accordance with the following:                      (A) The Company will reimburse Employee for all reasonable costs associated with the sale of his current home located at 2889 Hampton Cove Way, Owens Cross Rd, AL.                      (B) The Company will reimburse Employee for all reasonable temporary moving and/or storage of goods costs associated with his move from his current home including an initial and final move within 18 months of employment.                      (C) The Company will pay to Employee an amount or amounts sufficient to provide Employee with reasonable temporary living expenses for Employee and his family in connection with Employee’s relocation to an area within reasonable proximity of the Company’s current office. 2 --------------------------------------------------------------------------------                      (D) In addition, a one time bonus of $25,000 will be paid after 30 days of employment.                      (E) If the sale of Employee’s current home located at 2889 Hampton Cove Way, Owens Cross Rd, AL does not yield a minimum sale price of $430,000, the Company will pay to Employee the difference between the final sale price and $430,000.                      (F) Company will reimburse Employee and spouse for house hunting trips.                      (G) The Company will pay to Employee, in addition to all relocation payments otherwise required pursuant to this Section 4(h), an amount such that after payment by Employee of all of Employee’s applicable federal, state and local taxes on such additional amount, Employee will retain an amount sufficient to pay the total of Employee’s applicable federal, state and local taxes arising due to the payments under this Section 4(h).               (i) Stock Awards. Subject to the approval of the Board, on the Effective Date, Employee will be granted 250,000 Performance Options and 300,000 Super Performance Options. Employee shall also be eligible to receive additional equity-based incentive awards as may be approved by the Board from time to time.         5.  Termination. The Employee’s employment by the Company shall be terminated upon the occurrence of any of the following:         (a) By Employee Without Cause. The Employee may terminate his employment under this Agreement upon at least 120 days’ prior notice to the Board of the Company. Upon termination of his employment and upon experiencing a “qualifying event”, as defined in Section 4980B(f)(3) of the Internal Revenue Code of 1986, as amended, COBRA coverage shall be made available to the Employee in compliance with federal law.         (b) By Employee for Good Reason. The Employee may terminate his employment under this Agreement after the Effective Date, upon at least 30 days’ prior notice to the Board of the Company, for Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of the following:                      (i) the occurrence of a “Change in Control.” For purposes of this Agreement, a “Change in Control” shall mean the occurrence of (x) the consolidation, reorganization or merger of the Company with or into another corporation or corporations or other legal entitie(s) not controlled by any entity that is an affiliate of the Company immediately following the Effective Date, or (y) the conveyance of all or substantially all of the stock or assets of the Company to another person or entity not controlled by any entity that is an affiliate of the Company immediately following the Effective Date; provided that a Change in Control shall not be deemed to occur upon the occurrence of an initial public offering of the Company’s capital stock (“IPO”); or                      (B) the Employee’s duties, authority or responsibilities as Chief Operating Officer of the Company, whether managerial or supervisory, are materially diminished without the prior consent of the Employee.               (c)  By the Company for Cause. The Company may terminate the Employee’s employment for Cause. “Cause” for purposes of this Agreement shall mean Employee’s (i) personal dishonesty; (ii) willful misconduct; (iii) breach of fiduciary duty involving personal profit; (iv) intentional failure to perform designated duties or willful refusal to implement decisions of the Board made in good faith; (v) willful violation, for personal financial gain, of any law, rule or regulation; or (vi) material breach of any provision of this Agreement; provided, however, that prior to any proposed Board action pursuant to subparagraph (iv) the Board shall give the Employee reasonable opportunity to respond and, if appropriate, to otherwise perform as directed.               The Employee’s right to compensation and other benefits from the Company under this Agreement shall cease upon the Company’s terminating the Employee’s employment under this Agreement for Cause. The provisions of this Section 5(c) shall take precedence over the provisions of Section 5(a) notwithstanding any prior notice by the Employee to the Company under Section 5(a).               (d) By the Company Without Cause. The Company may terminate the Employee’s employment under this Agreement without Cause therefore at any time. 3 --------------------------------------------------------------------------------         6.  Severance Pay               a) In the event that the Employee’s employment under this Agreement is terminated pursuant to the provisions of Section 5(b) or 5(d), or if the Company pursuant to Section 2 does not renew the employee’s Employment Period, as severance pay the Employee shall be paid a total of $500,000. Such severance pay shall be paid in the form of a standby letter of credit issued by a bank or a lump sum deposit to an escrow account at a bank designated by the Company, and thereafter shall be drawn upon or paid to the Employee in eight equal installments on the last business day of each of the eight fiscal quarters following the quarter during which Employee’s employment is terminated, beginning with such fiscal quarter; provided that the escrow agreement will provide that all payments of Employee’s severance pay will cease if Employee breaches any of the provisions of Section 7 of this Agreement. Employee shall also be entitled to continued eligibility to participate in all health, medical and dental benefit plans of the Company for which Employee was eligible immediately prior to the effective time of the termination of Employee’s employment, or comparable coverage, for two years, or, if sooner, until comparable health insurance coverage is available to Employee in connection with subsequent employment or self-employment. In addition, the termination of the Employee’s employment shall not accelerate the vesting of unvested Options or Stock Appreciation Rights (as such terms are defined in the 1999 Management Incentive Plan) held by the Employee (if any).               (b) In the event that the Employee’s employment under this Agreement is terminated upon the death or disability of the Employee, then the Employee will not be entitled to the severance benefits set forth in Section 6(a); however, the Company will pay to the Employee or the Employee’s spouse (if she is then living) the Employee’s then-current Base Salary in accordance with the Company’s normal pay practices until the earlier of (i) the end of the sixth calendar month following Employee’s termination of active service, or (ii) such time as the Employee’s spouse (or a trust for her benefit) has received proceeds from the insurance policy described in Section 4(f). Any Base Salary paid after the death or disability of the Employee pursuant to clause (i) above shall be repaid to the Company upon the receipt of the insurance proceeds described in clause (ii) by the Employee’s spouse (or by a trust for her benefit). The Company shall also pay to Employee or Employee’s spouse the pro rata portion of Employee’s bonus for the year during which the death or disability of the employee occurs which payment shall not be subject to repayment. As of the date of the death or disability of Employee, all benefits for the Employee pursuant to section 4(d), (e) and (f) of this Agreement shall cease. Options and Stock Appreciation Rights held by the Employee (if any) shall expire on the dates upon which such Option and Stock Appreciation Rights would have expired had it not been for the termination of Employee’s employment or service. The Employee shall have the right to exercise such Options and Stock Appreciation Rights prior to such expiration to the extent such were exercisable at the date of such termination of employment or service and shall not have been exercised. In addition, the termination of the Employee’s employment shall not accelerate the vesting of any unvested Options or Stock Appreciation Rights held by the Employee (if any).               (c) If the Employee terminates his employment pursuant to Section 5(a) and continues to provide services to the Company, or if the Employee’s employment under this Agreement is terminated pursuant to Section 5(c), the Company shall continue to pay the Employee his then-current Base Salary in equal monthly installments until the termination of his active service with the Company if the Employee resigns pursuant to Section 5(a), or until the date of his termination if the Employee’s employment is terminated pursuant to Section 5(c). As of the effective date of Employee’s termination pursuant to Section 5(a) or Section 5(c), Employee shall be entitled to no bonus or benefits pursuant to this Agreement, and the Employee’s right to exercise an Option or a Stock Appreciation Right (if any) shall terminate, and such Option or Stock Appreciation Right shall expire, on the day of such termination of employment or service. In addition, the Company or its designee shall have the right to purchase all or a portion of the vested Options and/or Shares (as defined in the 1999 Management Incentive Plan) acquired upon the exercise of Options (if any) by the Employee at a per share price equal to the lower of (i) the price paid by Employee for such Shares which have been issued or which are issuable under vested but unexercised Options and (ii) the fair market value (as determined in accordance with Section 2.07 of the Investors Agreement dated as of April 1999 by and between the Company and the several Shareholders (as defined therein) from time to time parties thereto) of such Shares which have been issued or which are issuable under vested but unexercised Options on the date of purchase, less the exercise price in the case of vested Options. The Company or its designee shall also have the right to purchase all or a portion of any other Shares, including Rollover Shares a (as defined in the 1999 Management Incentive Plan), previously purchased by the Employee (if any), at a per share price equal to the fair market value (as determined in accordance with Section 2.07 of the Investors Agreement dated as of April 1999 by and between the Company and the several Shareholders (as defined therein) from time to time parties thereto) of the Shares on the date of purchase by the Company. If the Company elects to exercise its right under this Section 6(c), 4 -------------------------------------------------------------------------------- the Company shall deliver written notice (a “Purchase Notice”) to the Employee to such effect within 30 days of a termination of Employee’s employment. For purposes of this Section 6(c), the “date of purchase” shall mean the third business day following the receipt of notice by the Employee that the purchase right is to be exercised. Payment of the purchase price may be made in cash or by certified check; provided that if the terms of any agreement to which the Company is a party, or any of the indentures governing any debt securities issued by the Company or any of its subsidiaries would prohibit the Company from effecting such payment, payment may be effected through a promissory note having such commercially reasonable terms and interest rate as may be determined by the Company it is reasonable discretion, provided that in any event such note shall become due at such time as the prohibitions described above shall lapse.               (d) The provisions of this Section 6 and Section 7 of this Agreement shall survive any termination of this Agreement.         7.  Non-Competition and Non-Solicitation               (a) Subject to Section 7(b) below, in consideration of his employment hereunder and in view of the confidential position to be held by the Employee hereunder, during the Employment Period and through the two-year period commencing on the effective date of the termination of Employee’s employment hereunder, the Employee shall not, directly or indirectly, be employed by, or act as a consultant or lender to or in association with, or as a director, officer, employee, partner, owner, joint venturer, member or otherwise of any person, firm, corporation, partnership, limited liability company, association or other entity that engages in the same business as, or competes with, any business actually conducted by the Company or any or its subsidiaries (other than beneficial ownership of up to 2% of the outstanding voting stock of a publicly traded company that is or owns such a competitor);               (b) In the event that the employee is terminated by the Company for Cause or resigns without Good Reason, during the Employment Period and through the one-year period commencing on the effective date of the termination of Employee’s employment hereunder, the Employee shall not, directly or indirectly, be employed by, or act as a consultant or lender to or in association with, or as a director, officer, employee, partner, owner, joint venturer, member or otherwise of any person, firm, corporation, partnership, limited liability company, association or other entity that engages in the same business as, or competes with, any business actually conducted by the Company or any of its subsidiaries (other than beneficial ownership of up to 2% of the outstanding voting stock of a publicly traded company that is or owns such a competitor);               (c) In consideration of his employment hereunder and in view of the confidential position to be held by the Employee hereunder, during the Employment Period and through the one-year period commencing on the effective date of the termination of Employee’s employment hereunder, the Employee will not (i) induce or attempt to induce any employee of the Company or any of its subsidiaries to leave the employ of the Company or such subsidiary, or in any way interfere with the relationship between the Company or any of it subsidiaries and any employee thereof, (ii) hire directly or indirectly any person who is then an employee of the Company or any of its subsidiaries, or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any of its subsidiaries to cease doing business with the Company or such subsidiary, or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or such subsidiary; provided, however, that the Employee will cease to be bound by this Section 7(c) on the six-month anniversary of the effective date of the termination of Employee’s employment hereunder if his employment is terminated without Cause;               (d) The Employee expressly agrees that the character, duration and geographic scope of the provisions of this Section 7 are reasonable in light of the circumstances, as they exist on the date hereof. If any competent court shall determine that the character, duration or geographic scope of such provisions is unreasonable, then it is the intention and the agreement of the Employee and the Company that this Agreement shall be construed by the court in such a manner as to impose only those restrictions on the Employee’s conduct that are reasonable in the light of the circumstances and that are necessary to assure to the Company the benefits of this Section 7.         8.  Stockholder Approval. This Agreement shall be effective upon submission to and approval by stockholders of the Company holding more than 75% of the voting power of all outstanding common stock of the Company. In connection with such submission and approval, the Company represents that it has provided each stockholder with the disclosure required by Treasury Regulation Section 1.280G-1-Q&A 7(d). 5 --------------------------------------------------------------------------------         9.  Entire Agreement; Amendments. This Agreement (upon its effectiveness), together with option and other agreements relating to stock of the Company entered into substantially contemporaneously herewith (if any), contain the entire understanding of the parties with respect to the matters set out herein, merging and superseding all prior and contemporaneous agreements and understandings between the parties with respect to such matters. Only a written instrument duly executed by all parties or their respective heirs, successors, assigns or legal personal representatives may amend this Agreement.         10.  No Conflicts; No Assignments.               (a) Employee represents and warrants to the Company that he is not as of the date of this Agreement, and will not become during the Employment Period, a party to any oral or written contract that prohibits, or materially restricts or limits, or will prohibit or materially restrict or limit the performance of his duties or the fulfillment of his obligations as an employee and an officer of the Company or under this Agreement.               (b) The Employee acknowledges that the services to be rendered by him are unique and personal and, accordingly, that he shall not assign any of his rights or delegate any of his duties or obligations under this Agreement.         11. Waiver of Breach. Either party may, by written notice to the other: (i) extend the time for the performance of any of the obligations or other actions of the other, (ii) waive compliance with any of the covenants of the other contained in this Agreement, and (iii) waive or modify performance of any of the obligations of the other. However, mere forbearance or indulgence by either party in any regard whatsoever shall not constitute a waiver of the covenant or condition to be performed by the other party to which the same may apply and, until complete performance of said covenant or condition, said party shall be entitled to invoke any remedy available under this Agreement or by law or in equity despite said forbearance or indulgence.         12.  Gender Number. Whenever the context of this Agreement so required the masculine gender shall include the feminine or neuter, the single number shall include plural, and reference to one or more parties hereto shall include all assignees of the party.         13. Headings. The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.         14. Arbitration; Governing Law. To the fullest extent permitted by law, any dispute, claim or controversy of any kind including but not limited to, tort, contract and statute arising under, in connection with or related to this Agreement shall be resolved exclusively by binding arbitration in the State of California, in accordance with the rules of the American Arbitration Association. The Company and the Employee hereby waive any objection to personal jurisdiction or venue in any forum located in the State of California. Either party to this Agreement may file no claim, lawsuit or action of any kind; arbitration is the exclusive dispute resolution mechanism between the parties. Judgment may be entered on the arbitrator’s award in any court of relevant jurisdiction. This agreement shall be governed by and construed in accordance with the laws of the State of California as such laws are applied to agreements entered into and to be performed entirely within California by California residents.         15. Severability. In the event that any provision of this Agreement, or the application thereof to any person or circumstance, is held by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement in that jurisdiction or the application of that provision to any other person or circumstance or in any other jurisdiction, and this agreement shall then be construed in that jurisdiction as if such invalid, illegal or unenforceable provision had not been contained in this Agreement, but only to the extent of such invalidity, illegality or unenforceability.         16. Further Assurances. Each party shall perform such further acts and execute and deliver such further documents as may be reasonably necessary to carry out the provisions of this Agreement.         17. Enforcement. In the event either party hereto fails to perform any of its obligations under this Agreement or in the event a dispute arises concerning the meaning or interpretation of any provision of this Agreement, the defaulting party or the party not prevailing in such dispute as the case may be, shall pay the reasonable costs and expenses incurred by the other party in enforcing or establishing its rights hereunder, including without limitation, court costs and reasonable attorney’s fees. 6 --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the Company and the Employee have duly executed and delivered this Employment Agreement as of the day and year first above written.      CONDOR SYSTEMS, INC.   By:        --------------------------------------------------------------------------------      Title:      EMPLOYEE:           --------------------------------------------------------------------------------      Name 7

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10(u) MANAGEMENT AGREEMENT     AGREEMENT made as of the 26th day of May 2000, by and between Minntech Corporation, a Minnesota corporation, with its principal executive office at Plymouth, Minnesota ("Company") and Michael P. Petersen residing at 7843 Dover Cove, Eden Prairie, Minnesota 55347 (the "Executive").     WHEREAS, Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of Company and its shareholders; and     WHEREAS, the Executive is expected to make a significant contribution to the profitability, growth and financial strength of Company; and     WHEREAS, Company, as a publicly held corporation, recognizes that the possibility of a Change in Control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of the Executive in the performance of the Executive's duties to the detriment of Company and its shareholders; and     WHEREAS, the Executive is willing to be an employee of Company upon the understanding that Company will provide income security if the Executive's employment is terminated under certain terms and conditions; and     WHEREAS, it is in the best interests of Company and its shareholders to reinforce and encourage the continued attention and dedication of management personnel, including the Executive, to their assigned duties without distraction and to increase the likelihood of the continued availability to Company of the Executive in the event of a Change in Control.     THEREFORE, in consideration of the foregoing and other respective covenants and agreements of the parties herein contained, the parties hereto agree as follows:     1.  Term of Agreement.  This Agreement shall commence on the date hereof and shall continue in effect until such time as Company notifies the Executive or the Executive notifies Company of termination of this Agreement; provided, however, that in no event may this Agreement be terminated prior to two years from the date hereof, and notice of termination on the second or any subsequent anniversary date hereof must be given by Company in writing mailed to the Executive at his or her last known address within 60 days prior to such anniversary date or by the Executive by notice in writing mailed to Company at the principal executive office of Company within 60 days prior to such anniversary date. If no such notice is given, then the term of this Agreement shall be extended for additional periods of one year. Notwithstanding the preceding sentence, if a Change in Control occurs during the term of this Agreement (including any extension hereof), this Agreement shall continue in effect for a period of 36 months from the date of the occurrence of a Change in Control. Except as provided in Section 2(b) or Section 3(e) of this Agreement, nothing stated herein shall limit the right of the Executive or Company to terminate the employment of the Executive with Company at any time prior to the expiration of the term of this Agreement, with or without Cause (as defined in Section 3(b) of this Agreement) and for any reason whatsoever, subject to the right of the Executive to receive any payment and other benefits that may be due pursuant to the terms and conditions of Section 4 of this Agreement.     2.  Change in Control.  No amounts shall be payable hereunder unless a Change in Control, as set forth below, shall occur during the term of this Agreement.     (a) For purposes of this Agreement, a "Change in Control" of Company shall be deemed to occur if any of the following occur:     (i)  Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, or any successor statute thereto (the "Exchange Act")) acquires or becomes a "beneficial owner" (as defined in Rule 13d-3 or any successor rule under the Exchange Act), directly or indirectly, of securities of Company representing 30% or -------------------------------------------------------------------------------- more of the combined voting power of Company's then outstanding securities entitled to vote generally in the election of directors ("Voting Securities"), provided, however, that the following shall not constitute a Change in Control pursuant to this Section 2(a)(i):     (A) any acquisition or beneficial ownership by Company or a subsidiary of Company;     (B) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by Company or one or more of its subsidiaries;     (C) any acquisition or beneficial ownership by any corporation with respect to which, immediately following such acquisition, more than 70% of both the combined voting power of Company's then outstanding Voting Securities and the common stock of Company is then beneficially owned, directly or indirectly, by all or substantially all of the persons who beneficially owned Voting Securities and common stock of Company immediately prior to such acquisition in substantially the same proportions as their ownership of such Voting Securities and common stock, as the case may be, immediately prior to such acquisition;     (ii) A majority of the members of the Board of Directors of Company shall not be Continuing Directors. For purposes of this subsection 2(a)(ii), "Continuing Directors" shall mean: (A) individuals who, on the date hereof, are directors of Company, (B) individuals elected as directors of Company subsequent to the date hereof for whose election proxies shall have been solicited by the Board of Directors of Company or (C) any individual elected or appointed by the Board of Directors of Company to fill vacancies on the Board of Directors of Company caused by death or resignation (but not by removal) or to fill newly-created directorships;     (iii) Approval by the shareholders of Company of a reorganization, merger or consolidation of Company (other than a merger or consolidation with a subsidiary of Company) or a statutory exchange of outstanding Voting Securities of Company, unless immediately following such reorganization, merger, consolidation or exchange, all or substantially all of the persons who were the beneficial owners, respectively, of Voting Securities and common stock of Company immediately prior to such reorganization, merger, consolidation or exchange beneficially own, directly or indirectly, more than 70% of, respectively, the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors and the then outstanding shares of common stock, as the case may be, of the corporation resulting from such reorganization, merger, consolidation or exchange in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or exchange, of the Voting Securities and common stock of Company, as the case may be;     (iv) Approval by the shareholders of Company of (x) a complete liquidation or dissolution of Company or (y) the sale or other disposition of all or substantially all of the assets of Company (in one or a series of transactions), other than to a corporation with respect to which, immediately following such sale or other disposition, more than 70% of, respectively, the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and the then outstanding shares of common stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the persons who were the beneficial owners, respectively, of the Voting Securities and common stock of Company immediately prior to such sale or other disposition in substantially the same proportions as their ownership, immediately prior to such sale or other disposition, of the Voting Securities and common stock of Company, as the case may be; or 2 --------------------------------------------------------------------------------     (v) Company enters into a letter of intent, an agreement in principle or a definitive agreement relating to a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) above that ultimately results in such a Change in Control or a tender or exchange offer or proxy contest is commenced which ultimately results in a Change in Control described in Section 2(a)(i) or 2(a)(ii) hereof. Notwithstanding the above, a Change in Control shall not be deemed to occur with respect to the Executive if (x) the acquisition or beneficial ownership of the 30% or greater interest referred to in Section 2(a)(i) is by the Executive or by a group, acting in concert, that includes the Executive or (y) if a majority of the then combined voting power of the then outstanding voting securities (or voting equity interests) of the surviving corporation or of any corporation (or other entity) acquiring all or substantially all of the assets of Company shall, immediately after a reorganization, merger, consolidation, statutory share exchange or disposition of assets referred to in Section 2(a)(iii) or 2(a)(iv), be beneficially owned, directly or indirectly, by the Executive or by a group, acting in concert, that includes the Executive.     (b) The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Change in Control of Company described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv), occurring after the date hereof, the Executive, if employed by Company immediately prior to such a Change in Control, will not voluntarily terminate employment with Company except for Good Reason for a period of 90 days after the occurrence of such a Change in Control of Company.     (c) For purposes of this Agreement, a "subsidiary" of Company shall mean any entity of which securities or other ownership interests having general voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Company.     3.  Termination Following Change in Control.  If a Change in Control shall occur during the term of this Agreement, the Executive shall be entitled to the payments and other benefits provided in subsection 4(d) in the event of the termination of the Executive's employment with Company unless the Executive's termination is (A) because of the Executive's death, (B) by Company for Cause or Disability, or (C) by the Executive other than for Good Reason.     (a) Disability. If, as a result of incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with Company for six consecutive months, and within 30 days after written Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties, Company may terminate the Executive's employment for "Disability". Any question as to the existence of the Executive's Disability upon which the Executive and Company cannot agree shall be determined by a qualified independent physician selected by the Executive (or, if the Executive is unable to make such selection, it shall be made by any adult member of the Executive's immediate family), and approved by Company. The determination of such physician made in writing to Company and to the Executive shall be final and conclusive for all purposes of this Agreement.     (b) Cause. Termination of the Executive's employment for "Cause" shall mean termination upon the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct.     (c) Good Reason. Termination by the Executive for "Good Reason" shall mean termination by the Executive if, without the Executive's express written consent, any of the following shall occur:     (i)  the assignment to the Executive of any duties inconsistent with the Executive's status or position with Company, or a substantial alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; 3 --------------------------------------------------------------------------------     (ii) a reduction by Company in the Executive's annual base salary in effect immediately prior to a Change in Control;     (iii) the relocation of Company's principal executive offices to a location more than fifty miles from Plymouth, Minnesota or Company requiring the Executive to be based anywhere other than Company's principal executive office (or if the Executive is based at a location other than Company's principal executive office immediately prior to the first Change in Control, anywhere other than such location) except for required travel on Company's business to an extent substantially consistent with the Executive's prior business travel obligations;     (iv) the failure by Company to continue to provide the Executive with benefits at least as favorable to those enjoyed by the Executive under any of Company's pension, life insurance, medical, health and accident, disability, deferred compensation, incentive awards, employee stock options, or savings plans in which the Executive was participating at the time of the Change in Control, the taking of any action by Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed at the time of the Change in Control, or the failure by Company to provide the Executive with the number of paid vacation days to which the Executive is entitled at the time of the Change in Control, provided, however, that Company may amend any such plan or programs as long as such amendments do not reduce any benefits to which the Executive would be entitled upon termination;     (v) a termination pursuant to Section 3(d) of this Agreement;     (vi) the failure of Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6; or     (vii) any purported termination of the Executive's employment which is not made pursuant to a Notice of Termination satisfying the requirements of subsection (e) below; for purposes of this Agreement, no such purported termination shall be effective.     (d) Voluntary Termination Deemed Good Reason. Notwithstanding anything herein to the contrary, during the period commencing on the 91st day following a Change in Control under Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) of this Agreement and ending on the 180th day following such a Change in Control, the Executive may voluntarily terminate his or her employment for any reason, and such termination shall be deemed "Good Reason" for all purposes of this Agreement. In the event of such voluntary termination pursuant to this subsection 3(d)), the multiple applied to the Severance Payment (as defined in Section 4(d)), if any, payable to the Executive pursuant to subsection 4(d)(ii) below shall be reduced by 50%.     (e) Notice of Termination. Any purported termination of the Executive's employment by Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth the facts and circumstances claimed to provide a basis for termination of the Executive's employment.     (f)  Date of Termination. For purposes of this Agreement, "Date of Termination" shall mean:     (i)  if the Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such 30 day period); and     (ii) if the Executive's employment is terminated pursuant to subsections (b), (c) or (d) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to subsection (b) above, shall not be 4 -------------------------------------------------------------------------------- less than 10 days, and, in the case of a termination pursuant to subsection (c) or (d) above, shall not be less than 10 nor more than 30 days, respectively, from the date such Notice of Termination is given).     (g) Dispute of Termination. If, within 10 days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected); provided, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, Company shall continue to pay the Executive full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this subsection. Amounts paid under this subsection are in addition to all other amounts due under this Agreement and, except as provided in Section 4(d)(v), shall not be offset against or reduce any other amounts under this Agreement.     4.  Compensation Upon Termination or During Disability.  Upon termination of the Executive's employment (or, with respect to Section 4(a), during a period of Disability) following a Change in Control, as defined in Section 2(a), of Company or if there shall be a termination by Company of the Executive's employment prior to a Change in Control, or the Executive shall terminate employment with Company for Good Reason prior to a Change in Control (for which purpose the references in Section 3(c) to changes from circumstances existing immediately prior to or at the time of a Change in Control that constitute Good Reason for termination shall instead be deemed to be references to circumstances existing immediately prior to or at the time that the Change in Control is first anticipated), and the Executive reasonably demonstrates that such termination by Company or event constituting Good Reason for termination by the Executive (x) was requested by a third party that had previously taken other steps reasonably calculated to result in a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) and ultimately resulting in such a Change in Control following termination of the Executive's employment or (y) otherwise arose in connection with or in anticipation of a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) that ultimately occurs following termination of the Executive's employment, the Executive shall be entitled to the following benefits:     (a) Except as provided in Section 4(b), during any period that the Executive fails to perform full-time duties with Company as a result of Disability, Company shall pay the Executive the base salary of the Executive at the rate in effect at the commencement of any such period, until such time as the Executive is determined to be eligible for long term disability benefits in accordance with Company's insurance programs then in effect.     (b) If the Executive's employment shall be terminated by Company for Cause or Disability or by the Executive, following a Change in Control, other than for Good Reason, Company shall pay to the Executive his or her full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and Company shall have no further obligation to the Executive under this Agreement.     (c) If the Executive's employment shall be terminated by Company for Cause or Disability, or is terminated by reason of death, Company shall immediately cause to be commenced payment to the Executive (or the Executive's designated beneficiaries or estate, if no beneficiary is designated) 5 -------------------------------------------------------------------------------- of any and all benefits to which the Executive is entitled, if any, under Company's insurance programs then in effect.     (d) Except for termination of the Executive's employment with Company by reason of death, if the Executive's employment with Company shall be terminated (A) by Company other than for Cause or Disability or (B) by the Executive for Good Reason, then the Executive shall be entitled to the benefits provided below:     (i)  Company shall pay the Executive the Executive's full base salary through the Date of Termination at the rate in effect at the time the Notice of Termination is given.     (ii) In lieu of any further salary payments for periods subsequent to the Date of Termination, Company shall pay as a severance payment (the "Severance Payment") an amount equal to (A) one and one-half (1.5) times (subject to reduction pursuant to Section 3(d) in the event of a termination of employment by the Executive pursuant to Section 3(d)) the average of the annual compensation which was paid to the Executive by Company (or any corporation affiliated with Company within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code")) and includible in the Executive's gross income for federal income tax purposes for the shorter of the period consisting of (1) the five most recently completed taxable years of the Executive ending before the earlier of the first Change in Control (for which purpose the first Change in Control shall not be deemed to be a Change in Control pursuant to Section 2(a)(v) unless the Executive's termination of employment with Company occurs prior to the first Change in Control pursuant to Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv)) or (2) that portion of such five-year period during which the Executive was employed by Company (for which purpose compensation for a partial year shall be annualized before determining average annual compensation for the period in accordance with temporary or final regulations promulgated under Section 280G(d) of the Code or any successor provision thereto), less (B) $1.00. Such average shall be determined in accordance with temporary or final regulations promulgated under Section 280G(d) of the Code or any successor provision thereto. The Severance Payment shall be made in full within 60 days after termination of employment. Such Severance Payment shall be reduced by any severance pay that the Executive receives from Company, any subsidiary of Company or any successor thereof under any other policy or agreement of Company in the event of involuntary termination of the Executive's employment.     (iii) For a 36 month period after the Date of Termination, Company shall arrange to provide the Executive with life, disability, accident and health insurance benefits substantially similar to those which the Executive is receiving or entitled to receive immediately prior to the Notice of Termination. Benefits otherwise receivable by the Executive pursuant to this paragraph (iii) shall be reduced to the extent comparable benefits are actually received by the Executive from another employer or other third party during such 36 month period, and any such benefits actually received by the Executive shall be reported to Company.     (iv) Company shall also pay to the Executive all legal fees and expenses incurred by the Executive as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).     (v) Notwithstanding any provision to the contrary contained herein except the last sentence of this Section 4(d)(v), if the lump sum cash payment due and the other benefits to which the Executive shall become entitled under this Section 4 hereof, either alone or together with other payments in the nature of compensation to the Executive which are contingent on a change in the ownership or effective control of Company or in the ownership of a substantial portion of the assets of Company or otherwise, would constitute a "parachute 6 -------------------------------------------------------------------------------- payment" as defined in Section 280G of the Code or any successor provision thereto, such lump sum payment and/or such other benefits and payments shall be reduced (but not below zero) to the largest aggregate amount as will result in no portion thereof being subject to the excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or being non-deductible to Company for federal income tax purposes pursuant to Section 280G of the Code (or any successor provision thereto). The Executive in good faith shall determine the amount of any reduction to be made pursuant to this Section 4(d)(v) and shall select from among the foregoing benefits and payments those which shall be reduced. No modification of, or successor provision to, Section 280G or Section 4999 subsequent to the date of this Agreement shall, however, reduce the benefits to which the Executive would be entitled under this Agreement in the absence of this Section 4(d)(v) to a greater extent than they would have been reduced if Section 280G and Section 4999 had not been modified or superseded subsequent to the date of this Agreement, notwithstanding anything to the contrary provided in the first sentence of this Section 4(d)(v).     (e) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise except as specifically provided in this Section 4.     (f)  In addition to all other amounts payable to the Executive under this Section 4, the Executive shall be entitled to receive all benefits payable to the Executive under any other plan or agreement relating to retirement benefits except as specifically provided in this Section 4.     (g) If Company fails to make any payment at the times and in the amounts specified herein, or with respect to any fringe benefits, fails to provide such benefit as specified herein, within 10 days from the date of written notice from the Executive to Company of such failure, Company shall be deemed to have waived any right to enforce any restriction on employment or non-competition provision contained in any agreement between Company and the Executive then in existence which limits the ability of the Executive to accept other employment and, thereafter, the Executive may work or consult for any person or business organization which is engaged in the design, development, assembly, manufacture, marketing or sale of any product which competes with any product of Company, or for any person or business organization which is in competition with Company, without liability to Company for such acts. A waiver of such restrictive covenant or non-competition provision shall not in any way restrict or limit the Executive's right to enforce the provisions of this Agreement, including any legal or equitable action to enforce any and all payments, rights or benefits under this Agreement, it being the intention of this subsection that such waiver shall be in addition to, not in substitution of, any other rights to which the Executive is entitled hereunder. Once waived, any such restrictive covenant or non-competition provision shall not thereafter be enforceable even though the Executive may later receive the payment, right or benefit which was the basis of the waiver of such restrictive covenant or non-competition provision.     5.  Funding of Payments.  In order to assure the performance of Company or its successor of its obligations under this Agreement, Company may deposit in trust an amount equal to the maximum payment that will be due the Executive under the terms hereof. Under a written trust instrument, the Trustee shall be instructed to pay to the Executive (or the Executive's legal representative, as the case may be) the amount to which the Executive shall be entitled under the terms hereof, and the balance, if any, of the trust not so paid or reserved for payment shall be repaid to Company. If Company deposits funds in trust, payment shall be made no later than the occurrence of the first Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv). Company shall give notice of such a Change in Control to any such trustee upon any occurrence as defined herein. If and to the extent that the Executive becomes a beneficiary of any such funds deposited in trust, Company shall give prompt 7 -------------------------------------------------------------------------------- notice to the Executive, which shall include a copy of the trust instrument and amendments from time to time. The rights of the Executive under such trust instrument shall be enforceable against Company and any trustees named therein, as though the provisions of said trust were incorporated into this Agreement. If and to the extent there are not amounts in trust sufficient to pay the Executive under this Agreement, Company shall remain liable for any and all payments due to the Executive. In accordance with the terms of such trust, at all times during the term of this Agreement, the Executive shall have no rights, other than as an unsecured general creditor of Company, to any amounts held in trust and all trust assets shall be general assets of Company and subject to the claims of creditors of Company.     6.  Successors; Binding Agreement.       (a) Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place. Failure of Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from Company in the same amount and on the same terms as he would be entitled hereunder if he terminated his employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.     (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, successors, heirs, and designated beneficiaries. If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's designated beneficiaries, or, if there is no such designated beneficiary, to the Executive's estate.     7.  Notice.  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage pre-paid, addressed to the last known residence address of the Executive or in the case of Company, to its principal executive office to the attention of each of the then directors of Company with a copy to its Secretary, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.     8.  Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties. No waiver by either party hereto at any time of any breach by the other party to this Agreement of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior to similar time. No legally binding or enforceable agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof that remain in effect have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Minnesota. 8 --------------------------------------------------------------------------------     9.  Validity. The invalidity or unenforceability or any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. MINNTECH CORPORATION   EXECUTIVE:   By       --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Its   --------------------------------------------------------------------------------   Michael P. Petersen 9 -------------------------------------------------------------------------------- QUICKLINKS MANAGEMENT AGREEMENT

LEASE AGREEMENT SMALLWOOD VILLAGE ASSOCIATES LANDLORD and INTERSTATE GENERAL COMPANY LP TENANT for SUITE 211A                     INDEX Article   Title Page   1   Demised Premises 1   2   Ingress and Parking 1   3   Tenant Pans 1   4   Lease Term 1   5   Fixed Minimum Rent 1   6   Percentage Rent 1   7   Deposit 2   8   Gross Sales Report 2   9   Audit 2   10   Definition of Gross Sales 2   11   Taxes and Assessments 2   12   Laws and Ordinances 3   13   Furniture and Fixtures 4   14   Repairs 4   15   Alterations 4   16   Damage 4   17   Eminent Domain 5   18   Roof Rights 5   19   Store Purpose 5   20   Signs 6   21   Hours of Lighting 6   22   Parking and Common Use Areas 6   23   Utilities: General 7   24   Utilities: Separate Meter 7   25   Trash 7   26   Keep Clean 8   27   Hold Harmless 8   28   Property at Tenant's Risk 8   29   Insurance Risk 8   30   Landlord Access 8   31   Bankruptcy 8   32   Repossession 9   33   Reletting 10   34   Hold-Over 11   35   Rental Sign 11   36   Subordination 11   37   Notices 11   38   Assigns and Successors 11   39   Subletting and Assignment 11   40   Not Partners 12   41   Promotional Service 12   42   Continuous Occupancy 12   43   Maintenance and Operation of Common Areas 13   44   Cost of Maintenance and Operation of Common Areas 13   45   Insurance 13   46   Additional Rent 14   47   Quiet Enjoyment 14   48   Transfer of Landlord's Interest 14   49   No Waiver 14   50   Partial Invalidity 14   51   Rules and Regulations 14   52   Applicable Law 15   53   Captions and Headings 15   54   Joint and Several Liability 15   55   Modification 15   56   No Discrimination 15   57   Delay 15   58   Store Front 15   59   Estoppel Certificates 15   60   Outparcel 15   61   Waiver of Jury Trial 15   62   No Option 16   63   Security Deposit 16   64   Broker's Commission 16   65   Master Lease/Addenda 16   66   Landlord's Right to Change or Alter Stores or Shopping Center 16   67   Late Charges 16   68   Subordination 16   69   Right of First Offer 17   70   Right to Terminate Lease 17     LEASE THIS LEASE, made this 24th day of October, 2000, by and between, Smallwood Village Associates, LP a Maryland Limited Partnership, 222 Smallwood Village Center, St. Charles, Maryland 20602, hereinafter designated "Landlord," and Interstate General Company, LP, hereinafter designated "Tenant". WITNESSETH: DEMISED PREMISES. 1. In consideration of all Tenant's undertakings hereinafter set forth, including payment of rent as hereinafter specified. Landlord hereby leases to Tenant the building area located in a shopping center development known as 211A Smallwood Village Center, St. Charles, Maryland containing approximately 2,123 square feet (including storage area)(see attached rent calculation marked Exhibit A).     INGRESS & PARKING 2. Together with the building herein demised. The Landlord grants to the Tenant a right of ingress and egress and free parking of vehicles of the Tenant's invitees in the parking areas, and including a right for ingress and egress to and from the adjoining public streets, highways and/or service area.     FIT UP REQUIREMENTS 3. The premises are taken as is.     LEASE TERM 4a. The term of this Lease shall commence on the date hereof and shall end five (5) years after the "Rent Commencement Date", as hereafter defined. The "Rent Commencement Date" shall be the first day of September 2000.     FIXED MINIMUM RENT 5. Commencing with the Rent Commencement Date, Tenant shall pay as fixed minimum annual rental for the premises the sum of Fifteen thousand nine hundred nine and 50/100 dollars ($15,909.50) per annum, payable in equal monthly installments of One thousand three hundred twenty five and 79/100 dollars ($1,325.79) each. All such monthly installments of the fixed minimum rental shall be payable to Landlord, in addition, without previous notice or demand herefore, and without diminution, counterclaim, deduction or set-off whatsoever, with the first monthly installment to be due and payable upon execution hereof, and each subsequent monthly installment to be due and payable on the first day of each and every month following the Rent Commencement Date during the term hereof. If the Rent Commencement Date is a date other than the first day of a month, rent for the period commencing with and including the Rent Commencement Date until the first day of the following month shall be prorated at the rate of one-thirtieth (1/30th) of the fixed monthly rental.     PERCENTAGE RENT 6(a). Intentionally left blank.       6(b). Intentionally left blank.       6(c). Intentionally left blank.       6(d). Intentionally left blank.       6(e). At the expiration of said lease year, the Fixed Minimum Annual Rental herein provided for shall be adjusted by the Consumer Price Index as defined in Article 6(f). Any such adjustment shall be accomplished by multiplying the Fixed Minimum Annual Rental then in effect by a fraction, the numerator of which shall be the Consumer Price Index as of the most recent date prior to the date of such adjustment, and the denominator of which shall be the Consumer Price Index as of the date nearest the beginning of such lease year (but in no event shall the Fixed Minimum Annual Rent be reduced as a result of any such adjustment below the Fixed Minimum Annual Rent specified in Article 5 hereof), and the increased Fixed Minimum Annual Rental thereby established shall continue in effect as the Fixed Minimum Annual Rental until again adjusted as herein provided. The term "sufficient percentage rental" as used herein is defined as such Percentage Rent for any lease year, whether or not actually paid or payable, which, when added to the Fixed Minimum Annual Rental set forth in Article 5 would equal or exceed such Fixed Minimum Annual Rental if adjusted to the Consumer Price Index (applied as aforesaid) at the end of such lease year to reflect changes therein since the beginning of such lease year. For example, if the Consumer Price Index increases by 4% in the first lease year, then "sufficient percentage rental" for that lease year would be an amount equal to or in excess of 4% of the Fixed Minimum Annual Rental. If the Fixed Minimum Annual Rental set forth in Article 5, or otherwise in this lease shall provide for different fixed sums to be paid during certain lease years, or portions thereof (other than as may result from the application of this Section 6(e) hereof), then in each and every instance that the Fixed Minimum Annual Rental shall be adjusted pursuant to this Section 6(e), all other fixed sums payable as Fixed Minimum Annual Rental at some future time thereafter shall likewise be adjusted in the same proportion.       6(f). For all purposes of the Lease Agreement, the "Consumer Price Index" is hereby defined to be the index for the Washington, D.C.-Maryland-Virginia area, now known as the United States Bureau of Labor Statistics, Consumer Price Index, for Urban Wage Earners and Clerical Workers (revised) - U.S. City Average, and selected areas (1982/84 =100) all items; and if the Consumer Price Index shall be discontinued or altered, then any successor Consumer Price Index of the United States Bureau of Labor Statistics or successor agency thereto, for the Washington, D.C. Metropolitan area, shall be used, and if there is no such successor Consumer Price Index, Landlord and Tenant shall attempt to agree upon a substitute index or formula, and if said parties are not able to agree upon such substitute, the matter shall be referred to binding arbitration in accordance with the rules of the American Arbitration Association in the State of Maryland then prevailing.       6(g). No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of rent or other charges herein stipulated shall be deemed to be other than on account of the earliest stipulated rent or other charges, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check for payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this lease provided.       6(h). The Tenant also agrees to pay and the Landlord agrees to accept as additional rental for each lease year of the term the Tenant's proportionate share of any real estate or other taxes as defined in Article 11 and the Tenant's proportionate share of the cost of maintenance and operation of common areas as defined in Article 44.   DEPOSIT 7. Landlord hereby acknowledges receipt from Tenant of the sum of N/A which shall constitute prepayment of the first months' rental.   GROSS SALES REPORT 8. Intentionally left blank.     AUDIT 9. Intentionally left blank.     DEFINITION OF GROSS SALES 10. Intentionally left blank.     TAXES AND ASSESSMENTS 11(a). For the purposes of this paragraph, the term "Real Estate Taxes" means all taxes, rate and assessments, general and special, levied or imposed with respect to the land, buildings and improvements located or built within the Shopping Center, including all taxes, rates and assessments, general and special levied or imposed for school, public betterment, general or local improvements and operations and taxes imposed in connection with any special taxing district. If the system of Real Estate Taxation shall be altered or varied and any new tax or levy shall be levied or imposed on said land, buildings and improvements, and/or Landlord in substitution for Real Estate Taxes presently levied or imposed on immovable in the jurisdiction where the demised premises is located, then any such new tax or levy shall be included within the term "Real Estate Taxes." Should any governmental taxing authority acting under any regulation, levy, assess, or impose a tax, excise and/or assessment, however described (other than an income or franchise tax) upon, against, on account of, or measured by, in whole or in part, the rent expressly reserved hereunder, or upon the rent expressly reserved under any other leases or leasehold interest in the Shopping Center, as a substitute (in whole or in part) or in addition to any existing Real Estate Taxes on land and buildings and otherwise, such tax or excise on rents shall be included within the term "Real Estate Taxes."       11(b). The term "Base Year" means the 2000 real estate tax year. The term "Real Estate Tax Year" means each successive twelve (12) month period following and corresponding to the Base Year, irrespective of the period or periods which may from time-to-time in the future be established by competent authority for the purposes of levying or imposing Real Estate Taxes.     11(c). Each Real Estate Tax Year after the Base Year, Tenant shall pay to Landlord within ten (10) days after demand in writing thereof (accompanied by a statement showing the computation of same) as additional rent and in addition to Fixed Minimum Rental, Percentage Rent and all other payments provided for herein, Tenant's Percentage Share (hereafter defined) of the amount by which (i) the Real Estate Taxes for such tax year exceed (ii) the Real Estate Taxes for the Base Year. The term "Tenant's Percentage Share," for all purposes of this Lease, is hereby defined to be that percentage representing the proportion that the total gross rentable square feet contained within the leased premises bears to the total gross rentable square feet contained within the Shopping Center.     11(d). Reasonable expenses, consisting of attorneys' fees, expert witness fees and similar costs, incurred by Landlord in obtaining or attempting to obtain a reduction of any Real Estate Taxes shall be added to and included in the amount of any such Real Estate Taxes. Real Estate Taxes which are being contested by Landlord shall nevertheless be included for purposes of the computation of the liability of Tenant under the above paragraph, provided, however, that in the event that Tenant shall have paid any amount of increased rent pursuant to this Article 11 and the Landlord shall thereafter receive a refund of any portion of any Real Estate Taxes on which such payment shall have been based, Landlord shall pay to Tenant the appropriate portion of such refund. Landlord shall have no obligation to contest, object or litigate the levying or imposition of any Real Estate Taxes and may settle, compromise, consent to, waive or otherwise determine in its discretion to abandon any contest with respect to the amount of any Real Estate Taxes without consent or approval of the Tenant.     Nothing contained in this section shall be construed at any time to reduce the monthly installments of rent payable hereunder below the amount specified in Articles 5 and 6 of this Lease.     If the termination date of this Lease shall not coincide with the end of a Real Estate Tax fiscal year, then in computing the amount payable under this Article 11 for the period between the commencement of the applicable Real Estate Tax fiscal year in question and the termination date of this Lease, Tenant's Percentage Share of the Real Estate Taxes for the applicable Real Estate Tax fiscal year shall be equitably apportioned (on a per diem basis) so that Tenant shall pay only such portion of such Real Estate Taxes as is attributable to the portion of such Real Estate Tax fiscal year occurring during the term of this Lease. Tenant's obligation to pay Real Estate Taxes under this Article 11 for the final period of the Lease shall survive the expiration of the term of this Lease.     A tax bill or true copy thereof, together with any explanatory statement of the area or property covered thereby submitted by Landlord to Tenant shall be conclusive evidence of the amount of taxes assessed or levied, as well as of the items taxes. If any real property tax or assessment levied against the land, building or improvements covered hereby or the rents reserved therefrom, shall be evidenced by improvement bonds or other bonds, or in any other form, which may be paid in annual installments, only the amount paid or payable in any real estate tax fiscal year shall be included as Real Estate Taxes for that real estate tax year for the purposes of this Article 11.   LAWS AND ORDINANCES 12. At the time when Landlord tenders possession, in accordance with its obligations under this Lease, to Tenant, Landlord shall certify in writing that said premises and all of the work Landlord has performed therein is in accordance with all state, county, and municipal building and safety requirements. From that point forward, Tenant will, at its own costs, promptly comply with and carry out all orders, requirements or conditions now or hereafter imposed upon it by the ordinances, laws and/or regulations of the municipality, county and/or state in which the premises are located, whether required of the Landlord or otherwise, in the conduct of Tenant's business, except that Landlord shall comply with any orders affecting structural walls and columns unless due to Tenant's particular business or use of the premises. Tenant will indemnify and save Landlord harmless from all penalties, claims, and demands resulting from Tenant's failure or negligence in this respect.   FURNITURE AND FIXTURES 13. Tenant shall have the privilege of installing, subject to the written approval of the Landlord which shall not be unreasonably withheld, any furniture, fixtures and machinery necessary to the conduct of its business and the same shall remain the property of the Tenant, provided they be removed by the Tenant before the expiration of its tenancy, and further provided that in the event any damage is done to said premises in the removal of said furniture, fixtures or machinery, Tenant will promptly reimburse Landlord for the cost of such repairs as are necessary to restore said premises to their original condition. In the event of failure of Tenant to remove said furniture, fixtures and machinery from said premises before expiration of this Lease, it is agreed that Tenant is abandoning said furniture, fixtures and machinery and same shall become the property of Landlord, who shall have the right to use, remove or dispose of said furniture, fixtures and machinery at the Tenant's expense.   REPAIRS 14. The Tenant agrees to maintain the premises in good repair during the term of this Lease, at his own expense, including the floors, walls, ceiling, inside plumbing, heating, ventilating, air conditioning and other equipment and fixtures installed by the Landlord. Landlord agrees within a reasonable time after receipt of written notice from the Tenant to make all repairs necessary to the structural portion and roof, including gutters and downspouts of the demised premises. The Tenant also agrees, at his own expense, to replace all plate glass in the demised premises which shall be damaged or broken from any cause, except where due to building settlement. The Tenant also agrees at his own cost and expense to maintain exterior sign face, sign box and sign lighting. The Tenant also agrees at his own cost and expense to keep in effect during the term of this Lease and any extension or renewal thereof a full parts and labor maintenance contract on the heating, ventilating and air conditioning equipment, servicing the demised premises with a contractor licensed in this area, approved by the Landlord, which approval shall not be unreasonably withheld. The Tenant agrees to provide the Landlord with a copy of this contract upon request.   ALTERATIONS 15. Tenant shall not do any construction work or make any alterations, modifications, or changes to any part of the demised premises either exterior or interior, without Landlord's written consent which shall not be unreasonably withheld. Landlord may condition its consent upon Tenant's delivery to Landlord of a policy or policies of workmen's compensation, liability and property damage insurance, naming Landlord as additional insured, in limits and with companies acceptable to the Landlord. In the event of any such approved work or changes, Tenant shall have all work done at its own expense. Request for such consent shall be accompanied by plans stating in detail precisely what is to be done. Tenant and Tenant's contractors (who shall be licensed) shall comply with the building codes, regulations and laws now or hereafter to be made or enforced in the municipality, county and/or state in which said premises are located and which pertain to such work. Any additions, improvements, alterations and/or installations made by Tenant (except only movable store and office furniture and fixtures) shall become and remain a part of the building and be and remain Landlord's property upon the termination of Tenant's occupancy of said premises; provided, however, that if Landlord gives written notice to Tenant at the expiration or prior termination of this Lease to such effect, it may require Tenant to restore said premises to their original condition. Tenant shall save Landlord harmless from and against all expenses, liens, claims or damages to either property or person which may or might arise by reason of the making of any such additions, improvements, alterations and/or installations.   DAMAGE 16. If the demised premises shall be partially or totally damaged or destroyed by any risk covered by Landlord's insurance as provided for in Article 45(a) of this Lease, then Landlord shall diligently and as soon as practicably after such damage occurs (taking into account the time necessary to effectuate a satisfactory settlement with any insurance company, and reasonable delay on account of "labor troubles" or any other cause beyond Landlord's control) repair or rebuild the demised premises, provided, however, that in no event shall Landlord be obligated to expend in such repair or rebuilding any sums in excess of the amount of insurance proceeds paid to Landlord in connection therewith. The foregoing notwithstanding, in no event shall Landlord be required to repair, restore or rebuild any portions of the demised premises constituting a part of Tenant's leasehold improvements or other tenant work, trade fixtures, equipment and personal property. If the demised premises are rendered wholly or partially untenantable by such damage or destruction, and such damage and destruction was without the fault or neglect of the Tenant, his servants, employees, agents, visitors or licensees, then the rent payable by Tenant under this Lease during the period in which the demised premises are so untenantable shall be equitably abated. Except as set forth in this Article, Landlord shall not be liable for any damages (including without limitation, business interruption) that may be suffered by Tenant by reason of any casualty to the demised premises and/or Landlord's repairing or rebuilding thereof and/or the deprivation of Tenant's use and possession of the demised premises. All of the foregoing provisions of this Article 16 notwithstanding, if the demised premises are rendered wholly untenantable by fire or other cause, and the Landlord shall decide not to rebuild the same, or if the Shopping Center be so damaged that the Landlord shall decide to demolish it or not to rebuild it, then, or in any of such events, the Landlord may, at its option, cancel and terminate this Lease by giving to the Tenant, within sixty (60) days from the date of such damage, notice in writing of its intention to cancel this Lease, whereupon the term of this Lease shall cease and determine upon the tenth day after such notice is given, and the Tenant shall vacate the demised premises and surrender the same to the Landlord.   EMINENT DOMAIN 17. If the Shopping Center or any part thereof shall be taken by any governmental or quasi-governmental authority pursuant to the power of eminent domain or deed in lieu thereof, Tenant agrees to make no claim for compensation in the proceedings and hereby assigns to Landlord any rights which Tenant may have to any portion of any award made as a result of such taking, and this Lease shall terminate as to the portion of the premises taken by the condemning authority and rental shall be adjusted to such date. The foregoing notwithstanding, Tenant shall be entitled to claim, prove and receive in the condemnation proceedings such awards as may be allowed for relocation expenses and for fixtures and other equipment installed by it which shall not, under the terms of this Lease, be or become the property of Landlord at the termination hereof, but only if such awards shall be made by the condemnation court in addition to and stated separately from the award made by it for the land and the building or part thereof so taken.     If the nature, location or extent of any proposed condemnation affecting the Shopping Center is such that the Landlord elects in good faith to demolish all or substantially all of the buildings in the Shopping Center, then the Landlord may terminate this Lease by giving at least sixty (60) days' written notice of termination to the Tenant at any time after such condemnation and this Lease shall terminate on the date specified in such notice.   ROOF RIGHTS 18. Landlord shall have the exclusive right to use all or any portion of the roof of the leased premises for any purposes, and shall have the right to erect additional stories or other structures over all or any part of said premises.   STORE PURPOSE 19(a). The demised premises shall be used only for the purpose of office space Tenant shall not use all or any portion of the demised premises for any other purpose.     19(b). Tenant affirmatively agrees and represents that it understands and accepts the following as terms of this Lease.     19(c). The use of the demised premises solely for the above- mentioned purpose was critical to Landlord's decision to enter into this Lease. Landlord, in reaching its decision concerning the use of the demised premises, considered and was influenced by the tenant mix in the Shopping Center and the socio-economic status of the community in which the demised premises are located. Such decision by Landlord would not have been made if Tenant intended to use any portion of the demised premises for any purpose other than that specified herein.     19(d). Landlord is acutely aware of its standing and reputation in the community, and any use of the demised premises reflects on that standing and reputation. For this reason also, use of the demised premises was critical to Landlord's decision to enter into this Lease and to Landlord's continued good standing and reputation in the community.     19(e). No deviation whatsoever from the use specified herein shall be allowed for any portion of the demised premises without the prior written consent of Landlord, which consent may be withheld for any reason, or without reason, in the sole, absolute, and arbitrary discretion of Landlord.     19(f). The terms of this Article 19 including, but not limited to, any questions concerning the use for which all or any portion of the demised premises are being employed, shall be strictly enforced and any questions arising hereunder shall be resolved by Landlord in its sole and absolute discretion.     19(g). In addition to the provisions of Article 19(a) and (b) above, and in no way in limitation thereof, Tenant agrees not to commit waste on the demised premises and not to use the demised premises for any unlawful purpose, or in violation of any certificate of occupancy, nor suffer any dangerous article to be brought on the demised premises unless safeguarded as required by law. Moreover, no nuisances, public or private, shall be allowed on the demised premises nor shall any use be allowed which is a source of annoyance or embarrassment to Landlord or the other Tenants of the Shopping Center, or which is deemed by Landlord as not in keeping with the character of the neighborhood, nor shall the demised premises be used for any unlawful, immoral or improper purpose. Without limiting the generality of the foregoing, in no event shall all or any portion of the demised premises be used as a so-called "adult bookstore" selling obscene or pornographic books or magazines, or for the sale of drug paraphernalia or related items, nor operate in the Demised Premises or in any part of the Shopping Center any coin or token operated vending machines or similar device for sale of any merchandise service (including pay lockers, pay toilets, scales, amusement devices and machines for the sale of beverages, foods, candy or other commodities) except that one cigarette vending machine may be installed in the Demised Premises unless otherwise approved by the Landlord in writing.     19(h). In addition to, and not in limitation of, the foregoing subparagraphs of this Article 19 comply with and observe all restrictive covenants of record (as outlined in Exhibit "E" attached hereto and hereby made a part hereof) which affect or are applicable to the Shopping Center and/or the Demised Premises and/or the common areas, provided the same do not prohibit Tenant's permitted use of the Demised Premises specified in Section 19 hereof.   SIGNS 20. Tenant shall provide one (two in specified locations) signboard, sign or signs of such size, design and character, and in such location(s) only, as Landlord shall approve in writing in its sole discretion. Tenant hereby agrees that such sign shall, unless otherwise expressly permitted, also comply in all respects with the provisions and requirements of the sign regulations hereinafter adopted from time to time by Landlord. Tenant shall obtain and pay for all permits and license's required in connection with such sign and shall be responsible for the proper installation thereof. It is further understood that all signs placed by Tenant on the demised premises shall be erected and maintained in accordance with the County, State and/or other ordinances in force or effect at the time, and at the sole cost and expense of Tenant. Tenant agrees to maintain all signs in good condition and repair at all times to the reasonable satisfaction of Landlord. Except as expressly permitted by Landlord, no other signs, lights, lettering or other forms of inscription of advertising of display devices shall be displayed on the exterior of the demised premises or on or in immediate proximity to the inner or outer face of the show windows, entrances, doors or transoms nor shall the same be displayed in any other location within the demised premises from which said signs, lights, or other forms of inscription or advertising or display devices may readily be seen from outside the demised premises without prior written approval of Landlord as to size, material, design and neatness thereof. It is further agreed that Tenant shall not use sidewalks, parking areas, and alleys for displays, wares, or signs of any kind. The Landlord shall determine during what hours the Shopping Center and any signs shall be lit. Any tenant directory provided by Landlord shall be at the sole cost and expense of Landlord.   HOURS OF LIGHTING 21. If requested by Landlord, Tenant shall keep the display windows in the demised premises well-lighted from dusk until 10:00 p.m., or such other reasonable time as determined by Landlord, during each and every day.   PARKING AND COMMON USE AREAS 22. All automobile parking areas, driveways, and other facilities furnished by Landlord in or near the Shopping Center, including employee parking areas, the truckway or truckways, loading docks, package pick-up stations, pedestrian sidewalks and ramps, landscaped areas, exterior stairways, and other areas and improvements provided by Landlord for the general use, in common, of Tenants, their officers, agents, employees, and customers, shall at all times be subject to the exclusive control and management of the Landlord, and Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to all facilities and areas, the right to construct, maintain and operate lighting facilities on all said areas and improvements, the right to change the area, level, location and arrangement of parking areas and other facilities hereinabove referred to, and the right to restrict parking by tenants, their officers, agents and employees to employee parking areas. Landlord shall not, however, have any duty to police the traffic in the parking areas. However, if a parking lot attendant be required as determined by the Landlord or by ordinance, regulation or law, Landlord shall provide same. And the cost of such attendant shall be considered part of the cost of maintenance and operation of common areas as provided for in Article 44. The Landlord is obligated to hard surface, stripe and light the parking areas.     Tenant further agrees that its employees will not park their cars or other vehicles on the streets adjacent to the leased premises, or in the space provided for public use, but will use such space as Landlord shall designate from time to time as parking space for the use of Tenants and employees. Landlord may designate spaces provided for public parking for employee or Tenant parking at specific times. At Landlord's request, Tenant shall supply Landlord with the names of all employees assigned to the demised premises, along with the license number of their respective automobiles or vehicles. In addition, Tenant agrees to supply Landlord with the license numbers of all vehicles owned or operated by Tenant.     The parties agree that damages will accrue from the breach of the covenant relating to parking, and that the amount of such damage will be difficult to establish, and that by reason thereof liquidated damages in the amount of $10.00 per day, per vehicle, parked in violation of said covenant may be recovered by Landlord from Tenant, following written notification to Tenant naming the vehicles in violation.     Tenant agrees to prohibit the loading or unloading of delivery vans, trucks, carts, or vehicles of any sort by, through, into, or from the front door or doors or the demised premises after 10:00 a.m., during each seven (7) days of the week; except that retail customers may load or unload into or from the front door or doors of the demised premises purchases made by said retail customers.     The parties agree that damages will accrue from the breach of the covenant relating to loading or unloading of deliveries and that the amount of such damage will be difficult to establish; that by reason thereof liquidated damages in the amount $10.00 per day, per vehicle, loaded or unloaded in violation of said covenant may be recovered by Landlord from Tenant, following written notification to Tenant naming the supplier violating this covenant.   UTILITIES: GENERAL 23. Tenant shall, at its sole cost and expense, pay all charges when due for water, sewer, gas, electricity, heat, air-conditioning and any other utility or energy charges and taxes incurred by Tenant in the use of the demised premises.   UTILITIES: SEPARATE METER 24(a). Tenant shall pay to Landlord, within 10 days after rendition of a bill herefore by Landlord of the Charles County Department of Public Works, or successor, in addition to all other charges provided herein and as additional rent, a sum equal to the amount (or Tenant's pro rata share, as reasonably determined by Landlord) of any water or sewer rent or charge, or any other tax, rent, fee, levy or charge, imposed in connection with Tenant's use, consumption of supply of water, or Tenant's water system, or Tenant's sewerage connection or system.     24(b). If Landlord, in its sole discretion, determines at the inception of or during the term of this Lease that Tenant is a heavy water user, then Landlord will install at Tenant's expense, a submeter for the demised premises. Tenant shall keep such meter and any installation equipment in good order and repair; repay Landlord on receipt of a bill for its' installation and Tenant shall pay for all water consumed as shown on the meter together with the concomitant sewer charge within ten (10) days after rendition of a bill therefore.     24(c). The total charges for all Tenants in the Shopping Center coming within the purview of Article 24(b) shall be deducted from the charges pertaining to Tenants referred to in Article 24(a).   TRASH 25. Tenant will keep the premises in a clean, orderly and sanitary condition and free of insects, rodents, vermin, other pests, trash and dirt accumulations and shall furnish adequate and proper receptacles for trash and garbage in location designated by the Landlord. Landlord shall maintain and keep in good repair the parking lot, pedestrian walkways and driveways, keeping them clean, free of snow and ice, orderly, properly lighted and marked. Landlord will provide garbage and trash collection service for the demised premises. Tenant shall cooperate with Landlord in the scheduling of such collection service and Tenant shall not use any other garbage or trash collection service at the premises. The cost of any such service shall be included in the Landlord's common area costs or shall be billed monthly to Tenant, based on the ratio of the floor area of the demised premises to the aggregate floor area of all tenants to whom Landlord furnishes such service. Landlord may at any time change such collection methods, and will give reasonable notice to Tenant.   KEEP CLEAN 26. The Tenant agrees to keep the sidewalks abutting the demised premises in a clean and orderly fashion, and agrees not to use any space, other than within the walls of the demised premises, for the sale or storage of merchandise or for service of any kind.   HOLD HARMLESS 27. Tenant agrees that it will indemnify and save the Landlord harmless from any and all liabilities, damages, causes of action, suits, claims, judgments, costs and expenses of any kind (including attorneys' fees) (i) relating to or arising from or in connection with the possession, use, occupation, management, repair, maintenance or control of the demised premises, or any portion thereof, or (ii) arising from or in connection with any act or omission of Tenant or Tenant's agents, employees or invitees, or (iii) resulting from any default, violation or nonperformance of this Lease by Tenant, or (iv) resulting in injury to person or property or loss of life sustained in or about the demised premises. To assure such indemnity, Tenant shall carry and keep in full force and effect at all times during the term of this Lease for the protection of the Landlord and Tenant herein, public liability insurance with limits of at least One Million Dollars ($1,000,000.00) for each accident and Five Hundred Thousand Dollars ($500,000.00) for each separate injury, and property damage insurance In the amount of Fifty Thousand Dollars ($50,000,00), with an approved insurance company and to deliver to Landlord a copy of said policy or a certificate showing the same to be in force and effect. In the event Tenant shall fail to maintain such policy of insurance then Landlord may, after three (3) days' written notice to Tenant obtain such policy and pay the premium thereon and the amount so paid shall be added to the next installment of rent.   PROPERTY AT TENANT'S RISK 28. It is understood and agreed that all personal property, goods, wares and merchandise in said premises shall be and remain at the Tenant's sole risk and the Landlord shall not be liable for any damage to or loss of such personal property, goods and merchandise arising from the bursting, overflowing or leaking of the roof or of water, sewer, or steam pipes, or from wires or fixtures or from any other cause whatsoever, unless said damages are caused through the negligence of the Landlord, its servants, employees and contractors.   INSURANCE RISK 29. The Tenant shall not keep gasoline or other inflammable material or any other explosive in the demised premises or use the demised premises in any manner which will increase the rate of fire insurance on the Shopping Center or any part thereof beyond the ordinary risk established for the type of business hereinabove provided to be conducted therein, and any such increase in the insurance rate shall be borne by the Tenant. Tenant shall not do any act or thing upon the premises or in or about the Shopping Center or any part thereof which may make void or voidable any insurance on the demised premises or Shopping Center, and the Tenant expressly agrees to conform to all rules and regulations from time to time established by the Maryland Insurance Rating Bureau.   LANDLORD ACCESS 30. The Landlord and its Agent shall have access to the demised premises at any and all reasonable times for the purpose of protecting said premises against fire, for the prevention of damage and injury to the leased premises, or for the purpose of inspecting the same.   BANKRUPTCY 31(a). In the event the Tenant shall be adjudicated bankrupt or adjudged to be insolvent, or if Tenant shall file or acquiesce in a petition in any court in any bankruptcy, reorganization, composition, extension, arrangement or insolvency proceedings, or if Tenant shall make an assignment or other conveyance in trust for the benefit of its creditors, or if any execution or attachment shall be issued against Tenant or Tenant's property whereupon the demised premises shall be taken or occupied or attempted to be taken or occupied by someone other than Tenant and such execution or attachment shall not be dismissed, vacated, discharged or bonded within sixty (60) days' after issuance of same, or if a receiver of Trustee shall be appointed for the property and assets of the Tenant and such receivership be not discharged within twenty (20) days from the date of such appointment, then upon the happening of any of said events, the term hereby demised shall, at the option of the Landlord, cease and determine, it being expressly agreed that the covenant hereinafter contained against the assignment of this Lease shall cover the case of the assignment of this Lease by operation of law as well as the assignment of this Lease by a voluntary act of the Tenant.     31(b). If this Lease shall be so canceled and terminated, neither Tenant nor any person claiming through or under Tenant by virtue of any statute or order of any court shall be entitled to remain in possession of the demised premises but shall forthwith quit and surrender the demised premises. In no event, without the written approval of Landlord which approval may be granted or withheld at its sole discretion, shall this Lease be or be considered an asset of Tenant's estate in bankruptcy, or insolvency, or receiver or trustee (hereafter referred to as a "Trustee") with respect thereto.     31(c). To the extent that Landlord's right to cancel this Lease in accordance with the provisions of subsections (a) and (b) of this Article 31 is invalid or enforceable under the Bankruptcy Reform Act of 1978 (the "Act") or any other statute or rule of law, then the following provisions shall apply, to the extent valid and enforceable.     31(d). If there has been a Default by Tenant under any provision of this Lease (other than this Article 31), the Trustee may not assume this Lease, unless, at the time of assumption of this Lease, the Trustee:     31(d).i cures, or provides adequate assurance (to Landlord's reasonable satisfaction) that the Trustee will promptly cure such default; and     31(d).ii provides adequate assurance (to Landlord's reasonable satisfaction) of future performance under the Lease, which shall include, without limitation, adequate assurance:     31(d).iii of the source of rent and other consideration due under such Lease;     31(d).iv that the Percentage Rent will not decline substantially;       31(d).v that assumption or assignment of such Lease will not breach substantially any provision, such as a radius, location, use, or exclusivity provision, In any other lease, financing agreement, or master agreement relating to the Shopping Center; and     31(d)vi that assumption or assignment of this Lease will not disrupt substantially any tenant mix or balance in the Shopping Center.     31(e) If there has been a default by Tenant, the Trustee may not require the Landlord to provide services or supplies incidental to this Lease before assumption of this Lease unless the Landlord is compensated under the terms of this Lease for any services and supplies provided under this Lease before assumption of this Lease.     31(f) If this Lease is terminated under the provisions of this Article 31, or by reason of rejection by the Trustee, Landlord shall be entitled to the recovery of damages, and such other remedies, as are provided for in Article 33. The foregoing sentence shall not, however, limit or prejudice the right of Landlord to petition for and obtain as liquidated damages in any bankruptcy, insolvency, receivership, reorganization, or arrangement proceeding an amount equal to the maximum allowed by the Act or any other statute or rule of law governing such proceedings and in effect at the time when such damages are to be proved, whether or not such amount be greater, equal to or less than the amount of the excess referred to in the preceding sentence.   REPOSSESSION 32. This Lease is subject to the limitation that if at any time either of the following events (herein called a "Default") shall occur:     32 (a). If Tenant shall fail to pay any installment of rent or any other charge required to be paid by Tenant hereunder, when the same shall become due and payable (it being specifically understood and agreed that the term rent includes the minimum rental, the Percentage Rent, the share of real estate or other taxes and the share of cost of maintenance and operation of common areas, as referred to in this Lease or any other consideration under the Lease that is identified as rent in this Lease), and such failure shall continue for five (5) days; or     32 (b). If Tenant shall fail to perform or observe any other term, provision, covenant, condition or requirement of this Lease on the part of Tenant to be performed or observed, and such failure shall continue for ten (10) days after written notice from Landlord;     32 (c). then upon the happening of either of the aforementioned defaults, this Lease shall, at Landlord's option, cease and determine and shall operate as a Notice to Quit, any written Notice to Quit being hereby expressly waived. Landlord may proceed to recover possession of said premises by virtue of any legal process as may at the time be in operation and force in like cases relative to proceedings between Landlord and Tenant, and Tenant shall pay for any court costs relative to such proceedings and a reasonable attorneys' fee, or Landlord may at its option re-enter and re-rent the demised premises for the account of the Tenant, and in such event, Tenant shall remain liable to Landlord for any and all deficiencies in the rent under this Lease.   RELETTING 33. Should Landlord elect to re-enter, as herein provided, or should it take possession pursuant to legal proceedings or pursuant to any notice provided by law, it may either terminate this Lease or it may from time to time without terminating this Lease, make such reasonable alterations and reasonable repairs as may be necessary in order to relet the premises, and relet said premises or any part thereof for such term or terms (which may be for a term of less than as extending beyond the term of this Lease) and at such rental or rentals and upon other terms and conditions as Landlord in its discretion may deem advisable; upon each such reletting all rentals received by the Landlord from such reletting shall be applied first, to the payment of any indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including brokerage fees and attorneys' fees and of costs of such reasonable alterations and reasonable repairs; third, to the payment of rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same may become due and payable hereunder. If such rentals received from such reletting during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No such re-entry or taking possession of said premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for any such previous breach. Should Landlord at any time terminate this Lease for any breach, in addition to any other remedies it may have, it may recover from Tenant damages it may incur by reason of such breach, including any unpaid rent (or other amounts due under this Lease) which is due and owing at the time of termination, repairing and redecorating the premises to a condition sufficient for reletting same. In addition, in the event of termination by Landlord as aforesaid, if Landlord at its sole option so elects, Tenant shall pay to Landlord, on demand, as liquidated, agreed final damages, the following:     33 (a). The difference between: (i) the rent and all other charges which would have been payable from the date of such demand to the date when this Lease would have expired if it had not been terminated as aforesaid, and (ii) the fair rental value of the demised premises for the same period, with said difference being discounted at the rate of six percent (6%) per annum to present worth, and   33 (b). Commissions, advertising, cost of repairs and other expenses incidental to the reletting of the demised premises.     For purposes of the foregoing sentence, the term rent shall include fixed minimum rental, Percentage Rent, additional rent, and all other charges and pass-through provided herein. For the purpose of computing Percentage Rent after a Default, the monthly percentage rent shall be deemed to be equal to the average monthly Percentage Rent paid hereunder for the twenty-four (24) months during the term preceding such termination the entire preceding portion of the term if less than twenty-four months).   HOLDOVER 34. If the Tenant shall not immediately surrender said premises on the day after the end of the term hereby created, then the Tenant shall, by virtue of this agreement, become Tenant by the month at twice the rental agreed by the said Tenant to be paid as aforesaid, commencing said monthly tenancy with the first day next after the end of the term above demised; and said Tenant as monthly Tenant, shall be subject to all of the conditions and covenants of this Lease as though the same had originally been a monthly tenant, and the said Tenant shall give to the Landlord at least thirty (30) days' written notice to quit said premises, except in the event of non-payment of minimum rent in advance or of Percentage Rent when due or of the other additional rents, as provided for in Article 6 hereof, when due, or of the breach of any other covenant by the said Tenant, in which event the said Tenant shall not be entitled to any notice to quit, the usual thirty (30) days' notice to quit being expressly waived; provided, however, that in the event that the Tenant shall hold over after the expiration of the term hereby created, and if the said Landlord shall desire to regain possession of said premises promptly at the expiration of the term aforesaid, then at any time prior to the acceptance of the minimum rent by the Landlord from the Tenant, as monthly tenant hereunder, the Landlord, at its election or option, may re-enter and take possession of said premises forthwith, without process, or by any legal action or process in force in the State of Maryland.   RENTAL SIGN 35. The Tenant agrees to give Landlord permission to place a "For Rent" sign in the window sixty (60) days before termination of the lease term.   SUBORDINATION 36. Intentionally left blank.   NOTICES 37. All notices, demands. Requests, approval, consents or other instruments required or desired to be given hereunder by either party to the other shall be given by certified or registered mail, return receipt requested, postage prepaid, addressed as follows:     If to Landlord: Smallwood Village Associates LP 222 Smallwood Village Center Waldorf, MD 20602 If to Tenant: Interstate General Company LP Attn: Paul Dillon 222 Smallwood Village Center Waldorf, MD 20602   ASSIGNS AND SUCCESSORS 38. Feminine or neuter pronouns shall be substituted for those of the masculine form, and the plural may be substituted for the singular number, in any place or places herein in which the context may require such substitution or substitutions; and the covenants and agreements herein contained shall, wherever appropriate, be binding upon the heirs, administrators, executors, personal representatives, successors and assigns of the parties hereto.   SUBLETTING AND ASSIGNMENT 39. Tenant will not sublet demised premises or any part thereof, or transfer possession or occupancy thereof to any person (including but not by way of limitation, concessionaires or licensees of Tenant) firm or corporation or transfer, assign mortgage or encumber this Lease without the prior written consent of Landlord in each instance, nor shall any subletting or assignment hereof be effected by merger, liquidation or otherwise by operation of law or otherwise than by the prior written consent of the Landlord. Any attempted transfer, assignment, subletting, license or concession agreement or hypothecation shall be void and confer no rights upon any third party. If Landlord shall refuse to consent to any request of Tenant for the proposed assignment, sale, or other transfer of Tenant's interest in and to this Lease and/or the demised premises, Landlord may, if it so elects, but only with the consent of Tenant, terminate this Lease as of a mutually agreeable termination date, in which event (i) this Lease shall expire and come to an end with the same force and effect as if said date were originally set forth in this Lease for expiration of the Term, (ii) Tenant agrees Landlord shall have the absolute right, with no consent required from Tenant, to relet the demised premises for its own account to Tenant's prospective assignee at such rentals and upon such other terms and conditions as Landlord shall desire If, without Landlord's prior written consent, there shall be an attempted assignment or subletting or if the demised premises shall be occupied by anybody other than Tenant, whether as a result of act or omission by Tenant, or by operation of law, or otherwise, Landlord, may. In addition to, and not in diminution of or substitution for, any other rights and remedies under this Lease or pursuant to law to which Landlord may be entitled as a result thereof, collect rent from the proposed assignee, subtenant or occupant and apply the net amount collected to the rent herein reserved, but no such assignment, subletting, occupancy or collection shall be deemed a waiver of this covenant or the acceptance of the assignee, subtenant, or occupant as a tenant, or a release of Tenant hereunder from the further performance by Tenant of the covenants on the part of Tenant herein contained.   If Landlord shall consent to any requested transfer, assignment, mortgage, hypothecation, encumbrance, subletting, license and/or concession, such consent shall be deemed consent to that particular transaction only and shall not be deemed consent to any other or future transfer, assignment, mortgage, hypothecation, encumbrance, subletting, license and/or concession, as the case may be. Any permitted transfer, assignment, mortgage, hypothecation, encumbrance, subletting, license and/or concession shall be expressly subject to each and every term, covenant and condition of this Lease, unless otherwise specifically provided in writing, and Tenant shall remain fully liable and obligated under all of such terms, covenants and conditions.     If Tenant is a corporation, unincorporated association or partnership,and Tenant shall, without the prior written consent of Landlord, transfer, assign or hypothecate any stock or interest in such corporation, association or partnership so as to result in a change in the control thereof by the person, persons or entities owning a controlling interest therein as of the date of this Lease, then Landlord shall have the option to terminate this Lease at any time after actual notice of such change by giving Tenant at least sixty (60) days' prior written notice and, on the date fixed in such notice for termination of this Lease, this Lease shall expire and come to end with the same effect as if said date were originally set forth in this Lease for expiration of the term. The mere receipt by Landlord of rent from a party other than Tenant shall not be deemed actual notice of any change in control or ownership of Tenant. This provision shall not be applicable to the transfer of any stock or interest in such corporation, association or partnership to a member of the immediate family of any person(s) now owning a controlling interest therein (i.e.. the spouse and direct lineal ancestor or descendent of such person or such person's spouse).   NOT PARTNERS 40. The parties hereto by this agreement expressly do not intend as a matter of fact or law to create or constitute a partnership.   PROMOTIONAL SERVICE 41. Intentionally left blank.     CONTINUOUS OCCUPANCY 42(a). On the Rent Commencement Date, Tenant shall occupy the premises and promptly open for business, at which time the premises shall be fully fixture, fully stocked and fully staffed. Tenant acknowledges that it has been informed that its obligation to open for business promptly on the Rent Commencement Date has been and will be relied upon by the Landlord in dealing with other tenants in the Shopping Center, and failure of Tenant to open for business as above specified shall constitute a Default under this Lease, and may cause substantial damages to Landlord. Tenant shall defend, indemnify and save Landlord harmless from any damages which may be claimed against Landlord and shall indemnify Landlord for any losses suffered because of Tenant's failure to comply with its obligations under the first sentence of this Article.     42(b). Throughout the term, Tenant shall continuously conduct in the premises, with a full stock of merchandise and full staff of personnel, the business permitted under Article 19 (and no other business. Including specifically any business or use prohibited by the terms of this Lease) on all business days and during such hours as are kept by a majority of the tenants in the Shopping Center (excluding the Tenant hereunder) and at least 66 hours per week (unless fewer hours per week are agreed to by a majority of the tenants in the Shopping Center (excluding the Tenant hereunder). Regardless of the minimum number of hours per week Tenant is open for business, and regardless of which additional hours Tenant is open, Tenant shall in all events remain open for business during the hours of 8:00 A.M. to 5:00 P.M. Monday through Friday. Tenant acknowledges that its obligation to continuously and actively conduct business in the premises in the manner prescribed in this Article is for the purpose of enhancing the business activity and public patronage of all stores in the Shopping Center in order to produce for Landlord the maximum possible percentage rents from all stores in the Shopping Center as well as from the premises and to enhance the leaseability of floor space in the Shopping Center, and Tenant acknowledges that failure on its part to comply with the provisions of this Article shall constitute a Default under this Lease, and would cause Landlord substantial damages which might be difficult or insusceptible of exact proof. Accordingly, the parties have agreed that if Tenant fails to comply with the provisions of this Article, then Landlord shall not be required to prove its actual damages for breach of this Article, but in lieu thereof Tenant shall pay Landlord as liquidated damages, and not as a penalty, an additional monthly rent equal to the monthly minimum rent payable under Article 5 hereof, which liquidated damage payments shall continue from the date of breach until such breach is cured or until the end of the then current term of this Lease, whichever is first. Said liquidated damages shall be paid monthly, concurrently with the monthly payments of minimum rent reserved under this Lease. Nothing in this Article shall be construed as a limitation upon Tenants obligations to continuously conduct business in the manner herein specified or upon Landlord's remedies under Articles 32 and 33 or upon Landlord's right to recover any other provable monetary damages. A breach by Tenant of its obligations under subsection (a) of this Article shall also constitute a breach of this subsection (b) and entitle Landlord not only to its claims under subsection (a), but also to liquidated damages under this subsection (b) for so long as the breach of this subsection continues.   MAINTENANCE AND OPERATION OF COMMON AREAS 43. Landlord agrees to keep the parking areas in the Shopping Center and the other common areas (excepting service areas immediately adjacent and contiguous to the demised premises, the maintenance of which shall be Tenant's responsibility) reasonably free of snow, ice and debris and to keep the same lighted during the business hours of a majority of the tenants in the Shopping. Landlord further agrees to keep the parking areas in the Shopping Center and other common areas are in good repair and order.   COST OF MAINTENANCE AND OPERATION OF COMMON AREAS 44. Intentionally left blank.   INSURANCE 45(a). Landlord shall obtain and maintain in effect during the term of this Lease a policy or policies of insurance (i) covering the improvements constituting the Shopping Center (including the common areas, but excluding Tenant's leasehold improvements, trade fixtures and other property required to be insured by Tenant) in an amount not less than eighty percent (80%) of the full replacement cost (exclusive of the cost of excavations, foundations and footings), providing protection against perils included within the standard Maryland form of fire and extended coverage insurance policy, together with such other risks, and with such deductibles, as Landlord may from time to time determine, and (ii) public liability insurance covering the parking areas and other common areas in an amount not less than $500,000 for injury to any one person, $1,000,000 for injuries arising out of one accident, and $50,000 for property damage coverage. The cost of the premiums for any such policies shall be included in the Landlord common area maintenance costs. Any such insurance may be effected by a policy or policies of blanket insurance, covering additional items or locations or assureds. Tenant shall have no rights in any policy maintained by Landlord and shall not, by reason of payment by Tenant, as part of common area maintenance costs, of its pro rata share of Landlord's premium therefore, be entitled to be a named assured thereunder.     45(b). Tenant, at Tenant's sole cost and expense, shall obtain and maintain in effect at all times during the term of this Lease, policies providing the following coverage: (i) a comprehensive policy of general liability insurance, covering the demised premises and Tenant's use thereof against claims for personal injury or death or property damage occurring upon, in or about the demised premises, in the limits stipulated in Article 27; (ii) insurance covering Tenant's leasehold improvements, trade fixtures, equipment and personal property from time to time in, on or upon the demised premises, in an amount of not less than eighty percent (80%) of the full replacement value of said items, providing protection against perils included within the standard Maryland form of fire and extended coverage insurance policy, together with insurance against sprinkler damage, vandalism, and malicious mischief. Any policy proceeds from such insurance, so long as this Lease shall remain in effect, shall be held in trust by Tenant's insurance company first for the repair, reconstruction, restoration or replacement of the property damaged or destroyed, and (iii) plate glass insurance covering all plate glass in the demised premises. Tenant shall be and remain liable for the repair and restoration of all such plate glass.     45(c). All insurance policies herein required to be procured by Tenant (i) shall be issued in form acceptable to Landlord by good and solvent insurance companies qualified to do business in the State of Maryland and reasonably satisfactory to Landlord, (ii) shall be issued in the names of Landlord, Tenant and any other parties in interest from time to time designated in writing by notice from Landlord to Tenant, (iii) shall be written as primary policy coverage and not contributing with or in excess of any coverage which Landlord may carry; and (iv) shall contain an express waiver of any right of subrogation by the insurance company against Landlord. Neither the issuance of any insurance policy required hereunder, nor the minimum limits specified herein with respect to Tenant's insurance coverage, shall be deemed to limit or restrict in any way Tenant's liability arising under or out of this Lease. With respect to each and every one of the insurance policies herein required to be procured by Tenant, on or before the Rent Commencement Date and before any such insurance policy shall expire, Tenant shall delivery to Landlord certificates of insurance for, certified copies of, or duplicate originals of, each such policy or renewal thereof, as the case may be, together with evidence of payment of all applicable premiums. Any insurance required to be carried hereunder may be carried under a blanket policy covering the demised premises and other locations of Tenant, and if Tenant includes the demised premises in such blanket coverage Tenant shall deliver to Landlord, as aforesaid, a duplicate original or certified copy of each such insurance policy or a certificate evidencing such insurance. Each and every insurance policy required to be carried hereunder by or on behalf of Tenant shall provide that, unless Landlord shall first have been given ten (10) days' prior written notice thereof: (i) such insurance policy shall not be canceled and shall continue in full force and effect, (ii) the insurance carrier shall not, for any reason whatsoever, fail to renew such insurance policy, and (iii) no material change may be made in such insurance policy. In the event that Tenant shall fail promptly to furnish any insurance coverage herein required to be procured by Tenant, Landlord, at its sole option, shall have the right to obtain the same and pay the premium for a period not exceeding one (1) year in each instance, and the premium so paid by Landlord shall be immediately payable by Tenant to Landlord as additional rent.   ADDITIONAL RENT 46. If Landlord shall incur any charge or expense on behalf of Tenant under the terms of this Lease, such charge or expense and all other monetary payments due under this Lease to Landlord shall be considered additional rent hereunder; in addition to and not in limitation of any other rights and remedies which Landlord may have in case of the failure by Tenant to pay such sums when due, such nonpayment shall entitle Landlord to the remedies available to it hereunder for non-payment of rent. All such charges or expenses shall be paid to Landlord at its office in St. Charles, Maryland.   RENT 47. Landlord covenants that if Tenant pays the rent and all other charges provided for herein, performs all of its obligations provided for hereunder, and observes all of the other provisions hereof, Tenant shall at all times during the term hereof peaceably and quietly have, hold and enjoy the demised premises, without any interruption or disturbance from Landlord, or anyone claiming through or under Landlord, subject to the terms hereof.     TRANSFER OF LANDLORD'S INTEREST 48. Notwithstanding any provision of this Lease to the contrary, in the event of the sale or other transfer of Landlord's interest in the demised premises or the Shopping Center, (i) Landlord shall thereupon and without further act by either party hereto be released and discharged of all covenants and obligations of Landlord hereunder thereafter accruing, and (ii) it shall be deemed and construed conclusively, without further agreement between the parties, that the purchaser or other transferee or assignee has assumed and agreed to perform the obligations of Landlord thereafter accruing.   NO WAIVER 49. That no waiver of any breach of any covenant, condition or agreement herein contained shall operate as a waiver of the covenant, condition or agreement itself, or of any subsequent breach thereof.   PARTIAL INVALIDITY 50. If any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term, covenant or condition to persons or circumstances other than those s to which it is held invalid or unenforceable, shall not be affected thereby and each term, covenant and condition of this Lease shall be valid and enforced to the fullest extent permitted by law.   RULES & REGULATIONS 51. Tenant shall at all times comply with the rules and regulations set forth on Exhibit "D' attached hereto, and with any additions thereto and modifications thereof adopted from time to time by Landlord, and each such rule or regulation shall be deemed as a covenant of this Lease to be performed and observed by Tenant.   APPLICABLE LAW 52. This Lease shall be construed under the laws of the State of Maryland.       CAPTIONS AND HEADINGS 53. Captions and headings are for convenience and reference only.     JOINT AND SEVERAL LIABILITY 54. If two or more individuals, corporations, partnerships or other business associations (or any combination of two or more thereof) shall sign this Lease as Tenant, the liability of each such individual, corporation, partnership, or other business association to pay rent and perform all other obligations hereunder shall be deemed to be joint and several. In like manner, if the Tenant named in this Lease shall be a partnership or other business association, the members of which are, by virtue of statute or general law, subject to personal liability, the liability of each such member shall be joint and several.   NOTIFICATION 55. This writing is intended by the parties as final expression of their agreement and as a complete and exclusive statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein. No course of prior dealings between the parties or their affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease. Acceptance of, or acquiescence in, a course of performance rendered under this or any prior agreement between the parties or their affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease. No representations, understandings, or agreements have been made or relied upon in the making of this Lease other than those specifically set forth herein. This Lease can only be modified by a writing signed by all of the parties of their duly authorized agents.   NO DISCRIMINATION 56. It is intended that the Shopping Center be developed so that all prospective tenants and all customers, employees, licensees and invitees of all tenants shall have the opportunity to obtain all the goods, services, accommodations, advantages, facilities and privileges of the Shopping Center without discrimination because of race, creed, color, national origin or ancestry. To that end, Tenant will not discriminate in the conduct and operation of its business in the premises against any person or group of persons because of the race, creed, color, national origin or ancestry of such person or group of persons.   DELAY 57. Intentionally left blank.     STORE FRONT 58. The design and construction of the store front for the demised premises will be subject to the Landlord's approval, which shall not be unreasonably withheld.   ESTOPPEL CERTIFICATE 59. Tenant agrees, at any time and from time to time, upon not less than five (5) days prior written notice by Landlord, to execute, acknowledge and deliver to Landlord or to such person(s) as may be designated by Landlord, a statement in writing (i) certifying that Tenant is in possession of the demised premises, has unconditionally accepted the same and is currently paying the rents reserved hereunder, (ii) certifying that this Lease is unmodified and in full force and effect (or if there have been modifications, that the Lease is in full force and effect as modified and stating the modifications), (iii) stating the dates to which the rent and other charges hereunder have been paid by Tenant, (iv) stating whether or not to the best knowledge of Tenant, Landlord is in default in the performance of any covenant, agreement or condition contained in this Lease, and, if so, specifying each such default of which notices to Tenant should be sent. Any such statement delivered pursuant thereto may be relied upon by any owner of the Shopping Center, any prospective purchaser of the Shopping Center, any mortgagee or prospective mortgagee of the Shopping Center or of Landlord's interest, or any prospective assignee of any such mortgagee. OUTPARCEL 60. Landlord shall have the right to remove from the Shopping Center, sell, or separately develop any outparcels whereupon such outparcels shall, at the option of the Landlord, be removed from the definition of the Shopping Center.   WAIVER OF JURY TRIAL 61. Tenant hereby waives all right to trial by jury in any claim, action, proceeding or counterclaim by either Landlord or Tenant against the other or any matters arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant and/or Tenant's use or occupancy of the demised premises.   NO OPTION 62. The submission of this Lease for examination does not constitute a reservation of or option for the premises, and this Lease becomes effective only upon execution and delivery thereof by Landlord.   SECURITY DEPOSIT 63. Landlord hereby acknowledges receipt from Tenant of a security deposit in the amount of N/A s security for Tenant's faithful performance of Tenant's obligations hereunder. If Tenant fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provisions of this Lease. Landlord may use, apply or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Landlord may become entitled by reason of Tenant's default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or any portion of said deposit. Tenant shall within ten (10) days after written demand herefore deposit cash with Landlord in an amount sufficient to restore said deposit in full to the original amount and Tenant's failure to do so shall be a default under this Lease. Landlord shall not be required to keep said deposit separate from its general accounts. If Tenant performs all of Tenant's obligations hereunder, said deposit or so much thereof as has not therefore been applied by Landlord shall be returned, without payment of interest or other increment for its use, to Tenant within forty-five (45) days after the expiration of the term of this Lease, or after Tenant has vacated the demised premises, whichever is later.   BROKER'S PERMISSION 64. Intentionally left blank.     LESSOR'S RIGHT TO SELL OR MORTGAGE FEE 65. Nothing contained in this lease shall limit or curtail Landlord's right to sell, mortgage, or otherwise deal with its fee interest in the leased premises, the ground underlying the leased premises, the shopping center and the ground underlying the shopping center, or affect Landlord's right to assign the net rent payable under this Lease either as further collateral security under a fee mortgage or otherwise. Any such assignment of rent shall be honored by Tenant.   STORES OR SHOPPING CENTER 66. Landlord may from time to time change or alter the size, configuration, partitions or store designations of all or any of the stores in the shopping center and may expand the shopping center by adding thereto additional land and buildings without the consent of, or notice to, Tenant.   LATE PAYMENT CHARGES 67. In the event that any installment or payment of minimum rent,percentage rent, additional rent or any other sum required hereunder to be paid by Tenant to Landlord is not received by Landlord on or before the fifth (5th) calendar day after the same is due and payable, then, for each and every such late payment, in addition to the payment in arrears, Tenant shall immediately pa y to Landlord as additional rent, a service charge equal to whichever is the greater of (I) Twenty Dollars ($20.00); or (ii) one half of one percent (.5%) of such unpaid sum per day for each calendar day after the due date of such payment that such payment has not been received by Landlord. The provision herein for late payment service charges shall not be construed to extend the date for payment of any sums required to be paid by Tenant hereunder or to relieve Tenant of its obligations to pay all such sums at the time or times herein stipulated. Notwithstanding the imposition of such service charges pursuant to this subsection, Tenant shall be in default under this Lease if any or all payments required to be made by Tenant are not made at the time herein stipulated, and neither the demand for, nor collection by, Landlord of such late payment service charges shall be construed as a cure of such default on part of Tenant.   SUBORDINATION 68. Tenant agrees that this Lease shall be subject and subordinate to the lien of any bonafide mortgages or deeds of trust that may now or at any time hereafter be placed against the demised premises by the Landlord to secure money borrowed from any bonafide lender. Tenant agrees at any time hereafter, on demand, to execute any instrument, release, or other documents that may be required by Landlord for the purpose of subjecting and subordinating this Lease to the lien of any mortgage or deed of trust, whether original or substituted. If any person shall succeed to all or any part of Landlord's interest in the demised premised, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease, or otherwise, and if such successor-in-interest shall request, Tenant shall attorn to such successor-in-interest and shall execute such agreement in confirmation of such attornment as such successor-in-interest shall request. Tenant agrees that any suit, action or other proceeding commenced by any mortgagee in order to realize upon Landlord's interest in this Lease, the demised premises, or the Shopping Center of which the demised premises is a part shall not, by operation of law or otherwise, result in the cancellation or termination of this Lease or of the obligation of Tenant hereunder.   RIGHT OF FIRST OFFER 69. During the term of this lease, Landlord hereby gives tenant a right of first offer to lease the 517 sq. ft. currently known as 211B (Clares). Tenant shall have sixty days to respond to offer made pursuant to this right with an affirmative or negative response.   RIGHT TO TERMINATE LEASE 70. After nine (9) months of the initial term of lease, tenant has the right to terminate the lease providing 90 days notice to vacate premises is received in written form.                     (signature page to follow) IN WITNESS WHEREOF, and intending that this Lease be a sealed instrument, Landlord and Tenant have executed this Lease under seal on the dates indicated beneath their respective signatures.     Smallwood Village Associates, L.P. A Maryland Limited Partnership           By: Interstate Business Corporation, its General Partner LANDLORD                   /s/   /s/ James Michael Wilson WITNESS   James Michael Wilson, President           Date of Execution by Landlord: October 24, 2000                       Interstate General Company, L.P.     TENANT             /s/   /s/ Paul H. Dillon WITNESS   Paul H. Dillon, Vice President           Date of Execution by Tenant: October 24, 2000 State of Maryland SS: County of Charles     Before me, a Notary Public in and for the jurisdiction aforesaid, personally appeared this date, J. Michael Wilson, personally well known (or satisfactorily proven) to me to be the President of Interstate Business Corporation, a Delaware corporation, who, being by me first duly sworn, did acknowledge that he/she, as the duly authorized officer of said Corporation, executed the foregoing and annexed Instrument, in the name and on behalf of said Corporation, as its free act and deed for the uses and purposes therein contained.     WITNESS my hand and official seal this 24th day of October, 2000:       /s/ Elizabeth L. Clayton NOTARY PUBLIC     My Commission Expires: 11/30/01   EXHIBITS and ATTACHMENTS     1. EXHIBIT A Rent Calculation 2. EXHIBIT B Rules and Regulations 3. EXHIBIT C Lease Renewal Clause     EXHIBIT A RENT CALCULATION Square Feet Rent per Square Foot Annual Minimum Rent Monthly Minimum Rent Total Monthly Rent 989 sq. ft. $ 11.50 $ 11,373.50 $ 947.79 $ 947.79 462 sq. ft.* 4.00 1,848.00 154.00 154.00 672 sq. ft.* 4.00 2,688.00 224.00 224.00 *Storage Area     EXHIBIT B RULES AND REGULATIONS Smallwood Village Center St. Charles, Maryland   Tenant shall, at all times during the term of the Lease: 1.   Use, maintain and occupy the premises in a careful, safe, proper and lawful manner, keep the premises and it's appurtenances in a clean and safe condition;       2.   Keep all glass in the doors and windows of the premises clean and in good repair;       3.   Not place, maintain or sell any merchandise in any vestibule or entry to the premises, on the sidewalks adjacent to the premises, or elsewhere on the outside of the premises without the prior written consent of Landlord;       4.   Keep the premises in a clean, orderly and sanitary condition, free of insects, rodents, vermin and other pests.       5.   Not permit undue accumulations of garbage, trash, rubbish and other refuse in the premises, and keep refuse in closed containers within the interior of the premises until removed.       6.   Not use, permit or suffer the use of any apparatus or instruments for musical or other sound reproduction or transmission in such manner that the sound emanating therefrom or caused thereby shall be audible beyond the interior of the premises.       7.   Not deliver or suffer or permit delivery of merchandise to the premises after 10:00 a.m. on any day.       8.   Light the show windows and exterior signs of the premises to the extent required in the Lease.       9.   Keep all mechanical apparatus free of vibration and noise which may be transmitted beyond the confines of the premises.       10.   Not cause or permit objectionable odors to emanate or be dispelled from the premises.       11.   Not overload the floors or electrical wiring and not install any additional electrical wiring or plumbing without Landlord's prior written consent.       12.   Not use show windows in the premises for any purpose other than display of merchandise for sale in a neat and attractive manner.       13.   Not conduct, permit or suffer any public or private auction sale to be conducted on or from the premises; and         14.   Not solicit business in the common areas of the Shopping Center or distribute handbills or other advertising materials in the common areas, and if this provision is violated the Tenant shall pay Landlord the cost of collecting same from the common areas for trash disposal.       15.   Maintain an attractive display in the show windows; and       16.   Discourage congregations of people in the common areas and outside the store.   EXHIBIT C   LEASE RENEWAL CLAUSE     The following additional provisions are hereby added to the Lease: (a) Option to Extend Subject to the satisfaction of the conditions precedent set forth in Paragraph (b) below, Tenant shall have the right, at its option, to extend the term of this Lease for one additional period (the "Extension Period") of three (3) years. Such extension option shall be exercisable by Tenant giving written notice to Landlord of the exercise of such option only during the three-month period that is at least six (6) months, but not more than nine (9) months, prior to the expiration of the then current term of this Lease; and, upon the exercise of such extension option, the termination date of this Lease shall automatically be extended for three (3) years. Such Extension Period shall be upon the same terms, covenants, and conditions as set forth in this Lease with respect to the initial term, but subject to the rental adjustment provisions of Paragraph (c) below. With respect to such extension option, and in the event that (i) Tenant shall fail to exercise the same strictly within the time period and in the manner set forth above, and/or (ii) at the time hereinabove specified for the exercise of such option, all of the conditions precedent set forth in Paragraph (b) below shall not have been satisfied, then such extension option shall automatically expire and be absolutely void and of no force or effect.   (b) Conditions Precedent The extension option granted to Tenant in Paragraph (a) above, shall be void and of no force and effect unless, at the time above specified for exercising such option, each and every one of the following conditions precedent shall have been fully satisfied: 1.   This Lease shall be in full force and effect;       2.   Tenant shall be in possession of the demised premises and shall be regularly conducting its normal business operation therein; and       3.   Tenant shall not be in default (beyond any grace period granted in this Lease for curing the same) in the performance or observance of any of the terms, provisions, covenants and conditions of this Lease.   (c) Rent Adjustment Notwithstanding any other provision of this Lease, in the event the term of this Lease is extended pursuant to the exercise by Tenant of the extension option hereinabove granted in Paragraph (a) above, then, with respect to such Extension Period, the rents, other charges and other economic benefits to be derived by Landlord under this Lease shall be the same as then prevails in the Shopping Center for new leases executed at that time. The foregoing sentence notwithstanding, in no event shall the fixed minimum annual rental (and the monthly installments thereof) payable hereunder during and for the Extension Period be less than the greater of (i) the fixed minimum annual rental in effect immediately prior to the Extension Period or (ii) the fixed minimum annual rental during the Initial term adjusted to the Consumer Price Index (as set forth in the following sentence). Such adjustment shall be accomplished by multiplying the average fixed minimum annual rental in effect during the initial term of this Lease by a fraction, the numerator of which shall be the Consumer Price Index as of the most recent date prior to the beginning of the Extension Period, and the denominator of which shall be the Consumer Price Index as of the most recent date prior to the Rent Commencement Date. If the fixed minimum annual rental is established by the aforesaid adjustment pursuant to the preceding sentence, said fixed minimum annual rental shall be effective as of the beginning of the Extension Period and shall thereafter continue in effect as the fixed minimum annual rental required to be paid under this Lease during the entire Extension Period subject to adjustment as described in Article 6E of this Lease.   (d) Consumer Price Index For all purposes of the Lease Agreement, the Consumer Price Index is hereby defined to be the "United States Bureau of Labor Statistics, Consumer Price Index, for Urban Wage Earners and Clerical Workers (CPl-W)", all items for Washington, D. C. SMSA (1982/84 = 100); and if the Consumer Price Index shall be discontinued or altered, Landlord and Tenant shall attempt to agree upon a substitute index or formula, and if said parties are not able to agree upon such substitute, the matter shall be referred to binding arbitration in accordance with the rules of the American Arbitration Association in the State of Maryland then prevailing.

EXHIBIT 10.39 ADDITIONAL PURCHASE OBLIGATION AGREEMENT         ADDITIONAL PURCHASE OBLIGATION AGREEMENT, dated as of July 4, 2000, between Tower Semiconductor Ltd., an Israeli corporation (“T”), and SanDisk Corporation, a Delaware corporation (“S”).         WHEREAS, T and S are parties to that certain Share Purchase Agreement dated July 4, 2000, relating to the sale by T to S of 866,551 of T’s Ordinary Shares (the “ Share Purchase Agreement”) and parties to that certain Foundry Agreement dated July 4, 2000, relating to the production of certain silicon wafers by T for delivery to S; and         WHEREAS, as a condition to the closing of the sale of certain of T’s shares under the Share Purchase Agreement and the effectiveness of the Foundry Agreement, T and S have each agreed to enter into this Agreement providing for the issuance and delivery of conditional additional purchase obligations for the purchase by S of Ordinary Shares of T, subject to the terms and conditions set forth herein.         NOW, THEREFORE, in consideration of the foregoing and for the purpose of defining the terms and provisions of the Additional Purchase Obligations and the respective rights and obligations thereunder of T and S, T and S hereby agree as follows: 1.  Definitions         1.1.  Certain Definitions. As used in this Agreement, terms not defined herein shall have the meaning ascribed to them in the Share Purchase Agreement and the following terms shall have the following respective meanings:         “A Additional Purchase Obligation Certificates” shall have the meaning ascribed to it in Section 2.2.         “A Additional Purchase Obligations” shall have the meaning ascribed to it in Section 2.1.         “Additional Purchase Obligation Certificates” shall have the meaning ascribed to it in Section 2.2.         “Additional Purchase Obligations” shall have the meaning ascribed to it in Section 2.1.         “B Additional Purchase Obligation Certificates” shall have the meaning ascribed to it in Section 2.2.         “B Additional Purchase Obligations” – shall have the meaning ascribed to it in Section 2.1.         “Equity Securities” means (a) Ordinary Shares and securities convertible into, or exercisable or exchangeable for, Ordinary Shares or rights or options to acquire Ordinary Shares or such other securities, and (b) shares of any other class or series of capital shares and securities convertible into, or exercisable or exchangeable for, shares of such other class or series and rights or options to acquire shares of such other class or series or such other securities, in each case, excluding the Additional Purchase Obligations.         “Exchange Act” means the Securities Exchange Act of 1934, as amended.         “Exercise Price” means the purchase price per Ordinary Share to be paid upon the exercise of each Additional Purchase Obligation in accordance with the terms hereof, which price shall initially be $30 per share, as each may be adjusted from time to time pursuant to Section 4 hereof.         “Expiration Date” means the fifth anniversary of the date of this Agreement subject to earlier termination of one or more of the Additional Purchase Obligations pursuant to Section 5.1.         “Exercise Notice” – shall have the meaning ascribed to in Section 2.1.3.         “Grace Period” – shall have the meaning ascribed to it in Section 5.1.         “Mandatory Exercise Event” shall have the meaning ascribed to it in Section 5.1. --------------------------------------------------------------------------------         “Missed Exercise” - shall have the meaning ascribed to it in Section 5.1.         “Nasdaq” means the Nasdaq National Market.         “B Additional Purchase Obligation Certificates” shall have the meaning ascribed to it in Section 2.2.         “B Additional Purchase Obligations” – shall have the meaning ascribed to it in Section 2.1.         “Ordinary Shares” means the ordinary shares, par value NIS1.00 per share of T and any other capital shares of T into which such ordinary shares may be converted or reclassified or that may be issued in respect of, in exchange for, or in substitution of, such ordinary shares by reason of any share splits, shares dividends, distributions, mergers, consolidations or other like events.         “SEC” means the Securities and Exchange Commission.         “Securities Act” means the Securities Act of 1933, as amended.         “Share Purchase Agreement” – as defined in the recitals to this Agreement.         “T” means T, an Israeli corporation, and its successors and assigns.         “Underlying Ordinary Shares” means the Ordinary Shares issuable or issued upon the exercise of the Additional Purchase Obligations. 2.  Original Issue of Additional Purchase Obligations         2.1.  The Additional Purchase Obligations.         2.1.1.  A Additional Purchase Obligations. On the basis of the representations, warranties and agreements contained in this Agreement, but subject to the terms and conditions hereof, concurrently with the execution of this Agreement, T shall issue and deliver to S warrants mandatorily exercisable under Section 5.1 hereof for the purchase of up to an aggregate of 1,833,450 Ordinary Shares of T by S subject to adjustment as set forth herein (the “A Additional Purchase Obligations”).         2.1.2.  B Additional Purchase Obligations. On the basis of the representations, warranties and agreements contained in this Agreement, but subject to the terms and conditions hereof, concurrently with the execution of this Agreement, T shall issue and deliver to S Additional Purchase Obligations for the purchase of up to an aggregate of 2,700,000 Ordinary Shares of T by S subject to adjustment as set forth herein. Pursuant to the election of S to exercise the B Additional Purchase Obligations as provided in Section 2.1.3 below, the B Additional Purchase Obligations shall become mandatorily exercisable under Section 5.1 hereof (the “B Additional Purchase Obligations” and together with the A Additional Purchase Obligations, the “Additional Purchase Obligations”).         2.1.3.  B Additional Purchase Obligations Exercise Notice. In the event that S elects to exercise the B Additional Purchase Obligations, S is required to deliver to T, no later than October 1, 2001(the “Exercise Date”) , a written notice (the “Exercise Notice”) of its election to exercise the B Additional Purchase Obligations under Section 5.1 hereof. The Exercise Notice shall be accompanied by a payment for such number of B Additional Purchase Obligations as shall have been exercised in the A Additional Purchase Obligation series through the Exercise Date. For instance, if by the Exercise Date the A-1, A-2 and A-3 Additional Purchase Obligations shall have been exercised, on the Exercise Date S shall make a payment for the B-1, B-2 and B-3 Additional Purchase Obligations. For the avoidance of all doubt, the B Additional Purchase Obligations shall not become exercisable until the delivery o f the Election Notice and failure to deliver the Election Notice to T within the above date shall cause the B Additional Purchase Obligations to terminate and become void.         2.2.  Form of Additional Purchase Obligation Certificates. The A Additional Purchase Obligations shall be designated in five series (Series A1 – A5), each evidenced by an Additional Purchase Obligation certificate in the form of Exhibits A1 – A5 attached hereto (the “A Additional Purchase Obligation Certificates”). The B Additional Purchase Obligations shall be designated in five series (Series B1 – B5), each evidenced by an Additional Purchase Obligation certificate in the form of Exhibits B1 – B5 attached hereto (the “B Additional Purchase Obligation -------------------------------------------------------------------------------- Certificates” and together with the A Additional Purchase Obligation Certificates, the “Additional Purchase Obligation Certificates”). Each A Additional Purchase Obligation series shall contain Additional Purchase Obligations to purchase up to an aggregate of 366,690 Ordinary Shares of T. Each B1- to B-5 Additional Purchase Obligation series shall contain Additional Purchase Obligations to purchase 540,000 Ordinary Shares of T. Each Additional Purchase Obligation Certificate shall be dated the date hereof and shall bear the legend set forth in Exhibit C, together with such other legends and endorsements thereon as may be required to comply with any law or with any rule or regulation pursuant thereto or with any rule or regulation of any securities exchange on which the Ordinary Shares may be listed, or to conform to customary usage. 3.  Exercise Price; Exercise of Additional Purchase Obligations Generally         3.1.  Payment of Exercise Price. Each Additional Purchase Obligation Certificate shall entitle the holder thereof, subject to the provisions thereof and of this Agreement, to receive up to the number of Ordinary Shares stated therein, subject to adjustment as herein provided, upon payment of the Exercise Price for each of such shares. The Exercise Price shall be payable by wire transfer of immediately available funds to T in accordance with written wiring instructions provided by T, or by such other means as may be mutually agreed by the parties.         3.2.  Exercise Periods of A and B Additional Purchase Obligations         3.2.1.  Exercise Period of A Additional Purchase Obligations. Subject to the terms and conditions set forth herein, the A Additional Purchase Obligations shall be exercisable at any time on or after the Closing Date under the Share Purchase Agreement and on or prior to the Expiration Date.         3.2.2.  Exercise Period of B Additional Purchase Obligations. Subject to the terms and conditions set forth herein, the B Additional Purchase Obligations shall be exercisable at any time after the delivery of the Exercise Notice, pursuant to Section 2.1.3, and on or prior to the Expiration Date.         3.3.  Expiration of Additional Purchase Obligations. The Additional Purchase Obligations shall terminate and become void as of the close of business on the Expiration Date.         3.4.  Exercise Generally. Subject to Section 5, in order to exercise an Additional Purchase Obligation, S must surrender the Additional Purchase Obligation Certificate evidencing such Additional Purchase Obligation to T, with one of the forms on the reverse of or attached to the Additional Purchase Obligation Certificate duly executed. Subject to the terms of Section 5, each Additional Purchase Obligation may be exercised in whole or in part, provided that no Additional Purchase Obligation may be exercised for the purchase of less than an aggregate of 100,000 Ordinary Shares. If fewer than all of the Additional Purchase Obligations represented by an Additional Purchase Obligation Certificate are surrendered, such Additional Purchase Obligation Certificate shall be surrendered and a new Additional Purchase Obligation Certificate substantially in the form of the Additional Purchase Obligation Certificate surrendered for partial exercise thereof providing for purchase by S of the number of Ordinary Shares that were not exercised shall be executed by T and issued to S.         Upon surrender of an Additional Purchase Obligation Certificate and payment of the Exercise Price in conformity with the foregoing provisions, T shall promptly issue to S appropriate evidence of ownership of the Ordinary Shares or other securities or property to which S is entitled, including share certificates in the name of S and evidence of such Ordinary Shares having been registered in the share register of T in the name of S. Such Shares shall bear the same legend as set forth in Section 4.3.2 of the Share Purchase Agreement. 4.  Adjustments         4.1.  Adjustment of Exercise Price and Number of Shares of Ordinary Shares               The (a) number and kind of shares purchasable upon the exercise of Additional Purchase Obligations and (b) Exercise Price shall both be subject to adjustment from time to time as follows:         4.1.1.  Stock Dividends, Share-Splits, Combinations, etc. In case T shall hereafter (a) pay a stock dividend or make a distribution (whether in Ordinary Shares or capital shares of any other class on its Ordinary Shares), (b) subdivide its outstanding Ordinary Shares, (c) combine its outstanding Ordinary Shares into a smaller number of shares, or (d) issue by reclassification of its Ordinary Shares any capital shares of T, the Exercise Price in effect immediately prior to such action (after giving effect to all other adjustements under this Section 4) shall be adjusted so that, in relation to any Additional Purchase 3 --------------------------------------------------------------------------------              Obligation thereafter exercised, S shall be entitled to receive the number of Ordinary Shares or of other capital shares which S would have owned immediately following such action had such Additional Purchase Obligation been exercised immediately prior thereto. An adjustment made pursuant to this paragraph shall become effective immediately after the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification.         4.1.2.  Reclassification, Combination, Mergers, etc. In case of any reclassification or change of outstanding Ordinary Shares issuable upon exercise of the Additional Purchase Obligations (other than (i) as set forth in paragraph 4.1.1 above, and (ii) a change in par value, or from par value to no par value, or from no par value to par value or (iii) as a result of a subdivision or combination), or in case of any consolidation or merger of T with or into another corporation (other than a merger in which T is the continuing corporation and which does not result in any reclassification or change of the then outstanding Ordinary Shares or other capital shares issuable upon exercise of the Additional Purchase Obligations (other than a change in par value, or from par value to no par value, or from no par value to par value or as a result of a subdivision or combination), or in case of any sale or conveyance to ano ther corporation of the property of T as an entirety or substantially as an entirety, then, as a condition of such reclassification, change, consolidation, merger, sale or conveyance, T or such a successor or purchasing corporation, as the case may be, shall forthwith make lawful and adequate provision whereby S shall have the right thereafter to receive on exercise of such Additional Purchase Obligation the kind and amount of shares and other securities and property receivable upon such reclassification, change, consolidation, merger, sale or conveyance by a holder of the number of Ordinary Shares issuable upon exercise of such Additional Purchase Obligation immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Such provisions shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The above provisions of this paragraph 4.1.2 shall similarly apply to successive reclassificati on and changes of Ordinary Shares and to successive consolidations, mergers, sales or conveyances.         4.1.3.  Deferral of Certain Adjustments. No adjustment to the Exercise Price (including the related adjustment to the number of Ordinary Shares purchasable upon the exercise of each Additional Purchase Obligation) shall be required hereunder unless such adjustment, together with other adjustments carried forward as provided below, would result in an increase or decrease of at least one percent of the Exercise Price, provided, however, that any adjustments which by reason of this paragraph 4.1.3 are not required to be made shall be carried forward and taken into account in any subsequent adjustment. No adjustment need be made for a change in the par value of the Ordinary Shares.         4.1.4.  Other Adjustments. In the event that at any time, as a result of an adjustment made pursuant to this Section 4, S shall become entitled to receive any securities of T other than Ordinary Shares thereafter the number of such other securities so receivable upon exercise of the Additional Purchase Obligations and the Exercise Price applicable to such exercise shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Ordinary Shares contained in this Section 4.         4.2.  Notice of Adjustment. Whenever the number of Ordinary Shares or other Equity Securities or property issuable upon the exercise of each Additional Purchase Obligation or the Exercise Price is adjusted, as herein provided, T shall promptly mail by first class mail, postage prepaid, to S notice of such adjustment or adjustments and shall deliver to S a certificate of T’s chief financial officer setting forth the number of Ordinary Shares or other Equity Securities or property issuable upon the exercise of each Additional Purchase Obligation or the Exercise Price after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.         4.3.  Statement on Additional Purchase Obligations. Irrespective of any adjustment in the number or kind of shares issuable upon the exercise of the Additional Purchase Obligations or the Exercise Price, Additional Purchase Obligations theretofore or thereafter issued may continue to express the same number and kind of shares as are stated in the Additional Purchase Obligations initially issuable pursuant to this Agreement.         4.4.  Fractional Interest. T shall not be required to issue fractional Ordinary Shares upon the exercise of Additional Purchase Obligations. If more than one Additional Purchase Obligation shall be presented for exercise in full at the same time, the number of full Ordinary Shares which shall be issuable upon such exercise shall be 4 -------------------------------------------------------------------------------- computed on the basis of the aggregate number of Ordinary Shares acquirable on exercise of the Additional Purchase Obligations so presented. If any fraction of an Ordinary Share would, except for the provisions of this section, be issuable on the exercise of any Additional Purchase Obligation (or specified portion thereof), T shall pay an amount in cash calculated by it to equal to the then current market value per share multiplied by such fraction computed to nearest whole cent. S, by its acceptance of the Additional Purchase Obligation Certificates, expressly waive any and all rights to receive any fraction of an Ordinary Share or a share certificate representing a fraction of an Ordinary Share. 5.  Mandatory Exercise         5.1.  Mandatory Exercise Events; Termination of Obligation. Subject to the terms and conditions contained herein, S shall be obligated to exercise each Additional Purchase Obligation within thirty days of the following events (each a “Mandatory Exercise Event”):         5.1.1.  In respect of the Series A-1 Additional Purchase Obligation (and the B-1 Additional Purchase Obligation if an Exercise Notice was delivered prior to the date the Series A-1 Additional Purchase Obligation is mandatorily exercisable), upon receipt of written notice from T signed by the two Co-CEOs (or by the CEO, in the event that at the relevant time the Company shall employ only one CEO) and the Chairman of the Board of T certifying that the Board of Directors of T has authorized commencement of construction of Fab 2 at the site set forth in the Business Plan, which approval shall not occur prior to obtaining all regulatory approvals necessary for the construction start as described in the Business Plan, provided that such event must occur no later than one month after the Closing under the Share Purchase Agreement;         5.1.2.  In respect of the Series A-2 Additional Purchase Obligation and the Series B-2 Additional Purchase Obligation (if an Exercise Notice was delivered prior to the date the Series A-2 Additional Purchase Obligation is mandatorily exercisable), upon receipt of written notice from T signed by the two Co-CEOs or the CEO, as the case may be, and the Chairman of the Board of T certifying the commencement of construction of the shell of the Fab 2 building in accordance with the Business Plan provided that such event must occur no later than three months after the Closing under the Share Purchase Agreement;         5.1.3.   In respect of the Series A-3 Additional Purchase Obligation and the Series B-3 Additional Purchase Obligation (if an Exercise Notice was delivered prior to the date the Series A-3 Additional Purchase Obligation is mandatorily exercisable), upon receipt of written notice from T signed by the two Co-CEOs or the CEO, as the case may be, and the Chairman of the Board of T certifying the completion of the construction of the first phase of the cleanroom of Fab 2 in accordance with the Business Plan provided that such event must occur no later than 12 months after the Closing under the Share Purchase Agreement;         5.1.4.  In respect of the Series A-4 Additional Purchase Obligation and the Series B-4 Additional Purchase Obligation (if an Exercise Notice was delivered prior to the date the Series A-4 Additional Purchase Obligation is mandatorily exercisable), upon receipt of written notice from T signed by the two Co-CEOs or the CEO, as the case may be, and the Chairman of the Board of T certifying the completion of successful pilot production in Fab 2 in accordance with the Business Plan provided that such event must occur no later than 18 months after the Closing under the Share Purchase Agreement; and         5.1.5.  In respect of the Series A-5 Additional Purchase Obligation and the Series B-5 Additional Purchase Obligation (if an Exercise Notice was delivered prior to the date the Series A-5 Additional Purchase Obligation is mandatorily exercisable), upon receipt of written notice from T signed by the two Co-CEOs or the CEO, as the case may be, and the Chairman of the Board of T certifying that Fab 2 has successfully produced wafers at the rate of 5,000 per month for two full consecutive months in accordance with the Business Plan provided that such event must occur no later than 22 months after the Closing under the Share Purchase Agreement.         Each of the Mandatory Exercise Events shall be deemed to have occurred if the Mandatory Exercise Event occurs within seven and one-half months from its original exercise date set forth above (such seven and one-half month period, a “Grace Period”). In the event that one of the Mandatory Exercise Events does not occur by the last date set forth in the relevant clause of clauses 5.1.1 – 5.1.5, including 5 --------------------------------------------------------------------------------              during the corresponding Grace Period (a “Missed Exercise”), then, if the subsequent Mandatory Exercise Event does not occur by no later than the end of its corresponding Grace Period, S shall not be obligated to effect the Missed Exercise and any subsequent series of Additional Purchase Obligations and the Additional Purchase Obligation relating to the Missed Exercise, to the extent such Additional Purchase Obligations are unexercised, shall automatically expire. However, if such subsequent Mandatory Exercise Event does occur within the applicable Grace Period, then S shall be obligated to exercise the Additional Purchase Obligation related to that subsequent Mandatory Exercise Event and shall be required to either effect the Missed Exercise within thirty days of the occurrence of the relevant subsequent Mandatory Exercise Event or the Additional Purchase Obligation relating to the Missed E xercise shall expire.         In addition, and without limiting any other remedies available to T, in the event that S fails to exercise an Additional Purchase Obligation in connection with a Mandatory Exercise Event which it is obligated to effect pursuant to this Section 5, any Additional Purchase Obligations unexercised at such time shall automatically expire         5.2.  Percentage Ownership Delay. Notwithstanding the provisions of Section 5.1, S may delay the exercise of any Additional Purchase Obligation if any such exercise would result in S owning more than 19.9% of the outstanding share capital of T.         5.3.  Other Conditions to Mandatory Exercise. In addition to the conditions to Mandatory Exercise contained in Section 5.1, S’s obligation to effect a Mandatory Exercise shall be subject to satisfaction of the following conditions (any of which may be waived by S, in whole or in part, in S’s discretion) in relation to each Mandatory Exercise:         5.3.1.  Accuracy of Representations. All of T’s representations and warranties in Section 6.1(i) of this Agreement must have been accurate in all material respects (except that such representations and warranties specifically qualified by materiality shall be read for purposes of this Section so as not to require an additional degree of materiality) as of the date of this Agreement, and must be accurate in all material respects as of the date of the relevant Mandatory Exercise, after giving effect, with respect to the representations made in Section 3.1 and 3.3 of the Share Purchase Agreement, to the issuance of Ordinary Shares contemplated by the Business Plan and Additional Financing Plan and without giving effect to any supplement to the Schedules other than supplements disclosing events and facts not existing at the time of the Closing and arising in the Ordinary Course of Business.         5.3.2.  Additional Financings. T shall have raised all the funds under the Additional Financings required thereunder to have been raised or obtained either prior to or simultaneously with the date of the relevant Mandatory Exercise as described in the Additional Financing Plan (each, a “Target Date”), including those funds required to have been raised by the relevant Target Date under (i) the debt or equity financing described in Section 10 of the Business Plan and (ii) under the grant from the Investment Center, in each case on terms and conditions which do not significantly deviate from the terms and conditions agreed upon in accordance with Section 5.6 of the Share Purchase Agreement, provided, however, that this condition shall be deemed to have been not satisfied only if the failure to raise such funds causes a material change in the timetable or cost of the Fab 2 project in relati on to the Business Plan as determined by S. Notwithstanding the foregoing, the conditions set forth in this Section 5.2.2 shall be deemed to have been met if the funds which were not raised as of the relevant Target Date are raised within 90 days of such Target Date on terms and conditions substantially similar to the terms and conditions upon which such funds were supposed to have been raised in accordance with Section 5.6 of the of the Share Purchase Agreement.         5.3.3.  Transaction Documents; Ancillary Agreements. Each of the Transaction Documents and the Toshiba Agreement shall be in full force and effect and shall not have been materially breached by any party thereto.         5.3.4.  Certificates. In addition to the documents T is obligated to deliver to S under this Section 5, T shall furnish S with such other documents as T may reasonably request for the purpose of (i) evidencing the performance by T of, or the compliance by T with, any covenant or obligation required to be performed or complied with by T in relation to the relevant Mandatory Exercise and (ii)  evidencing the satisfaction of any condition referred to in this Section 5. 6 --------------------------------------------------------------------------------         5.3.5.  No Proceedings. Since the date of this Agreement, there must not have been commenced by a third party against S or T, or against any Person affiliated with S or T, any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the Contemplated Transactions, or (b) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Contemplated Transactions.         5.3.6.  Bankruptcy-Related Events. None of the following events shall have occurred for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary, or come about or be effected by operation of law, or pursuant to or in compliance with any judgement, decree or order of any court or any order, rule or regulation of any administrative or governmental body):         5.3.6.1.  T shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency statute; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking reorganization or arrangement or similar relief under applicable bankruptcy laws; or         5.3.6.2.  A court of competent jurisdiction shall have entered an order, judgement or decree appointing a custodian, receiver, trustee, liquidator or conservator of T or of the whole or any substantial part of its properties, or approve a petition filed against T seeking reorganization or arrangement or similar relief under applicable bankruptcy, or if, under the provisions of any law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of T or of the whole or any substantial part of its properties, or if there was commenced against T any proceeding or petition seeking reorganization or arrangement or similar relief under applicable bankruptcy laws, or if T shall have taken any action to indicate its consent to or approval of any such proceeding or petition, and any one of which proceedings shall not have been vacated or abandoned within 30 days.         5.3.6.3.  A default shall have occurred in any agreement or instrument under or pursuant to which any material indebtedness of T shall have been issued, created, assumed, guaranteed or secured, and such default shall continure for more than the period of grace, if any, therein specified, or if such default shall permit the holder of such indebtedness to accelerate the maturity thereof, provided, however, that the condition contained in this Section 5.3.6.3 shall not be deemed to have been satisfied in the event that a default in any agreement or instrument under which any indebtedness of T has been issued could give rise to a cross default provision in in any agreement or instrument under or pursuant to which any material indebtedness of T shall have been issued, created, assumed, guaranteed or secured, or if the cumulative effect of any or all such defaults could be material to the Company. 6.  Representations and Warranties         6.1.  Representations and Warranties of T. (i) T hereby makes in favor of S, as of the date hereof and as of the date of each exercise of each Additional Purchase Obligation, each of the representations and warranties made by the Company in Sections 3.1, 3.2, 3.3, 3.14.1(i), the first two sentences of 3.14.2 and clause (ii) of the first paragraph of 3.15 of the Share Purchase Agreement, provided that references to “this Agreement” shall refer both to this Agreement and the Share Purchase Agreement; references, directly or indirectly, to the Escrow Agreement shall be ignored; references to “Shares” and the “Closing” shall be deemed to be references to the Ordinary Shares to be issued pursuant to the exercise of the Additional Purchase Obligation; and references to the “Closing Date” shall refer to the date that Ordinary Shares are actually issued and delivered to S purs uant to the relevant exercise of an Additional Purchase Obligation. Notwithstanding the foregoing, the representation contained in the first two sentences of Section 3.14.2 shall be read to relate to Fab 2. In the event that it is uncertain if a situation, event or fact that would otherwise be included in the scope of such representation relates to Fab 2, the matter shall be conclusively decided by the Project Committee.         6.2.  Representations and Warranties of S. S hereby makes in favor of T, as of the date hereof and as of the date of each exercise of an Additional Purchase Obligation, the representations and warranties made by S under Sections 4.1 – 4.5 of the Share Purchase Agreement, provided that references to “this Agreement” shall refer both to this Agreement and the Share Purchase Agreement, references to Shares shall refer to the Additional Purchase 7 -------------------------------------------------------------------------------- Obligations and the Ordinary Shares issuable upon the exercise thereof and references, directly or indirectly, to the Escrow Agreement shall be ignored. 7.  Covenants         7.1.  Reservation of Shares. T will reserve for issuance such number of Ordinary Shares as shall be sufficient for issuance and delivery thereof upon exercise of all outstanding Additional Purchase Obligations and will take any and all corporate action necessary to validly and legally issue fully paid and nonassessable Ordinary Shares.         7.2.  Consents; Required Approvals. T and S will each, as promptly as practicable after the date of this Agreement, take all action required of each of them, respectively, to obtain as promptly as practicable all necessary Consents and agreements of, and to give all notices and make all other filings with, any third parties, including Governmental Bodies, necessary to authorize, approve or permit the consummation of the transactions contemplated hereby, the Contemplated Transactions and the transactions contemplated by the Ancillary Agreements. Between the date of this Agreement and the date of the last issuance of Ordinary Shares pursuant to an exercise of a Additional Purchase Obligation, T will cooperate with S with respect to all filings that S elects to make or is required by Legal Requirements to make in connection with the performance of this Agreement and the Additional Purchase Obligations and S will l ikewise cooperate with T.         7.3.  Operation of T’s Business. Between the date of this Agreement and the date of the last issuance of Ordinary Shares pursuant to a Mandatory Exercise, T will not (i) take or agree or commit to take any action that would make any representation or warranty of T hereunder inaccurate in any respect at, or as of any time prior to, the date of the last issuance of Ordinary Shares pursuant to a Mandatory Exercise or (ii) omit or agree or commit to omit to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time. 8.  Miscellaneous         8.1.  Payment of Taxes. T will pay all taxes and other governmental charges (other than on the net income of S) that may be imposed or deliverable upon exercise of Additional Purchase Obligations and issuance of Ordinary Shares with respect thereto. T will not be required, however, to pay any tax or other charges which may be payable in respect of any transfer involved in the issue of any certificate for Ordinary Shares or other securities underlying the Additional Purchase Obligations or payment of cash or other property to any person other than the holder of an Additional Purchase Obligation Certificate surrendered upon the exercise thereof.         8.2.  Mutilated, Destroyed, Lost and Stolen Additional Purchase Obligation Certificates. If (a) any mutilated Additional Purchase Obligation Certificate is surrendered to T or (b) T receives evidence to its satisfaction of the destruction, loss or theft of any Additional Purchase Obligation Certificate, then, T shall execute and deliver, in exchange for any such mutilated Additional Purchase Obligation Certificate or in lieu of any such destroyed, lost or stolen Additional Purchase Obligation Certificate, a new Additional Purchase Obligation Certificate of like tenor and for a like aggregate number of Additional Purchase Obligations.               Upon the issuance of any new Additional Purchase Obligation Certificate under this Section 8.2, T may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and other expenses in connection therewith and an appropriate indemnity with respect to losses related thereto.               Every new Additional Purchase Obligation Certificate executed and delivered pursuant to this Section 8.2 in lieu of any destroyed, lost or stolen Additional Purchase Obligation Certificate shall constitute an original contractual obligation of T, whether or not the destroyed, lost or stolen Additional Purchase Obligation Certificate shall be at any time enforceable by anyone, and shall be entitled to the benefits of this Agreement equally and proportionately with any and all other Additional Purchase Obligation Certificates duly executed and delivered hereunder.               The provisions of this Section 8.2 are exclusive and shall prelude (to the extent lawful) all other rights or remedies with respect to the replacement of mutilated, destroyed, lost or stolen Additional Purchase Obligation Certificates. 8 --------------------------------------------------------------------------------         8.3.  Miscellaneous Rights. The rights of S upon the occurrence of the events set forth in this Agreement are cumulative. If more than one such event shall occur and the periods following the occurrence of such events and prior to the closing of the transactions that are the subject of such events overlap, S may exercise such rights arising therefrom as S may elect without any condition imposed upon such exercise not contained in this Agreement.         8.4.  Notices. Any notice, demand or delivery authorized by this Agreement shall be sufficiently given or made when mailed if sent by first-class mail, postage prepaid, addressed to the parties as follows:  T:  Attention: Co-Chief Executive Officer P.O. Box 619 Migdal Haemek 23105 Israel Facsimile No.: 972-6-654-7788  with a copy to: Yigal Arnon & Co. 3 Daniel Frisch Street Tel Aviv, Israel  Attention: David H. Schapiro, Adv. Facsimile No.: 972-3-608-7714  S:  Attention: President and CEO SanDisk Corporation 140 Caspian Court Sunnyvale, California 94089 Facsimile No.: (408) 542-0600  with a copy to: SanDisk Corporation 140 Caspian Court Sunnyvale, California 94089  Attention: Vice President and General Counsel Facsimile No.: (408) 548-0385               or such other address as shall have been furnished to the party giving or making such notice, demand or delivery.         8.5.  Assignments, Successors, and no Third-Party Rights. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties, except that S may assign any of its rights under this Agreement to any wholly owned Subsidiary of S or to any Subsidiary which is wholly owned other than a nominal interest, so long as such ownership shall be maintained. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns.         8.6.  Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument.         8.7.  Entire Agreement and Modification. This Agreement supersedes all prior agreements between the parties with respect to its subject matter (including the term sheet between S and T dated March 15, 2000 and all drafts hereof and thereof) and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. 9 --------------------------------------------------------------------------------         8.8.  Termination. This Agreement (other than T’s obligations with respect to Additional Purchase Obligations previously exercised) and the indemnification provisions relating hereto appearing in Sections 10 of the Share Purchase Agreement, shall terminate and be of no further force and effect on the Expiration Date.         8.9.  Applicable Law. This Agreement and each Additional Purchase Obligation issued hereunder and all rights arising hereunder shall be governed by the law of the State of California, without giving effect to the conflict of laws provisions thereof.         8.10.  Headings. The descriptive headings of the several Sections of this Agreement are inserted for convenience and shall not control or affect the meaning or construction of any of the provisions hereof.         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. TOWER SEMICONDUCTOR LTD.     By: /s/  Yoav Nissan Cohen                                           Name:  Yoav Nissan Cohen Title:  Co-Chief Executive Officer SANDISK CORPORATION     By: /s/  Eli Harari                                                            Name:  Eli Harari Title:  Chief Executive Officer

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.34 MAXIM PHARMACEUTICALS, INC. 2000 NONSTATUTORY STOCK OPTION PLAN Adopted August 29, 2000 Amended November 17, 2000 Termination Date: August 28, 2010 1.  PURPOSES.     (a) Eligible Option Recipients. The persons eligible to receive Options are the Employees, Directors and Consultants of the Company and its Affiliates.     (b) Available Options. The purpose of the Plan is to provide a means by which eligible recipients of Options may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Nonstatutory Stock Options.     (c) General Purpose. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Options, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. 2.  DEFINITIONS.     (a) "Affiliate" means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.     (b) "Board" means the Board of Directors of the Company.     (c) "Code" means the Internal Revenue Code of 1986, as amended.     (d) "Committee" means a committee of one or more members of the Board appointed by the Board in accordance with subsection 3(c).     (e) "Common Stock" means the common stock of the Company.     (f)  "Company" means Maxim Pharmaceuticals, Inc., a Delaware corporation.     (g) "Consultant" means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) who is a member of the Board of Directors of an Affiliate. However, the term "Consultant" shall not include either Directors who are not compensated by the Company for their services as Directors or Directors who are merely paid a director's fee by the Company for their services as Directors.     (h) "Continuous Service" means that the Optionholder's service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. The Optionholder's Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionholder renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Optionholder renders such service, provided that there is no interruption or termination of the Optionholder's 1 -------------------------------------------------------------------------------- Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party's sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.     (i)  "Director" means a member of the Board of Directors of the Company.     (j)  "Disability" means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.     (k) "Employee" means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director's fee by the Company or an Affiliate shall not be sufficient to constitute "employment" by the Company or an Affiliate.     (l)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.     (m) "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows:      (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.     (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.     (n) "Non-Employee Director" means a Director who either (i) is not a current Employee or Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act ("Regulation S-K")), does not possess an interest in any other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for purposes of Rule 16b-3.     (o) "Nonstatutory Stock Option" means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.     (p) "Officer" means a person who possesses the authority of an "officer" as that term is used in Rule 4460(i)(1)(A) of the Rules of the National Association of Securities Dealers, Inc. For purposes of the Plan, a person in the position of "Vice President" or higher shall be classified as an "Officer" unless the Board or Committee expressly finds that such person does not possess the authority of an "officer" as that term is used in Rule 4460(i)(1)(A) of the Rules of the National Association of Securities Dealers, Inc.     (q) "Option" means a Nonstatutory Stock Option granted pursuant to the Plan.     (r) "Option Agreement" means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 2 --------------------------------------------------------------------------------     (s) "Optionholder" means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.     (t) "Plan" means this Maxim Pharmaceuticals, Inc. 2000 Nonstatutory Stock Option Plan.     (u) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.     (v) "Securities Act" means the Securities Act of 1933, as amended. 3.  ADMINISTRATION.     (a) Administration by Board. The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in subsection 3(c).     (b) Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:      (i) To determine from time to time which of the persons eligible under the Plan shall be granted Options; when and how each Option shall be granted; what type or combination of types of Option shall be granted; the provisions of each Option granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to an Option; and the number of shares of Common Stock with respect to which an Option shall be granted to each such person.     (ii) To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.    (iii) To amend the Plan or an Option as provided in Section 11.     (iv) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.     (c) Delegation to Committee.      (i) General. The Board may delegate administration of the Plan to a Committee or Committees of one (1) or more members of the Board, and the term "Committee" shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.     (ii) Committee Composition when Common Stock is Publicly Traded. At such time as the Common Stock is publicly traded, in the discretion of the Board, a Committee may consist solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such authority, the Board or the Committee may delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Options to eligible persons who are not then subject to Section 16 of the Exchange Act. 3 --------------------------------------------------------------------------------     (d) Effect of Board's Decision. All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. 4.  SHARES SUBJECT TO THE PLAN.     (a) Share Reserve. Subject to the provisions of Section 10 relating to adjustments upon changes in Common Stock, the Common Stock that may be issued pursuant to Options shall not exceed in the aggregate seven hundred fifty thousand (750,000) shares of Common Stock.     (b) Reversion of Shares to the Share Reserve. If any Option shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the shares of Common Stock not acquired under such Option shall revert to and again become available for issuance under the Plan.     (c) Source of Shares. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 5.  ELIGIBILITY.     (a) Eligibility for Specific Options. Nonstatutory Stock Options may be granted to Employees, Directors and Consultants.     (b) Restrictions on Eligibility. Notwithstanding the foregoing, the aggregate number of shares issued pursuant to Options granted to Officers and Directors shall be less than fifty percent (50%) of the number of shares reserved for issuance under the Plan as determined at the time of each such issuance to an Officer or Director, except that there shall be excluded from this calculation shares issued to Officers not previously employed by the Company pursuant to Options granted as an inducement essential to such individuals entering into employment contracts with the Company.     (c) Consultants.      (i) A Consultant shall not be eligible for the grant of an Option if, at the time of grant, a Form S-8 Registration Statement under the Securities Act ("Form S-8") is not available to register either the offer or the sale of the Company's securities to such Consultant because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8, unless the Company determines both (i) that such grant (A) shall be registered in another manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or (B) does not require registration under the Securities Act in order to comply with the requirements of the Securities Act, if applicable, and (ii) that such grant complies with the securities laws of all other relevant jurisdictions.     (ii) Form S-8 generally is available to consultants and advisors only if (i) they are natural persons; (ii) they provide bona fide services to the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer's parent; and (iii) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the issuer's securities. 6.  OPTION PROVISIONS.     Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall 4 -------------------------------------------------------------------------------- include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:     (a) Term. The term of an Option shall be the term determined by the Board, either at the time of grant of the Option or as the Option may be amended thereafter.     (b) Exercise Price of a Nonstatutory Stock Option. The exercise price of each Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.     (c) Consideration. The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the Company of other Common Stock, (2) according to a deferred payment or other similar arrangement with the Optionholder or (3) in any other form of legal consideration that may be acceptable to the Board. Unless otherwise specifically provided in the Option, the purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). At any time that the Company is incorporated in Delaware, payment of the Common Stock's "par value," as defined in the Delaware General Corporation Law, shall not be made by deferred payment.     In the case of any deferred payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement.     (d) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock Option shall be transferable to the extent provided in the Option Agreement. If the Nonstatutory Stock Option does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.     (e) Vesting Generally. The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this subsection 6(e) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.     (f)  Termination of Continuous Service. In the event an Optionholder's Continuous Service terminates (other than upon the Optionholder's death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of 5 -------------------------------------------------------------------------------- (i) the date three (3) months following the termination of the Optionholder's Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement; provided, however, that the Board may in its sole discretion extend the exercise period of any Option for up to thirty (30) days after the date specified in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.     (g) Disability of Optionholder. In the event that an Optionholder's Continuous Service terminates as a result of the Optionholder's Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.     (h) Death of Optionholder. In the event (i) an Optionholder's Continuous Service terminates as a result of the Optionholder's death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder's Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder's estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder's death pursuant to subsection 6(d), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.     (i)  Extension of Termination Date. An Optionholder's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in subsection 6(a) or (ii) the expiration of a period of three (3) months after the termination of the Optionholder's Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.     (j)  Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder's Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate.     (k) Re-Load Options.      (i) Without in any way limiting the authority of the Board to make or not to make grants of Options hereunder, the Board shall have the authority (but not an obligation) to include as part of any Option Agreement a provision entitling the Optionholder to a further Option (a "Re-Load Option") in the event the Optionholder exercises the Option evidenced by the Option Agreement, in whole or in part, by surrendering other shares of Common Stock in accordance with this Plan and the terms and conditions of the Option Agreement. Unless otherwise specifically provided in the Option, the Optionholder shall not surrender shares of Common Stock acquired, directly or indirectly from the Company, unless such shares have 6 -------------------------------------------------------------------------------- been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes).     (ii) Any such Re-Load Option shall (1) provide for a number of shares of Common Stock equal to the number of shares of Common Stock surrendered as part or all of the exercise price of such Option; (2) have an expiration date which is the same as the expiration date of the Option the exercise of which gave rise to such Re-Load Option; and (3) have an exercise price which is equal to one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Re-Load Option on the date of exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option shall be subject to the same exercise price and term provisions heretofore described for Options under the Plan.    (iii) Any such Re-Load Option shall be a Nonstatutory Stock Option. There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall be subject to the availability of sufficient shares of Common Stock under subsection 4(a) and shall be subject to such other terms and conditions as the Board may determine which are not inconsistent with the express provisions of the Plan regarding the terms of Options. 7.  COVENANTS OF THE COMPANY.     (a) Availability of Shares. During the terms of the Options, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Options.     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Options and to issue and sell shares of Common Stock upon exercise of the Options; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Option or any Common Stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Options unless and until such authority is obtained. 8.  USE OF PROCEEDS FROM STOCK.     Proceeds from the sale of Common Stock pursuant to Options shall constitute general funds of the Company. 9.  MISCELLANEOUS.     (a) Acceleration of Exercisability and Vesting. The Board shall have the power to accelerate the time at which an Option may first be exercised or the time during which an Option or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Option stating the time at which it may first be exercised or the time during which it will vest.     (b) Stockholder Rights. No Optionholder shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Option unless and until such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms.     (c) No Employment or other Service Rights. Nothing in the Plan or any instrument executed or Option granted pursuant thereto shall confer upon any Optionholder any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Option was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an 7 -------------------------------------------------------------------------------- Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant's agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.     (d) Investment Assurances. The Company may require an Optionholder, as a condition of exercising or acquiring Common Stock under any Option, (i) to give written assurances satisfactory to the Company as to the Optionholder's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Option; and (ii) to give written assurances satisfactory to the Company stating that the Optionholder is acquiring Common Stock subject to the Option for the Optionholder's own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Option has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.     (e) Withholding Obligations. To the extent provided by the terms of an Option Agreement, the Optionholder may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Option by any of the following means (in addition to the Company's right to withhold from any compensation paid to the Optionholder by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Optionholder as a result of the exercise or acquisition of Common Stock under the Option, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of Common Stock. 10. ADJUSTMENTS UPON CHANGES IN STOCK.     (a) Capitalization Adjustments. If any change is made in the Common Stock subject to the Plan, or subject to any Option, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to subsection 4(a) and the maximum number of securities subject to award to any person pursuant to subsection 5(c), and the outstanding Options will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Options. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction "without receipt of consideration" by the Company.) 8 --------------------------------------------------------------------------------     (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company, then all outstanding Options shall terminate immediately prior to such event.     (c) Asset Sale. In the event of a sale of all or substantially all of the assets of the Company, then all Options outstanding under the Plan shall continue in full force and effect.     (d) Merger or Consolidation In Which The Company Is Not The Surviving Corporation. In the event of a merger or consolidation in which the Company is not the surviving corporation, then any surviving corporation or acquiring corporation shall assume any Options outstanding under the Plan or shall substitute similar options (including an award to acquire the same consideration paid to the stockholders in the transaction described in this subsection 10(d)) for those outstanding under the Plan. In the event any surviving corporation or acquiring corporation refuses to assume such Options or to substitute similar options for those outstanding under the Plan, then with respect to Options held by Optionholders whose Continuous Service has not terminated, the vesting of such Options (and, if applicable, the time during which such Options may be exercised) shall be accelerated in full, and the Options shall terminate if not exercised (if applicable) at or prior to such event. With respect to any other Options outstanding under the Plan, such Options shall terminate if not exercised (if applicable) prior to such event.     (e) Reverse Merger. In the event of a reverse merger in which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then any acquiring corporation (or a corporation which directly or indirectly controls such an acquiring corporation) shall assume any Options outstanding under the Plan or shall substitute similar options (including an award to acquire the same consideration paid to the stockholders in the transaction described in this subsection 10(e) for those outstanding under the Plan. In the event any acquiring corporation or corporation controlling such an acquiring corporation refuses to assume such Options or to substitute similar options for those outstanding under the Plan, then with respect to Options held by Optionholders whose Continuous Service has not terminated, the vesting of such Options (and, if applicable, the time during which such Options may be exercised) shall be accelerated in full, and the Options shall terminate if not exercised (if applicable) at or prior to such event. With respect to any other Options outstanding under the Plan, such Options shall terminate if not exercised (if applicable) prior to such event. 11. AMENDMENT OF THE PLAN AND OPTIONS.     (a) Amendment of Plan. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.     (b) Stockholder Approval. The Board may, in its sole discretion, but is not obligated to, submit the Plan or any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to certain executive officers.     (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder and/or to bring the Plan and/or Options granted under it into compliance therewith. 9 --------------------------------------------------------------------------------     (d) No Impairment of Rights. Rights under any Option granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing.     (e) Amendment of Options. The Board at any time, and from time to time, may amend the terms of any one or more Options; provided, however, that the rights under any Option shall not be impaired by any such amendment unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing. 12. TERMINATION OR SUSPENSION OF THE PLAN.     (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the date the Plan is adopted by the Board. No Options may be granted under the Plan while the Plan is suspended or after it is terminated.     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Option granted while the Plan is in effect except with the written consent of the Optionholder. 13. EFFECTIVE DATE OF PLAN.     The Plan shall become effective as determined by the Board. 14. CHOICE OF LAW.     The law of the State of California shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state's conflict of laws rules. 10 -------------------------------------------------------------------------------- QuickLinks

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.38 AGREEMENT     THIS AGREEMENT is made by and between BellSouth Telecommunications, Inc., ("BellSouth"), a Georgia corporation, and Birch Telecom of the South, Inc. ("Birch"), a Delaware corporation, and shall be deemed effective as of the date of signatures by both parties. This Agreement may refer to either BellSouth or Birch or both as a "Party" or "Parties." W I T N E S S E T H     WHEREAS, BellSouth is a local exchange telecommunications company authorized to provide telecommunications services in the states of Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee; and     WHEREAS, Birch is or seeks to become an alternative local exchange telecommunications company ("CLEC") authorized to provide telecommunications services in the states of Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee; and     WHEREAS, the Parties wish to resell BellSouth's telecommunications services and/or interconnect their facilities, purchase network elements and other services, and exchange traffic specifically for the purposes of fulfilling their obligations pursuant to sections 251 and 252 of the Telecommunications Act of 1996 ("the Act").     NOW THEREFORE, in consideration of the mutual agreements contained herein, BellSouth and Birch agree as follows:   1.       Term of the Agreement   1.1       The term of this Agreement shall be two years, beginning as of the date of signature by both Parties and shall apply to the states of Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee. If as of the expiration of this Agreement, a Subsequent Agreement (as defined in Section 2.2 below) has not been executed by the Parties, this Agreement shall continue on a month-to-month basis at the same terms conditions and prices as those in effect as of the expiration date hereof while a Subsequent Agreement is being negotiated. The Parties' rights and obligations with respect to this Agreement after expiration shall be as set forth in Section 2.4 below.   1.2       The Parties agree that by no later than one hundred and eighty (180) days prior to the expiration of this Agreement, they shall commence negotiations with regard to the terms, conditions and prices of resale and/or local interconnection to be effective beginning on the expiration date of this Agreement ("Subsequent Agreement").   1.3       If, within one hundred and thirty-five (135) days of commencing the negotiation referred to in Section 2.2 above, the Parties are unable to satisfactorily negotiate new resale and/or local interconnection terms, conditions and prices, either Party may petition the Commission to establish appropriate local interconnection and/or resale arrangements pursuant to 47 U.S.C. 252. The Parties agree that, in such event, they shall encourage the Commission to issue its order regarding the appropriate local interconnection and/or resale arrangements no later than the expiration date of this Agreement. The Parties further agree that in the event the Commission does not issue its order prior to the expiration date of this Agreement, or if the Parties continue beyond the expiration date of this Agreement to negotiate the local interconnection and/or resale arrangements without Commission intervention, the terms, conditions and prices ultimately ordered by the Commission, or negotiated by the Parties, will be effective retroactive to the day following the expiration date of this Agreement.           --------------------------------------------------------------------------------   1.4       Notwithstanding the foregoing, in the event that as of the date of expiration of this Agreement and conversion of this Agreement to a month-to-month term, the Parties have not entered into a Subsequent Agreement and the parties have not commenced good faith negotiations in a timely manner, no arbitration proceeding has been filed in accordance with Section 2.3 above, or the Parties have not mutually agreed (where permissible) to extend the arbitration window for petitioning the applicable Commission(s) for resolution of those terms upon which the Parties have not agreed, then either Party may terminate this Agreement upon sixty (60) days notice to the other Party. In the event that BellSouth terminates this Agreement as provided above, BellSouth shall continue to offer interconnection, unbundled network elements and services to Birch pursuant to the terms, conditions and rates set forth in BellSouth's then current standard interconnection agreement. The Parties may continue to negotiate a Subsequent Agreement, and the terms of such Subsequent Agreement shall be effective retroactive to the day following expiration of this Agreement   2.       Good Faith Performance           In the performance of their obligations under this Agreement, the Parties shall act in good faith and consistently with the intent of the Act. Where notice, approval, or similar action by a Party is permitted or required by any provision of this Agreement, (including, without limitation, the obligation of the Parties to further negotiate the resolution of new or open issues under this Agreement) such action shall not be unreasonably delayed, withheld, or conditioned.   3.       Ordering Procedures   3.1       Birch shall provide BellSouth its Carrier Identification Code (CIC), Operating Company Number (OCN), Group Access Code (GAC) and Access Customer Name and Address (ACNA) code as applicable prior to placing its first order.   3.2       The Parties agree to adhere to the BellSouth Local Interconnection and Facility Based Ordering Guide and Resale Ordering Guide, as appropriate for the services ordered.   3.3       Birch shall pay charges for Operational Support Systems (OSS) as set forth in this Agreement in Attachment 1 and/or in Attachment 2, 3, 5 and 7 as applicable.   4.       Parity           When Birch purchases, pursuant to Attachment 1 of this Agreement, telecommunications services from BellSouth for the purposes of resale to end users, BellSouth shall provide said services so that the services and service provisioning are at least equal in quality, subject to the same conditions, and provided within the same provisioning time intervals that BellSouth provides to its affiliates, subsidiaries and end users. To the extent technically feasible, the quality of a Network Element, as well as the quality of the access to such Network Element provided by BellSouth to Birch shall be at least equal in quality to that which BellSouth provides to itself, its subsidiaries, affiliates, or other carriers. The quality of the interconnection between the networks of BellSouth and the network of Birch shall be at a level that is equal to that which BellSouth provides itself, a subsidiary, an Affiliate, or any other party. The interconnection facilities shall be designed to meet the same technical criteria and service standards that are used within BellSouth's network and shall extend to a consideration of service quality as perceived by end users and service quality as perceived by Birch.                         2 --------------------------------------------------------------------------------   5.       Directory Listings           BellSouth shall provide Birch and their customers on a non-discriminatory basis, access to white pages and yellow pages directory listings in the same manner BellSouth provides such listings to its own end users, and consistent with the following terms:   5.1       Listings. Birch shall provide all new, changed and deleted listings, on a timely basis and BellSouth or its agent will include Birch residential and business customer listings in the appropriate White Pages (residential and business) or alphabetical directories. Birch will provide to BellSouth all Birch end users that wish to be omitted from directories. Directory listings will make no distinction between Birch and BellSouth subscribers.   5.1.1       Enhanced Listings. Where BellSouth offers to publish, at no charge, in its white pages directory Enhanced White Pages Listings to its retail customers, BellSouth shall publish such listings, at no charge and under the same terms and conditions, for Birch for its end users. Where BellSouth charges its retail customers for Enhanced White Pages Listings, BellSouth shall publish such listings under the same terms and conditions to Birch for its Customers at the applicable wholesale discount set forth in Attachment 1.   5.1.2       Yellow Pages Directory Listings. Where BellSouth offers to publish in its Yellow Pages Directory free Yellow Pages listings to its retail end users, BellSouth shall publish such listings, at no charge, and under the same terms and conditions to Birch for its end users. Where BellSouth charges business end users for Yellow Pages basic Directory Listings, BellSouth shall provide one Yellow Pages basic Directory Listing for each AT&T Customer, who subscribes to business services, at BellSouth tariffed rates at the applicable wholesale discount. BellSouth shall not provide "lead" information on Birch end users to its Yellow Pages directory publishing Affiliate without written permission from Birch.   5.2       Rates. Unless otherwise agreed, BellSouth and Birch will provide to each other subscriber primary listing information in the White Pages at no charge except for discounted applicable wholesale service order charges as set forth in the appropriate tariffs.   5.3       Procedures for Submitting Birch Subscriber Information are found in BellSouth's Ordering Guide for manually processed listings and in the Local Exchange Ordering Guide for mechanically submitted listings.   5.3.1       Notwithstanding any provision(s) to the contrary, Birch agrees to provide to BellSouth, and BellSouth agrees to accept, Birch's Subscriber Listing Information (SLI) relating to Birch's customers in the geographic area(s) covered by this Interconnection Agreement. Birch authorizes BellSouth to release all such Birch SLI provided to BellSouth by Birch to qualifying third parties via either license agreement or BellSouth's Directory Publishers Database Service (DPDS), General Subscriber Services Tariff, Section A38.2, as the same may be amended from time to time. Such CLEC SLI shall be intermingled with BellSouth's own customer listings of any other CLEC that has authorized a similar release of SLI. Where necessary, BellSouth will use good faith efforts to obtain state commission approval of any necessary modifications to Section A38.2 of its tariff to provide for release of third party directory listings, including modifications regarding listings to be released pursuant to such tariff and BellSouth's liability therunder. BellSouth's obligation pursuant to this Section shall not arise in any particular state until the commission of such state has approved modifications to such tariff.           3 --------------------------------------------------------------------------------   5.3.2       No compensation shall be paid to Birch for BellSouth's receipt of Birch SLI, or for the subsequent release to third parties of such SLI. In addition, to the extent BellSouth incurs costs on an ongoing basis to administer the release of Birch SLI, Birch shall pay to BellSouth its proportionate share of the reasonable costs associated therewith. Before BellSouth incurs any cost under this Section, it shall inform Birch of its good faith estimate of Birch's share of such cost, and Birch shall have the option of agreeing in writing to the cost or of discontinuing the release of Birch's SLI.   5.3.3       BellSouth shall not be liable for the content or accuracy of any SLI provided by Birch under this Agreement. Birch shall indemnify, hold harmless and defend BellSouth from and against any damages, losses, liabilities, demands claims, suits, judgments, costs and expenses (including but not limited to reasonable attorneys' fees and expenses) arising from BellSouth's tariff obligations or otherwise and resulting from or arising out of any third party's claim of inaccurate Birch listings or use of the SLI provided pursuant to this Agreement. BellSouth shall forward to Birch any complaints received by BellSouth relating to the accuracy or quality of Birch listings.   5.3.4       Listings and subsequent updates will be released consistent with BellSouth system changes and/or update scheduling requirements.   5.4       Unlisted/Non-Published Subscribers. Birch will be required to provide to BellSouth the names, addresses and telephone numbers of all Birch customers that wish to be omitted from directories.   5.5       Inclusion of Birch Customers in Directory Assistance Database. BellSouth will include and maintain Birch subscriber listings in BellSouth's Directory Assistance databases at no charge and Birch shall provide such Directory Assistance listings at no charge. BellSouth will update the Directory Assistance database with the same timeliness as for its retail end users. BellSouth and Birch will formulate appropriate procedures regarding lead-time, timeliness, format and content of listing information. BellSouth shall advise Birch as soon as possible, but in no event fewer than six (6) months in advance, of any changes in the maintenance of the Directory Listings database or any mechanisms or interfaces, whether industry standard or not, pursuant to which BellSouth will provide Directory Listings to Birch.   5.6       Listing Information Confidentiality. BellSouth will accord Birch's directory listing information the same level of confidentiality that BellSouth accords its own directory listing information, and BellSouth shall limit access to Birch's customer proprietary or confidential directory information to those BellSouth employees who are involved in the preparation of listings and such information shall not be used for other purposes..   5.7       Optional Listings. Additional listings and optional listings will be offered by BellSouth at tariffed rates as set forth in the General Subscriber Services Tariff.   5.8       Directory Delivery. BellSouth or its agent shall deliver White Pages directories and Yellow Pages directories to Birch subscribers at no charge or as specified in a separate BAPCO agreement.           4 --------------------------------------------------------------------------------   6.       Bona Fide Request/New Business Request Process for Further Unbundling           If Birch is a facilities based provider or a facilities based and resale provider, this section shall apply. BellSouth shall, upon request of Birch, provide to Birch access to its network elements at any technically feasible point for the provision of Birch's telecommunications service where such access is necessary and failure to provide access would impair the ability of Birch to provide services that it seeks to offer. Any request by Birch for access to a network element, interconnection option, or for the provisioning of any service or product that is not already available shall be treated as a Bona Fide Request/New Business Request, and shall be submitted to BellSouth pursuant to the Bona Fide Request/New Business Request process set forth following.   6.1       A Bona Fide Request/New Business Request shall be submitted in writing to Birch's Account Manager by Birch and shall specifically identify the requested service date, technical requirements, space requirements and/or such specifications that clearly define the request such that BellSouth has sufficient information to analyze and prepare a response.   6.2       Upon request, a service or product requested by another carrier through BFR/NBR process shall be available to Birch on the same rates, terms and conditions.   7.       Court Ordered Requests for Call Detail Records and Other Subscriber Information   7.1       To the extent technically feasible, BellSouth maintains call detail records for Birch end users for limited time periods and can respond to subpoenas and court ordered requests for this information. BellSouth shall maintain such information for Birch end users for the same length of time it maintains such information for its own end users.   7.2       Birch agrees that BellSouth will respond to subpoenas and court ordered requests delivered directly to BellSouth for the purpose of providing call detail records when the targeted telephone numbers belong to Birch end users. Billing for such requests will be generated by BellSouth and directed to the law enforcement agency initiating the request.   7.3       Where BellSouth is providing to Birch telecommunications services for resale or providing to Birch the local switching function, then Birch agrees that in those cases where Birch receives subpoenas or court ordered requests regarding targeted telephone numbers belonging to Birch end users, if Birch does not have the requested information, Birch will advise the law enforcement agency initiating the request to redirect the subpoena or court ordered request to BellSouth. Where the request has been forwarded to BellSouth, billing for call detail information will be generated by BellSouth and directed to the law enforcement agency initiating the request.   7.4       In all other instances, Birch will provide Birch end user and/or other customer information that is available to Birch in response to subpoenas and court orders for their own customer records. When BellSouth receives subpoenas or court ordered requests regarding targeted telephone numbers belonging to Birch end users, BellSouth will advise the law enforcement agency initiating the request to redirect the subpoena or court ordered request to Birch.   8.       Liability and Indemnification   8.1       BellSouth Liability. BellSouth shall take financial responsibility for its own actions in causing, or its lack of action in preventing, unbillable or uncollectible Birch revenues.   8.2       Birch Liability. In the event that, by amendment to this agreement or otherwise, Birch consists of two (2) or more separate entities as set forth in the preamble to this Agreement, all such entities shall be jointly and severally liable for the obligations of Birch under this Agreement.             5 --------------------------------------------------------------------------------   8.3       Liability for Acts or Omissions of Third Parties. Neither BellSouth nor Birch shall be liable for any act or omission of another telecommunications company providing a portion of the services provided under this Agreement.   8.4       Limitation of Liability.   8.4.1       Each Party's liability to the other for any loss, cost, claim, injury or liability or expense, including reasonable attorney's fees relating to or arising out of any negligent act or omission in its performance of this Agreement whether in contract or in tort, shall be limited to a credit for the actual cost of the services or functions not performed or improperly performed, except to the extent otherwise provided for in this Agreement. Notwithstanding the foregoing, claims for damages by a Party, any customer of that Party, or any other person or entity resulting from the gross negligence or willful misconduct of the other Party shall not be subject to such limitation of liability.   8.4.2       Limitations in Tariffs. A Party may, in its sole discretion, provide in its tariffs and contracts with its Customer and third parties that relate to any service, product or function provided or contemplated under this Agreement, that to the maximum extent permitted by Applicable Law, such Party shall not be liable to Customer or third Party for (i) any Loss relating to or arising out of this Agreement, whether in contract, tort or otherwise, that exceeds the amount such Party would have charged that applicable person for the service, product or function that gave rise to such Loss and (ii) Consequential Damages. To the extent that a Party elects not to place in its tariffs or contracts such limitations of liability, and the other Party incurs a Loss as a result thereof, such Party shall indemnify and reimburse the other Party for that portion of the Loss that would have been limited had the first Party included in its tariffs and contracts the limitations of liability that such other Party included in its own tariffs at the time of such Loss.   8.4.3       Neither BellSouth nor Birch shall be liable for damages to the other's terminal location, POI or other company's customers' premises resulting from the furnishing of a service, including, but not limited to, the installation and removal of equipment or associated wiring, except to the extent caused by a company's negligence or willful or intentional misconduct or by a company's failure to properly ground a local loop after disconnection.   8.4.4       Under no circumstance shall a Party be responsible or liable for indirect, incidental, or consequential damages, including, but not limited to, economic loss or lost business or profits, damages arising from the use or performance of equipment or software, or the loss of use of software or equipment, or accessories attached thereto, delay, error, or loss of data. In connection with this limitation of liability, each Party recognizes that the other Party may, from time to time, provide advice, make recommendations, or supply other analyses related to the Services, or facilities described in this Agreement, and, while each Party shall use diligent efforts in this regard, the Parties acknowledge and agree that this limitation of liability shall apply to provision of such advice, recommendations, and analyses.   8.5       Indemnification for Certain Claims. The Party providing services hereunder, its affiliates and its parent company, shall be indemnified, defended and held harmless by the Party receiving services hereunder against any claim, loss or damage arising from the receiving company's use of the services provided under this Agreement pertaining to (1) claims for libel, slander or invasion of privacy arising from the content of the receiving company's own communications, or (2) any claim, loss or damage claimed by the customer of the Party receiving services arising from such company's use or reliance on the providing company's services, actions, duties, or obligations arising out of this Agreement.           6 --------------------------------------------------------------------------------   8.6       Disclaimer. EXCEPT AS SPECIFICALLY PROVIDED TO THE CONTRARY IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES TO THE OTHER PARTY CONCERNING THE SPECIFIC QUALITY OF ANY SERVICES, OR FACILITIES PROVIDED UNDER THIS AGREEMENT. THE PARTIES DISCLAIM, WITHOUT LIMITATION, ANY WARRANTY OR GUARANTEE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR FROM USAGES OF TRADE.   9.       Intellectual Property Rights and Indemnification   9.1       No License. Except for the limited right to access BellSouth information through various operational support systems as set forth in this Agreement for use as expressly set forth herein, no patent, copyright, trademark or other proprietary right is licensed, granted or otherwise transferred by this Agreement. Birch is strictly prohibited from any use, including but not limited to in sales, in marketing or advertising of telecommunications services, of any BellSouth name, service mark or trademark, except that (1) Birch may make factual references to the BellSouth name in response to a customer or potential customer inquiry regarding the source of the underlying services or the identity of repair technicians, and (2) Birch may use the BellSouth name in comparative advertising so long as the reference is truthful and factual, does not relate to the source of the underlying service and does not imply any agency relationship, partnership, endorsement, sponsorship or affiliation by or with BellSouth..   9.2       Ownership of Intellectual Property. Any intellectual property which originates from or is developed by a Party shall remain in the exclusive ownership of that Party. Except for a limited license to use patents or copyrights to the extent necessary for the Parties to use any facilities or equipment (including software) or to receive any service solely as provided under this Agreement, no license in patent, copyright, trademark or trade secret, or other proprietary or intellectual property right now or hereafter owned, controlled or licensable by a Party, is granted to the other Party or shall be implied or arise by estoppel. It is the responsibility of each Party to ensure at no additional cost to the other Party that it has obtained any necessary licenses in relation to intellectual property of third Parties used in its network that may be required to enable the other Party to use any facilities or equipment (including software), to receive any service, or to perform its respective obligations under this Agreement.   9.3       Indemnification. The Party providing a service pursuant to this Agreement will defend the Party receiving such service or data provided as a result of such service against claims of infringement arising solely from the use by the receiving Party of such service and will indemnify the receiving Party for any damages awarded based solely on such claims in accordance with Section 8 of this Agreement.   9.4       Claim of Infringement. In the event that use of any facilities or equipment (including software), becomes, or in reasonable judgment of the Party who owns the affected network is likely to become, the subject of a claim, action, suit, or proceeding based on intellectual property infringement, then said Party shall promptly and at its sole expense, but subject to the limitations of liability set forth below:   9.4.1       modify or replace the applicable facilities or equipment (including software) while maintaining form and function, or   9.4.2       obtain a license sufficient to allow such use to continue.           7 --------------------------------------------------------------------------------   9.4.3       In the event 9.4.1 or 9.4.2 are commercially unreasonable, then said Party may, terminate, upon reasonable notice, this contract with respect to use of, or services provided through use of, the affected facilities or equipment (including software), but solely to the extent required to avoid the infringement claim.   9.5       Exception to Obligations. Neither Party's obligations under this Section shall apply to the extent the infringement is caused by: (i) modification of the facilities or equipment (including software) by the indemnitee; (ii) use by the indemnitee of the facilities or equipment (including software) in combination with equipment or facilities (including software) not provided or authorized by the indemnitor provided the facilities or equipment (including software) would not be infringing if used alone; (iii) conformance to specifications of the indemnitee which would necessarily result in infringement; or (iv) continued use by the indemnitee of the affected facilities or equipment (including software) after being placed on notice to discontinue use as set forth herein.   9.6       Exclusive Remedy. The foregoing shall constitute the Parties' sole and exclusive remedies and obligations with respect to a third party claim of intellectual property infringement arising out of the conduct of business under this Agreement.   10.       Proprietary and Confidential Information   10.1       Proprietary and Confidential Information: Defined. It may be necessary for BellSouth and Birch, each as the "Discloser," to provide to the other party, as "Recipient," proprietary and confidential information(including trade secret information) including but not limited to technical, financial, marketing, staffing and business plans and information, strategic information, proposals, request for proposals, specifications, drawings, prices, costs, procedures, processes, business systems, software programs, techniques, customer account data, call detail records and like information. This proprietary and confidential information also includes, but is not limited to all orders for Services and Network Elements placed by either Party, and information that would constitute Customer Proprietary Network Information and Recorded Usage Data, whether disclosed by the Discloser or otherwise acquired by the Recepient in the course of the performance of this Agreement. (This proprietary and confidential information is collectively the Discloser's "Information"). All Information provided to Recipient by Discloser shall be treated as proprietary and confidential.   10.2       Use and Protection of Information. Recipient shall use the Information solely for the purpose(s) of performing this Agreement, and Recipient shall protect Information from any use, distribution or disclosure except as permitted hereunder. Recipient will use the same standard of care to protect Information as Recipient uses to protect its own similar confidential and proprietary information, but not less than a reasonable standard of care. Recipient may disclose Information solely to the Authorized Representatives of the Recipient who (a) have a substantive need to know such Information in connection with performance of the Agreement; (b)  have been advised of the confidential and proprietary nature of the Information; and (c) have personally agreed in writing to protect from unauthorized disclosure all confidential and proprietary information, of whatever source, to which they have access in the course of their employment. Unless otherwise agreed, Recipient shall not permit employees or agents of Recipient with end user marketing, product development, or any other non-Discloser purpose, to have access to Information under any circumstances. "Authorized Representatives" are the officers, directors and employees of Recipient and its Affiliates, as well as Recipient's and its Affiliates' consultants, contractors, counsel and agents. "Affiliates" means any company that is owned in whole or in part, now or in the future, directly or indirectly through a subsidiary, by a party hereto.           8 --------------------------------------------------------------------------------   10.3       Ownership, Copying & Return of Information. Information remains at all times the property of Discloser. Recipient may make tangible or electronic copies, notes, summaries or extracts of Information only as necessary for use as authorized herein. All such tangible or electronic copies, notes, summaries or extracts must be marked with the same confidential and proprietary notice as appears on the original. Upon Discloser's request, all or any requested portion of the Information (including, but not limited to, tangible and electronic copies, notes, summaries or extracts of any information) will be promptly returned to Discloser or destroyed according to Discloser's request, and Recipient will provide Discloser with written certification stating that such Information has been returned or destroyed.   10.4       Exceptions. Discloser's Information does not include: (a) any information publicly disclosed by Discloser; (b) any information Discloser in writing authorizes Recipient to disclose without restriction; (c) any information already lawfully known to Recipient at the time it is disclosed by the Discloser, without an obligation to keep confidential; or (d) any information Recipient lawfully obtains from any source other than Discloser, provided that such source lawfully disclosed and/or independently developed such information. If Recipient is required to provide Information to any court or government agency pursuant to written court order, subpoena, regulation or process of law, Recipient must first provided Discloser with prompt written notice of such requirement and cooperate with Discloser to appropriately protect against or limit the scope of such disclosure. To the fullest extent permitted by law, Recipient will continue to protect as confidential and proprietary all Information disclosed in response to a written court order, subpoena, regulation or process of law.   10.5       Equitable Relief. Recipient acknowledges and agrees that any breach or threatened breach of this Agreement is likely to cause Discloser irreparable harm for which money damages may not be an appropriate or sufficient remedy. Recipient therefore agrees that Discloser or its Affiliates, as the case may be, are entitled to receive injunctive or other equitable relief to remedy or prevent any breach or threatened breach of this Agreement. Such remedy is not the exclusive remedy for any breach or threatened breach of this Agreement, but is in addition to all other rights and remedies available at law or in equity.   10.6       Survival of Confidentiality Obligations. The parties' rights and obligations under this Section 10 shall survive and continue in effect until three (3)  years after the expiration or termination date of this Agreement with regard to all Information exchanged during the term of this Agreement. Thereafter, the parties' rights and obligations hereunder survive and continue in effect with respect to any Information that is a trade secret under applicable law.   11.       Assignments           Any assignment by either Party to any non-affiliated entity of any right, obligation or duty, or of any other interest hereunder, in whole or in part, without the prior written consent of the other Party shall be void. Such consent will not be unreasonably withheld. A Party may assign this Agreement or any right, obligation, duty or other interest hereunder to an Affiliate company of the Party without the consent of the other Party. All obligations and duties of any Party under this Agreement shall be binding on all successors in interest and assigns of such Party. No assignment or delegation hereof shall relieve the assignor of its obligations under this Agreement in the event that the assignee fails to perform such obligations.           9 --------------------------------------------------------------------------------   12.       Resolution of Disputes           Except as otherwise stated in this Agreement, the Parties agree that if any dispute arises as to the interpretation of any provision of this Agreement or as to the proper implementation of this Agreement, either Party may petition the Commission for a resolution of the dispute. However, each Party reserves any rights it may have to seek judicial review of any ruling made by the Commission concerning this Agreement.           The Parties agree that this Section does not prevent either Party from seeking temporary equitable remedies, including temporary restraining orders. A request by a Party to a court or a regulatory authority for interim measures or equitable relief shall not be deemed a waiver of the obligation to comply with the Dispute Resolution provisions.           Nonexclusive Remedies except as otherwise expressly provided in this Agreement, each of the remedies provided under this Agreement is cumulative and is in addition to any remedies that may be available at law or in equity.   13.       Taxes   13.1       Definition. For purposes of this Section, the terms "taxes" and "fees" shall include but not limited to federal, state or local sales, use, excise, gross receipts or other taxes or tax-like fees of whatever nature and however designated (including tariff surcharges and any fees, charges or other payments, contractual or otherwise, for the use of public streets or rights of way, whether designated as franchise fees or otherwise) imposed, or sought to be imposed, on or with respect to the services furnished hereunder or measured by the charges or payments therefore, excluding any taxes levied on income.   13.2       Taxes and Fees Imposed Directly On Either Providing Party or Purchasing Party.   13.2.1       Taxes and fees imposed on the providing Party, which are not permitted or required to be passed on by the providing Party to its customer, shall be borne and paid by the providing Party.   13.2.2       Taxes and fees imposed on the purchasing Party, which are not required to be collected and/or remitted by the providing Party, shall be borne and paid by the purchasing Party.   13.3       Taxes and Fees Imposed on Purchasing Party But Collected And Remitted By Providing Party.   13.3.1       Taxes and fees imposed on the purchasing Party shall be borne by the purchasing Party, even if the obligation to collect and/or remit such taxes or fees is placed on the providing Party.   13.3.2       To the extent permitted by applicable law, any such taxes and/or fees shall be shown as separate items on applicable billing documents between the Parties. Notwithstanding the foregoing, the purchasing Party shall remain liable for any such taxes and fees regardless of whether they are actually billed by the providing Party at the time that the respective service is billed.           10 --------------------------------------------------------------------------------   13.3.3       If the purchasing Party determines that in its opinion any such taxes or fees are not payable, the providing Party shall not bill such taxes or fees to the purchasing Party if the purchasing Party provides written certification, reasonably satisfactory to the providing Party, stating that it is exempt or otherwise not subject to the tax or fee, setting forth the basis therefor, and satisfying any other requirements under applicable law. If any authority seeks to collect any such tax or fee that the purchasing Party has determined and certified not to be payable, or any such tax or fee that was not billed by the providing Party, the purchasing Party may contest the same in good faith, at its own expense. In any such contest, the purchasing Party shall promptly furnish the providing Party with copies of all filings in any proceeding, protest, or legal challenge, all rulings issued in connection therewith, and all correspondence between the purchasing Party and the taxing authority.   13.3.4       In the event that all or any portion of an amount sought to be collected must be paid in order to contest the imposition of any such tax or fee, or to avoid the existence of a lien on the assets of the providing Party during the pendency of such contest, the purchasing Party shall be responsible for such payment and shall be entitled to the benefit of any refund or recovery.   13.3.5       If it is ultimately determined that any additional amount of such a tax or fee is due to the imposing authority, the purchasing Party shall pay such additional amount, including any interest and penalties thereon.   13.3.6       Notwithstanding any provision to the contrary, the purchasing Party shall protect, indemnify and hold harmless (and defend at the purchasing Party's expense) the providing Party from and against any such tax or fee, interest or penalties thereon, or other charges or payable expenses (including reasonable attorney fees) with respect thereto, which are incurred by the providing Party in connection with any claim for or contest of any such tax or fee.   13.3.7       Each Party shall notify the other Party in writing of any assessment, proposed assessment or other claim for any additional amount of such a tax or fee by a taxing authority; such notice to be provided, if possible, at least ten (10) days prior to the date by which a response, protest or other appeal must be filed, but in no event later than thirty (30) days after receipt of such assessment, proposed assessment or claim.   13.4       Taxes and Fees Imposed on Providing Party But Passed On To Purchasing Party.   13.4.1       Taxes and fees imposed on the providing Party, which are permitted or required to be passed on by the providing Party to its customer, shall be borne by the purchasing Party. Nothing in this Agreement shall be construed to create an independent right in the providing Party to pass on taxes and or fees to the purchasing Party.   13.4.2       To the extent permitted by applicable law, any such taxes and/or fees shall be shown as separate items on applicable billing documents between the Parties. Notwithstanding the foregoing, the purchasing Party shall remain liable for any such taxes and fees regardless of whether they are actually billed by the providing Party at the time that the respective service is billed.           11 --------------------------------------------------------------------------------   13.4.3       If the purchasing Party disagrees with the providing Party's determination as to the application or basis for any such tax or fee, the Parties shall consult with respect to the imposition and billing of such tax or fee. Notwithstanding the foregoing, the providing Party shall retain ultimate responsibility for determining whether and to what extent any such taxes or fees are applicable, and the purchasing Party shall abide by such determination and pay such taxes or fees to the providing Party. The providing Party shall further retain ultimate responsibility for determining whether and how to contest the imposition of such taxes and fees; provided, however, that any such contest undertaken at the request of the purchasing Party shall be at the purchasing Party's expense.   13.4.4       In the event that all or any portion of an amount sought to be collected must be paid in order to contest the imposition of any such tax or fee, or to avoid the existence of a lien on the assets of the providing Party during the pendency of such contest, the purchasing Party shall be responsible for such payment and shall be entitled to the benefit of any refund or recovery.   13.4.5       If it is ultimately determined that any additional amount of such a tax or fee is due to the imposing authority, the purchasing Party shall pay such additional amount, including any interest and penalties thereon.   13.4.6       Notwithstanding any provision to the contrary, the purchasing Party shall protect indemnify and hold harmless (and defend at the purchasing Party's expense) the providing Party from and against any such tax or fee, interest or penalties thereon, or other reasonable charges or payable expenses (including reasonable attorney fees) with respect thereto, which are incurred by the providing Party in connection with any claim for or contest of any such tax or fee.   13.4.7       Each Party shall notify the other Party in writing of any assessment, proposed assessment or other claim for any additional amount of such a tax or fee by a taxing authority; such notice to be provided, if possible, at least ten (10) days prior to the date by which a response, protest or other appeal must be filed, but in no event later than thirty (30) days after receipt of such assessment, proposed assessment or claim.   13.5       Mutual Cooperation. In any contest of a tax or fee by one Party, the other Party shall cooperate fully by providing records, testimony and such additional information or assistance as may reasonably be necessary to pursue the contest. Further, the other Party shall be reimbursed for any reasonable and necessary out-of-pocket copying and travel expenses incurred in assisting in such contest.   14.       Force Majeure           In the event performance of this Agreement, or any obligation hereunder, is either directly or indirectly prevented, restricted, or interfered with by reason of fire, flood, earthquake or like acts of God, wars, revolution, civil commotion, explosion, acts of public enemy, embargo, acts of the government in its sovereign capacity, labor difficulties, including without limitation, strikes, slowdowns, picketing, or boycotts, unavailability of equipment from vendor, changes requested by Customer, or any other circumstances beyond the reasonable control and without the fault or negligence of the Party affected, the Party affected, upon giving prompt notice to the other Party, shall be excused from such performance on a day-to-day basis to the extent of such prevention, restriction, or interference (and the other Party shall likewise be excused from performance of its obligations on a day-to-day basis until the delay, restriction or interference has ceased); provided however, that the Party so affected shall use diligent efforts to avoid or remove such causes of non-performance and both Parties shall proceed whenever such causes are removed or cease.             12 -------------------------------------------------------------------------------- 15.   Year 2000 Compliance           Each Party warrants that it has implemented a program the goal of which is to ensure that all software, hardware and related materials (collectively called "Systems") delivered, connected with BellSouth or supplied in the furtherance of the terms and conditions specified in this Agreement: (i) will record, store, process and display calendar dates falling on or after January 1, 2000, in the same manner, and with the same functionality as such software records, stores, processes and calendar dates falling on or before December 31, 1999; and (ii) shall include without limitation date data century recognition, calculations that accommodate same century and multicentury formulas and date values, and date data interface values that reflect the century.   16.       Modification of Agreement   16.1       BellSouth shall make available, pursuant to 47 USC § 252 and the FCC rules and regulations regarding such availability, to Birch any interconnection, service, or network element provided under any other agreement filed and approved pursuant to 47 USC § 252. The Parties shall adopt all rates, terms and conditions concerning such other interconnection, service or network element and any other rates, terms and conditions that are legitimately related. The adopted interconnection, service, or network element, provision and/or agreement shall apply to the same states as such other agreement and for the identical term of such other agreement.   16.2       If Birch changes its name or makes changes to its company structure or identity due to a merger, acquisition, transfer or any other reason, it is the responsibility of Birch to notify BellSouth of said change and request that an amendment to this Agreement, if necessary, be executed to reflect said change.   16.3       No modification, amendment, supplement to, or waiver of the Agreement or any of its provisions shall be effective and binding upon the Parties unless it is made in writing and duly signed by the Parties.   16.4       Execution of this Agreement by either Party does not confirm or infer that the executing Party agrees with any decision(s) issued pursuant to the Telecommunications Act of 1996 and the consequences of those decisions on specific language in this Agreement. Neither Party waives its rights to appeal or otherwise challenge any such decision(s) and each Party reserves all of its rights to pursue any and all legal and/or equitable remedies, including appeals of any such decision(s).   16.5       In the event that any effective legislative, regulatory (including generic proceedings), judicial or other legal action materially affects any material terms of this Agreement, or the ability of Birch or BellSouth to perform any material terms of this Agreement, Birch or BellSouth may, provide written notice to require that such terms be renegotiated, and the Parties shall renegotiate in good faith such mutually acceptable new terms as may be required. In the event that such new terms are not renegotiated within ninety (90) days after such notice, the Dispute shall be referred to the Dispute Resolution procedure set forth in Section 12.   16.6       If any provision of this Agreement, or the application of such provision to either Party or circumstance, shall be held invalid, the remainder of the Agreement, or the application of any such provision to the Parties or circumstances other than those to which it is held invalid, shall not be effective thereby, provided that the Parties shall attempt to reformulate such invalid provision to give effect to such portions thereof as may be valid without defeating the intent of such provision.           13 --------------------------------------------------------------------------------   17.       Waivers           A failure or delay of either Party to enforce any of the provisions hereof, to exercise any option which is herein provided, or to require performance of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or options, and each Party, notwithstanding such failure, shall have the right thereafter to insist upon the specific performance of any and all of the provisions of this Agreement.   18.       Governing Law           To the extent any provisions of this Agreement are subject to the jurisdiction of the FCC, applicable federal rules and regulations shall govern those provisions. To the extent any provisions of this Agreement are subject to the jurisdiction of the state Commission, applicable Commission rules and regulations shall govern those provisions. All other provisions of this Agreement shall be governed by the laws of the state of Georgia.   19.       Arm's Length Negotiations           This Agreement was executed after arm's length negotiations between the undersigned Parties and reflects the conclusion of the undersigned that this Agreement is in the best interests of all Parties.             20.   Notices   20.1       Every notice, consent, approval, or other communications required or contemplated by this Agreement shall be in writing and shall be delivered in person or given by postage prepaid mail, address to:                   BellSouth Telecommunications, Inc.                   CLEC Account Team 9th Floor 600 North 19th Street Birmingham, Alabama 35203                   and                   General Attorney—COU Suite 4300 675 W. Peachtree St. Atlanta, GA 30375                   Birch Telecom of the South, Inc.                   Greg Lawhon, General Counsel 2020 Baltimore Avenue Kansas City, Missouri 64108-1914                               or at such other address as the intended recipient previously shall have designated by written notice to the other Party.   20.2       Where specifically required, notices shall be by certified or registered mail. Unless otherwise provided in this Agreement, notice by mail shall be effective on the date it is officially recorded as delivered by return receipt or equivalent, and in the absence of such record of delivery, it shall be presumed to have been delivered the fifth day, or next business day after the fifth day, after it was deposited in the mails.           14 --------------------------------------------------------------------------------   20.3       BellSouth shall provide Birchat least 30 day advance (or such shorter notice as may be required or permitted by Commission order) notice via Internet posting of price changes and of changes to the terms and conditions of services available for resale in accordance with applicable Commission rules or orders. To the extent that revisions occur between the time BellSouth notifies Birch of changes under this Agreement and the time the changes are scheduled to be implemented, BellSouth will immediately notify Birch of such revisions consistent with its internal notification process.   21.       Rule of Construction           No rule of construction requiring interpretation against the drafting Party hereof shall apply in the interpretation of this Agreement.   22.       Headings of No Force or Effect           The headings of Articles and Sections of this Agreement are for convenience of reference only, and shall in no way define, modify or restrict the meaning or interpretation of the terms or provisions of this Agreement.   23.       Multiple Counterparts           This Agreement may be executed multiple counterparts, each of which shall be deemed an original, but all of which shall together constitute but one and the same document.   24.       Implementation of Agreement           If Birch is a facilities based provider or a facilities based and resale provider, this section shall apply. Within 60 days of the execution of this Agreement, the Parties will adopt a schedule for the implementation of the Agreement. The schedule shall state with specificity time frames for submission of including but not limited to, network design, interconnection points, collocation arrangement requests, pre-sales testing and full operational time frames for the business and residential markets. An implementation template to be used for the implementation schedule is contained in Attachment 10 of this Agreement.   25.       Guides           This Agreement contains references to numerous Guides maintained by BellSouth, including, but not limited to, the BellSouth Local Interconnection and Facility Based Ordering Guide, BellSouth Resale Ordering Guide, BellSouth Products and Services Interval Guide, and the BellSouth Facility Based CLEC Activation Requirements Customer Guide (together, "Guides"). Where this Agreement references any BellSouth Guides, the Parties agree to adhere to such Guides, provided that these Guides do not affect the substantive rights and obligations of the Parties under this Agreement. In the event of a conflict between this Agreement and any Guides, this Agreement controls. All intervals set forth in the most current Guides available on the effective date of this contract shall be available to Birch, regardless of future BellSouth updates to the Guides. In the event BellSouth modifies the intervals set forth in the Guides after the effective date of this agreement, Birch, at its sole option and upon written notice to BellSouth,, may choose to continue with the intervals set forth at the effective date of the agreement. Otherwise, the intervals in BellSouth's guides shall apply.   26.       Filing of Agreement           Upon execution of this Agreement it shall be filed with the appropriate state regulatory agency pursuant to the requirements of Section 252 of the Act. If the regulatory agency imposes any filing or public interest notice fees regarding the filing or approval of the Agreement, Birch shall be responsible for publishing the required notice and the publication and/or notice costs shall be borne by Birch.                         15 --------------------------------------------------------------------------------   27.       Entire Agreement           This Agreement and its Attachments, incorporated herein by this reference, sets forth the entire understanding and supersedes prior Agreements between the Parties relating to the subject matter contained herein and merges all prior discussions between them, and neither Party shall be bound by any definition, condition, provision, representation, warranty, covenant or promise other than as expressly stated in this Agreement or as is contemporaneously or subsequently set forth in writing and executed by a duly authorized officer or representative of the Party to be bound thereby.           This Agreement may include attachments with provisions for the following services:           Network Elements and Other Services Local Interconnection Resale Collocation           The following services are included as options for purchase by Birch. Birch shall elect said services by written request to its Account Manager if applicable.           Optional Daily Usage File (ODUF) Enhanced Optional Daily Usage File (EODUF) Access Daily Usage File (ADUF) Line Information Database (LIDB) Storage Centralized Message Distribution Service (CMDS) Calling Name (CNAM)                 IN WITNESS WHEREOF, the Parties have executed this Agreement the day and year above first written. BELLSOUTH TELECOMMUNICATIONS, INC.   BIRCH TELECOM OF THE SOUTH, INC.   --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Signature   Signature   Jerry D. Hendrix         --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Name   Name   Sr. Director—Interconnection Services         --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Title   Title   --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Date   Date 16 -------------------------------------------------------------------------------- Definitions     Affiliate is defined as a person that (directly or indirectly) owns or controls, is owned or controlled by, or is under common ownership or control with, another person. For purposes of this paragraph, the term "own" means to own an equity interest (or equivalent thereof) of more than 10 percent.     Centralized Message Distribution System is the Telcordia (formerly BellCore) administered national system, based in Kansas City, Missouri, used to exchange Exchange Message Interface (EMI) formatted data among host companies.     Commission is defined as the appropriate regulatory agency in each of BellSouth's nine state region, Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee.     Daily Usage File is the compilation of messages or copies of messages in standard Exchange Message Interface (EMI) format exchanged from BellSouth to a CLEC.     Exchange Message Interface is the nationally administered standard format for the exchange of data among the Exchange Carriers within the telecommunications industry.     Information Service means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.     Intercompany Settlements (ICS) is the revenue associated with charges billed by a company other than the company in whose service area such charges were incurred. ICS on a national level includes third number and credit card calls and is administered by Telcordia (formerly BellCore)'s Calling Card and Third Number Settlement System (CATS). Included is traffic that originates in one Regional Bell Operating Company's (RBOC) territory and bills in another RBOC's territory.     Intermediary function is defined as the delivery of traffic from Birch; a CLEC other than Birch or another telecommunications carrier through the network of BellSouth or Birch to an end user of Birch; a CLEC other than Birch or another telecommunications carrier.     Local Interconnection is defined as 1) the delivery of local traffic to be terminated on each Party's local network so that end users of either Party have the ability to reach end users of the other Party without the use of any access code or substantial delay in the processing of the call; 2) the LEC network features, functions, and capabilities set forth in this Agreement; and 3) Service Provider Number Portability sometimes referred to as temporary telephone number portability to be implemented pursuant to the terms of this Agreement.     Local Traffic is defined as in Attachment 3.     Message Distribution is routing determination and subsequent delivery of message data from one company to another. Also included is the interface function with CMDS, where appropriate.     Multiple Exchange Carrier Access Billing ("MECAB") means the document prepared by the Billing Committee of the Ordering and Billing Forum ("OBF:), which functions under the auspices of the Carrier Liaison Committee of the Alliance for Telecommunications Industry Solutions ("ATIS") and by Telcordia (formerly BellCore) as Special Report SR-BDS-000983, Containing the recommended guidelines for the billing of Exchange Service access provided by two or more LECs and/or CLECs or by one LEC in two or more states within a single LATA.     Network Element is defined to mean a facility or equipment used in the provision of a telecommunications service. Such term may include, but is not limited to, features, functions, and capabilities that are provided by means of such facility or equipment, including but not limited to, subscriber numbers, databases, signaling systems, and information sufficient for billing and collection or 17 -------------------------------------------------------------------------------- used in the transmission, routing, or other provision of a telecommunications service. BellSouth offers access to the Network Elements, unbundled loops; network interface device; sub-loop elements; local switching; transport; tandem switching; operator systems; signaling; access to call-related databases; dark fiber as set forth in Attachment 2 of this Agreement.     Non-Intercompany Settlement System (NICS) is the Telcordia (formerly BellCore) system that calculates non-intercompany settlements amounts due from one company to another within the same RBOC region. It includes credit card, third number and collect messages.     Percent of Interstate Usage (PIU) is defined as a factor to be applied to terminating access services minutes of use to obtain those minutes that should be rated as interstate access services minutes of use. The numerator includes all interstate "non-intermediary" minutes of use, including interstate minutes of use that are forwarded due to service provider number portability less any interstate minutes of use for Terminating Party Pays services, such as 800 Services. The denominator includes all "non-intermediary", local, interstate, intrastate, toll and access minutes of use adjusted for service provider number portability less all minutes attributable to terminating Party pays services.     Percent Local Usage (PLU) is defined as a factor to be applied to intrastate terminating minutes of use. The numerator shall include all "non-intermediary" local minutes of use adjusted for those minutes of use that only apply local due to Service Provider Number Portability. The denominator is the total intrastate minutes of use including local, intrastate toll, and access, adjusted for Service Provider Number Portability less intrastate terminating Party pays minutes of use.     Revenue Accounting Office (RAO) Status Company is a local exchange company/alternate local exchange company that has been assigned a unique RAO code. Message data exchanged among RAO status companies is grouped (i.e. packed) according to From/To/Bill RAO combinations.     Service Control Points ("SCPs") are defined as databases that store information and have the ability to manipulate data required to offer particular services.     Signal Transfer Points ("STPs") are signaling message switches that interconnect Signaling Links to route signaling messages between switches and databases. STPs enable the exchange of Signaling System 7 ("SS7") messages between switching elements, database elements and STPs. STPs provide access to various BellSouth and third party network elements such as local switching and databases.     Signaling links are dedicated transmission paths carrying signaling messages between carrier switches and signaling networks. Signal Link Transport is a set of two or four dedicated 56 kbps transmission paths between Birch designated Signaling Points of Interconnection that provide a diverse transmission path and cross connect to a BellSouth Signal Transfer Point.     Telecommunications means the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received.     Telecommunications Service means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.     Telecommunications Act of 1996 ("Act") means Public Law 104-104 of the United States Congress effective February 8, 1996. The Act amended the Communications Act of 1934 (47, U.S.C. Section 1 et. seq.).     Wire Center denotes a building or space within a building a building which serves as an aggregation point on a given carrier's network, where transmission facilities and circuits are connected or switched. Wire Center can also denote a building in which one or more Central Offices, used for the provision of basic exchange services and Switched access service, are located. 18 -------------------------------------------------------------------------------- QUICKLINKS EXHIBIT 10.38

Exhibit 10(b)                       FIRST AMENDMENT dated as of September 29, 2000 (this "Amendment"), to the Credit Agreement dated as of April 20, 2000 (the "Credit Agreement") among BERGEN BRUNSWIG CORPORATION (the "Company") BERGEN BRUNSWIG DRUG COMPANY, PHARMERICA, INC., the other BORROWING SUBSIDIARIES party hereto, the LENDERS party hereto, and THE CHASE MANHATTAN BANK, as Administrative Agent.                     A.         Pursuant to the Credit Agreement, the Lenders and the Issuing Banks have extended credit to the Company and the Borrowing Subsidiaries, and have agreed to extend credit to the Company and the Borrowing Subsidiaries, in each case pursuant to the terms and subject to the conditions set forth therein.                 B.         The Company has informed the Administrative Agent that it seeks an amendment of the Credit Agreement as set forth herein.                 C.         The Required Lenders are willing to agree to such amendment pursuant to the terms and subject to the conditions set forth herein.                 D.         Each capitalized term used and not otherwise defined herein shall have the meaning assigned to such term in the Credit Agreement.                 Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:                                 SECTION 1.         Amendments to the Credit Agreement.                   (a)         The definition of "Consolidated Cash Interest Expense" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:                                       ""Consolidated Cash Interest Expense" means, for any period, the excess of (a) the sum of (i) the interest expense (including imputed interest expense in respect of Capital Lease Obligations and including all distributions in respect of the Trust Preferred) of the Company and the Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, (ii) any interest accrued during such period in respect of Indebtedness of the Company or any Subsidiary that is required to be capitalized rather than included in consolidated interest expense for such period in accordance with GAAP, (iii) all discount, interest, fees, premiums and other charges in respect of all Securitizations for such period, plus (iv)  any cash payments made during such period in respect of obligations referred to in clause (b)(B) below that were amortized or accrued in a previous period, minus (b) the sum, to the extent included in such consolidated interest expense for such period, of (A) non-cash amounts attributable to amortization of financing costs paid in a previous period, (B) non-cash amounts attributable to amortization of debt discounts or accrued interest payable in kind for such period, and (C)  all fees incurred on or prior to the Effective Date in respect of the financing hereunder and all expenses incurred in connection with the closing hereunder on the Effective Date. In the event that the Company or any Subsidiary shall have completed an acquisition or disposition of any material Person, division or business unit since the beginning of the relevant period, Consolidated Cash Interest Expense shall be determined for such period on a pro forma basis as if such acquisition or disposition, and any related incurrence or repayment of Indebtedness, had occurred at the beginning of such period. For periods including fiscal quarters ending prior to the Effective Date, Consolidated Cash Interest Expense for such periods shall be deemed to be the amounts set forth on Schedule 1.01, as adjusted to give pro forma effect to any acquisition or disposition that occurred since the beginning of the relevant period by an increase or decrease, as appropriate, in Consolidated Cash Interest Expense equal to the actual amount attributable to the Person or assets acquired or disposed of.".                       (b)         The definition of "Consolidated EBITDA" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:                                       ""Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum of (i) consolidated interest expense for such period, (ii) consolidated income tax expense for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any special one-time or extraordinary non-cash charges for such period (except that such add back for charges against the receivables of PharMerica and Stadtlander Operating Company, L.L.C., and their subsidiaries for the quarter ended September 30, 1999, shall be limited to $40,596,000), and (v) any LIFO adjustment (if negative to earnings) or charge for such period, and minus (b) without duplication and to the extent included in determining such Consolidated Net Income, any extraordinary gains for such period and any LIFO adjustment (if positive to earnings) or credit, all determined on a consolidated basis in accordance with GAAP; provided that there shall be added back to Consolidated EBITDA $66,700,000 of the provision for accounts receivable reported in the Company's financial statements for its fourth fiscal quarter of 2000. In the event that the Company or any Subsidiary shall have completed an acquisition or disposition of any material Person, division or business unit since the beginning of the relevant period, Consolidated EBITDA shall be determined for such period on a pro forma basis as if such acquisition or disposition, and any related incurrence or repayment of Indebtedness, had occurred at the beginning of such period. For periods including fiscal quarters ending prior to the Effective Date, Consolidated EBITDA for such periods shall be deemed to be the amounts set forth on Schedule 1.01, as adjusted to give pro forma effect to any acquisition or disposition that occurred since the beginning of the relevant period by an increase or decrease, as appropriate, in Consolidated EBITDA equal to the actual amount attributable to the Person or assets acquired or disposed of.".                       (c)         The definition of "Consolidated EBITDAR" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:                                       ""Consolidated EBITDAR" means, for any period, Consolidated EBITDA for such period plus rental payments in respect of real property, delivery equipment and pharmacy equipment of the Company and the Subsidiaries for such period (other than under capital leases), determined on a consolidated basis in accordance with GAAP. For periods including fiscal quarters ending prior to the Effective Date, Consolidated EBITDAR shall be deemed to be the amounts set forth on Schedule 1.01, as adjusted to give pro forma effect to any acquisition or disposition that occurred since the beginning of the relevant period by an increase or decrease, as appropriate, in Consolidated EBITDAR equal to the actual amount attributable to the Person or assets acquired or disposed of.".                       (d)         The definition of "Consolidated Net Worth" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:                                       ""Consolidated Net Worth" means, on any date, consolidated shareholders' equity of the Company and the Subsidiaries shown on the consolidated balance sheet of the Company and the Subsidiaries as of such date in accordance with GAAP; provided that (i) up to an aggregate amount of $525,000,000 of charges against goodwill associated with PharMerica reported in Company's financial statements for its fourth fiscal quarter of 2000 may be added back in the calculation of Consolidated Net Worth and (ii) to the extent deducted in determining Consolidated Net Worth, up to an aggregate amount of $66,700,000 of the provision for accounts receivable may be added back in calculating Consolidated Net Worth.".                       (e)         The definition of "Permitted Investments" in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to read as follows:                                       ""Permitted Investments" means:                     (a)         direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;                           (b)         investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's (within which there may be sub-categories or gradations indicating relative standing), and investments in master notes that are rated (or that have been issued by an issuer that is rated with respect to a class of short-term debt obligations, or any security within that class, that is comparable in priority and security with said master note) by S&P or Moody's in the highest rating categories for short-term debt obligations (within which there may be sub-categories or gradations indicating relative standing);                           (c)         investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;                           (d)         fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above (or subsidiaries or Affiliates of such financial institutions); and                           (e)         money market funds.".                   (f)         Section 6.05 of the Credit Agreement is hereby amended by inserting the following language at the end thereof:     "Notwithstanding the foregoing limitation, the Company may sell one or more Subsidiaries or all or any portion of the assets of such Subsidiaries for consideration not less than the fair market value thereof in a transaction (an " Excluded Transaction") in which less than 90% of the consideration consists of cash, provided that (i) the Subsidiary, business unit or assets being sold in each Excluded Transaction do not contribute in excess of $1,000,000 per year in EBITDA to the Company and (ii) the net book value of the assets being sold is less than $10,000,000 per Excluded Transaction; provided further that the aggregate net book value of the assets sold in all transactions effected in reliance on this sentence shall not exceed $40,000,000. Any Equity Interests received pursuant to the previous sentence shall be treated as a Permitted Investment (and shall not be subject to the limitations set forth in Sections 6.04(k) and (l)), provided that such Equity Interests are pledged to the Collateral Agent for the benefit of the Secured Parties as collateral for the payment and performance of the obligations of the Borrowers under this Agreement.".                                   SECTION 2.         Representations and Warranties. The Company represents and warrants to the Administrative Agent and the Lenders that:                   (a)         This Amendment has been duly executed and delivered by it and constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws affecting creditors' rights generally and except as enforceability may be limited by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).                       (b)         Before and after giving effect to this Amendment, the representations and warranties set forth in Article III of the Credit Agreement are true and correct in all material respects with the same effect as if made on the date hereof, except to the extent such representations and warranties expressly relate to an earlier date.                       (c)         After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing.                                   SECTION 3.         Effectiveness. This Amendment shall become effective as of the date set forth above on the date (the "Amendment Effective Date") that the following conditions are satisfied: (a) the Administrative Agent shall have received the Amendment Fee and (b) the Administrative Agent or its counsel shall have received counterparts of this Amendment that, when taken together, bear the signatures of the Company and the Required Lenders.                                   SECTION 4.         Amendment Fee. The Company agrees to pay to each Lender that executes and delivers a copy of this Amendment to the Administrative Agent (or its counsel) on or prior to 12:00 noon on October 20, 2000 an amendment fee (the "Amendment Fee") in an amount equal to 0.075% of such Lender's Revolving Commitment (whether used or unused) and outstanding Term Loans, in each case as of the Amendment Effective Date; provided that the Company shall have no liability for any such amendment fee if this Amendment does not become effective. The Amendment Fee shall be payable in immediately available funds on the Amendment Effective Date. Once paid, the Amendment Fee shall not be refundable.                                   SECTION 5.         Effect of Amendment. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Issuing Banks, the Collateral Agent or the Administrative Agent, under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Company to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Amendment shall constitute a "Loan Document" for all purposes of the Credit Agreement and the other Loan Documents.                                   SECTION 6.         Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. Delivery of any executed counterpart of a signature page of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof.                                   SECTION 7.         Applicable Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.                                   SECTION 8.         Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.       --------------------------------------------------------------------------------                       IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.         BERGEN BRUNSWIG CORPORATION,                   by /s/ Eric Schmitt --------------------------------------------------------------------------------     Name: Eric Schmitt     Title: VP, Corporate Treasurer                   BERGEN BRUNSWIG DRUG COMPANY,                   by /s/ Eric Schmitt --------------------------------------------------------------------------------     Name: Eric Schmitt     Title: VP, Corporate Treasurer                   PHARMERICA, INC.,                   by /s/ Eric Schmitt --------------------------------------------------------------------------------     Name: Eric Schmitt     Title: VP, Corporate Treasurer                   THE CHASE MANHATTAN BANK, individually and as Administrative Agent, Collateral Agent and Issuing Bank,                   by /s/ Bruce Borden --------------------------------------------------------------------------------     Name: Bruce Borden     Title: Vice President                 -------------------------------------------------------------------------------- Signature Page to First Amendment to Bergen Brunswig Corporation Credit Agreement     AMSOUTH BANK,                   by /s/ Kevin R. Rogers --------------------------------------------------------------------------------     Name: Kevin R. Rogers     Title: Attorney-In-Fact                   BANK ONE, N.A.                   by /s/ Stephanie A. Mack --------------------------------------------------------------------------------     Name: Stephanie A. Mack     Title: Commercial Banking Officer                   THE BANK OF NOVA SCOTIA,                   by /s/ R.P. Reynolds --------------------------------------------------------------------------------     Name: R.P. Reynolds     Title: Director                   THE CIT GROUP/BUSINESS CREDIT, INC.,                   by /s/ Patrick Lee --------------------------------------------------------------------------------     Name: Patrick Lee     Title: Vice President                   CITIZENS BUSINESS CREDIT COMPANY, a division of Citizens Leasing Corp.,                   by /s/ Vincent P. O' Leary --------------------------------------------------------------------------------     Name: Vincent P. O' Leary     Title: Senior Vice President                     COMERICA BANK,                   by /s/ David Weismiller --------------------------------------------------------------------------------     Name: David Weismiller     Title: Corporate Banking Officer           BANKERS TRUST COMPANY,                   by /s/ Mary Jo Jolly --------------------------------------------------------------------------------     Name: Mary Jo Jolly     Title: Assistant Vice President                   DIME COMMERICAL CORP.,                   by /s/ Dan Bueno --------------------------------------------------------------------------------     Name: Dan Bueno     Title: Assistant Treasurer                   FLEET NATIONAL BANK,                   by /s/ Carol P. Castle --------------------------------------------------------------------------------     Name: Carol P. Castle     Title: Senior Vice President                   FOOTHILL INCOME TRUST, L.P.,                   by /s/ M.P. Sadilek --------------------------------------------------------------------------------     Name: M.P. Sadilek     Title: Senior Vice President                   FOOTHILL INCOME TRUST II, L.P.,                   by /s/ M.E. Stearns --------------------------------------------------------------------------------     Name: M.E. Stearns     Title: Managing Member of FIT II       GP, LLC, its general partner                     FOOTHILL CAPITAL CORPORATION,                   by /s/ M.P. Sadilek --------------------------------------------------------------------------------     Name: M.P. Sadilek     Title: Senior Vice President                   GMAC COMMERCIAL CREDIT LLC                   by /s/ Sam Cirelli --------------------------------------------------------------------------------     Name: Sam Cirelli     Title: Executive Vice President                   HELLER FINANCIAL, INC.,                   by /s/ Albert J. Forzano --------------------------------------------------------------------------------     Name: Albert J. Forzano     Title: Vice President                   IBJ WHITEHALL BUSINESS CREDIT CORPORATION                   by /s/ Edward A. Jesser --------------------------------------------------------------------------------     Name: Edward A. Jesser     Title: Senior Vice President                   LASALLE BUSINESS CREDIT, INC.,                   by /s/ Michael Richmond --------------------------------------------------------------------------------     Name: Michael Richmond     Title: Senior Vice President                   MELLON BANK, N.A.,                   by /s/ Timothy K. Turner --------------------------------------------------------------------------------     Name: Timothy K. Turner     Title: Senior Vice President                     NATEXIS BANQUE,                   by /s/ Gary Kania --------------------------------------------------------------------------------     Name: Gary Kania     Title: Vice President                   by /s/ Frank H. Madden, Jr. --------------------------------------------------------------------------------     Name: Frank H. Madden, Jr.     Title: Vice President & Group Manager                   NATIONAL CITY BANK OF PENNSYLVANIA,                   by /s/ David G. Hammon --------------------------------------------------------------------------------     Name: David G. Hammon     Title: Vice President                   ORIX BUSINESS CREDIT, INC.,                   by /s/ Michael J. Cox --------------------------------------------------------------------------------     Name: Michael J. Cox     Title: Senior Vice President                   PNC BUSINESS CREDIT,                   by /s/ Thomas Stoltz --------------------------------------------------------------------------------     Name: Thomas Stoltz     Title: Vice President                   JACKSON NATIONAL LIFE INSURANCE COMPANY, INC. By: PPM Finance, Inc. as its Attorney-in-Fact                   by /s/ Michael Molenda --------------------------------------------------------------------------------     Name: Michael Molenda     Title: Vice President                     THE PROVIDENT BANK,                   by /s/ Jose V. Garde --------------------------------------------------------------------------------     Name: Jose V. Garde     Title: Vice President                   SIEMENS FINANCIAL SERVICES, INC.,                   by /s/ Frank Amodio --------------------------------------------------------------------------------     Name: Frank Amodio     Title: Vice President - Credit                   TRANSAMERICA BUSINESS CREDIT CORPORATION                   by /s/ Perry Vavoules --------------------------------------------------------------------------------     Name: Perry Vavoules     Title: Senior Vice President                   WACHOVIA BANK, N.A.                   by /s/ Eero H. Maki --------------------------------------------------------------------------------     Name: Eero H. Maki     Title: Vice President                   BOEING CAPITAL CORPORATION,                   by /s/ Daniel O. Anderson --------------------------------------------------------------------------------     Name: Daniel O. Anderson     Title: Vice President                   JOHN HANCOCK LIFE INSURANCE COMPANY                   by /s/ Stephen J. Blewitt --------------------------------------------------------------------------------     Name: Stephen J. Blewitt     Title: Managing Director                     JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY,                   by /s/ Stephen J. Blewitt --------------------------------------------------------------------------------     Name: Stephen J. Blewitt     Title: Authorized Signatory                   INVESTORS PARTNER LIFE INSURANCE COMPANY,                   by /s/ Stephen J. Blewitt --------------------------------------------------------------------------------     Name: Stephen J. Blewitt     Title: Authorized Signatory                   TEXTRON FINANCIAL CORPORATION,                   by /s/ Stuart --------------------------------------------------------------------------------     Name: Stuart     Title: Managing Director        

EXHIBIT 10.3 AMENDMENT NUMBER TWO TO THE GEORGIA-PACIFIC CORPORATION/TIMBER GROUP 1997 LONG-TERM INCENTIVE PLAN           WHEREAS, pursuant to Section 8 of the Georgia-Pacific Corporation/Timber Group 1997 Long Term Incentive Plan (the "Plan"), the Board of Directors of Georgia-Pacific Corporation ("Board") has reserved the right to amend the Plan; and           WHEREAS, the Board desires to amend the Plan to provide that any Award granted pursuant to the Plan shall become fully vested immediately prior to the Effective Time under the Agreement and Plan of Merger by and among Plum Creek Timber Company, Inc., Georgia-Pacific Corporation and the Spincos (as defined therein) dated July 18, 2000;           NOW THEREFORE, the Board hereby amends the Plan as follows:           1.    Section 6(b) of the Plan is amended by adding the following sentence to the end thereof:           Notwithstanding the terms of any Award Agreement, any Award granted pursuant to the provisions of this Plan shall become fully vested immediately prior to the Effective Time under the Agreement and Plan of Merger by and among Georgia-Pacific Corporation and Plum Creek Timber Company, Inc and the Spincos (as defined therein) dated July 18, 2000.

QuickLinks -- Click here to rapidly navigate through this document Execution Copy TERMINATION AGREEMENT     THIS TERMINATION AGREEMENT dated as of June 30, 2000 (the "Agreement") is made by and between ReliaStar Life Insurance Company, Northern Life Insurance Company, ReliaStar Life Insurance Company of New York, ReliaStar United Services Life Insurance Company, Washington Square Advisers Private Placement Fund, any subsequent holder of a Note under the Note Purchase Agreement (as defined in the Intercreditor Agreement) (collectively, the "Purchasers"), the banks which are parties to the Credit Agreement specified below (the "Banks"), and U.S. Bank National Association, as agent for the Banks (in such capacity, the "Agent") and as Collateral Agent under the Security Documents (defined below) (in such capacity, the "Collateral Agent"). RECITALS      A. The Banks, the Agent and Osmonics, Inc., a Minnesota corporation (the "Borrower") are parties to that certain Amended and Restated Letter Credit Agreement dated as of March 18, 1998 (as amended, and as the same may be amended, supplemented or modified from time to time, the "Credit Agreement").      B. The Banks, the Agent, the Purchasers and the Collateral Agent are parties to that certain Amended and Restated Security Agreement dated as of March 18, 1998 (the "Security Agreement") whereunder, among other things, the Borrower granted to the Collateral Agent for the benefit of the Agent, the Banks and the Purchasers a security interest in certain "Collateral" consisting of certain securities accounts and investments.      C. In connection with the Security Agreement, the Purchasers, the Banks, the Agent and the Collateral Agent executed and mutually delivered an Intercreditor Agreement dated as of March 18, 1998 (the "Intercreditor Agreement" and collectively with the Security Agreement, the "Security Documents").      D. The Borrower has requested that the Agent, the Banks, Collateral Agent and the Purchasers agree to terminate the Security Documents, in exchange for the Pay-Down Amounts indicated below.     NOW, THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, it is agreed as follows: TERMS     1.  Distribution of Pay-Down Amounts.  On June 30, 2000, the Borrower shall cause to be distributed to the Collateral Agent from the proceeds of the "Collateral" (as defined in the Security Agreement) the aggregate amount of $4,000,000 (the "Pay-Down Amount"). Upon receiving such distribution, the Collateral Agent shall distribute the Pay-Down Amount to the Purchasers for application to the Notes issued under the Note Purchase Agreement. The Collateral Agent shall distribute the Pay-Down Amount pursuant to wire transfer instructions furnished in writing to the Collateral Agent by the Borrower. This Agreement shall terminate and the Purchasers, the Collateral Agent, the Agent and the Banks shall have no obligation hereunder if the Pay-Down Amount is not received by the Collateral Agent by 4:00 p.m. (Minneapolis time) on June 30, 2000.     2.  Termination of Security Documents.  Upon the distribution of the Pay-Down Amount by the Collateral Agent to the Banks and the Purchasers in the manner set forth in Section 1 hereof, the Security Documents shall be automatically terminated without further action by the parties, provided, that Section 8(e) of the Security Agreement and Section 10 of the Intercreditor Agreement shall each remain in full force and effect and shall not be terminated hereby.     3.  Notices.  Any notice, report, demand, waiver, distribution, consent, and other communications pertaining to this Agreement shall be in writing and shall be given by hand delivery, by prepaid -------------------------------------------------------------------------------- registered or certified mail, with return receipt requested, by an established national overnight courier providing proof of delivery for next business day delivery, addressed as follows: If to the Purchasers: c/o Reliastar Investment Research, Inc. 100 Washington Avenue South Minneapolis, MN 55401-2121 Attention: Randall J. Williamson Telecopier: 612-372-5368 If to the Agent or the Banks: Mail Station—MPFP0609 601 Second Avenue South Minneapolis, MN 55402-4302 Attention: Nick Myers Telecopier: 612-973-0822 If to the Grantor: 5951 Clearwater Drive Minnetonka, Minnesota 55343 Attention: Keith B. Robinson Telecopier: 612-933-0141     The date of any such notice and service thereof shall be deemed to be (i) the day of delivery if hand delivered or delivered by overnight courier or (ii) the day of delivery as indicated on the return receipt if dispatched by mail. Any party may change its address for the purpose of notice by giving of such change in accordance with the provisions of this Section.     4.  Miscellaneous.  This Agreement constitutes the entire agreement and understanding of the parties concerning subject matter thereof. This Agreement may be amended only by a writing signed by the party against whom enforcement is sought. The headings in this Agreement are intended solely for convenience or reference and shall be given no effect in the construction or interpretation of this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to the choice of law rules utilized in that jurisdiction. This Agreement, when transmitted by facsimile or otherwise, shall bind and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.     5.  Further Assurances.  Each party hereto will promptly execute and deliver to the any other requesting party any and all documents or instruments reasonably requested by such other party and take such other further action reasonably requested by such other party to further evidence or effectuate the terms and conditions of this Agreement.     6.  Advice of Counsel; Read and Understood.  Each of the parties agrees and acknowledges (a) that he or she has read and understood each and every term and provision of this Agreement and (b) has been advised by competent counsel regarding this Agreement.     7.  Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original. 2 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have duly executed this Termination Agreement as of the day and year first above written.           U.S. BANK NATIONAL ASSOCIATION, as sole Bank under the Credit Agreement, as Agent and as Collateral Agent, each as aforesaid     By --------------------------------------------------------------------------------      Its --------------------------------------------------------------------------------   RELIASTAR PURCHASERS:           RELIASTAR LIFE INSURANCE COMPANY       RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY By --------------------------------------------------------------------------------   By --------------------------------------------------------------------------------  Its --------------------------------------------------------------------------------    Its --------------------------------------------------------------------------------   NORTHERN LIFE INSURANCE COMPANY       WASHINGTON SQUARE ADVISERS PRIVATE PLACEMENT TRUST FUND By --------------------------------------------------------------------------------   By --------------------------------------------------------------------------------  Its --------------------------------------------------------------------------------    Its --------------------------------------------------------------------------------   RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK         By --------------------------------------------------------------------------------      Its --------------------------------------------------------------------------------     3 -------------------------------------------------------------------------------- QUICKLINKS TERMINATION AGREEMENT RECITALS TERMS

EMPLOYMENT AGREEMENT (President and Chief Executive Officer) THIS AGREEMENT, made and entered into as of August 17, 2000, by and between Richard C. Notebaert (the "Executive") and Tellabs, Inc., a Delaware corporation (the "Company"); WITNESSETH THAT : WHEREAS, the parties desire to enter into this Agreement pertaining to the employment of the Executive by the Company; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, it is hereby covenanted and agreed by the Executive and the Company as follows: 1. Employment. Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive as its President and Chief Executive Officer during the Agreement Term (as defined below), with the authority, responsibilities and duties customarily exercised by a person holding that position, with such additions or modifications thereto which are consistent with his authority, responsibilities and duties hereunder, as the Board of Directors of the Company (the "Board") may, from time to time, in its discretion and after consultation with the Executive, adopt. The "Agreement Term" shall be the period beginning on September 18, 2000 (the "Effective Date") and ending on the third anniversary of the Effective Date, subject to earlier termination as provided herein; provided, however, that the Agreement Term will be automatically extended by twelve months on the second anniversary of the Effective Date and on each anniversary thereof, unless one party to this Agreement provides written notice of non-renewal to the other party at least 30 days prior to the date of such automatic extension. 2. Performance of Duties. The Executive agrees that during his employment with the Company, he shall devote his full business time, energies and talents to serving as its President and Chief Executive Officer and that he shall perform his duties faithfully and efficiently subject to the directions of the Board. Notwithstanding the foregoing provisions of this Section  2, the Executive may (i) serve as a director, trustee or officer or otherwise participate in not-for-profit educational, welfare, social, religious and civic organizations; (ii) after consultation with, and approval by, the Board, serve as a director of any for-profit business which does not compete with the Company or any of its subsidiaries or affiliates, and (iii) acquire passive investment interests in one or more entities; provided, that such activities described in clauses (i), (ii) and (iii) are not prohibited under the Company's Integrity Policy and do not inhibit or interfere with the performance of the Executive's duties under this Agreement. The Company acknowledges that the Executive has entered into a services agreement with SBC Communications, Inc. ("SBC") pursuant to which he may be obligated to provide consulting services to SBC and its subsidiaries through April 8, 2002. The Executive represents that any demands that would require him to devote time to SBC pursuant to such services agreement will not materially interfere with the performance of his duties under this Agreement. 3. Initial Stock Option Awards. The Executive shall be granted options under the Company's 1998 Stock Option Plan, as amended, to acquire up to 900,000 shares of the Company's common stock ("Common Stock") in accordance with the following: a. On the Effective Date, the Executive shall be granted options to acquire 500,000 shares of Common Stock. Subject to the discretion of the Compensation Committee based on the Executive's performance, on the first anniversary of the Effective Date the Executive shall be granted options to acquire 200,000 shares of Common Stock, and on the second anniversary of the Effective Date, the Executive shall be granted options to acquire an additional 200,000 shares of Common Stock; provided, such options may be granted on earlier date or dates as the Compensation Committee may in its discretion determine. The date of grant of the options shall be referred to herein as the Award Date. Each option shall have a ten-year term commencing on the applicable Award Date, subject to earlier termination as provided in subparagraph (e) below upon termination of employment. b. The option price ("Option Price") with respect to each option shall be the closing price on the applicable Award Date for sales of shares of Common Stock made and reported through the National Market System of the National Association of Securities Dealers, Inc. or such national stock exchange on which Common Stock may then be listed and which constitutes the principal market for the Common Stock, or, if no sales of Common Stock shall have been reported with respect to that date, on the next preceding date with respect to which sales were reported. Upon the exercise of any such options, the Option Price with respect thereto shall be payable in cash or its equivalent (including, for this purpose, the proceeds from a cashless exercise as permitted under the Federal Reserve Board's Regulation T), or by tendering (either actually or by attestation of ownership) shares of Common Stock previously acquired by the Executive in the open market or shares of Common Stock which have been held by the Executive for at least six months having an aggregate fair market value (determined as provided in the preceding sentence based on the closing sales price of shares of Common Stock) at the time of exercise equal to the total Option Price of the options. c. In the event of any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes with the definition of such term in Section 368 of the Internal Revenue Code) or any partial or complete liquidation of the Company, the number and class of shares subject to options awarded or to be awarded in accordance with subparagraph (a) above, and the Option Price for such options under subparagraph (b) above, shall be adjusted by the Compensation Committee of the Company's Board of Directors to prevent dilution of the Executive's rights. d. The options relating to the 500,000 shares of Common Stock granted on the Effective Date in accordance with paragraph (a) above shall become vested and exercisable at the rate of 25% per year on each anniversary of the Award Date thereof. Each of the options relating to 200,000 shares of Common Stock described in paragraph (a) above shall become vested and exercisable at the rate of one-third per year on each anniversary of the Award Date thereof. To the extent not previously vested, all such options shall become fully vested and exercisable on the earlier of a Change in Control (as defined in subparagraph 6(e) below) or the Executive's termination of employment by reason of death, Disability (as defined in subparagraph 6(a) below) termination by the Company without Cause (as defined in subparagraph 6(b) below), or Constructive Discharge (as defined in subparagraph 6(d) below). To the extent not previously vested, all such options shall be immediately forfeited in the event of a termination of the Executive's employment for Cause or upon the Executive's resignation from the employ of the Company other than pursuant to a Constructive Discharge. e. In the event that the Executive resigns from the employ of the Company other than pursuant to a Constructive Discharge, or is terminated by the Company for Cause, any option or unexercised portion thereof granted under subparagraph (a) above may be exercised, to the extent such option would have been exercisable by the Executive on the date on which the Executive ceased to be an employee, within three months of such date, but in no event later than the date of expiration of the term of the option. In the event of a termination of the Executive's employment by the Company without Cause or by the Executive by reason of a Constructive Discharge, any such option shall be exercisable until the third anniversary of such date of termination, but in no event later than the expiration of the term of the option. In the event of termination of employment due to the death or Disability of the Executive while an employee of the Company or in the event of death within not more than three months after the date on which the Executive ceases to be an employee, any such option or unexercised portion thereof maybe exercised, to the extent exercisable at the date on which the Executive ceased to be an employee, by the Executive or the Executive's personal representatives, heirs or legatees at any time prior to one year after the date on which the Executive ceased to be an employee, but in no event later than the date of the expiration of the term of the option. f. Options granted in accordance with subparagraph (a) above may be transferred by the Executive to the Executive's spouse, children or grandchildren ("Immediate Family Members") or to a trust or trusts for the exclusive benefit of such Immediate Family Members or to a partnership in which such Immediate Family Members are the only partners. g. The Company shall take all steps necessary or desirable to register the shares subject to the foregoing options under an S-8 or other appropriate form.   4. Compensation. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows: a. Base Salary. The Executive shall receive a Base Salary of not less than $750,000 per annum payable in 26 bi-weekly installments. The Executive's Base Salary shall be reviewed and may be increased, but not decreased, annually by the Board pursuant to its normal performance review policies for senior executives, with the first such review occurring in 2001. b. Annual Bonus. For each calendar year, the Executive shall be eligible to receive an Annual Bonus payment in accordance with the Company's annual bonus plans as in effect from time to time. The target level for each Annual Bonus shall not be less than 50% of the Executive's Base Salary for the year, provided that the Company achieves the applicable financial and strategic objectives established for the year. Commencing with calendar year 2001, such objectives will be established by the Compensation Committee of the Board, in consultation with the Executive and other senior officers. The Executive shall be eligible to receive a bonus for calendar year 2000, based on the Company's achievement of financial and strategic goals established for the year 2000. The amount of the bonus shall be prorated to reflect the Executive's partial year of service from the Effective Date through the end of the calendar year. c. Annual Equity Awards. Commencing with 2003, the Executive shall be entitled to annual stock option grants and, to the extent applicable, other stock based compensation on a basis no less favorable than the awards granted to other senior executives of the Company. Such awards shall be in addition to the initial stock option awards under Section 3 above. d. Employee Benefits, Fringe Benefits and Perquisites. The Executive shall be provided with employee benefits, fringe benefits and perquisites on a basis no less favorable than such benefits and perquisites are provided by the Company from time to time to the Company's other senior executives. e. Expense Reimbursement. The Company will reimburse the Executive for all reasonable expenses incurred by him (i) in connection with the negotiation and preparation of this Agreement, which reimbursement shall not exceed $25,000, and (ii) in the performance of his duties in accordance with the Company's policies applicable to senior executives. f. Change in Control Benefits. Following the Effective Date, the Executive and the Company shall enter into a change of control agreement substantially similar to those which the Company has entered into with its other senior executives, it being understood that the Executive shall only receive whatever incremental payments or benefits are provided under such change of control agreement and that there shall be no duplication of payments or benefits under this Agreement and such change of control agreement. g. Additional Payments. If any payments or benefits received or to be received by the Executive in connection with the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, or any person affiliated with the Company) (the "Payments"), will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed), the Company shall pay at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Payments and any federal, state and local income or other applicable tax and Excise Tax upon the payment provided for by this paragraph, shall be equal to the Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the Executive's highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the Executive's highest marginal rate of taxation in the state and locality of the Executive's residence on the date on which the Excise Tax is determined, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. The computations required by this paragraph shall be made by the independent public accountants then regularly retained by the Company, in consultation with tax counsel selected by them and acceptable to the Executive. The Company shall provide the Executive with sufficient tax and compensation data to enable the Executive or his tax advisor to verify such computations and shall reimburse the Executive for reasonable fees and expenses incurred with respect thereto. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, the Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by the Executive) plus interest on the amount of such repayment from the date the Gross-Up Payment was initially made to the date of repayment at the rate provided in Section 1274(b)(2)(B) of the Code (the "Applicable Rate"). In the event that the Excise Tax is determined by the Internal Revenue Service or by such independent public accountants to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties, fines or additions to tax payable with respect to such excess) at the time that the amount of such excess if finally determined. Any payment to be made under this paragraph shall be payable within five (5) days of the determination of the accountants that such a payment is required hereunder and, if applicable, within five (5) days of such determination that the Excise Tax is greater or less than initially calculated but, in no event, later than thirty (30) days after the Executive's receipt of the Payments resulting in such Excise Tax. 5. Indemnification. The Company agrees that if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Company to the fullest extent legally permitted or authorized by the Company's certificate of incorporation or bylaws or resolutions of the Company's Board of Directors or, if greater, by the laws of the State of Delaware, against all cost, expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, ERISA excise taxes or other liabilities or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Company or other entity, with respect to acts or omissions which occurred prior to his cessation of employment with the Company, and shall inure to the benefit of the Executive's heirs, executors and administrators. The Company shall advance to the Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within 20 calendar days after receipt by the Company of a written request for such advance. Such request shall include an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such costs and expenses. 6. Termination of Employment. Upon termination of the Executive's employment for any reason, the Executive or, in the event of death, the Executive's estate shall be entitled to the Executive's Base Salary prorated through the date of termination. Any Annual Bonus awarded to the Executive for a prior award period, but not yet paid to the Executive, and any employee benefits to which the Executive is entitled by reason of his employment shall be paid to the Executive or his estate at such time as is provided by the terms of the applicable Company plan or policy. If the Executive's employment is terminated during the Agreement Term, the Executive's right to additional payments and benefits under this Agreement for periods after his date of termination shall be determined in accordance with the following provisions of this Section 6. a. Death or Disability. If the Executive's employment is terminated by reason of death or by reason of the Executive's Disability, the Executive, or, in the event of his death, his estate, shall be entitled to a prompt cash payment of a prorated Annual Bonus for the year in which such termination occurs, based on the target Annual Bonus for such year. The Executive or the Company shall be entitled to terminate the Executive's employment because of the Executive's Disability during the Agreement Term. "Disability" means that the Executive is disabled within the meaning of the Company's long-term disability policy or, if there is no such policy in effect, that (i) the Executive has been substantially unable, for 120 business days within a period of 180 consecutive business days, to perform the Executive's duties under this Agreement, as a result of physical or mental illness or injury, and (ii) a physician selected by the Company or its insurers, and reasonably acceptable to the Executive or the Executive's legal representative, has determined that the Executive is disabled. A termination of the Executive's employment by the Company for Disability shall be communicated to the Executive by written notice, and shall be effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Time"), unless the Executive returns to full-time performance of the Executive's duties before the Disability Effective Time. b. Termination for Cause or Voluntary Resignation. If the Executive's employment is terminated by the Company for Cause or if the Executive voluntarily resigns from the employ of the Company, other than pursuant to a Constructive Discharge, all payments and benefits to which the Executive would otherwise be entitled under this Agreement shall immediately cease, except as otherwise specifically provided above in this Section 6 with respect to his prorated Base Salary through the date of termination, his Annual Bonus, if any, awarded for a prior award period but not yet paid and his previously earned employee benefits. For purposes of this Agreement, the term "Cause" shall mean: i. The Executive is convicted of a felony or any crime involving moral turpitude; or ii. A reasonable determination by a vote of directors comprising two-thirds of the entire Board, after giving the Executive notice and an opportunity to be heard, that, (A) the Executive has willfully and continuously failed to perform substantially his duties as contemplated by Section 2 above (other than such failure resulting from incapacity due to physical or mental illness), after a written demand for corrected performance is delivered to the Executive by the Board which specifically identifies the manners in which the Board believes the Executive has not substantially performed his duties or (B) the Executive has engaged in gross neglect or gross misconduct, unless the Executive had a good faith belief that such conduct was in, or not opposed to, the best interests of the Company. c. Termination Without Cause. If the Company terminates the Executive without Cause, the Executive shall be entitled to a prompt lump sum cash payment equal to the Base Salary and Annual Bonus to which he would otherwise would have been entitled if he had remained in the employ of the Company through the last day of the Term of this Agreement. For purposes of the preceding sentence, the Annual Bonus component shall be based upon the target bonus for the year of termination and shall include a prorated bonus for the partial year ending on the last day of the Agreement Term. d. Resignation for Constructive Discharge. The Executive's voluntary resignation for Constructive Discharge shall be treated for all purposes of this Agreement as a termination by the Company without Cause. For purposes of this Agreement, "Constructive Discharge"" shall mean the occurrence of any of the following circumstances: i. A reduction by the Company in the Executive's Base Salary or Annual Bonus target to an amount that is less than required under Section 4 above; ii. The removal of the Executive from the position of President and Chief Executive Officer or the failure of the Executive to be nominated or reelected to the Company's Board of Directors; iii. Any action by the Company which results in significant diminution in the Executive's authority, power, responsibilities or duties from those contemplated by Sections 1 and 2 above, or the assignment to the Executive without his written consent of any duties inconsistent with the Executive's position and status as President and Chief Executive Officer of the Company as contemplated by Sections 1 and 2 above, which action or assignment continues after written notice thereof and a reasonable opportunity to cure of not less than fifteen (15) days has been given by the Executive to the Company; or iv. Any other breach by the Company of any of its material obligations to the Executive under this Agreement, which breach continues after written notice thereof and a reasonable opportunity to cure of not less than thirty (30) days has been given by the Executive to the Company. e. Change in Control. The term "Change in Control" of the Company means the first to occur of: i. Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, the Company or any subsidiary of the Company, or any employee benefit plan of the Company or any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; ii. During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board and any new director (except for a director designated by a person who has entered into an agreement with the Company to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; iii. Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of the Company; (ii) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; iv. Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company; or v. A tender offer (for which a filing has been made with the Securities and Exchange Commission "SEC") which purports to comply with the requirements of Section 14(d) of the Securities Exchange Act of 1934 and the corresponding SEC rules) is made for the stock of the Company, then the first to occur of: (A) Any time during the offer when the person making the offer owns or has accepted for payment stock of the Company with 25% or more of the total voting power of the Company's securities, or (B) Three business days before the offer is to terminate unless the offer is withdrawn first if the person making the offer could own, by the terms of the offer plus any shares owned by this person, stock with 50% or more of total voting power of the Company's securities when the offer terminates. 7. No Mitigation; No Offset. In the event of any termination of employment, the Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain. 8. Confidential Information. The Executive agrees that, during his employment by the Company and at all times thereafter, he shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its subsidiaries or affiliates, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or during his consultation with the Company after his termination of employment, and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). Except in the good faith performance of his duties for the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. 9. Protective Covenants. For a period of two years following the termination of Executive's employment for any reason, the Executive shall not, without the written consent of the Board, directly or indirectly, a. engage or be interested in (as owner, partner, stockholder, employee, director, officer, agent, consultant or otherwise), with or without compensation, any business which is in direct competition with the Company or of any of its subsidiaries in providing data, voice or video transport, switching/routing, network access system and/or voice quality enhancement solutions to service providers or end users; b. hire any person who was employed by the Company or any of its subsidiaries or affiliates (other than persons employed in a clerical or other non-professional position) within the six-month period preceding the date of such hiring; or c. solicit, entice, persuade or induce any person or entity doing business with the Company and its subsidiaries or affiliates, to terminate such relationship or to refrain from extending or renewing the same. Nothing in subparagraph (a) above, will prohibit the Executive from acquiring or holding not more than one percent of any class of publicly traded securities of any such business; provided that such securities entitle the Executive to no more than one percent of the total outstanding votes entitled to be cast by security holders of such business in matters on which such security holders are entitled to vote. 10. Remedies. The Executive agrees that the restrictions set forth in Sections 8 and 9 hereof are reasonably and necessary to protect the legal interests of the Company. The Executive further agrees that the Company shall be entitled to injunctive relief in the event of any actual or threatened breach of such restrictions. 11. Assignability, Binding Nature. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it shall take whatever action it legally can in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of the Company hereunder. No rights or obligations of the Executive under this Agreement may be assigned or transferred by the Executive other than his rights to compensation and benefits, which may be transferred only by will or operation of law. 12. Amendment. This Agreement may be amended or canceled only by mutual agreement of the parties in writing without the consent of any other person. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof except that in the event of the Executive's Disability so as to render him incapable of such action, his legal representative may be substituted for purposes of such amendment. 13. Applicable Law. The provisions of this Agreement shall be construed in accordance with the internal laws of the State of Illinois, without regard to the conflict of law provisions of any state. 14. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified). 15. Waiver of Breach. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues. 16. Notices. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice): to the Company: Tellabs, Inc. 4951 Indiana Avenue Lisle, Illinois 60532-1698 Attn: Chairman of the Board or to the Executive: Richard C. Notebaert 2355 North Commonwealth Chicago, Illinois 60614 with a copy to: Mayer, Brown & Platt 190 South LaSalle Street Chicago, Illinois 60603-3441 Attn: Herbert W. Krueger Each party, by written notice furnished to the other party, may modify the applicable delivery address, except that notice of change of address shall be effective only upon receipt. Such notices, demands, claims and other communications shall be deemed given in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery; or in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. 17. Arbitration of Disputes and Reimbursement of Legal Costs. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof) shall be settled by final, binding and non-appealable arbitration in Chicago, Illinois by three arbitrators. Subject to the following provisions, the arbitration shall be conducted in accordance with the rules of the American Arbitration Association (the "Association") then in effect. One of the arbitrators shall be appointed by the Company, one shall be appointed by the Executive, and the third shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the third arbitrator within 30 days of the appointment of the second arbitrator, then the third arbitrator shall be appointed by the Association and shall be experienced in the resolution of disputes under employment agreements for CEOs of major corporations. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. If the Executive prevails on any material issue which is the subject of such arbitration or lawsuit, the Company shall be responsible for all of the fees of the American Arbitration Association and the arbitrators and any expenses relating to the conduct of the arbitration (including the Company's and the Executive's reasonable attorneys' fees and expenses). Otherwise, each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys' fees and expenses) and shall share the fees of the American Arbitration Association equally. 18. Survivorship. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement. 19. Entire Agreement. Except as otherwise noted herein, this Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, if any, between the parties relating to the subject matter hereof. 20. Counterparts. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.     IN WITNESS THEREOF, the Executive has hereunto set his hand, and the Company has caused this Agreement to be executed in its name and on its behalf, and its corporate seal to be hereunto affixed, all as of the day and year first above written. EXECUTIVE: RICHARD C. NOTEBAERT COMPANY: TELLABS, INC., a Delaware corporation By: /s Michael J. Birck Its: Chairman of the Board   ATTEST: Secretary

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 CORILLIAN CORPORATION 2000 STOCK INCENTIVE COMPENSATION PLAN (as Amended and Restated on October 24, 2000) SECTION 1. PURPOSE     The purpose of the Corillian Corporation 2000 Stock Incentive Compensation Plan (the "Plan") is to enhance the long-term shareholder value of Corillian Corporation, an Oregon corporation (the "Company"), by offering opportunities to selected persons to participate in the Company's growth and success, and to encourage them to remain in the service of the Company and its Related Corporations (as defined in Section 2) and to acquire and maintain stock ownership in the Company. SECTION 2. DEFINITIONS     For purposes of the Plan, the following terms shall be defined as set forth below:     "Award" means an award or grant made pursuant to the Plan, including, without limitation, awards or grants of Stock Awards and Options, or any combination of the foregoing.     "Board" means the Board of Directors of the Company.     "Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conviction or confession of a crime punishable by law (except minor violations), in each case as determined by the Plan Administrator, and its determination shall be conclusive and binding.     "Code" means the Internal Revenue Code of 1986, as amended from time to time.     "Common Stock" means the common stock, no par value, of the Company.     "Corporate Transaction" has the meaning set forth in Section 12.3.     "Disability," unless otherwise defined by the Plan Administrator, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable, in the opinion of the Company, to perform his or her duties for the Company or a Related Corporation and to be engaged in any substantial gainful activity.     Effective Date" has the meaning set forth in Section 16.     "Exchange Act" means the Securities Exchange Act of 1934, as amended.     "Fair Market Value" shall be as established in good faith by the Plan Administrator or (a) if the Common Stock is listed on the Nasdaq National Market, the closing sales price for the Common Stock as reported by the Nasdaq National Market for a single trading day or (b) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, the closing sales price for the Common Stock as such price is officially quoted in the composite tape of transactions on such exchange for a single trading day. If there is no such reported price for the Common Stock for the date in question, then such price on the last preceding date for which such price exists shall be determinative of Fair Market Value.     "Grant Date" means the date on which the Plan Administrator completes the corporate action relating to the grant of an Award and all conditions precedent to the grant have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.     "Incentive Stock Option" means an Option to purchase Common Stock granted under Section 7 with the intention that it qualify as an "incentive stock option" as that term is defined in Section 422 of the Code. --------------------------------------------------------------------------------     "Nonqualified Stock Option" means an Option to purchase Common Stock granted under Section 7 other than an Incentive Stock Option.     "Option" means the right to purchase Common Stock granted under Section 7.     "Option Term" has the meaning set forth in Section 7.3.     "Parent," except as otherwise provided in Section 8.3 in connection with Incentive Stock Options, means any entity, whether now or hereafter existing, that directly or indirectly controls the Company.     "Participant" means (a) the person to whom an Award is granted; (b) for a Participant who has died, the personal representative of the Participant's estate, the person(s) to whom the Participant's rights under the Award have passed by will or by the applicable laws of descent and distribution, or the beneficiary designated in accordance with Section 11; or (c) the person(s) to whom an Award has been transferred in accordance with Section 11.     "Plan Administrator" means the Board or any committee or committees designated by the Board.     "Related Corporation" means any Parent or Subsidiary of the Company.     "Retirement" means retirement as of the individual's normal retirement date under the Company's 401(k) plan or other similar successor plan applicable to salaried employees, unless otherwise defined by the Plan Administrator from time to time for purposes of the Plan.     "Securities Act" means the Securities Act of 1933, as amended.     "Stock Award" means shares of Common Stock or units denominated in Common Stock granted under Section 9, the rights of ownership of which may be subject to restrictions prescribed by the Plan Administrator.     "Subsidiary," except as otherwise provided in Section 8.3 in connection with Incentive Stock Options, means any entity that is directly or indirectly controlled by the Company.     "Successor Corporation" has the meaning set forth in Section 12.3.     "Termination Date" has the meaning set forth in Section 7.6. SECTION 3. ADMINISTRATION 3.1  Plan Administrator     The Plan shall be administered by the Board and/or a committee or committees (which term includes subcommittees) appointed by, and consisting of two or more members of, the Board (a "Plan Administrator"). If and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in selecting the members of any committee acting as Plan Administrator, with respect to any persons subject or likely to become subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee directors" as contemplated by Rule 16b-3 under the Exchange Act. Notwithstanding the foregoing, the Board may delegate the responsibility for administering the Plan with respect to designated classes of eligible persons to different committees consisting of two or more members of the Board, subject to such limitations as the Board deems appropriate. Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time. To the extent consistent with applicable law, the Board may authorize one or more officers of the Company to grant Awards to designated classes of eligible persons, within the limits specifically prescribed by the Board. 2 -------------------------------------------------------------------------------- 3.2  Administration and Interpretation by Plan Administrator     Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to Awards under the Plan, including the selection of individuals to be granted Awards, the type of Awards, the number of shares of Common Stock subject to an Award, all terms, conditions, restrictions and limitations, if any, of an Award and the terms of any instrument that evidences the Award. The Plan Administrator shall also have exclusive authority to interpret the Plan and the terms of any instrument evidencing the Award and may from time to time adopt and change rules and regulations of general application for the Plan's administration. The Plan Administrator's interpretation of the Plan and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected. The Plan Administrator may delegate administrative duties to such of the Company's officers as it so determines. SECTION 4. STOCK SUBJECT TO THE PLAN 4.1  Authorized Number of Shares     Subject to adjustment from time to time as provided in Section 12.1, the number of shares of Common Stock that shall be available for issuance under the Plan shall be:     (a) 6,000,000 shares plus;     (b) an annual increase to be added on the first day of the Company's fiscal year beginning in 2002 equal to the lesser of (i) 600,000 shares and (ii) 1% of the adjusted average common shares outstanding of the Company used to calculate fully diluted earnings per share as reported in the Annual Report to shareholders for the preceding year; provided that any shares from any such increases in previous years that are not actually issued shall be added to the aggregate number of shares available for issuance under the Plan; plus     (c) any authorized shares subject to outstanding awards under the Company's 1997 Stock Option Plan (as amended and restated April 15, 1999) (the "Prior Plan") on the Effective Date that cease to be subject to such awards (other than by reason of exercise or payment of the awards to the extent they are exercised for or settled in shares), which shares shall cease, as of the date of shareholder approval of the Plan, to be available be available for grant and issuance under the Prior Plans, but shall be available for issuance under the Plan.     Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company 4.2  Reuse of Shares     Any shares of Common Stock that have been made subject to an Award that cease to be subject to the Award (other than by reason of exercise or payment of the Award to the extent it is exercised for or settled in vested and nonforfeitable shares) shall again be available for issuance in connection with future grants of Awards under the Plan. SECTION 5. ELIGIBILITY     Awards may be granted under the Plan to those officers, directors and employees of the Company and its Related Corporations as the Plan Administrator from time to time selects. Awards may also be made to consultants, agents, advisors and independent contractors who provide services to the Company and its Related Corporations; provided, however, that such Participants render bona fide services that are not in connection with the offer and sale of the Company's securities in a capital- 3 -------------------------------------------------------------------------------- raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities. SECTION 6. AWARDS 6.1  Form and Grant of Awards     The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be made under the Plan. Such Awards may include, but are not limited to, Incentive Stock Options, Nonqualified Stock Options and Stock Awards. Awards may be granted singly or in combination. 6.2  Settlement of Awards     The Company may settle Awards through the delivery of shares of Common Stock, cash payments, the granting of replacement Awards or any combination thereof as the Plan Administrator shall determine. Any Award settlement, including payment deferrals, may be subject to such conditions, restrictions and contingencies as the Plan Administrator shall determine. The Plan Administrator may permit or require the deferral of any Award payment, subject to such rules and procedures as it may establish, which may include provisions for the payment or crediting of interest, or dividend equivalents, including converting such credits into deferred stock equivalents. The Plan Administrator may at any time offer to buy out, for a payment in cash or Common Stock, an Award previously granted based on such terms and conditions as the Plan Administrator shall establish and communicate to the Participant at the time such offer is made. 6.3  Acquired Company Awards     Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Awards under the Plan in substitution for awards issued under other plans, or assume under the Plan awards issued under other plans, if the other plans are or were plans of other acquired entities ("Acquired Entities") (or the parent of the Acquired Entity) and the new Award is substituted, or the old award is assumed, by reason of a merger, consolidation, acquisition of property or stock, reorganization or liquidation (the "Acquisition Transaction"). In the event that a written agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, except as may be required for compliance with Rule 16b-3 under the Exchange Act, and the persons holding such awards shall be deemed to be Participants. SECTION 7. AWARDS OF OPTIONS 7.1  Grant of Options     The Plan Administrator is authorized under the Plan, in its sole discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock Options, which shall be appropriately designated. 7.2  Option Exercise Price     The exercise price for shares purchased under an Option shall be as determined by the Plan Administrator, but shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date with respect to Incentive Stock Options. For Incentive Stock Options granted to a more than 10% shareholder, the Option exercise price shall be as specified in Section 8.2. 4 -------------------------------------------------------------------------------- 7.3  Term of Options     The term of each Option (the "Option Term") shall be as established by the Plan Administrator or, if not so established, shall be ten years from the Grant Date. For Incentive Stock Options, the maximum Option Term shall be as specified in Sections 8.2 and 8.4. 7.4  Exercise of Options     The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall vest and become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time: Period of Participant's Continuous Employment or Service With the Company or Its Related Corporations From the Option Grant Date   Percent of Total Option That Is Vested and Exercisable   After 1 year       1/4   Each additional three-month period of continuous service completed thereafter       An additional 1/16   After 4 years       100%     The Plan Administrator may adjust the vesting schedule of an Option held by a Participant who works less than "full-time" as that term is defined by the Plan Administrator.     To the extent that an Option has vested and become exercisable, the Option may be exercised from time to time by delivery to the Company of a written stock option exercise agreement or notice, in a form and in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement, if any, and such representations and agreements as may be required by the Plan Administrator, accompanied by payment in full as described in Section 7.5. An Option may not be exercised for less than a reasonable number of shares at any one time, as determined by the Plan Administrator. 7.5  Payment of Exercise Price     The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid in cash or by check or, unless the Plan Administrator in its sole discretion determines otherwise, either at the time the Option is granted or at any time before it is exercised, in any combination of     (a) cash or check;     (b) tendering (either actually or, if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock already owned by the Participant for at least six months (or any shorter period necessary to avoid a charge to the Company's earnings for financial reporting purposes) having a Fair Market Value on the day prior to the exercise date equal to the aggregate Option exercise price;     (c) if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed exercise notice, together with irrevocable instructions, to (i) a brokerage firm designated by the Company to deliver promptly to the Company the aggregate 5 -------------------------------------------------------------------------------- amount of sale or loan proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise and (ii) the Company to deliver the certificates for such purchased shares directly to such brokerage firm, all in accordance with the regulations of the Federal Reserve Board; or     (d) such other consideration as the Plan Administrator may permit.     In addition, to assist a Participant (including a Participant who is an officer or a director of the Company) in acquiring shares of Common Stock pursuant to an Award granted under the Plan, the Plan Administrator, in its sole discretion, may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Award, (i) the payment by a Participant of a full-recourse promissory note, (ii) the payment by the Participant of the purchase price, if any, of the Common Stock in installments, or (iii) the guarantee by the Company of a full-recourse loan obtained by the Participant from a third party. Subject to the foregoing, the Plan Administrator shall in its sole discretion specify the terms of any loans, installment payments or loan guarantees, including the interest rate and terms of and security for repayment. 7.6  Post-Termination Exercises     The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, if a Participant ceases to be employed by, or to provide services to, the Company or its Related Corporations, which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time:     (a) Any portion of an Option that is not vested and exercisable on the date of termination of the Participant's employment or service relationship (the "Termination Date") shall expire on such date.     (b) Any portion of an Option that is vested and exercisable on the Termination Date shall expire upon the earliest to occur of      (i) the last day of the Option Term;     (ii) if the Participant's Termination Date occurs for reasons other than Cause, death, Disability, or Retirement, the three-month anniversary of such Termination Date; and     (iii) if the Participant's Termination Date occurs by reason of death, Disability or Retirement, the one-year anniversary of such Termination Date.     Notwithstanding the foregoing, if the Participant dies after the Termination Date while the Option is otherwise exercisable, the portion of the Option that is vested and exercisable on such Termination Date shall expire upon the earlier to occur of (y) the last day of the Option Term and (z) the first anniversary of the date of death, unless the Plan Administrator determines otherwise.     Also notwithstanding the foregoing, in case of termination of the Participant's employment or service relationship for Cause, the Option shall automatically expire upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise. If a Participant's employment or service relationship with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant's rights under any Option likewise shall be suspended during the period of investigation.     A Participant's transfer of employment or service relationship between or among the Company and its Related Corporations, or a change in status from an employee to a consultant, agent, advisor or independent contractor, shall not be considered a termination of employment or service relationship for 6 -------------------------------------------------------------------------------- purposes of this Section 7. The effect of a Company-approved leave of absence on the terms and conditions of an Option shall be determined by the Plan Administrator, in its sole discretion. SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS     To the extent required by Section 422 of the Code, Incentive Stock Options shall be subject to the following additional terms and conditions: 8.1  Dollar Limitation     To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted. 8.2  More Than 10% Shareholders     If an individual owns more than 10% of the total voting power of all classes of the Company's stock, then the exercise price per share of an Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date and the Option Term shall not exceed five years. The determination of more than 10% ownership shall be made in accordance with Section 422 of the Code. 8.3  Eligible Employees     Individuals who are not employees of the Company or one of its parent corporations or subsidiary corporations may not be granted Incentive Stock Options. For purposes of this Section 8.3, "parent corporation" and "subsidiary corporation" shall have the meanings attributed to those terms for purposes of Section 422 of the Code. 8.4  Term     Subject to Section 8.2, the Option Term shall not exceed ten years. 8.5  Exercisability     An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than three months after the Termination Date for reasons other than death or Disability, (b) more than one year after the Termination Date by reason of Disability, or (c) after the Participant has been on leave of absence for more than 90 days, unless the Participant's reemployment rights are guaranteed by statute or contract.     For purposes of this Section 8.5, Disability shall mean "disability" as that term is defined for purposes of Section 422 of the Code. 8.6  Taxation of Incentive Stock Options     In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares issued upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year from the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The 7 -------------------------------------------------------------------------------- Participant shall give the Company prompt notice of any disposition of shares acquired by the exercise of an Incentive Stock Option prior to the expiration of such holding periods. 8.7  Promissory Notes     The amount of any promissory note delivered pursuant to Section 7.5 in connection with an Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in no case less than the rate required to avoid imputation of interest (taking into account any exceptions to the imputed interest rules) for federal income tax purposes. SECTION 9. STOCK AWARDS 9.1  Grant of Stock Awards     The Plan Administrator is authorized to make Awards of Common Stock or Awards denominated in units of Common Stock on such terms and conditions and subject to such restrictions, if any (which may be based on continuous service with the Company or the achievement of performance goals), as the Plan Administrator shall determine, in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award. The terms, conditions and restrictions that the Plan Administrator shall have the power to determine shall include, without limitation, the manner in which shares subject to Stock Awards are held during the periods they are subject to restrictions and the circumstances under which forfeiture of the Stock Award shall occur by reason of termination of the Participant's employment or service relationship. 9.2  Issuance of Shares     Upon the satisfaction of any terms, conditions and restrictions prescribed in respect to a Stock Award, or upon the Participant's release from any terms, conditions and restrictions of a Stock Award, as determined by the Plan Administrator, the Company shall release, as soon as practicable, to the Participant or, in the case of the Participant's death, to the personal representative of the Participant's estate or as the appropriate court directs, the appropriate number of shares of Common Stock. 9.3  Waiver of Restrictions     Notwithstanding any other provisions of the Plan, the Plan Administrator may, in its sole discretion, waive the forfeiture period and any other terms, conditions or restrictions on any Stock Award under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate. SECTION 10. WITHHOLDING     The Company may require the Participant to pay to the Company the amount of any withholding taxes that the Company is required to withhold with respect to the grant, vesting or exercise of any Award. Subject to the Plan and applicable law, the Plan Administrator may, in its sole discretion, permit the Participant to satisfy withholding obligations, in whole or in part, (a) by paying cash, (b) by electing to have the Company withhold shares of Common Stock (up to the minimum required federal tax withholding rate) or (c) by transferring to the Company shares of Common Stock (already owned by the Participant for the period necessary to avoid a charge to the Company's earnings for financial reporting purposes), in such amounts as are equivalent to the Fair Market Value of the withholding obligation. The Company shall have the right to withhold from any Award or any shares of Common Stock issuable pursuant to an Award or from any cash amounts otherwise due or to become due from the Company to the Participant an amount equal to such taxes. The Company may also deduct from any Award any other amounts due from the Participant to the Company or a Related Corporation. 8 -------------------------------------------------------------------------------- SECTION 11. ASSIGNABILITY     Awards granted under the Plan and any interest therein may not be assigned, pledged or transferred by the Participant and may not be made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, and, during the Participant's lifetime, such Awards may be exercised only by the Participant. Notwithstanding the foregoing, and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit such assignment, transfer and exercisability and may permit a Participant to designate a beneficiary who may exercise the Award or receive compensation under the Award after the Participant's death; provided, however, that any Award so assigned or transferred shall be subject to all the same terms and conditions contained in the instrument evidencing the Award. SECTION 12. ADJUSTMENTS 12.1  Adjustment of Shares     In the event that, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (a) the outstanding shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of securities of the Company or of any other corporation or (b) new, different or additional securities of the Company being received by the holders of shares of Common Stock of the Company, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities subject to the Plan as set forth in Section 4.1 and (ii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding. Notwithstanding the foregoing, a dissolution or liquidation of the Company or a Corporate Transaction shall not be governed by this Section 12.1 but shall be governed by Section 12.2 and 12.3, respectively. 12.2  Dissolution or Liquidation     In the event of the proposed dissolution or liquidation of the Company, the Plan Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Plan Administrator in its discretion may permit a Participant to exercise an Option until ten days prior to such transaction with respect to all vested and exercisable shares of Common Stock covered thereby and with respect to such number of unvested shares as the Plan Administrator shall determine. In addition, the Plan Administrator may provide that any forfeiture provision or Company repurchase option applicable to any Award shall lapse as to such number of shares as the Plan Administrator shall determine, contingent upon the occurrence of the proposed dissolution or liquidation at the time and in the manner contemplated. To the extent an Option has not been previously exercised, the Option shall terminate automatically immediately prior to the consummation of the proposed action. To the extent a forfeiture provision applicable to a Stock Award has not been waived by the Plan Administrator, the Stock Award shall be forfeited automatically immediately prior to the consummation of the proposed action. 12.3  Corporate Transaction     (a) In the event of a Corporate Transaction, except as otherwise provided in the instrument evidencing an Option and except as provided in subsection (b) below, each outstanding Option shall be assumed or an equivalent option or right substituted by the surviving corporation, the successor corporation or its parent corporation, as applicable (the "Successor Corporation"). 9 --------------------------------------------------------------------------------     (b) If in the event of a Corporate Transaction the Successor Corporation refuses to assume or substitute for an Option, then each such outstanding Option shall become fully vested and exercisable with respect to 100% of the unvested portion of the Option. In such case, the Plan Administrator shall notify the Participant in writing or electronically that the unvested portion of the Option specified above shall be fully vested and exercisable for a specified time period. At the expiration of the time period, the Option shall terminate, provided that the Corporate Transaction is consummated.     (c) For the purposes of this Section 12.3, the Option shall be considered assumed or substituted for if following the Corporate Transaction the option or right confers the right to purchase or receive, for each share of Common Stock subject to the Option immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Corporate Transaction is not solely common stock of the Successor Corporation, the Plan Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Corporation substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Corporate Transaction. The determination of such substantial equality of value of consideration shall be made by the Plan Administrator and its determination shall be conclusive and binding.     "Corporate Transaction" means any of the following events:     (a) Consummation of any merger or consolidation of the Company with or into another corporation; or     (b) Consummation of any sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all the Company's outstanding securities or substantially all the Company's assets other than a transfer of the Company's assets to a majority-owned subsidiary corporation (as defined in Section 8.3) of the Company; or     (c) Acquisition by a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) (as in effect on the date of adoption of the Plan) of the Exchange Act of a majority or more of the Company's outstanding voting securities (whether directly or indirectly, beneficially or of record). Ownership of voting securities shall take into account and shall include ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the date of adoption of the Plan) under the Exchange Act. 12.4  Further Adjustment of Awards     Subject to Section 12.2 and 12.3, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable, and fair and equitable to the Participants, with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation or change in control that is the reason for such action. 10 -------------------------------------------------------------------------------- 12.5  Limitations     The grant of Awards shall in no way affect the Company's right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 12.6  Fractional Shares     In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment. SECTION 13. MARKET STANDOFF     In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, a person shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any shares issued pursuant to an Award granted under the Plan without the prior written consent of the Company or its underwriters. Such limitations shall be in effect for such period of time as may be requested by the Company or such underwriters and agreed to by the Company's officers and directors with respect to their shares; provided, however, that in no event shall such period exceed 180 days. The limitations of this paragraph shall in all events terminate two years after the effective date of the Company's initial public offering. Holders of shares issued pursuant to an Award granted under the Plan shall be subject to the market standoff provisions of this paragraph only if the officers and directors of the Company are also subject to similar arrangements.     In the event of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company's outstanding Common Stock effected as a class without the Company's receipt of consideration, any new, substituted or additional securities distributed with respect to the purchased shares shall be immediately subject to the provisions of this Section 13, to the same extent the purchased shares are at such time covered by such provisions.     In order to enforce the limitations of this Section 13, the Company may impose stop-transfer instructions with respect to the purchased shares until the end of the applicable standoff period. SECTION 14. AMENDMENT AND TERMINATION OF PLAN 14.1  Amendment of Plan     The Plan may be amended only by the Board in such respects as it shall deem advisable; provided, however, that to the extent required for compliance with Section 422 of the Code or any applicable law or regulation, shareholder approval shall be required for any amendment that would (a) increase the total number of shares available for issuance under the Plan, (b) modify the class of persons eligible to receive Options, or (c) otherwise require shareholder approval under any applicable law or regulation. Any amendment made to the Plan that would constitute a "modification" to Incentive Stock Options outstanding on the date of such amendment shall not, without the consent of the Participant, be applicable to such outstanding Incentive Stock Options but shall have prospective effect only. 14.2  Termination of Plan     The Board may suspend or terminate the Plan at any time. Unless sooner terminated as provided herein, the Plan shall terminate ten years after the earlier of the Plan's adoption by the Board and approval by the shareholders. 11 -------------------------------------------------------------------------------- 14.3  Consent of Participant     The amendment or termination of the Plan or the amendment of an outstanding Award shall not, without the Participant's consent, impair or diminish any rights or obligations under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 12 shall not be subject to these restrictions. SECTION 15. GENERAL 15.1  Evidence of Awards     Awards granted under the Plan shall be evidenced by a written instrument that shall contain such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable and that are not inconsistent with the Plan. 15.2  No Individual Rights     Nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Corporation or limit in any way the right of the Company or any Related Corporation to terminate a Participant's employment or other relationship at any time, with or without Cause. 15.3  Registration     Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act), and the applicable requirements of any securities exchange or similar entity.     The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under state securities laws, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made. The Company may issue certificates for shares with such legends and subject to such restrictions on transfer and stop-transfer instructions as counsel for the Company deems necessary or desirable for compliance by the Company with federal and state securities laws.     To the extent that the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange. 15.4  No Rights as a Shareholder     No Option or Stock Award denominated in units shall entitle the Participant to any cash dividend, voting or other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award. 12 -------------------------------------------------------------------------------- 15.5  Compliance With Laws and Regulations     Notwithstanding anything in the Plan to the contrary, the Plan Administrator, in its sole discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers or directors subject to Section 16 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. Additionally, in interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code. 15.6  Participants in Foreign Countries     The Plan Administrator shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Related Corporations may operate to assure the viability of the benefits from Awards granted to Participants employed in such countries and to meet the objectives of the Plan. 15.7  No Trust or Fund     The Plan is intended to constitute an "unfunded" plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company. 15.8  Severability     If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect. 15.9  Choice of Law     The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Oregon without giving effect to principles of conflicts of laws. SECTION 16. EFFECTIVE DATE     The Effective Date is the date on which the Plan is adopted by the Board, so long as it is approved by the Company's shareholders at any time within 12 months of such adoption. 13 -------------------------------------------------------------------------------- PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS SUMMARY PAGE Date of Board Action --------------------------------------------------------------------------------   Action --------------------------------------------------------------------------------   Section/Effect of Amendment --------------------------------------------------------------------------------   Date of Shareholder Approval -------------------------------------------------------------------------------- March 2, 2000   Initial Plan Adoption       March 27, 2000 June 2, 2000   Amendment   3.1   N/A March 20, 2000   Amendment   7.2   N/A October  , 2000   Amendment   12.3   N/A 1 -------------------------------------------------------------------------------- QUICKLINKS CORILLIAN CORPORATION 2000 STOCK INCENTIVE COMPENSATION PLAN (as Amended and Restated on October 24, 2000) SECTION 1. PURPOSE SECTION 2. DEFINITIONS SECTION 3. ADMINISTRATION SECTION 4. STOCK SUBJECT TO THE PLAN SECTION 5. ELIGIBILITY SECTION 6. AWARDS SECTION 7. AWARDS OF OPTIONS SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS SECTION 9. STOCK AWARDS SECTION 10. WITHHOLDING SECTION 11. ASSIGNABILITY SECTION 12. ADJUSTMENTS SECTION 13. MARKET STANDOFF SECTION 14. AMENDMENT AND TERMINATION OF PLAN SECTION 15. GENERAL SECTION 16. EFFECTIVE DATE PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS SUMMARY PAGE

  EXHIBIT 10.2   CONSULTING SERVICES AGREEMENT FOR THE IBM/SBC AND OTHER PROJECTS           This Consulting Services Agreement (“Agreement”) is made and entered into as of the 1st day of July, 2000 (the “ Effective Date”), by and between Peritus Software Services, Inc. (“Peritus”), a Massachusetts corporation, with its principal place of business at 112 Turnpike Road, Suite 111, Westborough, MA 01581 and Rocket Software, Inc. (“ Client”), a Massachusetts corporation, with its principal place of business at Two Apple Hill Drive, Natick, Massachusetts 01760.           Peritus and Client agree that the following terms and conditions will apply to the services provided by Peritus for Client as specified in Statement of Work No. 1, attached hereto and incorporated herein by reference, and any future Statement of Work which may be agreed to in writing between the parties (the “Services”).           1.    Term and Termination.    The Agreement shall commence as of the Effective Date and shall remain in effect for a period of two (2) years, unless otherwise extended by written agreement of the parties or earlier terminated in accordance with the provisions of this paragraph. This Agreement and any Statement of Work attached hereto may not be terminated by either party (unless otherwise provided for in the applicable Statement of Work), except that either party may terminate the Agreement or a Statement of Work at any time effective immediately upon written notice to the other party, if the other party fails to perform any of its obligations under this Agreement or such Statement of Work and fails to remedy such breach within thirty (30) days following the receipt of written notice of the breach from the non-breaching party. The duration of any Services engagement hereunder shall be as set forth in the applicable Statement of Work, unless earlier terminated as set forth herein in which case Client shall be obligated to pay Peritus for all Services performed through the effective date of such termination. Upon the expiration or termination of this Agreement or any Statement of Work hereunder, each party shall promptly return to the other all data, material, and other properties of the other party which relate to the Agreement or such expired or terminated Statement(s) of Work, as the case may be.           2.    Site of Services.    The Services provided under this Agreement shall be performed at the site set forth in the applicable Statement of Work.           3.    Fees and Payment Terms.    In consideration of the Services rendered by Peritus hereunder, Client will pay to Peritus a fee(s) as set forth in the applicable Statement of Work. Such fee(s) will be invoiced upon completion of the Services (or on a monthly basis if Services are being performed for longer than a month) and shall be due upon receipt of such invoice(s).           4.    Expenses.    Any out-of-pocket expenses incurred by Peritus shall be paid by Client promptly after receipt of an invoice therefor. Out-of-pocket expenses shall mean any reasonable and documented expenses incurred in connection with the performance of the Services under this Agreement such as travel, meals and lodging expenses, in the event the Services are to be performed at a location other than the offices of Peritus. All travel by Peritus staff shall be in accordance with Peritus’ standard policies governing travel and business expenses.           5.    Confidentiality.    Peritus agrees to treat any information received from Client during the performance of Services hereunder which has been identified in writing as confidential or proprietary in the same manner as it would treat its own confidential or proprietary information of a similar nature and shall not disclose such information except to those employees or agents with a need to know. The foregoing shall not apply to information which (i) is publicly known through no breach of the confidentiality provisions of this Agreement by Peritus, (ii) was previously known by or in the possession of Peritus without use of confidential or proprietary information obtained though the performance of Services under this Agreement, (iii) is independently developed by Peritus without use of confidential or proprietary information obtained through the performance of Services under this Agreement, (iv) is approved for release by written authorization by Client, or (v) is released by Peritus pursuant to a good faith adherence to a court order. The confidentiality obligations imposed herein shall extend for a period of three (3) years following disclosure of the confidential and proprietary information to Peritus.           6.    Ownership Rights.    Client shall retain all right, title or interest in and to (i) any product which is developed specifically and exclusively for Client pursuant to any fully-executed Statement of Work under this Agreement, (ii) any revisions, modifications, updates, upgrades or enhancements to Client’s products or product code which are created or developed by Peritus specifically for Client pursuant to any fully-executed Statement of Work to this Agreement, and (iii) any materials furnished by Client to Peritus under this Agreement.           Except as set forth in the previous paragraph, Peritus retains all right, title and interest in and to any software, methods, techniques, systems, data and materials used or developed by it in the performance of the Services. Peritus shall retain all rights to and be entitled to use, disclose, and otherwise employ any and all ideas, concepts, know-how, knowledge bases, methods, techniques, processes, skills, and adaptations, including generalized features of sequence, structure, and organization, in conducting its business, providing the Services or pertaining to its software or methodologies. Nothing in this Agreement shall be deemed to implicitly or explicitly grant any license or other right to Client to use, possess, copy or own any of Peritus’ software, products, processes, techniques, methodologies, knowledge bases or intellectual property. This Agreement shall not limit Peritus’ ability to market, develop and provide functionally comparable deliverables, work products or services to others based on the same general concepts, techniques and routines as are used hereunder. This Agreement shall not preclude Peritus from developing or providing deliverables, work products or services which are competitive to deliverables, work products or services which might be provided to Client, irrespective of their similarity.           7.    Limitation of Liability.    Peritus’ liability for any and all claims of damages arising out of this Agreement shall be limited to direct damages and shall not exceed the amount paid to Peritus for the performance of Services hereunder.           IN NO EVENT SHALL PERITUS BE LIABLE FOR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING ANY DAMAGES RESULTING FROM THE LOSS OF USE, LOSS OF DATA, LOSS OF PROFITS, OR LOSS OF BUSINESS, EVEN IF PERITUS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.           8.    Warranty of Performance.    Peritus warrants that the Services performed under this Agreement will be performed in a good and workmanlike manner, subject to the supervision and instructions provided by Client, and that the Services will be performed substantially as specified under this Agreement.           THE EXPRESS WARRANTY SET FORTH IN THIS SECTION 8 IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.           9.    Non-Solicitation.    The parties agree that during the performance of Services by Peritus hereunder and for a period of one year thereafter, neither party shall directly or indirectly solicit, hire or otherwise retain as an employee or independent contractor, a staff member of the other party or a former staff member who was assigned to such Services.           10.    Independent Contractors.    The relationship between Peritus and Client is that of independent contractors, and nothing in this Agreement shall be construed to create a relationship of employer and employee, agency, joint venturers or partners between the parties. Neither party shall have the right, power or authority to enter into agreements of any kind on behalf of the other party, or to create any obligation or responsibility, express or implied, on behalf of or in the name of the other party.           11.    Assignment.    This Agreement may not be assigned by either party, whether by merger, consolidation, sale of assets or otherwise, without the prior written consent of the other party.           12.    General.    The provisions of paragraphs 1, 5, 6, 7, 8, 9 and 12 shall survive any termination or expiration of this Agreement. This Agreement and any fully executed Statement of Work attached hereto set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersede any and all oral and prior written agreements, understandings and quotations relating thereto. No alteration, modification, or cancellation of any of the provisions of this Agreement shall be binding unless made in writing and signed by officers of the parties. Printed terms and conditions on Client’s purchase order(s) shall not apply to the Services performed hereunder. This Agreement will be governed by, and construed and enforced in accordance with, the substantive laws of the Commonwealth of Massachusetts, U.S.A.           The Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, permitted assigns and legal representatives.   Client: Rocket Software, Inc.   By:  -------------------------------------------------------------------------------- (Authorized Signature)   Name:  --------------------------------------------------------------------------------   Title:  --------------------------------------------------------------------------------   Date:  -------------------------------------------------------------------------------- Peritus Software Services, Inc.   By:  -------------------------------------------------------------------------------- (Authorized Signature)   Name:  --------------------------------------------------------------------------------   Title:  --------------------------------------------------------------------------------   Date:  --------------------------------------------------------------------------------

ASPIRATION ACHIEVEMENT INCENTIVE AWARD AGREEMENT FOR EXECUTIVE OFFICERS         THIS AGREEMENT, made as of the 23rd day of September, 1997 (the “Grant Date”), between National Service Industries, Inc., a Delaware corporation (“NSI”) and NSI SERVICES, L.P. (GA), a Subsidiary of NSI (together, the “Company”), and Grantee (the “Grantee”).         WHEREAS, NSI has adopted the National Service Industries, Inc. Long-Term Achievement Incentive Plan (the “Plan”) in order to provide additional incentives to certain officers and key employees of NSI and its Subsidiaries; and         WHEREAS, the Committee responsible for administration of the Plan has determined to grant to the Grantee an Aspiration Achievement Incentive Award as provided herein.         NOW, THEREFORE, the parties hereto agree as follows:         1. Grant of Aspiration Award.         1.1 The Company hereby grants to the Grantee an Aspiration Achievement Incentive Award (the “Award”), which has a value determined as provided in Section 2 below based upon the performance of the Operations during the Performance Cycle from September 1, 1997 to August 31, 2000. As provided in the Plan, Grantee’s right to payment of this Award is dependent upon Grantee’s continued employment in Grantee’s current position with the Company, or in a position with responsibilities of substantially similar value to the Company during the Performance Cycle. Under certain circumstances as described below, Grantee may be entitled to receive payment for some portion of the Award if Grantee’s employment terminates prior to the end of the Performance Cycle.         1.2 The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. This Agreement shall be construed in accordance with, and subject to, the provisions of the Plan (the provisions of which are hereby incorporated by reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same definitions as set forth in the Plan.         2. Performance Measure and Performance Levels.         The Committee has established the performance measure (the “Performance Measure”), and award and performance levels set forth in Appendix A attached hereto. The chart in Appendix A specifies a Commitment performance level, at which the Commitment Level Award will be paid, an Aspiration performance level, at or above which an Aspiration Level Award will be paid, and a threshold performance level, at which a minimum incentive award will be paid and below which no award will be paid. For each level of performance at or above the threshold performance level through the Aspiration performance level, Grantee will receive an award determined in accordance with the chart and formulae set forth in Appendix A. The terms used in determining the Performance Measure are defined in Appendix B. 102         3. Determination of Aspiration Award.         3.1 Determination Notice. Subject to Section 3.2, as soon as practical following the last day of the Performance Cycle, the Committee will determine, in accordance with Section 7(c) of the Plan, the performance level of NSI with respect to the Performance Measure for the Performance Cycle. The Committee may in determining the performance level with respect to the Performance Measure adjust NSI’s financial results for the Performance Cycle to exclude the effect of unusual charges or income items which are distortive of financial results for the Performance Cycle; provided, that, in determining financial results, items whose exclusion from consideration will increase the performance level of NSI shall only have their effects excluded if they constitute “extraordinary items” under generally accepted accounting principles and all such items shall be excluded. The Committee shall also adjust the performance calculations to exclude the unanticipated effect on financial results of changes in the Code, or other tax laws, and the regulations thereunder. The Committee shall also exclude from consideration the effect on financial performance of each of the following events or items where the result of excluding the particular event or item is to increase the performance level of NSI: (i) an acquisition or a divestiture involving more than $10 million in net worth or $25 million in business revenues; (ii) an equity restructuring involving more than $1 million; (iii) asset impairment charges involving more than $1 million and restructuring costs involving more than $1 million associated with facility closings or reduction in employment levels; (iv) changes in accounting treatment or rules involving more than $1 million. The Committee may decrease the amount of the Award otherwise payable to Grantee if, in the Committee’s view, such adjustment is necessary or desirable, regardless of the extent to which the Performance Measure has been achieved. The Committee may establish such guidelines and procedures for reducing the amount of an Award as it deems appropriate.         The Company will notify the Grantee (or the executors or administrators of the Grantee’s estate, if applicable) of the Committee’s determination (the “Determination Notice”). The Determination Notice shall specify the performance level of the Operations with respect to the Performance Measure for the Performance Cycle and the amount of Award (if any) Grantee will be entitled to receive. Unless the Committee determines otherwise at the time the Award is paid and except as otherwise provided in the event of a Change in Control, the amount Grantee is entitled to receive will be paid one-half in cash and one-half in Shares. The Shares will be valued at their Fair Market Value as of the last day of the Performance Cycle. Except in the case of a Change in Control, the Committee may, in its discretion, attach restrictions, terms and conditions to the Shares issued as part of the Award.         3.2 Significant Corporate Events. If, during a Performance Cycle, NSI consummates an acquisition or disposition that (i) involves assets whose value equals or exceeds 20% of the total value of NSI’s assets, (ii) represents a part of the business whose revenues equal or exceed 20% of the total of NSI’s revenues, or (iii) causes a material restructuring of NSI, the following rules shall apply: 103         (a) If the transaction is consummated during the first year of the Performance Cycle, the Performance Cycle and the Grantee’s outstanding Award will be terminated with no payout and a new Performance Cycle containing a new Award will be started.         (b) If the transaction is consummated after the first year of the Performance Cycle, the Performance Cycle will end and the outstanding Award will be determined and paid at NSI’s actual performance level to such date, taking into account the adjustments provided for in Section 3.1 above and using prorated performance levels of the Performance Measure to reflect the portion of the Performance Cycle that had elapsed as of the date of consummation of the acquisition or disposition. Payment of the Award will be made as soon as practical after it is determined. A new Performance Cycle will be started to cover the period remaining in the initial Performance Cycle or, if that result is not practical, the Committee will make an appropriate adjustment to reflect the premature termination of the initial Performance Cycle.         If, during a Performance Cycle, NSI consummates an acquisition or disposition that is not covered by the special provisions of this Section 3.2, the financial effects of such acquisition or disposition shall be handled as provided in Section 3.1.         Any actions under this Section 3.2 shall be taken in accordance with the requirements of Code Section 162(m) and the regulations thereunder.         4. Termination of Employment.         4.1 In General. Except as provided in Sections 4.2, 4.3 and 4.4 below, in the event that a Grantee’s employment terminates during a Performance Cycle, all unearned Aspiration Awards shall be immediately forfeited by the Grantee.         4.2 Termination of Employment Due to Death, Disability, or Retirement. In the event the employment of a Grantee is terminated by reason of death or Disability during a Performance Cycle, the Grantee shall be entitled to a prorated payout with respect to the unearned Award. The prorated payout shall be determined by the Committee based upon the length of time that the Grantee was actively employed during the Performance Cycle relative to the full length of the Performance Cycle; provided, that payment shall only be made to the extent at the end of the Performance Cycle the Award would have been earned based upon the performance level achieved for the Performance Cycle (taking into account the adjustment provisions and other rules in Section 3 above); and provided, further, that the performance level used to determine the prorated award cannot exceed 200% of the Commitment performance level.         In the event of Grantee's Retirement (on or after age 65), the full Award shall continue to be eligible for payout at the end of the Performance Cycle, just as if Grantee had remained employed for the remainder of the Performance Cycle (including if the Grantee dies after Retirement but before the end of the Performance Cycle). At the end of the Performance Cycle, the Committee shall make its determination in the same manner as provided in Section 3. 104         Payment of earned Awards to Grantee in the event of termination due to death, Disability, or Retirement shall be made at the same time payments would be made to Grantee if Grantee did not terminate employment during the Performance Cycle.         4.3 Change In Control. Notwithstanding anything in this Agreement to the contrary, if a Change in Control occurs during the Performance Cycle, then the Grantee’s Award shall be determined for the Performance Cycle then in progress as though the Performance Cycle had ended as of the date of the Change in Control and the outstanding Award will be paid at the Commitment Level Award or the actual performance level to such date (using, for such purpose, prorated performance levels of the Performance Measure to reflect the portion of the Performance Cycle that has elapsed as of the date of the Change in Control), whichever provides the greater payment. The Award determined in accordance with the preceding sentence shall be fully vested and payable immediately to the Grantee. The Committee shall determine the amount of the Award under this Section 4.3, subject to the terms of this section, and no downward adjustment of the Award which would result in reduction of the Award by more than 50% shall be permitted. The Award will be paid in full in cash, unless the Grantee elects to receive one-half of the Award in Shares. For purposes of determining the number of Shares to be paid to a Grantee under this Section 4.3, the Fair Market Value of a Share shall be determined by taking the average closing price per share for the last twenty (20) trading days prior to the commencement of the offer, transaction or other event which resulted in a Change in Control.         4.4 Termination Without Cause. In the event Grantee's employment is terminated by the Company without Cause more than one (1) year after the commencement of the Performance Cycle and prior to the end of the Performance Cycle, the Grantee shall be entitled to a prorated payout of the Award based upon the length of time that the Grantee was actively employed during the Performance Cycle relative to the full length of the Performance Cycle; provided, that payment shall be made only to the extent at the end of the Performance Cycle the Award would have been earned based upon the performance level achieved during the Performance Cycle (taking into account the adjustment provisions and other rules in Section 3 above); and provided, further, that the performance level used to determine the prorated award cannot exceed 200% of the Commitment performance level. Payment shall be made to Grantee at the same time as if Grantee had not terminated employment during the Performance Cycle         5. No Right to Continued Employment.         Nothing in this Agreement or the Plan shall be interpreted to confer upon the Grantee any rights with respect to continuance of employment by the Company, nor shall this Agreement or the Plan interfere in any way with the right of the Company to terminate the Grantee’s employment at any time.         6. Nonassignment.         The Grantee shall not have the right to assign, alienate, pledge, transfer or encumber any amounts due Grantee hereunder, and any attempt to assign, alienate, pledge, transfer, or encumber Grantee’s rights or benefits shall be null and void and not recognized by the Plan or the Company. 105         7. Modification of Agreement.         This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto.         8. Severability; Governing Law         Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.         The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof.         9. Successors in Interest.         This Agreement shall inure to the benefit of and be binding upon any successor to the Company. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be binding upon the Grantee’s heirs, executors, and administrators.         10. Resolution of Disputes.         Any dispute or disagreement which may arise under, or as a result of, or in any way relate to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Grantee and the Company for all purposes.         11. Withholding of Taxes.         The Company shall have the right to deduct from any amount payable under this Agreement, an amount equal to the federal, state and local income taxes and other amounts as may be required by law to be withheld (the “Withholding Taxes”) with respect to any such amount. In satisfaction of all or part of the Withholding Taxes, the Grantee may make a written election (the “Tax Election”), which may be accepted or rejected in the discretion of the Company, to have withheld a portion of the Shares issuable to him or her pursuant to an Award, having an aggregate Fair Market Value equal to the Withholding Taxes. 106         12. Shareholder Approval.         The effectiveness of this Agreement and of the grant of the Award pursuant hereto is subject to the approval of the Plan by the stockholders of NSI in accordance with the terms of the Plan. NATIONAL SERVICE INDUSTRIES, INC. By: ----------------------------------------------------------------- JAMES S. BALLOUN Chairman, President and Chief Executive Officer NSI SERVICES, L.P. (GA), Subsidiary By: ----------------------------------------------------------------- JAMES S. BALLOUN Chairman, President and Chief Executive Officer ---------------------------------------------------------------------- Name of Grantee: Grantee 107 NSI Aspiration Award Program Illustration - FY 1998-2000 ---------------------- -------------------- -------------------- -------------------- -------------------- Name James S. Balloun David Levy Stewart A. Searle Brock A. Hattox ---------------------- -------------------- -------------------- -------------------- -------------------- Position Chairman & Chief EVP, SVP, Corporate EVP, Chief Executive Officer Administration & Development Financial Officer Counsel Salary $ 750,000 $ 350,000 $ 225,000 $ 360,000 Division NSI Total NSI Total NSI Total NSI Total Total LTI Multiple 160% 160% 160% 160% AAI % of LTI 30% 30% 30% 30% FY 98-00 Economic Profit ($000,000) Threshold 24.15 24.15 24.15 24.15 Commitment 42.1 42.1 42.1 42.1 Aspiration 97.25 97.25 97.25 97.25 Individual AAI Opportunity Threshold $90,000 $42,000 $27,000 $43,200 Commitment $360,000 $168,000 $108,000 $172,800 Aspiration $1,800,000 $840,000 $540,000 $864,000 108

[**] CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED WITH THE SEC. Cepheid 1190 Borregas Avenue Sunnyvale, CA 94089-1302 Telephone: 408-541-4191 Fax: 408-541-4192 July 11, 2000 TAKARA SHUZO CO., LTD. Biomedical Group Seta 3-4-1, Otsu Shiga 520-2193 JAPAN Attn: Ikunoshin Kato, Ph.D., President  Dear Dr. Kato, This letter is to confirm the terms of the agreement between CEPHEID ("CEPHEID") and TAKARA Shuzo Co., Ltd. ("TAKARA") (the "Parties"), under which TAKARA will serve as distributor, in the defined Territory , of the Smart Cycler™ System, accessories, and reaction tubes developed by and made by or for CEPHEID. 1. Product Line. The "Products" shall include the Smart Cycler ® System described in Exhibit A, the accessories listed in Exhibit A, and the reaction tubes described in Exhibit A. Excluded is the computer, which TAKARA must purchase for integration into the system. The "Products" shall further include additional, upgraded and improved Smart Cycler™ Systems, accessories and reaction tubes introduced by CEPHEID as a replacement for existing Products and intended for sale in the life science research market (the "Field"). Additional thermal cyclers, accessories, and reaction tubes offered by CEPHEID shall become "Products" only upon agreement of the parties. All Products shall conform to CEPHEID's specifications as have been disclosed to TAKARA. All outer shipping cartons shall conform to applicable Department of Transportation specifications. 2. Distribution Rights. CEPHEID grants to TAKARA the right to distribute the Products in Japan, South Korea, Taiwan. (the "Territory") into the life science research market (the "Field"). Such right shall be exclusive, except for CEPHEID's reserved right to sell directly to the end user customers listed in Exhibit B. 2a. Definition of Field. Rights are granted by CEPHEID to TAKARA for distribution of the Products into the Field of life science research. Specifically excluded from the Field are human and veterinary diagnostics (including applications subject to regulatory labeling including "For Investigational Use Only" or "For Research Use Only"), environmental testing, quality assurance and control testing, identity and forensic testing, and testing for biothreat agents. 2b. Definition of Territory. Rights are granted by CEPHEID to TAKARA for distribution of the Products into Japan, South Korea, and Taiwan. 2b. Exclusive Supplier. While the exclusive distribution rights under Paragraph 2 remain in force, CEPHEID will be the exclusive supplier to TAKARA of systems capable of performing thermal cycling with real-time optical detection. 2c. Sales Targets; Loss of Exclusivity. The parties have set minimum sales targets for T AKARA, in terms of units of Smart Cycler™ Systems (units defined as the total number of 16-site Smart Cycler™ processing blocks, either as part of a Starter System or as Add-On Blocks) in each of the countries comprising the Territory. Such sales targets shall not represent commitments to purchase; but if TAKARA fails to achieve a sales target, CEPHEID may, by written notice to TAKARA terminate the exclusivity of TAKARA's distribution rights under Paragraph 2. Such written notice shall be given within 90 days after the end of the sales target period and shall become effective 30 days after TAKARA's receipt of the notice. Such termination of exclusivity shall be CEPHEID's sole remedy for TAKARA's failure to achieve sales targets. The sales targets are as follows: Year 1 Year 2 Year 3 -------- -------- -------- Japan [**] units [**] units [**] units South Korea [**] units [**] units [**] units Taiwan [**] units [**] units [**] units TAKARA shall provide CEPHEID within 30 days after the first of each March, June, September, and December a true and accurate accounting report of Products (including units sold and selling price) sold on a country-by-country basis during the preceding 3 months. In addition, T AKARA shall provide to CEPHEID on a quarterly basis an updated customer and contact list.   TAKARA shall also provide CEPHEID with one year (comprised of four quarters) territory forecasts that will be updated on a quarterly basis and will include projections for each of the upcoming three months. While the forecast will not be binding in total, the projections provided for the upcoming quarter will represent a purchase commitment. 3. Product Price. The transfer prices to T AKARA for the Products shall be as listed in Exhibit A. These prices shall be fixed for the period ending on the first anniversary of this Agreement. Thereafter, prices may be reviewed and increased annually due to increases in production cost, provided that such annual increase will not exceed 10%. Such production cost increases will be subject to verification at TAKARA's option and expense, utilizing the accounting firm serving CEPHEID at the time. In addition the prices may be reviewed and renegotiated at the request of either party, but shall not be changed more than once in any given year. If in the course of such review and renegotiation the Parties are unable to agree upon new prices, the existing prices will remain in effect for one year after which time they will again be subject to review and renegotiation if either Party requests. Each shipment shall be billed at the price in effect at the time of order placement. Notice of price changes shall be sent to: TAKARA SHUZO CO., LTD. Biomedical Group Seta 3-4-1, Otsu-Shiga 520-2193 JAPAN 3a. Payment Terms. Payment terms shall be net forty-five days from receipt of valid invoice. Payments will be made in US dollars. 4. Warranty. CEPHEID shall warrant all Smart Cycler™ System Products for 12 months from delivery to TAKARA's customer and all accessories (except the computer) for 12 months from delivery to TAKARA's customer. CEPHEID shall provide or reimburse T AKARA for parts used in making repairs during the warranty period and shall make parts available after the warranty period to TAKARA at a discount of [**]% from CEPHEID's list price for such parts. CEPHEID also warrants that the Smart Cycler™ System to be distributed by TAKARA in the Field and Territory shall be an "authorized thermal cycler" under the terms of the Thermal Cycling Authorization Program administered by PE Biosystems, a division of PE Corporation. 5. Computer System. .TAKARA shall be responsible for the direct purchase of compatible computer systems to be sold to end users for use with the Products. CEPHEID will provide to TAKARA specifications and recommendations for an applicable computer. If TAKARA selects a preferred computer vendor and model that is different than that being supplied by CEPHEID with its own Smart Cycler System, TAKARA will provide Cepheid at no cost one appropriately configured computer for software qualification and will pay CEPHEID's direct costs of qualifying the software. 6. Shipping. CEPHEID will ship all Smart Cycler™ System Products (systems, accessories and reaction tubes) FOB Sunnyvale, CA to TAKARA's designated distribution centers in Japan. TAKARA will be responsible for paying all freight charges and import duties. 7. Marketing and Training Support. CEPHEID will provide to TAKARA English language copies of the User's Manual, Service Manual, and other promotional support materials used to support the sale of the Products in the US market. T AKARA will be responsible for the translation and production of such materials in a form suitable for use in their Territory . Prior to commercial launch of the Products in the Territory, CEPHEID will provide initial technical and sales training to TAKARA personnel at the CEPHEID facilities in Sunnyvale, California. In the case that such training is conducted in Japan at TAKARA's request, TAKARA shall pay the travel and lodging expenses of CEPHEID personnel conducting the training. 8. Customer Support and Service. T AKARA will be responsible for providing direct support to its local distributors and end user customers. In order to support TAKARA's efforts to support TAKARA's customers, CEPHEID will provide to T AKARA, as reasonable and appropriate, technical and product updates and will respond to questions from TAKARA personnel received via phone, fax, or e-mail. CEPEHID will not be responsible for providing support directly to TAKARA local distributors or end-user customers. 9. Customer Complaint Records. TAKARA shall establish and maintain and, as necessary, make available to CEPHEID, customer complaint records to enable CEPHEID to operate under the appropriate ISO and QSR regulations and standards governing the manufacture and distribution of Products. 10. Term. The term of this Agreement shall be from the date of mutual execution of this Letter Agreement and extending for three years from the date of initial product launch. Thereafter, the Agreement shall remain in force for successive twelve month periods, unless either party gives written notice of non- renewal to the other at least sixty (60) days prior to the current expiration date. 11. Amendments This Agreement may not be amended or modified except in writing signed by both parties, and no course of dealing by or between the parties shall be deemed to affect any such amendment or modification. 12. Public Announcements. Neither Party shall issue or cause to be issued any press release or public announcement or otherwise disclose the existence of this Agreement or the transactions contemplated hereby except as and to the extent that the Parties agree, in writing. 13. Material Breach. Either party shall be entitled to terminate this Agreement by not less than 60 days' written notice if the other party is in material breach of any provision of this Agreement; provided that if such breach is capable of being remedied and is remedied before expiration of the said 60 day period, the notice of termination shall not take effect. 14. Bankruptcy. Either party may terminate this Agreement upon the bankruptcy or insolvency of the other party. 15. Assignment. Neither party may assign, subcontract, or delegate its rights and obligations under this Agreement without the prior written consent of the other party. 16. Governing Law. This Agreement shall be governed by the laws of the State of California applicable to contracts between California residents wholly to be performed in the State of California. 17. Force Majeure. Neither party shall be liable for failure to perform or delay in performing any provision of this Agreement where such failure results from an act of God, acts of civil or military authority, fires, strikes, floods, epidemics, quarantine, restrictions, riots, delays in transportation, shortage of raw materials, fuel or power or from any other cause whether or not of the same nature as the foregoing beyond the control of the party in question. 18. Notices. Any notice required or permitted to be given pursuant to this Agreement shall be delivered by hand at or sent by pre-paid registered or certified mail or by facsimile to the party in question at the address set out below or such other address as shall have been notified to the other party, and any notice sent by registered or certified mail shall be deemed to have been given on the third day after the date of mailing If to CEPHEID: Cepheid 1190 Borregas Avenue Sunnyvale, CA 94089 Attn: Cris McReynolds Telephone No. 408-541-4191 Fax No.408-734-1260 If to TAKARA: Takara Shuzo Co., Ltd. Biomedical Group Seta 3-4-1, Otsu, Shiga 520-2193, Japan Attn: Director, Marketing & Sales, Biomedical Group Telephone No. 077-543-7247 Fax No. 077-543-9254 19. Severability. Should any part of this Agreement determined by a court of competent jurisdiction to be invalid or unenforceable, such determination shall not affect the validity or enforceability of the remainder unless the part so determined invalid or unenforceable impairs the value of the whole Agreement to either party. 20. Entire Agreement. This agreement sets forth the entire agreement between the parties relating to the subject matter hereof and supercedes any and all prior and contemporaneous agreements, discussions, understandings and correspondence. Please signify your acceptance of this Agreement by signing below and returning one original to CEPHEID. Yours truly, /s/ THOMAS L. GUTSHALL Thomas L. Gutshall Chairman and CEO Cepheid Agreed and Accepted: TAKARA SHUZO CO., LTD. By: /s/ Ikunoshin Kato, Ph.D. Name: Ikunoshin Kato, Ph.D. Title: President, Biomedical Group 7/19/2000 Date Exhibits: A. - Products and Prices B. - Customer Groups Excluded From Exclusivity Provision     EXHIBIT A   SMART CYCLER@ SYSTEM (see attached flyer for description and specifications)   Part# Description TAKARA Price ------- ----------------------------------- ----------------- TBD Smart Cycler@ Processing Block $[**] (U.S.) (16-site block, Japan compatible, w/ USB cable) TBD Smart Cycler@ Accessory Pack* $[**] (U.S.) * Accessory pack includes 1 mini-centrifuge, four reaction tube racks, one cooling block, software, users manual. ACCESSORIES: Part# Description TAKARA Price ------- ----------------------------------- ----------------- TBD Mini-Centrifuge $[**] (U.S.) TBD Tube Racks (pack of 4) $[**] (U.S.) TBD Cooling Block $[**] (U.S.) REACTION TUBES: Part# Description TAKARA Price ------- ----------------------------------- ----------------- TBD 1 Carton of 25 ~L Smart Cycler@ $[**] (U.S.) Reaction Tubes (20 bags of 50 tubes ea) TBD 1 Carton of 100 ~L Smart Cycler@ $[**] (U.S.) Reaction Tubes (20 bags of 50 tubes ea)                 EXHIBIT B End User Customers Groups Excluded From The Exclusivity Provisions Of Paragraph 2 [**]                                                                  

Exhibit 10.11 WELLS FARGO BANK CERTIFICATE OF INCUMBENCY TO: WELLS FARGO BANK, NATIONAL ASSOCIATION              The undersigned, Scott M. Gibson, Secretary of PLX TECHNOLOGY, INC., a corporation created and existing under the laws of the state of Delaware, hereby certifies to Wells Fargo Bank, National Association (“Bank”) that (a) the following named persons are duly elected officers of this corporation and presently hold the titles specified below, (b) said officers are authorized to act on behalf of this Corporation in transactions with Bank, and (c) the signature opposite each officer’s name is his or her true signature:           /s/ Michael J. Salameh      --------------------------------------------------------------------------------      Michael J. Salameh President              The undersigned further certifies that if any of the above-named officers change, or if, at any time, any of said officers are no longer authorized to act on behalf of this corporation in transactions with Bank, this corporation shall immediately provide to Bank a new Certificate of Incumbency. Bank is hereby authorized to rely on this Certificate of Incumbency until a new Certificate of Incumbency certified by the Secretary of this corporation is received by Bank.              IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the corporate seal of said corporation as of                           .           /s/ Scott M. Gibson      --------------------------------------------------------------------------------      Scott M. Gibson Secretary (SEAL) -------------------------------------------------------------------------------- WELLS FARGO BANK DISBURSEMENT ORDER DATE:   October 25, 2000 OFFICE:   Peninsula Technology RCBO, 400 Hamilton Avenue, Palo Alto, CA 94301 Wells Fargo Bank. National Association, is hereby authorized to pay the proceeds of the credit accommodation to the undersigned granted in the principal amount of $28,500,000.00 to the order of: Name Amount -------------------------------------------------------------------------------- PLX Technology, Inc.   $ 28,500,000     $     $     $     $        PLX TECHNOLOGY, INC.   By:   /s/ Michael J. Salameh      --------------------------------------------------------------------------------      Micheal J. Salameh President -------------------------------------------------------------------------------- PROMISSORY NOTE $28,500,000.00 Palo Alto, California October 25, 2000              FOR VALUE RECEIVED, the undersigned PLXTECHNOLOGY, INC. (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at 400 Hamilton Avenue, Palo Alto, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Twenty Eight Million Five Hundred Thousand Dollars ($28,500,000.00), with interest thereon as set forth herein. DEFINITIONS:              As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:         (a)  “Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close.         (b)  “Fixed Rate Term” means a period of 1, 2, 3, 6, 9 or 12 months, as designated by Borrower,] during which the entire outstanding principal balance of this Note bears interest determined in relation to LlBOR, with the understanding that (i) the initial Fixed Rate Term shall commence on the date this Note is disbursed, (ii) each successive Fixed Rate Term shall commence automatically, and without notice to or consent from Borrower, on the first Business Day following the date on which the immediately preceding Fixed Rate Term matures, and (iii) if, on the first Business Day of the last Fixed Rate Term applicable hereto the remaining term of this Note is less than [one (1) month, said Fixed Rate Term shall be in effect only until the scheduled maturity date hereof. If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.         (c)  “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula: LIBOR = Base LlBOR -------------------------------------------------------------------------------- 100% - LIBOR Reserve Percentage               (i)  “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market. 1 --------------------------------------------------------------------------------               (ii)  “LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term.         (d)  “Prime Rate” means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank’s base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate. INTEREST:         (a)  Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a fixed rate per annum determined by Bank to be forty-five hundredths of one percent (0.45%) above LlBOR in effect on the first day of each Fixed Rate Term. With respect to each Fixed Rate Term hereunder, Bank is hereby authorized to note the date and interest rate applicable thereto and any payments made thereon on Bank’s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted. At the time this Note is disbursed and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying the length of the applicable Fixed Rate Term. Any such notice may be given by telephone so long as (i) if requested by Bank, Borrower provides to Bank written confirmation thereof not later than three (3) Business Days after such notice is given, and (ii) such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at it’s sole option but without obligation to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower. If Borrower does not immediately accept a- fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate. If Bank has not received such notice at the time principal is disbursed hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have selected the shortest pem1itted Fixed Rate Term.         (b)  Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LlBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR. In detem1ining which of the foregoing are attribut able to any LlBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower .         (c)  Payment of Interest. Interest accrued on this Note shall be payable on the 6th day of each month, commencing December 6, 2000. 2 --------------------------------------------------------------------------------         (d)  Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note. REPAYMENT AND PREPAYMENT:         (a)  Repayment. The outstanding principal balance of this Note shall be due and payable in full on November 6, 2005.         (b)  Application of Payments. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.         (c)  Prepayment. Borrower may prepay principal on this Note at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance hereof. In consideration of Bank providing this prepayment option to Borrower, or if this Note shall become due and payable at any time prior to the last day of any Fixed Rate Term by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month:               (i)  Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.               (ii)  Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LlBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.               (iii)  If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.              Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascel1aln the full extent of such costs, expenses and/or liabilities. Each Borrower, therefore, agrees to pay the above described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.00%) above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed). EVENTS OF DEFAULT:              This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of October 25, 2000, as amended from 3 -------------------------------------------------------------------------------- time to time (the “Credit Agreement”). Any default in the payment or performance of any obligation under this Note. or any defined event of default under the Credit Agreement, shall constitute an “Event of Default” under this Note. MISCELLANEOUS:         (a)  Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower. Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holders in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity .         (b)  Obligations joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.         (c)  Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California.         IN WITNESS WHEREOF, the Undersigned has executed this Note as of the date first written above.      PLX TECHNOLOGY   By:   /s/ Michael J. Salameh      --------------------------------------------------------------------------------      Michael J. Salameh President 4 -------------------------------------------------------------------------------- SECURITY AGREEMENT: SECURITIES ACCOUNT         1.  GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned PLX TECHNOLOGY, INC., or any of them (“Debtor”), hereby grants and transfers to WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) a security interest in (a) Debtor’s Wells Capital Management Liquidity Account No.000758 (whether held in Debtor’s name or as a Bank collateral account for the benefit of Debtor), and all replacements or substitutions therefore, including any account resulting from a renumbering or other administrative re-identification thereof (collectively, the “Securities Account”) maintained with WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through its Investment Group (“Intermediary”), (b) all financial assets credited to the Securities Account, (c) all security entitlements with respect to the financial assets credited to the Securities Account, and (d) any and all other investment property or assets maintained or recorded in the Securities Account (with all the foregoing defined as “Collateral”), together with whatever is receivable or received when any of the Collateral or proceeds thereof are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including without limitation, (i) all rights to payment, including returned premiums, with respect to any insurance relating to any of the foregoing, (ii) all rights to payment with respect to any cause of action affecting or relating to any of the foregoing, and (iii) all stock rights, rights to subscribe, stock splits, liquidating dividends, cash dividends, dividends paid in stock, new securities or other property of any kind which Debtor is or may hereafter be entitled to receive on account of any securities pledged hereunder, including without limitation, stock received by Debtor due to stock splits or dividends paid in stock or sums paid upon or in respect of any securities pledged hereunder upon the liquidation or dissolution of the issuer thereof (hereinafter called “Proceeds”). Except as otherwise expressly permitted herein, in the event Debtor receives any such Proceeds, Debtor will hold the same in trust on behalf of and for the benefit of Bank and Will immediately deliver all such. Proceeds to Bank in the exact form received, with the endorsement of Debtor if necessary and/or appropriate undated stock powers duly executed in blank, to be held by Bank as part of the Collateral, subject to all terms hereof. As used herein, the terms “security entitlement,” “financial asset” and “investment property” shall have the respective meanings set forth in the California Uniform Commercial Code.         2.  OBLIGATIONS SECURED. The obligations secured hereby are the payment and performance of; (a) all present and future Indebtedness of Debtor to Bank as described in Section 6 of the Addendum hereto; and (b) all obligations of Debtor and rights of Bank under this Agreement. The word “Indebtedness” is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Debtor, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due. absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether Debtor may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable, but, notwithstanding the generality of the foregoing definition, shall be limited as set forth In Section 6 of the Addendum.         3.  TERMINATION. This Agreement will terminate upon the performance of all obligations of Debtor to Bank, including without limitation, the payment of all Indebtedness of Debtor to Bank, and the termination of all commitments of Bank to extend credit to Debtor, existing at the time Bank receives written notice from Debtor of the termination of this Agreement. 1 --------------------------------------------------------------------------------         4.  OBLIGATIONS OF BANK. Bank shall have no duty to take any steps necessary to preserve the rights of Debtor against prior parties, or to initiate any action to protect against the possibility of a decline in the market value of the Collateral or Proceeds. Bank shall not be obligated to take any action with respect to the Collateral or Proceeds requested by Debtor unless such request is made in writing and Bank determines, in its sole discretion, that the requested action would not unreasonably jeopardize the value of the Collateral and Proceeds as security for the Indebtedness.         5.  REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Bank that: (a) Debtor is the sole owner of the Collateral and Proceeds; (b) Debtor has the right to grant a security interest in the Collateral and Proceeds; (c) all Collateral and Proceeds are genuine, free from liens, adverse claims, setoffs, default, prepayment, defenses and conditions precedent of any kind or character, except the lien created hereby or as otherwise agreed to by Bank, or heretofore disclosed by Debtor to Bank, in writing; (d) all statements contained herein and, where applicable, in the Collateral, are true and complete in all material respects; (e) no financing statement or control agreement covering any of the Collateral or Proceeds, and naming any secured party other than Bank, exists or is on file in any public office or remains in effect: (f) no person or entity, other than Debtor, Bank and Intermediary, has any interest in o r control over the Collateral; and (g) specifically with respect to Collateral and Proceeds consisting of investment securities, instruments, chattel paper, documents, contracts, insurance policies or any like property , (i) all persons appearing to be obligated thereon have authority and capacity to contract and are bound as they appear to be, and (ii) the same comply with applicable laws concerning form, content and manner of preparation and execution.         6.  COVENANTS OF DEBTOR.               (a)  Debtor agrees in general: (i) to pay Indebtedness secured hereby when due; (ii) to indemnify Bank against all losses, claims, demands, liabilities and expenses of every kind caused by property subject hereto; (iii) to pay all costs and expenses, including reasonable attorneys’ fees, incurred by Bank in the perfection and preservation of the Collateral or Bank’s interest therein and/or the realization, enforcement and exercise of Bank’s rights, powers and remedies hereunder; (iv) to permit Bank to exercise its powers; (v) to execute and deliver such documents as Bank deems necessary to create, perfect and continue the security interests contemplated hereby; and (vi) not to change its chief place of business (or personal residence, if applicable) or the places where Debtor keeps any of Debtor’s records concerning the Collateral and Proceeds without first giving Bank written notice of the address to which Debtor is moving same.               (b)  Debtor agrees with regard to the Collateral and Proceeds, unless Bank agrees otherwise in writing: (i) not to permit any security interest in or lien on the Collateral or Proceeds, except in favor of Bank and except liens in favor of Intermediary to the extent expressly permitted by Bank in writing; (ii) not to hypothecate or permit the transfer by operation of law of any of the Collateral or Proceeds or any interest therein; (iii) to keep, in accordance with generally accepted accounting principles, complete and accurate records regarding all Collateral and Proceeds, and to permit Bank to inspect the same and make copies thereof at any reasonable time; (iv) if requested by Bank, to receive and use reasonable diligence to collect Proceeds, in trust and as the property of Bank, and to immediately endorse as appropriate and deliver such Proceeds to Bank daily in the exact form in which they are received together with a collection report in form satisfactory to Bank; (v) in the event Bank elects to receive payments of Proceeds hereunder, to pay all expenses incurred by Bank in connection therewith, including expenses of accounting, correspondence, collection efforts, 2 -------------------------------------------------------------------------------- filing, recording, record keeping and expenses incidental thereto; (vi) to provide any service and do any other acts which may be necessary to keep all Collateral and Proceeds free and clear of all defenses, rights of offset and counterclaims; and (vii) if the Collateral or Proceeds consists of securities and so long as no Event of Default exists, to vote said securities and to give consents, waivers and ratifications with respect thereto, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would impair Bank’s interests in the Collateral and Proceeds or be inconsistent with or violate any provisions of this Agreement Debtor further agrees that any party now or at any time hereafter authorized by Debtor to advise or otherwise act with respect to the Securities Account shall be subject to all tem1s and conditions contained herein and in any control, custodial or other similar agreement at any time in effect among Bank, Debtor and In termediary relating to the Collateral.         7.  POWERS OF BANK. Debtor appoints Bank its true attorney in fact to perform any of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time to time by Bank’s officers and employees, or any of them, whether or not Debtor is in default: (a) to perform any obligation of Debtor hereunder in Debtor’s name or otherwise; (b) to notify any person obligated on any security, instrument or other document subject to this Agreement of Bank’s rights hereunder; (c) to collect by legal proceedings or otherwise all dividends, interest, principal or other sums now or hereafter payable upon or on account of the Collateral or Proceeds; (d) to enter into any extension, reorganization, deposit, merger or consolidation agreement, or any other agreement relating to or affecting the Collateral or Proceeds, and in connection therewith to deposit or su rrender control of the Collateral and Proceeds, to accept other property in exchange for the Collateral and Proceeds, and to do and perform such acts and things as Bank may deem proper I with any money or property received in exchange for the Collateral or Proceeds, at Bank’s option, to be applied to the Indebtedness or held by Bank under this Agreement; (e) to make any compromise or settlement Bank deems desirable or proper in respect of the Collateral and Proceeds; (f) to insure, process and preserve the Collateral and Proceeds; (g) to exercise all rights, powers and remedies which Debtor would have, but for this Agreement, with respect to all Collateral and Proceeds subject hereto; and (h) to do all acts and things and execute all documents in the name of Debtor or otherwise, deemed by Bank as necessary, proper and convenient in connection with the preservation, perfection or enforcement of its rights hereunder. To effect the purposes of this Agreement or otherwise upon instructions of Debtor, or any of them, Bank may cause any Collateral and/or Proceeds to be transferred to Bank’s name or the name of Bank’s nominee. If an Event of Default has occurred and is continuing and pending foreclosure by Bank of the Collateral, any or all Collateral and/or Proceeds consisting of securities may be registered, without notice, in the name of Bank or its nominee, and thereafter Bank or its nominee may exercise, without notice, all voting and corporate rights at any meeting of the shareholders of the issuer thereof, any and all rights of conversion, exchange or subscription, or any other rights, privileges or options pertaining to such Collateral and/or Proceeds, all as if it were the absolute owner thereof. The foregoing shall include, without limitation, the right of Bank or its nominee to exchange, at its discretion, any and all Collateral and/or Proceeds upon the merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof, or upon the exercise by the issuer there of or Bank of any right, privilege or option pertaining to any shares of the Collateral and/or Proceeds, and in connection therewith, the right to deposit and deliver any and all of the Collateral and/or Proceeds with any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as Bank may determine. All of the foregoing rights, privileges or options may be exercised without liability on the part of Bank or its nominee except to account for property actually received by Bank. Bank shall have no duty to exercise any of the 3 -------------------------------------------------------------------------------- foregoing, or any other rights, privileges or options with respect to the Collateral or Proceeds and shall not be responsible for any failure to do so or delay in so doing.         8.  PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor agrees to pay, prior to delinquency, all insurance premiums, taxes, charges, liens and assessments against the Collateral and Proceeds, and upon the failure of Debtor to do so, Bank at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same. Any such payments made by Bank shall be obligations of Debtor to Bank, due and payable immediately upon demand, together with interest at a rate determined in accordance with the provisions of Section 15 hereof, and shall be secured by the Collateral and Proceeds, subject to all terms and conditions of this Agreement.         9.  EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an “Event of Default” under this Agreement: (a) any defined event of default under any loan or credit agreement relating to or executed in connection with any Indebtedness, or (b) any default by Borrower under any control, custodial or other similar agreement in effect among Bank, Debtor and Intermediary relating to the Collateral.         10.  REMEDIES. Upon the occurrence of any Event of Default, Bank shall have the right to declare immediately due and payable all or any Indebtedness secured hereby and to terminate any commitments to make loans or otherwise extend credit to Debtor. Bank shall have all other rights, powers, privileges and remedies granted to a secured party upon default under the California Uniform Commercial Code or otherwise provided by law, including without limitation, the right to contact Intermediary and to instruct Intermediary to deliver all Collateral and/or Proceeds directly to Bank. All rights, powers, privileges and remedies of Bank shall be cumulative. No delay, failure or discontinuance of Bank in exercising any right, power, privilege or remedy hereunder shall affect or operate as a waiver of such right, power, privilege or remedy; nor shall any single or partial exercise of any such right, power, privilege or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Any waiver, permit, consent or approval of any kind by Bank of any default hereunder, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing- It is agreed that public or private sales, for cash or on credit, to a wholesaler or retailer or investor, or user of property of the types subject to this Agreement, or public auction, are all commercially reasonable since differences in the sales prices generally realized in the different kinds of sales are ordinarily offset by the differences in the costs and credit risks of such sales. While an Event of Default exists: (a) Debtor will not dispose of any of the Collateral or Proceeds except on terms approved by Bank; (b) Bank may appropriate the Collateral and apply all Proceeds toward repayment of the Indebtedness in such order of application as Bank may from time to time elect; (c) Bank may take any action with respect to the Collateral contemplated by any control, custodial or other similar agreement then in effect among Bank, Debtor and Intermediary; and (d) at Bank’s request, Debtor will assemble and deliver all books and records pertaining to the Collateral or Proceeds to Bank at a reasonably convenient place designated by Bank. For any Collateral or Proceeds consisting of securities, Bank shall have no obligation to delay a sale of any portion thereof for the period of time necessary to permit the issuer thereof to register such securities for public sale under any applicable state or Federal law, even if the issuer thereof would agree to do so.         11.  DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or any part of the Indebtedness, Bank may transfer all or any part of the Collateral or Proceeds 4 -------------------------------------------------------------------------------- and shall be fully discharged thereafter from all liability and responsibility with respect to any of the foregoing so transferred, and the transferee shall be vested with all rights and powers of Bank hereunder with respect to any of the foregoing so transferred; but with respect to any Collateral or Proceeds not so transferred, Bank shall retain all rights, powers, privileges and remedies herein given. Any proceeds of any disposition of any of the Collateral or Proceeds, or any part thereof, may be applied by Bank to the payment of expenses incurred by Bank in connection with the foregoing, including reasonable attorneys’ fees, and the balance of such proceeds may be applied by Bank toward the payment of the Indebtedness in such order of application as Bank may from time to time elect.         12.  STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid in full and all commitments by Bank to extend credit to Debtor have been terminated, the power of sale and all other rights, powers, privileges and remedies granted to Bank hereunder shall continue to exist and may be exercised by Bank at any time and from time to time irrespective of the fact that the Indebtedness or any part thereof may have become barred by any statute of limitations, or that the personal liability of Debtor may have ceased, unless such liability shall have ceased due to the payment in full of all Indebtedness secured hereunder-         13.  MISCELLANEOUS. (a) The obligations of Debtor are joint and several; (b) Debtor waives any right (i) to require Bank to make any presentment or demand, or give any notice of nonpayment or nonperformance, protest, notice of protest or notice of dishonor hereunder, (ii) to direct the application of payments or security for any Indebtedness of Debtor, or indebtedness of customers of Debtor, or (iii) to require proceedings against others or to require exhaustion of security; and (c) Debtor hereby consents to extensions, forbearances or alterations of the terms of Indebtedness, the release or substitution of security, and the release of any guarantors; provided however, that in each instance, Bank believes in good faith that the action in question is commercially reasonable in that it does not unreasonably increase the risk of nonpayment of the Indebtedness to which the action applies. Until all Indebtedness shall have been p aid in full, no Debtor shall have any right of subrogation or contribution, and each Debtor hereby waives any benefit of or right to participate in any of the Collateral or Proceeds or any other security now or hereafter held by Bank.         14.  NOTICES. All notices, requests and demands required under this Agreement must be in writing, addressed to Bank at the address specified in any other loan documents entered into between Debtor and Bank and to Debtor at the address of its chief executive office (or personal residence, if applicable) specified below or to such other address as any party may designate by written notice to each other party, and Sh811 be deemed to have been given or made as follows: (a) if personally delivered, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.         15.  COSTS, EXPENSES AND ATTORNEYS’ FEES, Debtor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges. costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house counsel), expended or incurred by Bank in exercising any right, power, privilege or remedy conferred by this Agreement or in the enforcement thereof, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Debtor or in any way affecting any of the Collateral or Bank’s ability to exercise any of Its rights or remedies with respect thereto, All of the foregoing shall be paid by 5 -------------------------------------------------------------------------------- Debtor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or the Prime Rate in effect from time to time.         16.  SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties, and may be amended or modified only in writing signed by Bank and Debtor.         17.  OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this Agreement as Debtor hereby expressly agrees that recourse may be had against his or her separate property for all his or her Indebtedness to Bank secured by the Collateral and Proceeds under this Agreement.         18.  SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Agreement.         19.  GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the Jaws of the State of California.         20.  ADDENDUM. Additional terms and conditions relating to the Securities Account are set forth in an Addendum attached hereto and incorporated herein by this reference.              Debtor warrants that its chief executive office (or personal residence, if applicable) is located at the following address: 390 POTRERO AVENUE, SUNNYVALE, CA 94086.              IN WITNESS WHEREOF, this Agreement has been duly executed as of October 25, 2000.      PLX TECHNOLOGIES   By:   /s/ Michael J. Salameh      --------------------------------------------------------------------------------      Michael J. Salameh President 6 -------------------------------------------------------------------------------- ADDENDUM TO SECURITY AGREEMENT: SECURITIES ACCOUNT              THIS ADDENDUM is attached to and made a part of that certain Security Agreement: Securities Account executed by PLX TECHNOLOGY, INC. (“ Debtor”) in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”), dated as of October 25, 2000 (the “Agreement”).              The following provisions are hereby incorporated into the Agreement:         1.  Securities Account Activity. So long as no Event of Default exists, Debtor, or any party authorized by Debtor to act with respect to the Securities Account, may (a) receive payments of interest and/or cash dividends earned on financial assets maintained in the Securities Account, {b) trade financial assets maintained in the Securities Account, and (c) in addition to the distributions described in clause (a); withdraw Collateral from the Securities Account free and clear of Bank’s security interest therein $0 long as the Collateral Value of the Collateral remaining in the Securities Account after each such withdrawal is not less than one hundred percent (100%) the outstanding principal balance of the Indebtedness secured hereby. Without Bank’s prior written consent, except as permitted by the preceding sentence, neither Debtor nor any party other than Bank may withdraw or receive any distribution of any C ollateral from the Securities Account. The Collateral Value of the Securities Account shall at all times be equal to or greater than one hundred percent (100%) of the outstanding principal balance of the Indebtedness secured hereby. In the event that the Collateral Value, for any reason and at any time, is less than the required amount, Debtor shall promptly make a principal reduction on the Indebtedness or deposit additional assets of a nature satisfactory to Bank into the Securities Account, in either case in amounts or with values sufficient to achieve the required Collateral Value.         2.  “Collateral Value”. means the percentage set forth below for each type of Investment property held in the Securities Account at the time of computation;               (a)  100% of the face amount of cash and cash equivalents;               (b)  90% of the market value of obligations of the United States of America, but not to exceed the face amount;               (c)  90% of the market fair of commercial paper rated at least A1 by a nationally recognized rating agency, but not to exceed the face amount;               (d)  85% of the market value of corporate and municipal bonds (excluding convertible bonds) rated at least AA by a nationally recognized rating agency, but not to exceed the face amount;               (e)  85% of the market value of “money market” mutual funds; with market value, in all instances, determined by Bank in its sole discretion, and excluding from such computation all WF Securities and Common Trust Funds.         3.  Exclusion from Collateral. Notwithstanding anything herein to the contrary, the terms “Collateral” and “Proceeds” do not include, and Bank disclaims a security interest in all WF Securities and Common Trust Funds now or hereafter maintained in the Securities Account. 1 --------------------------------------------------------------------------------         4.  “Common Trust Funds” means common trust funds as described in 12 CFR 9.18 and includes, without limitation, common trust funds maintained by Bank for the exclusive use of its fiduciary clients.         5.  “WF Securities” means stock, securities or obligations of Wells Fargo & Company or of any affiliate thereof (as the term affiliate is defined in Section 23A of the Federal Reserve Act (12 USC 371(c), as amended from time to time).         6.  Limitation on Indebtedness. Notwithstanding anything in this Agreement to the contrary, the Indebtedness secured hereby is limited to all obligations of Debtor arising, under or in connection with that certain Term Note executed by Debtor and payable to the order of Bank, dated as of October 25, 2000, in the original principal amount of $28,500,000.00, and all extensions, renewals or modifications thereof, and restatements or substitutions therefore.              IN WITNESS WHEREOF, this Addendum has been executed as of the same date as the Agreement.      PLX TECHNOLOGY, INC   By:   /s/ Michael J. Salameh      --------------------------------------------------------------------------------      Michael J. Salameh President      WELLS FARGO BANK,     NATIONAL ASSOCIATION   By:   /s/ Sherrill Swan      --------------------------------------------------------------------------------      Sherrill Swan Vice President 2 -------------------------------------------------------------------------------- SECURITIES ACCOUNT CONTROL AGREEMENT (Bank Intermediary)              THIS SECURITIES ACCOUNT CONTROL AGREEMENT (this “Agreement”) is entered into as of October 25, 2000, by and among PLX TECHNOLOGY, INC. (“Customer”), WELLS FARGO BANK, NATIONAL ASSOCIATION, acting through its Investment Group (“Intermediary”), and WELLS FARGO BANK. NATIONAL ASSOCIATION, acting through its Peninsula Regional Commercial Banking Office (“Secured Party”). RECITALS         A.  Customer maintains that certain Wells Capital Investment Management Account No.000758 (the “Securities Account”) with Intermediary pursuant to an agreement between Intermediary and Customer dated as of                    , and governed by the laws of the State of Ca1ifornia (the “Account Agreement”). and Customer has granted to Secured Party a security interest in the Securities Account and all financia1 assets and other property now or at any time hereafter held in the Securities Account.         B.  Secured Party, Customer and Intermediary have agreed to enter into this Agreement to perfect Secured Party’s security interests in the Collateral, as defined below.              NOW, THEREFORE, in consideration of their mutual covenants and promises, the parties agree as follows:               1.  DEFINITIONS. As used herein;                      (a)  the term “Collateral” shall mean: (i) the Securities Account; (ii) all financial assets credited to the Securities Account; (iii) all security entitlements with respect to the financial assets credited to the Securities Account; (iv) any and all other investment property or assets maintained or recorded in the Securities Account; and (v) all replacements or substitutions for, and proceeds of the sale or other disposition of, any of the foregoing, including without limitation, cash proceeds; and                      (b)  the terms “investment property ,” “entitlement order ,” “ financial asset” and “security entitlement” shall have the respective meanings set forth in the California Uniform Commercial Code. The parties hereby expressly agree that all property, including without limitation, cash, certificates of deposit and mutual funds, at any time held in the Securities Account is to be treated as a “financial asset.”               2.  AGREEMENT FOR CONTROL. Intermediary is authorized by Customer and agrees to comply with all entitlement orders originated by Secured Par1y with respect to the Securities Account, and all other requests or instructions from Secured Party regarding disposition and/or delivery of the Collateral, without further consent or direction from Customer or any other party.               3.  CUSTOMER’S RIGHTS WITH RESPECT TO THE COLLATERAL.                      (a)  Until Intermediary is notified otherwise by Secured Party: (i) Customer, or any party authorized by Customer to act with respect to the Securities Account. may give trading instructions to Intermediary with respect to Collateral in the Securities Account; (ii) Intermediary may distribute to Customer or any other party in accordance with Customer’s directions that por1ion of the Collateral which consists of interest and/or cash dividends earned on financial assets maintained in the Securities Account: and (iii) in addition to the distributions described in clause (ii) Intermediary may distribute to Customer or any other party in accordance with Customer’s directions any Collateral so long as the Collateral Value (as defined in an Addendum to Security Agreement: Securities Account of even date herewith, as amended or replaced from time to time a copy of which is attached hereto) is not less than the amount required pursuant to said Addendum. 1 --------------------------------------------------------------------------------                      (b)  Without Secured Party’s prior written consent, except to the extent permitted by Section 3(a) hereof: (i) neither Customer nor any party other than Secured Party may withdraw any Collateral from the Securities Account: and (ii) Intermediary will not comply with any entitlement order or request to withdraw any Collateral from the Securities Account given by any party other than Secured Party.                      (c)  Upon receipt of either written or oral notice from Secured Party: (i) Intermediary shall promptly cease complying with entitlement orders and other instructions concerning the Collateral, including the Securities Account, from all parties other than Secured Party: and (ii) Intermediary shell not make any further distributions of any Collateral to any party other than Secured Party, nor permit any further voluntary changes in the financial assets.               4.  INTERMEDIARY’S ACKNOWLEDGMENTS. Intermediary acknowledges that:                      (a)  The Securities Account is maintained with Intermediary solely in Customer’s name.                      (b)  Intermediary has no knowledge of any claim to, security interest in or lien upon any of the Collateral, except: (i) the security interests in favor of Secured Party; and (ii) Intermediary’s liens securing fees and charges, or payment for open trade commitments, as described in Section 4(c) hereof.                      (c)  Any claim to, security interest in or lien upon any of the Collateral which Intermediary now has or at any time hereafter acquires shall be junior and subordinate to the security interests of Secured Party in the Collateral, except for Intermediary’s liens securing; (i) fees and charges owed by Customer with respect to the operation of the Securities Account; and {ii) payment owed to Intermediary for open trade commitments for purchases in and for the Securities Account.               5.  AGREEMENTS OF INTERMEDIARY AND CUSTOMER. Intermediary and Customer agree that:                      (a)  Intermediary shall flag its books, records and systems to reflect Secured Party’s security interests in the Collateral, and shall provide notice thereof to any party making inquiry as to Customer’s accounts with Intermediary to whom or which Intermediary is legally required or permitted to provide information.                      (b)  Intermediary shall send copies of all statements relating to the Securities Account simultaneously to Customer and Secured Party.                      (c)  Intermediary shall promptly notify Secured Party if any other party asserts any claim to, security interest in or lien upon any of the Collateral, and Intermediary shall not enter into any control, custodial or other similar agreement with any other party that would create or acknowledge the existence of any such other claim, security interest or lien.                      (d)  Without Secured Party’s prior written consent, Intermediary and Customer shall not amend, modify or terminate the Account Agreement, other than; (i) amendments to reflect ordinary and reasonable changes in Intermediary’s fees and charges for handling the Securities Account; and (ii) operational changes initiated by Intermediary as long as they do not alter any of Secured Party’s rights hereunder.               6.  MISCELLANEOUS.                      (a)  This Agreement shall not create any obligation or duty of Intermediary except as expressly set forth herein,                      (b)  In the event of any conflict between this Agreement and the Account Agreement or any other agreement between Intermediary and Customer, the terms of this Agreement shall control.                       2 --------------------------------------------------------------------------------                      (c)  All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing (unless otherwise specifically provided) and delivered to each party at the address or facsimile number set forth below its signature, or to such other address or facsimile number as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (i) if sent by hand delivery, upon delivery; (ii) if sent by facsimile upon receipt; and (iii) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid.                      (d)  This Agreement shall be binding upon and Inure to the benefit of the heirs, executors. administrators, legal representatives, successors and assigns of the parties. This Agreement may be amended or modified only in writing signed by all parties hereto                      (e)  This Agreement shall terminate upon Intermediary’s receipt of written notice from Secured Party expressly stating that Secured Party no longer claims any security interest in the Collateral.                      (f)  This Agreement shall be governed by and construed in accordance with the laws of the State of California.              IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.      WELLS FARGO BANK,     NATIONAL ASSOCIATION, acting through its Investment Group   By:        --------------------------------------------------------------------------------           WELLS FARGO BANK,     NATIONAL ASSOCIATION, acting through its Peninsula Regional Commercial Banking Office   By:   /s/ Sherrill Swan      --------------------------------------------------------------------------------      Sherrill Swan Vice President Address: P.O. Box 150 Palo Alto, CA 94301 Fax No: 650-328-0814        By:        --------------------------------------------------------------------------------      Title: Address: Fax No:      PLX TECHNOLOGY, INC.      /s/ Micheal J. Salameh      --------------------------------------------------------------------------------      Micheal J. Salameh Address: 390 Potrero Avenue Sunnyvale, CA 94086 Fax No: 3   -------------------------------------------------------------------------------- ADDENDUM TO SECURITY AGREEMENT: SECURITIES ACCOUNT              THIS ADDENDUM is attached to and made a part of that certain Security Agreement: Securities Account executed by PLX TECHNOLOGY. INC. (“ Debtor”) in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank.”), dated as of October 25,2000 (the “Agreement”).              The following provisions are hereby incorporated into the Agreement:         1.  Securities Account Activity. So long as no Event of Default exists, Debtor, or any party authorized by Debtor to act with respect Securities Account, (b) trade financial assets maintained in the Securities Account. and (c) in addition to the distributions described in clause (a), withdraw Collateral from the Securities Account free and clear of Bank’s security interest therein so long as the Collateral Value of the Collateral remaining in the Securities Account after each such withdrawal is not less than one hundred percent (100%) of the outstanding principal balance of the Indebtedness secured hereby. Without Bank’s prior written consent, except as permitted by the preceding sentence, .neither Debtor nor any party other than Bank may withdraw or receive any distribution of any Collateral from the Securities Account. The Collateral Value of the Securities Account shall at all times be equal to or greater than one hundred percent (100%) of the outstanding principal balance of the Indebtedness secured hereby. In the event that the Collateral Value, for any reason and at any time, is less than the required amount, Debtor shall promptly make a principal reduction on the Indebtedness or deposit additional assets of a nature satisfactory to Bank into the Securities Account, in either case in amounts or with values sufficient to achieve the required Collateral Value.         2.  “Collateral Value” means the percentage set forth below for each type of investment property held in the Securities Account at the time of computation:               (a)  100% of the face amount of cash and cash equivalents;               (b)  90% of the market value of obligations of the United States of America, but not to exceed the face amount;               (c)  90% of the market value of commercial paper rated at least A1 by a nationally recognized rating agency, but not to exceed the face amount;               (d)  85% of the market value of corporate and municipal bonds (excluding convertible bonds) rated at least AA by a nationally recognized rating agency. but not to exceed the face amount;               (e)  85% of the market value of “money market” mutual funds; with market value, in all instances, determined by Bank in its sole discretion, and excluding from such computation all WF Securities and Common Trust Funds.         3.  Exclusion from Collateral. Notwithstanding anything herein to the contrary, the terms “Collateral” and include, and Bank disclaims a security interest in all WF Securities and Common Trust Funds now or hereafter maintained in the Securities Account. 1   --------------------------------------------------------------------------------         4.  “Common Trust Funds” means common trust funds as described in 12 CFR 9.18 and includes, without limitation, common trust funds maintained by Bank for the exclusive use of its fiduciary clients.         5.  “WF Securities” means stock, securities or obligations of Wells Fargo & Company or of any affiliate thereof (as the term affiliate is defined in Section 23A of the Federal Reserve Act (12 USC 371 (c), as amended from time to time).         6.  Limitation on Indebtedness. Notwithstanding anything in this Agreement to the contrary, the Indebtedness secured hereby is limited to all obligations of Debtor arising under or in connection with that certain Term Note executed by Debtor and payable to the order of Bank, dated as of October 25, 2000, in the original principal amount of $28,500,000.00, and all extensions, renewals or modifications thereof, and restatements or substitutions therefor.              IN WITNESS WHEREOF, this Addendum has been executed as of the same date as the Agreement.      PLX TECHNOLOGY, INC.   By:   /s/ Michael J. Salameh      --------------------------------------------------------------------------------      Michael J. Salameh      WELLS F ARGO BANK     NATIONAL ASSOCIATION   By:   /s/ Sherrill Swan      --------------------------------------------------------------------------------   Title:   Sherrill Swan Vice President 2 -------------------------------------------------------------------------------- CREDIT AGREEMENT              THIS AGREEMENT is entered into as of October 25, 2000, by and between PLX TECHNOLOGY, INC., a Delaware corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”). RECITALS              Borrower has requested that Bank extend or continue credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein.              NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows: ARTICLE I CREDIT TERMS SECTION 1.1. TERM LOAN.         (a)  Term Loan. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make a loan to Borrower in the principal amount of Twenty Eight Million Five Hundred Thousand Dollars ($28,500,000.00) (“Term Loan”), the proceeds of which shall be used for the purchase of real estate. Borrower’s obligation to repay the Term Loan shall be evidenced by a promissory note substantially in the form of Exhibit A attached hereto (“Term Note”), all terms of which are incorporated herein by this reference. Bank’s commitment to grant the Term Loan shall terminate on November 25,2000.         (b)  Repayment. The principal amount of the Term Loan shall be repaid in accordance with the provisions of the Term Note.         (c)  Prepayment. Borrower may prepay principal on the Term Loan solely in accordance with the provisions of the Term Note. SECTION 1.2. INTEREST/FEES.         (a)  Interest. The outstanding principal balance of the Term Note shall bear interest at the rate of interest set forth in the Term Note; provided, however, that if and to the extent that the collateral for the Term Loan described in Section 1.4 below is replaced by a deposit account or other deposit product acceptable to and maintained at Bank (the “Deposit product”), the Term Note shall be modified in writing to provide for a rate of interest determined by Bank based on Bank’s matched maturity cost of funds and such other factors as Bank then considers appropriate.         (b)  Computation and Payment. Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the times and place set forth in each promissory note or other instrument required hereby. 1 --------------------------------------------------------------------------------              SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and existing and in good standing under the laws of the State of Delaware, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on Borrower.              SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory note, contract, instrument and other document required hereby or at any time hereafter delivered to Bank in connection herewith (collectively, the “Loan Documents”) have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same enforceable in accordance with their respective terms.              SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the Articles of Incorporation or By-laws, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound.              SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower’s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority , arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the date hereof.              SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of Borrower dated June 30,2000, a true copy of which has been delivered by Borrower to Bank prior to the date hereof, (a) is complete and correct and presents fairly the financial condition of Borrower, (b) discloses all liabilities of Borrower that are required to be reflected or reserved against under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) has been prepared in accordance with generally accepted accounting principles consistently applied. Since the date of such financial statement there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing.              SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year .              SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower’s obligations subject to this Agreement to any other obligation of Borrower.              SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to ;all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable raw.              SECTION 2.9. ERISA. Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or 3 -------------------------------------------------------------------------------- recodified from time to time (“ERISA”); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles.              SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.              SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower’s operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time. None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.              SECTION 2.12. SUBSIDIARIES. As of the date hereof, the entities listed in Schedule 2.12 hereto are the only entities in which Borrower owns or controls directly or indirectly 50% or more of the voting stock or other equity interests (if not a corporation). Each such entity, together with any others in which Borrower shall hereafter own or control directly or indirectly 50% or more of the voting stock or other equity interests (if not a corporation) is referred to collectively as “Subsidiaries” and individually as a “Subsidiary”. ARTICLE III CONDITIONS              SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank’s satisfaction of all of the following conditions:         (a)  Approval of Bank Counsel. All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank’s counsel.         (b)  Documentation. Bank shall have received, in form and Substance satisfactory to Bank, each of the following, duly executed:               (i)  This Agreement and each promissory note or other instrument required hereby.               (ii)  Security Agreement: Securities Account.               (iii)  Addendum to Security Agreement; Securities Account 4 --------------------------------------------------------------------------------               (iv)  Securities Account Control Agreement.               (v)  Corporate Resolution; Borrowing               (vi)  Certificate of Incumbency               (vii)  Loan Disbursement Order               (viii)  Such other documents as Bank may require under any other Section of this Agreement.         (c)  Financial Condition. There shall have been no material adverse change, as determined by Bank, in the consolidated financial condition or business of Borrower, nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower and Subsidiaries, taken as a whole.         (d)  Insurance. Borrower shall have delivered to Bank evidence of insurance coverage on all Borrowers property, in form, substance, amounts, covering risks and issued by companies satisfactory to Bank.              SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank’s satisfaction of each of the following conditions:         (a)  Compliance. The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date. no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have Occurred and be continuing or shall exist.         (b)  Documentation. Bank shall have received all additional documents which may be required in connection with such extension of credit. ARTICLE IV AFFIRMATIVE COVENANTS              Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, and shall, as applicable, cause each Subsidiary to, unless Bank otherwise consents in writing:              SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.              SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and 5 -------------------------------------------------------------------------------- records, to make copies of the same, and to inspect the properties of Borrower and Subsidiaries.              SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and detail satisfactory to Bank:         (a)  not later than 90 days after and as of the end of each fiscal year, a complete copy of Borrower’s 10K report filed with the Securities and Exchange Commission with respect to such fiscal year, together with Borrower’s proxy statement;         (b)  not later than 45 days after and as of the end of each fiscal quat1er, a Complete copy of Borrower’s 10Q report filed with the Securities and Exchange Commission with respect to such fiscal quarter;         (c)  from time to time such other information as Bank may reasonably request              SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and Comply with the provisions of all documents pursuant to which Borrower and each Subsidiary is organized and/or which govern their continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower, each Subsidiary and/or its business.              SECTION 4.5. INSURANCE—Maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Borrower and each Subsidiary, including but not limited to fire, extended coverage, public liability, flood, property damage and workers’ compensation, with all such insurance carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank’s request schedules setting forth all insurance then In effect.              SECTION 4.6. FACILITIES. Keep all properties useful or necessary to Borrower’s and each Subsidiary’s business in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained.              SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all indebtedness, obligations, assessments and taxes both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except such (a) as Borrower or any Subsidiary may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower or such Subsidiary has made provision, to Bank’s satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment.              SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any litigation pending or threatened against Borrower or any Subsidiary.              SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower’s consolidated financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein): 6 --------------------------------------------------------------------------------         (a)  Net income after taxes not less than $1.00 on an annual basis, determined as of each fiscal year end, with expenses, for purposes of determining compliance with this covenant, not to include amortization of (i) goodwill and other purchased intangible assets, (ii) non-cash In process research and development expense, and (iii) non-cash deferred compensation expense.              SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Bank in reasonable Detail of: (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; (b) any change in the name or the organizational structure of Borrower or any Subsidiary ; (C) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Borrower or any Subsidiary is required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower’s or any Subsidiary’ s property . ARTICLE V NEGATIVE COVENANTS              Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment In full of all obligations of Borrower subject hereto, Borrower will not, and will not cause or permit any Subsidiary to, without Bank’s prior written consent:              SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof.              SECTION 5.2. MERGER, TRANSFER OF ASSETS. Merge into or with any other entity unless (i) Borrower or a Subsidiary is the surviving entity , (ii) the boards of directors of all involved entities have approved the transaction, and (iii) Borrower is in compliance with all terms and conditions of this Agreement following any such merger, provided, however, that Borrower shall not merge into a Subsidiary unless Borrower is the surviving entity; make any substantial change in the nature of Borrower’s or any Subsidiary’s business as conducted as of the date hereof; or sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower’s or any Subsidiary’s assets except in the ordinary course of its business.              SECTION 5.3. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest or lien (collectively, “Lien”) in or upon all or any portion of Borrower’s or any Subsidiary’s assets now owned or hereafter acquired, except any of the following:         (a)  any Lien created under any Loan Document;         (b)  Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 4. 7: Provided, that no notice of lien has been filed or recorded with respect thereto; 7 --------------------------------------------------------------------------------         (c)  suppliers’, carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other similar Liens arising in the ordinary course of business which are not delinquent for a period of more than thirty days or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;         (d)  Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation;         (e)  Liens on the property securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the ordinary course of business;         (f)  Liens consisting of judgment or judicial attachment liens; provided, that the enforcement of such Liens is effectively stayed and all such liens in the aggregate at any time outstanding for Borrower and all Subsidiaries do not exceed $2,000,000.00;         (g)  leases, subleases, easements, rights-of-way, encroachments and other survey defects, restrictions and other similar encumbrances incurred in the ordinary course of business which do not impose material financial obligations on the Borrower or any Subsidiary, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of Borrower’s or such Subsidiary’s business;         (h)  purchase money security interests on equipment acquired or held by Borrower or any Subsidiary securing indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such equipment; provided, that (i) any such Lien attaches to such equipment concurrently with or within 20 days after the acquisition thereof, (ii) such Lien attaches solely to the equipment so acquired in such transaction, and (iii) the principal amount of the debt secured thereby does not exceed the cost of such equipment;         (i)  Liens securing obligations in respect of capital leases on assets subject to such leases;         (j)  Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution provided, that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by Borrower or any Subsidiary in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by Borrower to provide collateral to the depository institution;         (k)  Liens assumed in connection with a business acquisition or merger; provided, that, such Lien was created prior to such acquisition or merger (and not in contemplation thereof) and if any such Lien is of a type not permitted under the other provisions of this Section 5.3, such Lien is satisfied and terminated within 30 days after such acquisition or merger; and 8 --------------------------------------------------------------------------------         (l) any Lien existing on property of Borrower or any Subsidiary as of the date hereof and set forth on Schedule 5.3 hereto; provided, that no such Lien shall be amended to cover additional property and no such Lien shall be amended to cover additional Indebtedness. ARTICLE VI EVENTS OF DEFAULT              SECTION 6.1. The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:         (a)  Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents.         (b)  Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.         (c)  Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those referred to in subsections (a) and (b) above), and with respect to any such default which by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence.         (d)  Any default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract or instrument (other than any of the Loan Documents) pursuant to which Borrower or any Subsidiary has incurred any debt or other liability to any person or entity, including Bank, and, if the debt or other liability is owed to a person or entity other than Bank, the amount thereof exceeds $2,000,000.00 individually or in the aggregate, and the default (i) consists of the non-payment of money when due, or is, under the applicable documentation, of a nature or type which permits the holder of such debt or liability to accelerate the same.         (e)  The filing of a notice Of judgment lien against Borrower or any Subsidiary; or the recording of any abstract of judgment against Borrower or any Subsidiary in any county in which Borrower or such Subsidiary has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process against the assets of Borrower or any Subsidiary; or the entry of a judgment against Borrower or any Subsidiary; provided, however, that the occurrence or existence of Liens permitted under and within the limitations set forth in Section 5.3(f) shall not constitute an Event of Default hereunder.         (f)  Borrower or any Subsidiary shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fall to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower or any Subsidiary shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time (“Bankruptcy Code”), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal 9 -------------------------------------------------------------------------------- law relating to bankruptcy .reorganization or other relief for debtors is filed or commenced against Borrower or any Subsidiary , or Borrower or any Subsidiary shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower or any Subsidiary shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.         (g)  There shall exist or occur any event or condition which Bank in good faith and reasonably believes impairs, or is substantially likely to impair, the prospect of payment by Borrower of its obligations under any of the Loan Documents, provided that Bank shall provide written notice to Borrower of the occurrence or existence such event or condition and Borrower shall have 60 days following receipt of such notice in which to cause such event or condition to be abated to Bank’s reasonable satisfaction.         (h)  The dissolution or liquidation of Borrower; or Borrower, or any of its directors, or stockholders holding in excess of 10% of the outstanding common stock in Borrower, shall take action seeking to effect the dissolution or liquidation of Borrower.         (i)  Any change in ownership during the term of this Agreement of an aggregate of fifty percent (50%) or more of the common stock of Borrower in a single or in a series of related transactions.              SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Bank’s option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by each Borrower; (b) the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity. ARTICLE VII MISCELLANEOUS              SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof-or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.              SECTION 7.2. NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address: 10 -------------------------------------------------------------------------------- BORROWER:    PLX TECHNOLOGY, INC    390 POTRERO A VENUE    SUNNYVALE, CA 94086   BANK:    WELLS FARGO BANK, NATIONAL ASSOCIATION    PENINSULA RCBO    400 HAMILTON AVE,    PALO ALTO, CA 94301 or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class al’)d postage prepaid; and (c) if sent by telecopy, upon receipt.              SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house counsel), expended or incurred by Bank in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents, Bank’s continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement of Bank’s rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellat e level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.              SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interest hereunder without Bank’s prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank’s rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, [any guarantor hereunder or the business of such guarantor,] or any collateral required hereunder.              SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be-amended or modified only in writing signed by each party hereto.              SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party. 11 --------------------------------------------------------------------------------              SECTION 7.7. TIME. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.              SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.              SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.              SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California.              SECTION 7.11. ARBITRATION.         (a)  Arbitration. Upon the demand of any party, any Dispute shall be resolved by binding arbitration in accordance with the terms of this Agreement. A “ Dispute” shall mean any action, dispute, claim or controversy of any kind, whether in contract or tort, statutory or common law, legal or equitable, now existing or hereafter arising under or in connection with, or in any way pertaining to, any of the Loan Documents, or any past, present or future extensions of credit and other activities, transactions or obligations of any kind related directly or indirectly to any of the Loan Documents, including without limitation, any of the foregoing arising in connection with the exercise of any self help, ancillary or other remedies pursuant to any of the Loan Documents. Any party may by summary proceedings bring an action in court to compel arbitration of a Dispute. Any party who fails or refuses to submit to arbitrat ion following a lawful demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute.         (b)  Governing Rules. Arbitration proceedings shall be administered by the American Arbitration Association (“AAA”) or such other administrator as the parties shall mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be resolved in accordance with the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Loan Documents. The arbitration Shall be conducted at a location in California selected by the AAA or other administrator. If there is any inconsistency between the terms hereof and any such rules, the terms and procedures set forth herein shall control. All statutes of limitation applicable to any Dispute shall apply to any arbitration proceeding. All discovery activities shall be expressly limited to matters directly relevant to the Dispute being arbitrated. Judg ment upon any award rendered in an arbitration may be entered in any court having jurisdiction; provided however, that nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.         (c)  No Waiver; Provisional Remedies, Self-Help and Foreclosure. No provision hereof shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies, including without limitation injunctive relief, sequestration, attachment, garnishment or the appointment of a receiver, from a court of competent jurisdiction before, after or during the 12 -------------------------------------------------------------------------------- pendency of any arbitration or other proceeding. The exercise of any such remedy shall not waive the right of any party to compel arbitration or reference hereunder.         (d)  Arbitrator Qualifications and Powers; Awards. Arbitrators must be active members of the California State Bar or retired judges of the state or federal judiciary of California, with expertise in the substantive laws applicable to the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary rulings in response to motions filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance with the substantive law of the State of California, (ii) may grant any remedy or relief that a court of the State of California could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award, and (iii) shall have the power to award recovery of all costs and fees, to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Any Dispute in which the amount in controversy is $5,000,000 or less shall be decided by a single arbitrator who shall not render an award of greater than $5,000,000 (Including damages, costs, fees and expenses). By submission to a single arbitrator, each party expressly waives any right or claim to recover more than $5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in ell hearings and deliberations.         (e)  Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary , no Dispute shall be submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such Dispute is not submitted to arbitration, the Dispute shall be referred to a referee In accordance with California Code of Civil Procedure Section 638 et seq., an d this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.         (f)  Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the Dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the parties potentially applies to a Dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the Dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties. 13 --------------------------------------------------------------------------------              IN WITNESS WHEREOF- the parties hereto have caused this Agreement to be executed as of the day and year first written above.      PLX TECHNOLOGY, INC.   By:   /s/ Michael J. Salameh      --------------------------------------------------------------------------------      Michael J. Salameh President      WELLS FARGO BANK,     NATIONAL ASSOCIATION   By:   /s/ Sherrill Swan      --------------------------------------------------------------------------------      Sherrill Swan Vice President 14 -------------------------------------------------------------------------------- SCHEDULE 2.12 Subsidiaries PLX Technology LTD, a U.K. Corporation Sebring networks, Inc., a Delaware corporation 15 -------------------------------------------------------------------------------- EXHIBIT A PROMISSORY NOTE $28,500,000.00 Palo Alto, California October 25, 2000              FOR VALUE RECEIVED, the undersigned PLX TECHNOLOGY, INC. (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at 400 Hamilton Avenue, Palo Alto, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Twenty Eight Million Five Hundred Thousand Dollars ($28,500,000.00), with interest thereon as set forth herein. DEFINITIONS:              As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:         (a)  “Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close.         (b)  “Fixed Rate Term” means a period of 1, 2, 3,6, 9 or 12 months, as designated by Borrower,] during which the entire outstanding principal balance of this Note bears interest determined in relation to LIBOR, with the understanding that (i) the initial Fixed Rate Term shall commence on the date this Note is disbursed, (ii) each successive Fixed Rate Term shall commence automatically, and without notice to or consent from Borrower, on the first Business Day following the date on which the immediately preceding Fixed Rate Term matures, and (iii) if, on the first Business Day of the last Fixed Rate Term applicable hereto the remaining term of this Note is less than [one (1) month, said Fixed Rate Term shall be in effect only until the scheduled maturity date hereof. If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.         (c)  “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1 %) and determined pursuant to the following formula: LIBOR = Base LlBOR -------------------------------------------------------------------------------- 100% - LIBOR Reserve Percentage                (i)  “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar . deposits on the London Inter-Bank Market. 1 --------------------------------------------------------------------------------               (ii)  “LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for .’Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term.         (d)  “Prime Rate” means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank’s base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate. INTEREST:         (a)  Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a fixed rate per annum determined by Bank to be forty-five hundredths of one percent (0.45%%) above LIBOR in effect on the first day of each Fixed Rate Term. With respect to each Fixed Rate Term hereunder, Bank is hereby authorized to note the date and interest rate applicable thereto and any payments made thereon on Bank’s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted. At the time this Note is disbursed and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying the length of the applicable Fixed Rate Term. Any such notice may be given by telephone so long as (i) if requested by Bank, Borrower pr ovides to Bank written confirmation thereof not later than three (3} Business Days after such notice is given, and (ii} such notice is given to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at a later time during any Business Day if Bank, at ifs sole option but without obligation to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower. If Borrower does not immediately accept a fixed rate when quoted by Bank, the quoted rate shall expire and any subsequent LIBOR request from Borrower shall be subject to a redetermination by Bank of the applicable fixed rate. If Bank has not received such notice at the time principal is disbursed hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have selected the shortest permitted Fixed Rate Term.         (b)  Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i} withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LlBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of the foregoing are attribut able to any LlBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.         (c)  Payment of Interest. Interest accrued on this Note shall be payable on the 6th day of each month, commencing December 6, 2000. 2 --------------------------------------------------------------------------------         (d)  Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note. REPAYMENT AND PREPAYMENT:         (a)  Repayment. The outstanding principal balance of this Note shall be due and payable in full on November 6, 2005.         (b)  Application of Payments. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.         (c)  Prepayment. Borrower may prepay principal on this Note at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance hereof. In consideration of Bank providing this prepayment option to Borrower, or if this Note shall become due and payable at any time prior to the last day of any Fixed Rate Term by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month:               (i)  Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.               (ii)  Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LlBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.               (iii)  If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above. Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Each Borrower, therefore, agrees to pay the above- described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.00%) above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed). EVENTS OF DEFAULT:              This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of October 25, 2000, as amended from 3 -------------------------------------------------------------------------------- time to time (the “Credit Agreement”). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an “Event of Default” under this Note. MISCELLANEOUS:         (a)  Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower. Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limit ation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (Including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity.         (b)  Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.         (c)  Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California.              IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.      PLX TECHNOLOGY, INC.   By:   /s/ Micheal J. Salameh      --------------------------------------------------------------------------------      Michael J. Salameh President 4

QuickLinks -- Click here to rapidly navigate through this document HEIGHTS CAPITAL MANAGEMENT, INC. 425 California Street, Suite 110 San Francisco, CA 94104     November 30, 2000 Mr. Alan Koslow Network Commerce Inc. 411 First Avenue South, Suite 200 North Seattle, WA 98104     Re: Registration Statement and Conversion Price Dear Alan:     This letter will confirm our agreement that:     1.  Network Commerce Inc. ("NWKC") has agreed to file, within 5 days of the date hereof, a Section 462(b) Registration Statement for the purpose of increasing the number of shares of NWKC common stock previously registered by NWKC on November 22, 2000, on Form S-3 for public resale by Capital Ventures International ("CVI") by 20%, from 11,250,000 shares to 13,500,000 shares. Of the 13,500,000 shares so registered, 12,000,000 shares represent the number of shares issuable to CVI upon conversion of the $20 million principal amount of Convertible Notes, and all accrued interest thereon from the date of issuance through November 22, 2000, purchased by CVI from NWKC pursuant to the Securities Purchase Agreement dated September 28, 2000.     2.  NWKC shall have no further obligation pursuant to Section 2(c) of the Registration Rights Agreement to register additional shares of its common stock for resale by CVI above the 13,500,000 shares referenced in Paragraph 1 above, unless an adjustment to the Conversion Price of the Notes shall occur pursuant to Article VII of the Notes, and shall not be liable to CVI for penalties under Section 2(c) of the Registration Rights Agreement resulting solely from its failure to register 100% of the Registrable Securities (as such term is defined in the Registration Rights Agreement); provided, however, that all other obligations, set froth in the Securities Purchase Agreement, the Registration Rights Agreement, the Notes and the Warrants, of NWKC with respect to the Registration Statement shall remain in full force and effect.     3.  The Conversion Price of the $20,000,000 principal amount of Convertible Notes purchased by CVI from NWKC pursuant to the Securities Purchase Agreement is reduced from $7.50 to $1.682, subject to further adjustment as provided in the Notes. 5 --------------------------------------------------------------------------------     Please indicate your consent and agreement with the foregoing by executing the enclosed copy of this letter where indicated below and returning the same to my attention.         CAPITAL VENTURES INTERNATIONAL                   BY: HEIGHTS CAPITAL MANAGEMENT, INC., ITS AUTHORIZED AGENT                   By:       /s/ ANDREW FROST    -------------------------------------------------------------------------------- Name: Andrew Frost Title: President, Heights Capital Management, Inc.   CONSENTED AND AGREED THIS 30 DAY OF NOVEMBER, 2000:                   NETWORK COMMERCE INC.                   By:       /s/ ALAN KOSLOW    -------------------------------------------------------------------------------- Name: Alan Koslow Title: Chief Financial Officer                 6 -------------------------------------------------------------------------------- QUICKLINKS HEIGHTS CAPITAL MANAGEMENT, INC. 425 California Street, Suite 110 San Francisco, CA 94104

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.02 FIRST AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT PARTIES Ceridian Corporation (A Delaware Corporation) 8100 34TH Avenue South Minneapolis, Minnesota 55425-1640 and Ronald L. Turner ("Executive") Date: May 31, 2000 RECITALS A.Ceridian and Executive are parties to an Executive Employment Agreement dated October 1, 1999 (the "Agreement"). B.Ceridian and Executive desire to amend the Agreement in the manner described in this First Amendment to Executive Employment Agreement (the "Amendment") for the purpose of providing for a supplemental retirement benefit. C.Except as expressly amended by this Amendment, the parties intend that the Agreement remain in effect.     NOW, THEREFORE, in consideration of Executive's continued employment for the term of the Agreement and the parties' intent to be bound by the terms contained in the Agreement as amended by this Amendment, the parties agree to amend the Agreement in the manner described below, effective as of the date of this Amendment. 1.A new Section 3.04 is added to the Agreement which reads as follows:     3.04  Supplemental Retirement Benefit.       (a)  Entitlement.       (1)  Termination of Employment.  Subject to Sections 3.04(a)(2), 3.04(a)(3) and 3.04(a)(4), Executive shall be entitled to a supplemental retirement benefit pursuant to this Section 3.04 following his termination of employment with Ceridian at any time for any reason.     (2)  Forfeiture.  Executive or his surviving spouse, as the case may be, shall not be entitled to receive or retain a supplemental retirement benefit pursuant to this Section 3.04 if (A) Executive's employment with Ceridian terminates or is terminated for any reason prior to his attainment of age 62 and (B) Executive breached or breaches any of his obligations arising under Article VI of this Agreement. If, after Executive or his surviving spouse, as the case may be, has received a benefit pursuant to this Section 3.04, Ceridian determines that Executive is not entitled to the benefit, Executive or his surviving spouse, as the case may be, shall promptly repay to Ceridian the benefit payment previously received pursuant to this Section 3.04 together with interest on such payment for the period beginning on the date on which it was paid to Executive or his surviving -------------------------------------------------------------------------------- spouse, as the case may be, and ending on the date on which it is repaid to Ceridian at the prime rate of interest (or such comparable index as may be adopted) established from time to time by the Bank of America National Trust and Savings Association, New York, New York, or its successor in interest, as in effect from time to time during the period in question.     (3)  Death.  Except as provided in Section 3.04(d), no benefit shall be paid pursuant to this Section 3.04 to Executive or any other person if Executive's employment with Ceridian terminates because of Executive's death or if Executive dies after his termination of employment with Ceridian but before his supplemental retirement benefit pursuant to this Section 3.04 is paid to Executive.     (4)  Other Conditions.  As a condition to receiving any benefit pursuant to this Section 3.04, Executive or his surviving spouse, as the case may be, agrees to provide to Ceridian on a timely basis any such information as Ceridian may reasonably request to determine the entitlement of Executive or his surviving spouse, as the case may be, to a benefit pursuant to this Section 3.04 or the amount or timing of the benefit payment or to resolve any other issue or assist Ceridian in making any determination regarding the benefit.     (b)  Commencement and Form.  The benefit pursuant to this Section 3.04 shall be paid on or as soon as administratively practicable after the Determination Date in the form of a lump sum cash payment.     (c)  Amount.       (1)  Determination Date on or After Age 60.  If the Determination Date is on or after the date on which Executive attains age 60, the amount of Executive's benefit pursuant to this Section 3.04 shall be a lump sum amount that is actuarially equivalent to a monthly benefit, paid in the Normal Form and commencing as of the Determination Date, equal to one-twelfth of the excess of: (A)the sum of (i)the product of Executive's Final Average Pay multiplied by his Years of Service through the calendar year during which he attains age 62 (or, if earlier, through the date on which he terminates employment) multiplied by .025 plus (ii)the product of Executive's Final Average Pay multiplied by his Years of Service, if any, following the calendar year during which he attains age 62 multiplied by .0167; over (B)the Offset Amount.     (2)  Determination Date Before Age 60.  If the Determination Date is before the date on which Executive attains age 60, the amount of Executive's benefit pursuant to this Section 3.04 shall be a lump sum amount that is actuarially equivalent to a monthly benefit, paid in the Normal Form and commencing as of the Determination Date, equal to one-twelfth of the excess of: (A)the product of Executive's Final Average Pay multiplied by his Years of Service multiplied by .025, reduced by one-fourth of one percent for each month by which the Determination Date precedes the first day of the month coinciding with or next following the date on which Executive attains age 60; over (B)the Offset Amount. 2 --------------------------------------------------------------------------------     (3)  Actuarial Equivalence.  For the purpose of this Section 3.04(c), actuarial equivalence for a given Determination Date shall be based on the annual interest rate on 30-year Treasury securities for the month of November of the calendar year immediately preceding the calendar year that includes the Determination Date, as determined in accordance with published guidance from the Internal Revenue Service pursuant to Section 417(e)(3) of the Code (as defined in Section 7.1(e)) and mortality rates per the "applicable mortality table" published in Revenue Ruling 95-6 or other applicable guidance from the Internal Revenue Service pursuant to Section 417(e)(3) of the Code in effect as of the Determination Date.     (d)  Death Benefits.       (1)  Death Before Determination Date.  If Executive dies before the Determination Date, his surviving spouse, if any, shall, subject to Sections 3.04(a)(2) and 3.04(a)(4), be entitled to a surviving spouse benefit. The benefit shall be paid to Executive's surviving spouse on or as soon as administratively practicable after the Determination Date in the form of a lump sum cash payment. The amount of the surviving spouse benefit pursuant to this Section 3.04(d)(1) shall be equal to fifty percent (50%) of the amount of the supplemental retirement benefit that would have been paid to Executive pursuant to this Section 3.04 had he terminated employment on the date of his death (or, if earlier, on the actual date on which he terminated employment) and lived until he received his supplemental retirement benefit. If Executive's surviving spouse dies after becoming entitled to a surviving spouse benefit pursuant to this Section 3.04(d)(1) but before the benefit is paid to the surviving spouse, the benefit shall be paid to the surviving spouse's estate at the same time the benefit would have been paid to the surviving spouse had she lived.     (2)  Death on or After Determination Date.  If Executive dies on or after the Determination Date but before payment of his supplemental retirement benefit pursuant to this Section 3.04, the benefit that would have been paid to Executive had he lived shall, subject to Sections 3.04(a)(2) and 3.04(a)(4), be paid to Executive's estate at the same time the benefit would have been paid to Executive had he lived.     (e)  Nonassignability.  The benefit pursuant to this Section 3.04 and the right to receive a future benefit pursuant to this Section 3.04 may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered or subjected to any charge or legal process.     (f)  Rabbi Trust.  Ceridian may, but is not required to, provide for payment of the benefit pursuant to this Section 3.04 through a trust. The trust must (1) be a grantor trust with respect to which Ceridian is treated as the grantor, (2) not cause benefits under this Section 3.04 to be funded for federal income tax purposes or for purposes of the Employee Retirement Income Security Act of 1974, as amended, and (3) provide that trust assets will, upon Ceridian's insolvency, be used to satisfy the claims of Ceridian's general creditors. If Ceridian elects to provide benefits through such a trust, neither Executive nor his surviving spouse shall have any interest in the assets of the trust.     (g)  Nature of Interest.  Nothing contained in this Section 3.04 is to be construed as providing for assets to be held for the benefit of Executive or his surviving spouse. If Executive or his surviving spouse acquires a right to receive benefit payments pursuant to this Section 3.04, that right is no greater than the right of any unsecured general creditor of Ceridian.     (h)  Determinations.  Ceridian shall make all determinations as to entitlement, amount and timing of any benefit payment pursuant to this Section 3.04. Ceridian shall have discretionary power and authority to interpret, construe, apply, enforce and otherwise administer the terms of this Section 3.04 and any reasonable determination made by Ceridian in good faith shall be binding and conclusive on Executive and his surviving spouse. Any determination by Ceridian denying a claim by Executive or his surviving spouse shall be stated in writing and shall set forth the specific reason for the denial. Ceridian shall afford a reasonable opportunity to the claimant for a full and fair review of the determination 3 -------------------------------------------------------------------------------- denying the claim. A claimant must exhaust the procedure described in this Section 3.04(h) before pursuing the claim in any other proceeding.     (i)  Special Definitions.  The definitions set forth in this Section 3.04(i) apply in construing this Section 3.04 unless the context otherwise indicates. Other terms used in this Section 3.04 have the meanings ascribed to them in Article I of this Agreement. In addition, the general provisions of Article IX of this Agreement apply to this Section 3.04 unless the context otherwise indicates. (1)"Ceridian" means, for purposes of Sections 3.04(a)(4), 3.04(f), 3.04(g) and 3.04(h), Ceridian Corporation and any successor in interest by way of consolidation, operation of law, merger or otherwise, but not any Subsidiary. (2)"Determination Date" means the first day of the fourth calendar month following Executive's termination of employment with Ceridian. (3)"Final Average Pay" means Executive's "final average pay" as defined in the Retirement Plan but determined by disregarding any part of the definition of final average pay in the Retirement Plan that is included for the purpose of complying with Section 401(a)(17) of the Code (within the meaning of Section 7.01(e)). If the Retirement Plan is terminated effective as of a date that is before the date on which Executive terminates employment with Ceridian, the previous sentence shall be applied after the effective date of the termination of the Retirement Plan based on the definition of final average pay in effect under the Retirement Plan on the effective date of the termination of the Retirement Plan as if the Retirement Plan had continued in effect. (4)"Normal Form" means monthly payments to Executive for his life with the last payment made for the month during which Executive dies and with no death benefits payable to any person. (5)"Offset Amount" means the annual benefit to which Executive would be entitled under the "offset plans" if his benefit under the offset plans commenced as of the Determination Date and was paid in the Normal Form, based on the terms of the offset plans in effect and applicable to Executive on the Determination Date or, if earlier, as of the effective date of the termination of an offset plan. If the Determination Date is before the earliest date on which Executive's benefit could commence under an offset plan, the Offset Amount with respect to that offset plan shall be determined by calculating the Offset Amount as of the earliest date on which Executive's benefit could commence under the offset plan and then reducing that benefit by one fourth of one percent for each month by which the offset date precedes the earliest date on which Executive's benefit could commence under the offset plan. The Offset Amount shall be determined without regard to the actual timing of commencement and form of Executive's benefit pursuant to the offset plans. For the purpose of this Section 3.04(i)(5), the offset plans are the Retirement Plan, the Ceridian Corporation Benefit Equalization Plan and any defined benefit pension plan maintained by any previous employer of Executive which was or is operated by such previous employer as a qualified plan pursuant to Section 401(a) of the Code (within the meaning of Section 7.01(e)), or any successor to any such plans. (6)"Retirement Plan" means the Ceridian Corporation Retirement Plan as from time to time amended. (7)"Years of Service" means (A) each calendar year from and including 1993 through and including 2000 and (B) each calendar year after 2000 and before 2012 during any part of which Executive is an employee of Ceridian (as classified by Ceridian at the time without 4 -------------------------------------------------------------------------------- regard to any subsequent retroactive reclassification). Executive shall not be credited with any Years of Service for any period of employment with Ceridian after 2011. 2.Section 7.03(b) of the Agreement is amended to read as follows: (b)In addition to the payments pursuant to Section 7.03(a) hereof, in the event of a Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, Ceridian shall provide to Executive a pension supplement equivalent to the difference, if any, between: (i) the monthly benefits to which Executive would have been entitled under the defined benefit pension plan or plans in which Executive participates immediately prior to the Change of Control Termination which includes an additional three years of age and service; and (ii) the amount to which Executive is, in fact, entitled under such defined benefit pension plan or plans. Executive's supplemental retirement benefit pursuant to Section 3.04 shall not be considered a defined benefit pension plan in which Executive participates immediately prior to the Change of Control Termination for the purpose of this Section 7.03(b). 3.Section 7.03(c) of the Agreement is redesignated as Section 7.03(d) and a new Section 7.03(c) is added to the Agreement which reads as follows: (c)In addition to the payments pursuant to Section 7.03(a) and Section 7.03(b), in the event of a Change of Control Termination that occurred during the term of this Agreement, then, and without further action by the Board, Compensation Committee or otherwise, in determining Executive's supplemental retirement benefit pursuant to Section 3.04: (1)An additional three years of age and an additional three Years of Service shall be added to Executive's actual age and Years of Service (the additional Years of Service shall not be limited by the final sentence of Section 3.04 (i)(9)); and (2)the benefit shall not be reduced for commencement before age 60 pursuant to Section 3.04(c)(2), if applicable. 4.Section 7.03(d) of the Agreement, as redesignated pursuant to item 3 of this Amendment, is amended to read as follows: (c)Neither the payments made pursuant to Section 7.03(a), the pension supplement provided pursuant to Section 7.03(b) or the additional supplemental retirement benefits provided pursuant to Section 3.04 due to the adjustments pursuant to Section 7.03(c) nor any other compensation to be provided to Executive by Ceridian pursuant to this Agreement or any other agreement or Benefit Plan which may be considered Change of Control Compensation shall be subject to any limitation on Change of Control Compensation which may otherwise be expressed in any such agreement or Benefit Plan. 5 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, The parties have caused this Amendment to be duly executed and delivered as of the day and year first above written. EXECUTIVE   CERIDIAN CORPORATION   /s/ Ronald L. Turner       By:   /s/ Shirley J. Hughes --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Ronald L. Turner   Title: Sr. Vice President, Human Resources   Address:             --------------------------------------------------------------------------------       --------------------------------------------------------------------------------       --------------------------------------------------------------------------------       6 -------------------------------------------------------------------------------- QUICKLINKS FIRST AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT     THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of October 31, 2000, by and among Apex Inc., a Washington corporation ("Employer" or "Apex"), Avocent Corporation, a Delaware corporation, and Barry L. Harmon (the "Employee"). RECITALS     WHEREAS, Avocent Corporation and its affiliates including Apex and Cybex Computer Products Corporation ("Cybex") (Avocent Corporation and its affiliates are collectively referred to in this Agreement as "Avocent") are engaged in the business of designing, manufacturing, and selling stand-alone console/KVM switching systems, console/KVM remote access products, and integrated server cabinet solutions for the client/server computing market;     WHEREAS, Employee and Employer entered into that certain Employment and Noncompetition Agreement dated March 7, 2000 (the "Original Employment Agreement"); and     WHEREAS, on March 8, 2000, Apex, Cybex, and Avocent Corporation entered into an Agreement and Plan of Reorganization dated March 8, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, (i) Apex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Apex on July 1, 2000 (the "Apex Merger"), and upon the Apex Merger, Apex became a wholly-owned subsidiary of Avocent, and (ii) Cybex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Cybex (the "Cybex Merger") on July 1, 2000, and upon the Cybex Merger, Cybex also became a wholly-owned subsidiary of Avocent; and     WHEREAS, for and in consideration of an increase in base pay, certain incentive bonus eligibility and awards, and an award of stock options that would not otherwise be made to Employee, Employer, Employee, and Avocent now wish to amend and restate the Original Employment Agreement with this Amended and Restated Employment and Noncompetition Agreement. AGREEMENT     THE PARTIES HERETO AGREE AS FOLLOWS:     DUTIES.  During the term of this Agreement, the Employee agrees to be employed by Apex and to serve Avocent and Apex as their Senior Vice President of West Coast Operations. The Employee shall devote such of his business time, energy, and skill to the affairs of Avocent and Apex as shall be necessary to perform the duties of the Senior Vice President of West Coast Operations of Avocent and Apex. The Employee shall report to the President of Avocent, and to the Boards of Directors of Avocent and Apex, and at all times during the term of this Agreement, the Employee shall have powers and duties at least commensurate with his position as Senior Vice President of West Coast Operations. The Employee's principal place of business with respect to his services to Avocent and Apex shall be within the vicinity of the city of Redmond, Washington. The Employee shall function as the principal officer with responsibility for business activities in Avocent's Redmond, Washington facility, currently consisting of engineering, production, marketing, sales and after-sales support, administration, and finance. Employee shall assist Avocent in integrating the work of the departments and individuals in Redmond, within the context of a developing, worldwide business and merger integration strategy for Avocent. Employee shall also contribute to the development of a worldwide business strategy, with key managers and individuals located in Huntsville, Alabama, Shannon, Ireland, and Acton, Massachusetts. Employee's duties will also include a role in investor and press relations actives, including conference speaking engagements and one-on-one meetings with institutional investors. Coordination of these investor and press relations duties will be done with the CFO. --------------------------------------------------------------------------------     TERM OF EMPLOYMENT.       DEFINITIONS.  For purposes of this Agreement the following terms shall have the following meanings:     "TERMINATION FOR CAUSE" shall mean termination by the Employer of the Employee's employment by the Employer by reason of the Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the Employer or Avocent or by reason of the Employee's willful material breach of this Agreement which has resulted in material injury to the Employer or Avocent.     "TERMINATIONS OTHER THAN FOR CAUSE" shall mean termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than in a Termination for Cause) and shall include (i) any constructive termination of the Employee's employment by reason of material breach of this Agreement by the Employer or Avocent, such constructive termination to be effective upon thirty (30) days written notice from the Employee to the Employer of such constructive termination and (ii) any attempt to relocate outside of the vicinity of Redmond, Washington: (x) the Employee, (y) the Employee's duties and responsibilities, or (z) the Employer's office at which Employee is employed. Notwithstanding the foregoing, Employee agrees that a change in his duties and responsibilities shall not result in a constructive termination under this Section 2.1(b) unless such change results in a substantial diminution of Employee's duties and responsibilities.     "VOLUNTARY TERMINATION" shall mean termination by the Employee of the Employee's employment by the Employer other than (i) constructive termination as described in subsection 2.1(b), (ii) "Termination Upon a Change in Control" as described in Section 2.1(e), and (iii) termination by reason of the Employee's disability or death as described in Sections 2.5 and 2.6.     "TERMINATION UPON A CHANGE IN CONTROL" shall mean (i) a termination by the Employee of the Employee's employment with the Employer or services to Avocent within six (6) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement), or (ii) any termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than a Termination for Cause) within eighteen (18) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement).     "CHANGE IN CONTROL" shall mean any one of the following events:     Any person (other than Avocent) acquires beneficial ownership of Employer's, Apex's, or Avocent Corporation's securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of Employer's, Apex's, or Avocent Corporation's then outstanding stock. For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Employer's, Apex's, or Avocent Corporation's securities 2 -------------------------------------------------------------------------------- would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.     Within any twenty-four (24) month period, the individuals who were Directors of Avocent Corporation at the beginning of any such period, together with any other Directors first elected as directors of Avocent Corporation pursuant to nominations approved or ratified by at least two-thirds (2/3) of the Directors in office immediately prior to any such election, cease to constitute a majority of the Board of Directors of Avocent Corporation.     Avocent Corporation's stockholders approve:     any consolidation or merger of Avocent Corporation in which Avocent Corporation is not the continuing or surviving corporation or pursuant to which shares of Avocent Corporation common stock would be converted into cash, securities or other property, other than a merger or consolidation of Avocent Corporation in which the holders of Avocent Corporation's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Avocent Corporation. Notwithstanding subparagraphs (e)(iii)(1) and (e)(iii)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Avocent Corporation is owned, directly or indirectly, by a holding company, and the holders of Avocent Corporation's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     Apex's stockholders approve:     any consolidation or merger of Apex in which Apex is not the continuing or surviving corporation or pursuant to which shares of Apex common stock would be converted into cash, securities or other property, other than a merger or consolidation of Apex (including a merger of Apex into Avocent Corporation) in which the holders of Apex's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Apex. Notwithstanding subparagraphs (e)(iv)(1) and (e)(iv)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Apex is owned, directly or indirectly, by a holding company, and the holders of Apex's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     BASIC TERM.  The term of employment of the Employee by the Employer shall be for the period beginning immediately prior to the closing of the Apex Merger (as described in the Reorganization Agreement) on July 1, 2000, and ending on December 31, 2004, unless terminated earlier pursuant to this Section 2. At any time before December 31, 2004, the Employer and the Employee may by mutual written agreement extend the Employee's employment under the terms of this Agreement for such additional periods as they may agree. 3 --------------------------------------------------------------------------------     TERMINATION FOR CAUSE.  Termination For Cause may be effected by the Employer at any time during the term of this Agreement and shall be effected by thirty (30) days written notification to the Employee from the Boards of Directors of Employer and Avocent Corporation stating the reason for termination. Upon Termination For Cause, the Employee immediately shall be paid all accrued salary, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     TERMINATION OTHER THAN FOR CAUSE.  Notwithstanding anything else in this Agreement, the Employer may effect a Termination Other Than For Cause at any time upon giving thirty (30) days written notice to the Employee of such termination. Upon any Termination Other Than For Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.2, but no other compensation or reimbursement of any kind.     TERMINATION BY REASON OF DISABILITY.  If, during the term of this Agreement, the Employee, in the reasonable judgment of the Board of Directors of Avocent, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than six (6) consecutive months, the Employer shall have the right to terminate the Employee's employment hereunder by delivery of written notice to the Employee at any time after such six month period and payment to the Employee of all accrued salary, bonus compensation in an amount equal to the average annual bonus earned by the Employee as an employee of Avocent and its affiliates and predecessors in the two (2) years immediately preceding the date of termination, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of this Agreement, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     TERMINATION BY REASON OF DEATH.  In the event of the Employee's death during the term of this Agreement, the Employee's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Employer shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated), accrued 4 -------------------------------------------------------------------------------- vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     VOLUNTARY TERMINATION.  Notwithstanding anything else in this Agreement, the Employee may effect a Voluntary Termination at any time upon giving thirty (30) days written notice to the Employer of such termination. In the event of a Voluntary Termination, the Employer shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation.     TERMINATION UPON A CHANGE IN CONTROL.  In the event of a Termination Upon a Change in Control, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.1, but no other compensation or reimbursement of any kind. Employee acknowledges and agrees that the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger do not constitute, and shall not be construed retroactively or otherwise as constituting, a "Change in Control" as defined in Section 2.1(e) and that any future termination of Employee's employment with Employer will not constitute a "Termination Upon A Change in Control" under Section 2.1(d) or this Section 2.8 unless there is a Change in Control as defined in Section 2.1(e) of this Agreement after the date of this Agreement.     SALARY, BENEFITS AND BONUS COMPENSATION.       BASE SALARY.  Effective July 1, 2000, as payment for the services to be rendered by the Employee as provided in Section 1 and subject to the terms and conditions of Section 2, the Employer agrees to pay to the Employee a "Base Salary" at the rate of $245,000 per annum, payable in equal bi-weekly installments. The Base Salary for each calendar year (or proration thereof) beginning January 1, 2001 shall be determined by the Board of Directors of Avocent Corporation upon a recommendation of the Compensation Committee of Avocent Corporation (the "Compensation Committee"), which shall authorize an increase in the Employee's Base Salary in an amount which, at a minimum, shall be equal to the cumulative cost-of-living increment on the Base Salary as reported in the "Consumer Price Index, Seattle, Washington, All Items," published by the U.S. Department of Labor (using July 1, 2000, as the base date for computation prorated for any partial year). The Employee's Base Salary shall be reviewed annually by the Board of Directors and the Compensation Committee of Avocent Corporation.     BONUSES.  The Employee shall be eligible to receive a bonus for each calendar year (or portion thereof) during the term of this Agreement and any extensions thereof, with the actual amount of any such bonus to be determined in the sole discretion of the Board of Directors of Avocent Corporation based upon its evaluation of the Employee's performance during such year. 5 -------------------------------------------------------------------------------- All such bonuses shall be payable during the last month of the fiscal year or within forty-five (45) days after the end of the fiscal year to which such bonus relates. All such bonuses shall be reviewed annually by the Compensation Committee of Avocent Corporation.     ADDITIONAL BENEFITS.  During the term of this Agreement, the Employee shall be entitled to the following fringe benefits:     THE EMPLOYEE BENEFITS.  The Employee shall be eligible to participate in such of Avocent's benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of or Avocent, including, without limitation, stock option plans, Section 401(k) plan, profit sharing plans, annual physical examinations, dental and medical plans, personal catastrophe and disability insurance, retirement plans and supplementary executive retirement plans, if any. For purposes of establishing the length of service under any benefit plans or programs of Apex or Avocent, the Employee's employment with the Employer (or any successor) will be deemed to have commenced on the date that Employee first commenced employment with Apex, which was January 18, 1999.     VACATION.  The Employee shall be entitled to vacation in accordance with the Avocent Corporation's vacation policy but in no event less than three weeks during each year of this Agreement.     LIFE INSURANCE.  For the term of this Agreement and any extensions thereof, the Employer shall at its expense procure and keep in effect term life insurance on the life of the Employee, payable to such beneficiaries as the Employee may from time to time designate, in an aggregate amount equal to the lesser of (i) three times the Employee's Base Salary or (ii) $500,000. Such policy shall be owned by the Employee or by any person or entity with an insurable interest in the life of the Employee.     REIMBURSEMENT FOR EXPENSES.  During the term of this Agreement, the Employer or Avocent Corporation shall reimburse the Employee for reasonable and properly documented out-of-pocket business and/or entertainment expenses incurred by the Employee in connection with his duties under this Agreement.     SEVERANCE COMPENSATION.       SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL.  In the event the Employee's employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of termination of this Agreement, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.1 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.1. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate of 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under 6 -------------------------------------------------------------------------------- any Apex or Avocent stock option plans fully accelerated. The Employee shall be provided with medical plan benefits under any health plans of Avocent or the Employer in which the Employee is a participant to the full extent of the Employee's rights under such plans for a period of 12 months from the date of termination of this Agreement; provided, however, that the benefits under any such plans of Employer or Avocent in which the Employee is a participant, including any such perquisites, shall cease upon employment by a new employer.     SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE.  In the event the Employee's employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of such termination, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.2 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Other Than for Cause, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.2. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate on 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Apex or Avocent stock option plans fully accelerated.     NO SEVERANCE COMPENSATION UNDER OTHER TERMINATION.  In the event of a Voluntary Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to Section 2.5, or termination by reason of the Employee's death pursuant to Section 2.6, the Employee or his estate shall not be paid any severance compensation.     NON-COMPETITION OBLIGATIONS.  Unless waived or reduced by the Employer or Avocent, during the term of this Agreement and for a period of 12 months thereafter, the Employee will not, without the Employer's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity in the United States, Canada, or Europe which is substantially similar to or in direct competition with any of the business activities of or services provided by the Employer at such time (a "Competing Business"). Notwithstanding the foregoing, (i) the ownership by the Employee of not more than five percent (5%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on The Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions of this Section 5, and (ii) the Employee's performance of services in any capacity for any consulting firm, public accounting firm, or law firm that has as a client any company or business that is a Competing Business shall not violate the prohibitions of this Section 5 so long as the Employee does not perform any services directly for such Competing Business.     MISCELLANEOUS.       PAYMENT OBLIGATIONS.  If litigation after a Change in Control shall be brought to enforce or interpret any provision contained herein, the Employer and Avocent Corporation, to 7 -------------------------------------------------------------------------------- the extent permitted by applicable law and the Employer's and Avocent Corporation's Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for the Employee's reasonable attorneys' fees and disbursements incurred in such litigation.     GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable guarantees the payment obligations of the Employer under this Agreement, including, without limitation, the Employer's obligations under Section 6.1 hereof.     WITHHOLDINGS.  All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.     WAIVER.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.     ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral with respect to the subject matter hereof including without limitation, the Original Employment Agreement and the Section 1 of that certain Proprietary Information and Non-Competition Agreement dated January 18, 1999, between the Employee and Apex, which such section shall be of no further force or effect (although the other sections of such Proprietary Information and Non-Competition Agreement shall remain in full force and effect), and any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to the Employee from the Employer or Avocent Corporation. In particular, Employee acknowledges and agrees that the terms and conditions of this Agreement (and not the Original Employment Agreement) shall apply to all stock option awards granted to Employee under any Apex or Avocent stock option plan (including, without limitation, Employee's September 18, 2000 stock option award from Avocent Corporation). All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.     NOTICES.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon hand delivery to an officer of the Employer or the Employee, as the case may be, or upon three (3) days after mailing to the respective persons named below: If to the Employer/Avocent:   Avocent Corporation 4991 Corporate Drive Huntsville, AL 35805 Attn: Executive Vice President Copy to: General Counsel   If to the Employee:       Barry L. Harmon           --------------------------------------------------------------------------------           --------------------------------------------------------------------------------     Any party may change such party's address for notices by notice duly given pursuant to this Section 6.6.     HEADINGS.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement. 8 --------------------------------------------------------------------------------     GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in accordance with the laws of the State of Washington. The Employee, the Employer, and Avocent Corporation each hereby expressly consents to the exclusive venue of the state and federal courts located in Seattle, King County, Washington, for any lawsuit arising from or relating to this Agreement.     ARBITRATION.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in Seattle, Washington, in accordance with the Rules of the American Arbitration Association, and judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. There shall be three (3) arbitrators, one (1) to be chosen directly by each party at will, and the third arbitrator to be selected by the two (2) arbitrators so chosen. To the extent permitted by the Rules of the American Arbitration Association, the selected arbitrators may grant equitable relief. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The cost of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne equally by the parties.     SEVERABILITY.  If a court or other body of competent jurisdiction determines that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.     SURVIVAL OF EMPLOYER'S OBLIGATIONS.  The Employer's and Avocent Corporation's obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to the Employer or Avocent Corporation. This Agreement shall not be terminated by any merger or consolidation or other reorganization of the Employer or Avocent Corporation. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Employer (except to an affiliate of the Employer (including Avocent Corporation) in which event the Employer shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by the Employee.     COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.     INDEMNIFICATION.  In addition to any rights to indemnification to which the Employee is entitled to under the Employer's Articles of Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify the Employee at all times during and after the term of this Agreement to the maximum extent permitted under the corporation laws of the State of Delaware and any other applicable state law, and shall pay the Employee's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws.     AMENDMENT OF STOCK OPTION LETTER AGREEMENTS.       ACCELERATED VESTING.  The parties agree that, effective immediately prior to the closing of the Apex Merger described in the Reorganization Agreement, Section 6 of that certain Nonstatutory Stock Option Letter Agreement dated March 12, 1999, between the Employer and 9 -------------------------------------------------------------------------------- the Employee is/are hereby amended by deleting the existing language and substituting therefor the following new language:     6.  Vesting.  Your option shall vest and become exercisable in full immediately prior to the closing of the Apex Merger described in that certain Agreement and Plan of Reorganization dated March 8, 2000, by and among the Company, Cybex Computer Products Corporation, and Avocent Corporation. Specifically, immediately prior to the closing of the Apex Merger (as defined in such Agreement and Plan of Reorganization), your entire option grant (all 75,000 shares) will become fully vested and immediately available for exercise. You may exercise your option on vested option shares; however, you may only exercise your option for whole shares.     REMAINING TERMS UNCHANGED.  Except as specifically set forth in this Section 6.14, the remaining terms and conditions of the Nonqualified Stock Option Letter Agreement dated March 12, 1999, shall remain unchanged and in full force and effect.     INDEMNIFICATION FOR SECTION 4999 EXCISE TAXES.  In the event that it shall be determined that any payment or other benefit paid by the Employer or Avocent Corporation to or for the benefit of the Employee under this Agreement or otherwise, but determined without regard to any additional payments required under this Amendment (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employer and Avocent Corporation shall indemnify the Employee for such Excise Tax in accordance with the following:     The Employee shall be entitled to receive an additional payment from the Employer and/or Avocent Corporation equal to (i) one hundred percent (100%) of any Excise Tax actually paid or finally or payable by the Employee in connection with the Payments, plus (ii) an additional payment in such amount that after all taxes, interest and penalties incurred in connection with all payments under this Section 2(a), the Employee retains an amount equal to one hundred percent (100%) of the Excise Tax.     All determinations required to be made under this Section shall be made by the Avocent Corporation's primary independent public accounting firm, or any other nationally recognized accounting firm reasonably acceptable to the Avocent Corporation and the Employee (the "Accounting Firm"). Avocent Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Employer and the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. For purposes of making the calculations required by this Section, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Internal Revenue Code, provided the Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Internal Revenue Code). The payments to which the Employee is entitled pursuant to this Section shall be paid by the Employer and/or Avocent Corporation to the Employee in cash and in full not later than thirty (30) calendar days following the date the Employee becomes subject to the Excise Tax. 10 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     APEX INC.:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Vice President --------------------------------------------------------------------------------           AVOCENT CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Executive Vice President --------------------------------------------------------------------------------           EMPLOYEE:           /s/ BARRY L. HARMON    -------------------------------------------------------------------------------- Barry L. Harmon 11 -------------------------------------------------------------------------------- QUICKLINKS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT RECITALS AGREEMENT

Date Name Address RE: Special Severance Agreement Dear Name:             Carpenter Technology Corporation (the "Company") considers it essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders.             The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Company, although no such change is now contemplated. If you agree, this letter will replace any previous special severance agreement.             In order to induce you to remain in the employ of the Company and in consideration of your agreement set forth in Subsection 2(ii) hereof, the Company agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with the Company is terminated subsequent to a "change in control of the Company" (as defined in Section 2 hereof) under the circumstances described below. 1. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2001; provided, however, that commencing on January 1, 2002 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than the October 31 preceding each such January 1, the Company shall have given notice that it does not wish to extend this Agreement; provided, further, if a change in control of the Company shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for the later of (i) the original or extended term or (ii) a period of twenty-four (24) months beyond the month in which such change in control occurred. Notwithstanding the foregoing, in no event shall the term of this Agreement extend beyond the date that you attain sixty-five years of age. 2. Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below. For purposes of this Agreement, a "change in control of the Company" shall be deemed to have occurred if (A) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities; or (B) during any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clauses (A), (C) or (D) of this Subsection) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (C) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (D) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets. i. Hidden text do not remove ii. For purposes of this Agreement, a "potential change in control of the Company" shall be deemed to have occurred if (A) the Company enters into an agreement, the consummation of which would result in the occurrence of a change in control of the Company, (B) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a change in control of the Company; (C) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s then outstanding securities, increases his beneficial ownership of such securities by 5% or more of the combined voting power of the Company’s then outstanding securities on the date hereof; or (D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control of the Company has occurred. You agree that, subject to the terms and conditions, of this Agreement, in the event of a potential change in control of the Company, you will remain in the employ of the Company until the earliest of (i) a date which is six (6) months from the occurrence of such potential change in control of the Company, (ii) the termination by you of your employment by reason of Disability or Retirement as defined in Subsection 3(i), or (iii) the occurrence of a change in control of the Company. 3. Termination Following Change in Control. If any of the events described in Subsection 2(i) hereof constituting a change in control of the company shall have occurred, you shall be entitled to the benefits provided in Subsection 4(iii) hereof upon the subsequent termination of your employment during the term of this Agreement unless such termination is (A) because of your death, Disability or Retirement, (B) by the Company for Cause, or (C) by you other than for Good Reason. i. Disability; Retirement. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time performance of your duties with the Company for twenty-four (24) consecutive months (or twelve (12) consecutive months if you have been employed by the Company for less than five (5) years as of the date your absence from full-time performance of duties under this Subsection begins), and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". Termination by the Company or you of your employment based on "Retirement" shall mean termination with your consent in accordance with the Company’s Pension Plan (as hereafter defined) including early retirement, generally applicable to its salaried employees, provided, however, that termination based on "Retirement" shall not include retirement in conjunction with termination by you for Good Reason. ii. Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (A) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii), respectively) after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (B) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters ¾ of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in clauses (A) or (B) of the first sentence of this Subsection and specifying the particulars thereof in detail. iii. Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without your express written consent, the occurrence after a change in control of the Company of any of the following circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), such circumstances are fully corrected prior to the Date of Termination specified in the Notice of Termination, as defined in Subsections 3(v) and 3(iv), respectively, given in respect thereof: A. the assignment to you of any duties inconsistent with your present status as ______________________________ of the Company (or such other title or titles as you may be holding immediately prior to the change in control of the Company) or a substantial adverse alteration in the nature or status of your responsibilities from those in effect immediately prior to the change in control of the Company; B. a reduction by the Company in your annual base salary as in effect on the date of the change in control of the Company; C. the relocation of the Company’s principal executive offices to a location outside of Berks County, Pennsylvania (or, if different, the metropolitan area in which such offices are located immediately prior to the change in control of the Company) or the Company’s requiring you to be based anywhere other than the Company’s principal executive offices except for required travel on the Company’s business to an extent substantially consistent with your present business travel obligations; D. the failure by the Company, without your consent, to pay to you any portion of your current compensation, or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due; E. the failure by the Company to continue in effect any compensation plan in which you participate immediately prior to the change in control of the Company which is material to your total compensation, including but not limited to the Company’s stock option plans, Executive Annual Compensation Plan, Profit Sharing Plan for Employees of Carpenter Technology Corporation and the Flexible Savings Plan of Carpenter Technology Corporation or any substitute plans adopted prior to the change in control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as existed at the time of the change in control; F. the failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under the Company’s General Retirement Plan for Employees of Carpenter Technology Corporation, Earnings Adjustment Plan of Carpenter Technology Corporation, Benefit Equalization Plan of Carpenter Technology Corporation, Supplemental Retirement Plan for Executives of Carpenter Technology Corporation and Officers’ Supplemental Retirement Plan of Carpenter Technology Corporation (the "Pension Plan" or "Pension Plans") or under any of the Company’s other deferred compensation plans, life insurance, medical, health and accident, or disability plans in which you were participating at the time of the change in control of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Company, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy for officers in effect at the time of the change in control of the Company; G. the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or H. any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (iv) below (and, if applicable, the requirements of Subsection (ii) above); for purposes of this Agreement, no such purported termination shall be effective. Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder, subject to the applicable notice requirements of Subsection (iv) below. iv. Notice of Termination. Any purported termination of your employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. A Notice of Termination given by you indicating termination for Good Reason pursuant to Subsection (iii) above must be communicated within six (6) months from the date on which the facts and circumstances believed by you to constitute such Good Reason first became known to you or reasonably ascertainable by you. v. Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (B) if your employment is terminated pursuant to Subsection (ii) or (iii) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection (ii) above shall not be less than thirty (30) days, and in the case of a termination pursuant to Subsection (iii) above shall not be less than fifteen (15) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided that if within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating whether or not specifically referenced in this Agreement when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 4. Compensation Upon Termination or During Disability. Following a change in control of the Company, as defined by Subsection 2(i), upon termination of your employment or during a period of Disability you shall be entitled to the following benefits: i. During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive the benefits payable to you under the Company’s Salary Continuation Program, together with all other compensation payable to you during such period, until this Agreement is terminated pursuant to Section 3(i) hereof. Thereafter, or in the event your employment shall be terminated by the Company or by you for Retirement, or by reason of your death, your benefits shall be determined under the Company’s retirement, insurance and other compensation plans and programs then in effect in accordance with the terms of such programs. ii. If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, Disability, death or Retirement, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. iii. If your employment by the Company shall be terminated (a) by the Company other than for Cause, Retirement or Disability or (b) by you for Good Reason, then you shall be entitled to the benefits provided below: A. the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company, at the time such payments are due, except as otherwise provided below; B. in lieu of any further (i) salary payments to you for periods subsequent to the Date of Termination or (ii) payments to you under the Company’s Salary Continuation Program, the Company shall pay as severance pay to you a lump sum severance payment equal to two (2) times the sum of (x) your annual base salary in effect immediately prior to the occurrence of the circumstance giving rise to the Notice of Termination given in respect thereof, and (y) a full annual bonus payment (without regard to actual attainment of all relevant performance goals) calculated by using the Executive Annual Compensation Plan Target Percentages found in section "J" of such plan, as amended on June 22, 2000, times your base salary referenced in (x), above ; C. in lieu of shares of common stock of the Company ("Company Shares") issuable upon exercise of outstanding options ("Options") or any related stock appreciation rights ("Rights"), if any, granted to you under the Long-Term Incentive Program (which Options and Rights shall be canceled upon the making of the payment referred to below), you shall receive an amount in cash equal to the product of (i) the excess of the higher of the closing price of the Company’s Shares as reported on the New York Stock Exchange-Composite Tape on or nearest the Date of Termination (or, if not listed on such exchange, on the nationally recognized exchange or Quotation System on which trading volume in Company Shares is highest) or the highest per share price for Company Shares actually paid in connection with any change in control of the Company, over the per share exercise price of each Option or Right held by you (whether or not then fully exercisable), times (ii) the number of Company Shares covered by each such Option or Right; and D. an amount in cash equal to the sum of (i) the present value of your accrued benefit (determined by using the ongoing actuarial assumptions in effect immediately prior to your Date of Termination under the Company’s defined benefit plan in which you are a participant) under any Pension Plans or other defined benefit plan sponsored by the Company and (ii) your account balance under any defined contribution plan sponsored by the Company, in either case to the extent that such accrued benefit or account balance, as the case may be, shall not be fully vested at the time of your Date of Termination. E. In addition to the retirement benefits to which you are entitled under the Pension Plan or any successor plans thereto, the Company shall pay to you a lump sum amount, in cash, equal to the actuarial equivalent of the excess of (x) the retirement pension (determined as a straight life annuity commencing at Normal Retirement Age or, if later, two years after the Date of Termination) which you would have accrued under the terms of the Pension Plan (without regard to any amendment to the Pension Plan made subsequent to a change in control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had accumulated (after the Date of Termination) twenty-four (24) additional months of service credit thereunder at your highest annual rate of compensation during the twelve (12) months immediately preceding the Date of Termination, over (y) the retirement pension (determined as a straight life annuity commencing at Normal Retirement Age which you had then accrued pursuant to the provisions of the Pension Plan). For the purposes of this Section 4(iii)(E), the actuarial value of the retirement benefits shall be calculated as the present value of a single life annuity using the UP 1984 mortality table adjusted one year forward. The interest rate used in the calculation shall be the rate specified for purposes of determining the present value of lump sum distributions under section 417(e)(3) of the Code established for the second month preceding the date of your termination. F. The payments provided for in paragraphs (B), (C) and (D), above, shall be made not later than the fifth day following the Date of Termination, and the payment described in (E) not later than the fifth day following the date of your election, under Section 4(iii)(G)(1) to receive such payment, provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later then the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you, payable on the fifth day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). (G) Notwithstanding any contrary provision of any other agreement between you and the Company, or of the Supplemental Retirement Plan for Executives of Carpenter Technology Corporation (the "SERP"), at the time of your termination of service under Section 4(i) or 4(iii) hereof, provided that you have then attained at least age 50 and have completed, or within 24 months after the date of the change in control would have completed, five years of service, you will be considered to have attained the greater of age 62 or your actual age, and to have completed the greater of five years of service, or your actual number of years of service, and therefore entitled to retire with an immediate pension under Section 7(A) of the SERP, and will be entitled to: (1) the Normal Retirement Benefit payable to you under Section 5 of the SERP, reduced in accordance with Section 6(C) of the SERP, based on the sum of your actual years of service, plus, at your election, an additional 24 months, and the greater of your attained age or age 62. You may elect to receive the additional 24 months of service credit described in the preceding sentence, by agreeing, within 60 days following your termination of service under conditions entitling you to the benefits of the Agreement and this amendment, by agreeing to waive your right to receive the lump sum pension benefit described in Section 4(iii)(E) of the Agreement. Notwithstanding the provisions of Section 6(C) of the SERP, the reduction provided therein shall be based on the benefits actually payable to you under the GRP, the Benefit Equalization Plan, the Earnings Adjustment Plan, the Officers’ Supplemental Retirement Plan, and your Primary Social Security Retirement Benefit, beginning when you actually commence receipt of those benefits. (2) a special supplemental benefit payable to you under the SERP for life equal to the benefits that would have been payable to you under the Company’s General Retirement Plan (the "GRP") had you attained age 62 and completed the greater of ten years of service or your actual number of completed years of service, calculated using your actual number of completed years of service, plus, if you agree to waive your right to receive the lump sum pension benefit described in Section 4(iii)(E), an additional 24 months of service. This benefit shall be reduced, beginning when you actually commence receipt of the benefits to which you are entitled under the GRP by the benefit actually payable to you under the GRP at that time. The benefit payable under this Section 4(iii)(G)(2) will be paid in the same form, and the necessary adjustments computed using the same actuarial methods and assumptions, as you have elected with respect to your benefit under the GRP, or if you have failed to make any such election, in the form of an annuity for your life and, if you are married at the time of your termination of employment hereunder, 50% of that amount payable to your surviving spouse for her life; (3) participate in, and receive coverage under, any post-retirement medical and life insurance benefits sponsored by the Company for executive level employees who retire from active service, in accordance with the terms of any such plan as in effect during the 90 days preceding the change in control, or as such plans may be subsequently improved. If the Company determines to amend any such plan in any way that could reasonably be expected to be adverse to you, or to discontinue any such plan, the Company will pay you an amount in cash, payable annually in advance, sufficient to enable you, after the payment of any income or payroll taxes imposed on such amount, to pay the premiums necessary to maintain in effect, on an individual basis, insurance at least equal to that provided to you by the Company immediately before any such amendment or termination. Any such insurance shall be provided by the insurer(s) selected by you, provided that if the Company is able to procure such coverage at a lower cost from another insurer rated by Moody’s rating service at least equal to the rating of the insurer selected by you, and requiring no more proof of insurability than the insurer selected by you, you agree you will accept coverage from that insurer. G. The Company also shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such legal fees and legal expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Code to any payment or benefit provided hereunder). Such payments shall be made at the later of the times specified in paragraph (F) above, or within five (5) days after your request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require. iv. Certain Additional Payments. (A) If all, or any portion, of the payments or other benefits provided under any section of this Agreement, either alone or together with other payments and benefits which you receive or are entitled to receive from the Company or its affiliates, (whether or not under an existing plan, arrangement or other agreement) (collectively the "Payments") would constitute an excess "parachute payment" within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and would result in the imposition on you of an excise tax under section 4999 of the Code, (such excise tax, together with any interest and penalties related thereto, is hereinafter collectively referred to as the "Excise Tax") then, in addition to any other benefits to which you are entitled under this Agreement, you shall be entitled to receive an additional payment (a "Gross-Up Payment") in cash, in an amount such that after payment by you of all taxes (and any interest and penalties imposed with respect thereto) imposed upon the Gross-Up Payment, including, without limitation, (1) any income taxes, (2) any payroll taxes, including FICA and FUTA, and any state or local payroll taxes and (3) any Excise Tax, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (B) Unless you and the Company otherwise agree in writing, any determination required under this Section 4(iv), including without limitation, the amount of the Gross-Up Payment, shall be computed and made in writing by the independent public accountants engaged by the Company as its auditors, (the "Accountants"), whose determination shall be, subject to your reasonable approval of the calculations required under this Section 4(iv), conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required by this Section 4(iv), the Accountants may rely on reasonable, good faith interpretations concerning the application of section 280G and section 4999 of the Code. You and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 4(iv). The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 4(iv). (C) As a result of the uncertainty in the application of section 280G and section 4999 of the Code at the time of the initial determination by the Accountants hereunder, it is possible that, as a result of Internal Revenue Service examination of your tax returns or otherwise, (i) an amount of Gross-Up Payment will not have been made by the Company that should have been made (an "Underpayment") or that (ii) an amount of Gross-Up Payment that has been made will be determined to have been in excess of the Gross-Up Payment actually required (an "Overpayment"). In the event that you are required to make an additional payment of any Excise Tax beyond that originally calculated by the Accountants, the Accountants shall determine the amount of the Underpayment that has occurred, taking into account all taxes described in (A) above, and any such Underpayment shall be promptly paid by the Company to you or to the Internal Revenue Service for your benefit. In the event that it is finally determined that an Overpayment has occurred, you agree that you shall promptly, and in any event within 30 days of such determination, refund the amount of the Overpayment, plus any interest actually paid to you with respect to the Overpayment, to the Company. (D) The Company shall have the right with respect to the determination of either an Underpayment or an Overpayment to require you to appeal the assertion of any Underpayment or to claim, and sue for, a refund of any Excise Tax paid by you upon any Payment or Gross-Up Payment, provided that the Company shall promptly following your request, advance you all expenses, including counsel and accounting fees, that based on advice of your counsel or accountants, you may reasonably expect to incur in connection with any such proceeding. You agree that if the total of such advances exceeds the expenses incurred by you, you will refund the excess to the Company. Alternatively, the Company may undertake any such proceeding, in which case you agree that you shall cooperate with the Company, as the Company may reasonably request, in any such proceeding. v. If your employment shall be terminated (A) by the Company other than for Cause, Retirement or Disability or (B) by you for Good Reason, then for a twenty-four (24) month period after such termination, the Company shall arrange to provide you at the Company’s expense with life, disability, accident, and health insurance benefits, as well as tax and financial planning services, substantially similar to those which you are receiving immediately prior to the Notice of Termination. Benefits otherwise receivable by you pursuant to this Subsection 4(v) shall be reduced to the extent comparable benefits are actually received by you during the twenty-four (24) month period following your termination, and any such benefits actually received by you shall be reported to the Company. vi. You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise except as specifically provided in this Section 4. vii. In addition to all other amounts payable to you under this Section 4, you shall be entitled to receive all benefits payable to you, at the respective time or times such payments are due, under the Pension Plans, the Flexible Savings Plan of Carpenter Technology Corporation and any other plan or agreement relating to retirement benefits. 5. Successors; Binding Agreement. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled to hereunder if you terminate your employment for Good Reason following a change in control of the company, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. i. Hidden text do not remove ii. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage pre-paid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless. such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled, at the Company’s expense, exclusively by arbitration in Berks County, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely,     By: Robert W. Cardy Chairman and Chief Executive Officer   Agreed to this ____ of June, 2000.     _____________________________ Recipient Name

Exhibit 10.25 PURCHASE/LEASEBACK AGREEMENT Buyer: Seller: COMDISCO LABORATORY AND EXELIXIS, INC. SCIENTIFIC GROUP, A DIVISION OF 170 Harbor Way COMDISCO, INC. So. San Francisco, California 94083 6111 North River Road   Rosemont, Illinois 60018   PURCHASE : Seller agrees to sell and Buyer agrees to purchase from Seller the equipment listed below (the "Equipment") in accordance with the terms and conditions specified in this Purchase/Leaseback Agreement dated as of August 2, 2000. Item Number Qty. Mfg. Machine Type/Feature Description Serial Number Various Equipment listed and described in the attachments made hereto PURCHASE PRICE : $5,954212.99. The Purchase Price is due upon execution of this Agreement ("Payment Date"). Seller agrees to provide Buyer with all purchase documentation associated with Seller's purchase of the Equipment from the vendor ("Vendor"), including the Vendor's quotation, invoices, and Bill of Sale to Seller (collectively, "Proof of Ownership") within sixty (60) days of the Payment Date. Seller also agrees to cooperate with Buyer in obtaining any UCC releases (Form UCC-3) deemed necessary by Buyer for the Equipment within ninety (90) days of the Payment Date. If Seller is unable to provide Buyer with Proof of Ownership for the Equipment, or the UCC-3 releases as set forth above, then (i) Buyer will notify Seller, (ii) Seller will immediately refund to Buyer the Purchase Price for such Equipment plus interest at the rate of 15% per annum until the date of Buyer's receipt of the refunded Purchase Price, and (iii) all obligations of either party with respect to such Equipment will thereafter terminate. If Buyer receives the refunded Purchase Price within ten (10) days of Seller's receipt of Buyer's notice, no interest will be due on the refunded Purchase Price. LEASEBACK : This Agreement is contingent upon Seller leasing the Equipment from Buyer pursuant to the Equipment Schedule Nos. SG-01 and SG-02 to the Master Lease Agreement dated August 2, 2000 between Seller, as Lessee, and Buyer, as Lessor (collectively the "Lease"). WARRANTY : SELLER MAKES NO WARRANTIES OTHER THAN THOSE SPECIFICALLY SET OUT IN THIS AGREEMENT (IF ANY), AND SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. TITLE : Title to the Equipment will be free and clear of all liens, claims and encumbrances of any kind and will vest in Buyer upon payment of the full Purchase Price. Upon request, Seller will provide Buyer with a Bill of Sale to evidence such title. TAXES : Buyer warrants that it is in the business of buying and selling laboratory and scientific equipment and that the purchase of the Equipment is for the purpose of resale only. GOVERNING LAW : Illinois MULTIPLE COUNTERPARTS : This Agreement may be executed in multiple counterparts, each of which will be deemed to be an original and of equal force and effect. MISCELLANEOUS : Seller agrees to and will indemnify and hold Buyer harmless from and against all liens, costs, expenses, damages or claims, including reasonable attorney's fees, arising out of the performance of Seller's obligations, the breach by Seller of its obligations, defects in the Equipment or any misrepresentation by Seller under this Agreement. Exelixis, Inc. As Seller By: (authorized signature) Date: COMDISCO LABORATORY AND SCIENTIFIC GROUP, A DIVISION OF COMDISCO, INC. As Buyer By: (authorized signature) Date:

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.22 AMENDMENT NO. 2 TO CREDIT AND SECURITY AGREEMENT     This AMENDMENT No. 1 TO CREDIT AND SECURITY AGREEMENT, dated as of July 21, 2000 (the "Amendment"), between Lifecore Biomedical, Inc. (the "Borrower") and U.S. Bank National Association (the "Lender"). RECITALS:     A.  The Borrower and the Lender are parties to that certain Credit and Security Agreement dated as of December 29, 1998, as amended by that certain Amendment No. 1 to Credit and Security Agreement and Consent dated as of February 7, 2000 (as so amended, the "Original Agreement").     B.  The Borrower has requested that the Lender amend a certain Section of the Original Agreement.     C.  Subject to the terms and conditions of this Amendment, the Lender will agree to the foregoing requests of the Borrower.     NOW, THEREFORE, the parties agree as follows:     1.  Defined Terms. All capitalized terms used in this Amendment shall, except where the context otherwise requires, have the meanings set forth in the Original Agreement as amended hereby.     2.  Amendments. The Original Agreement is further amended as follows:     (a) Section 1.1 is amended by adding the following new definition of "EBITDA": "EBITDA": For any period, the consolidated net income of the Borrower and its Subsidiaries before provision for income taxes, interest expense (including, without limitation, implicit interest expense on Capitalized Leases), depreciation, amortization and other non-cash expenses or charges, all as determined in accordance with GAAP, excluding therefrom (to the extent included): (a) non-operating gains (including, without limitation, extraordinary or nonrecurring gains, gains from discontinuance of operations and gains arising from the sale of assets other than Inventory) during the applicable period; and (b) similar non-operating losses during such period."     (b) Supplement A attached to the Original Agreement is amended in its entirety to conform to Supplement A (Amended 7/2000) attached hereto.     3.  Conditions to Effectiveness.  This Amendment shall become effective on the date (the "Effective Date") when, and only when, the Lender shall have received:     (a) Counterparts of this Amendment executed by the Borrower;     (b) A certified copy of Resolutions of the Board of Directors of Borrower authorizing or ratifying the execution, delivery and performance of this Amendment and any other documents provided for in this Amendment;     (c) A certificate by the Secretary or any Assistant Secretary of Borrower certifying the names of the officers of Borrower authorized to sign this Amendment and any other documents provided for in this Amendment together with a sample of the true signature of such officers;     (d) Such other documents as the Lender may reasonably request. --------------------------------------------------------------------------------     4.  Representations and Warranties.  To induce the Lender to enter into this Amendment, the Borrower represents and warrants to the Lender as follows:     (a) The execution, delivery and performance by the Borrower of this Amendment and any other documents to be executed and/or delivered by the Borrower in connection herewith have been duly authorized by all necessary corporate action, do not require any approval or consent of, or any registration, qualification or filing with, any government agency or authority or any approval or consent of any other person (including, without limitation, any stockholder), do not and will not conflict with, result in any violation of or constitute any default under, any provision of the Borrower's articles of incorporation or bylaws, any agreement binding on or applicable to the Borrower or any of its property, or any law or governmental regulation or court decree or order, binding upon or applicable to the Borrower or of any of its property and will not result in the creation or imposition of any security interest or other lien or encumbrance in or on any of its property pursuant to the provisions of any agreement applicable to the Borrower or any of its property;     (b) The representations and warranties contained in the Original Agreement are true and correct as of the date hereof as though made on that date except to the extent that such representations and warranties relate solely to an earlier date;     (c) No events have taken place and no circumstances exist at the date hereof which would give the Borrower the right to assert a defense, offset or counterclaim to any claim by the Lender for payment of the Obligations;     (d) No Default or Event of Default and no Adverse Event has occurred and is continuing; and     (e) The Original Agreement as amended by this Amendment and each other Loan Document to which the Borrower is a party are the legal, valid and binding obligations of the Borrower and are enforceable in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws, rulings or decisions at the time in effect affecting the enforceability of rights of creditors generally and to general equitable principles which may limit the right to obtain equitable remedies.     5.  Reference to and Effect on the Loan Documents.     (a) From and after the date of this Amendment, each reference in the Original Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Original Agreement, and each reference to the "Agreement", "thereunder", "thereof", "therein" or words of like import referring to the Original Agreement in any other Loan Document shall mean and be a reference to the Original Agreement as amended hereby     (b) Except as specifically set forth above, the Original Agreement remains in full force and effect and is hereby ratified and confirmed.     (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Lender under the Agreement or any other Loan Document, nor constitute a waiver of any provision of the Agreement or any such other Loan Document.     6.  Costs, Expenses and Taxes.  The Borrower agrees to pay on demand all costs and expenses of the Lender in connection with the preparation, reproduction, execution and delivery of this Amendment and the other documents to be delivered hereunder or thereunder, including their reasonable attorneys' fees and legal expenses. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution and delivery, filing or recording of this Amendment and the other instruments and documents to be delivered hereunder, and agrees to save the Lender harmless from and against any and all liabilities with respect to, or resulting from, any delay in the Borrower's paying or omission to pay, such taxes or fees. --------------------------------------------------------------------------------     7.  Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of Minnesota.     8.  Headings.  Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.     9.  Counterparts.  This Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original.     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the date first above.     LIFECORE BIOMEDICAL, INC.           By:   /s/ DENNIS J. ALLINGHAM    --------------------------------------------------------------------------------     Title: Exec. Vice Pres & CFO -------------------------------------------------------------------------------- Signed and sworn to before me this 21 day of July, 2000. /s/ COLLEEN M. OLSON -------------------------------------------------------------------------------- Notary Public     U.S. BANK NATIONAL ASSOCIATION           By:   /s/ KIM LEPPANEN    --------------------------------------------------------------------------------     Title: Vice President -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SUPPLEMENT A (Amended 7/2000) to CREDIT AND SECURITY AGREEMENT Between U.S. BANK NATIONAL ASSOCIATION (the "Lender") and LIFECORE BIOMEDICAL, INC. (the "Borrower")     1.  Credit Agreement Reference.  This Supplement A, as it may be amended or modified from time to time, is a part of the Credit and Security Agreement, dated as of December 29, 1998, between the Borrower and the Lender (together with all amendments, modifications and supplements thereto, the "Credit Agreement"). Capitalized terms used herein which are defined in the Credit Agreement shall have the meanings given such terms in the Credit Agreement unless the context otherwise requires.     2.  Definitions.       2.1  Credit Amount.  The term "Credit Amount" shall be Five Million and No/100ths ($5,000,000.00).     2.2  Borrowing Base.  The term "Borrowing Base" shall mean:      (i) an amount (the "Accounts Receivable Availability") of up to the sum of: (1) 85% of the net amount (as determined by the Lender after deduction of such reserves and allowances as the Lender deems proper and necessary) of the Borrower's Eligible Accounts Receivable other than the Eligible Accounts Receivable arising from purchase agreements or contracts permitting to pay such Account Receivable through installments (such Accounts Receivable being an "Installment Accounts Receivable"); plus (2) 50% of the net amount (as determined by the Lender after deduction of such reserves and allowances as the Lender deems proper and necessary) of the Borrower's Eligible Accounts Receivable that are Installment Accounts Receivable; plus     (ii) an amount (the "Inventory Availability") of up to the sum of:     (1) the lesser of (A) 50% of the net value (the lower of the cost, determined on a first in first out basis, or market value of such Inventory, as determined by the Lender after deduction of such reserves and allowances as the Lender deems proper and necessary)(such value is hereinafter called the "Net Value") of the Borrower's Oral Restorative Division's Eligible Inventory comprised of finished goods inventory; or (B) $1,500,000, such dollar amount is hereinafter called the "Oral Restorative Division's Inventory Availability Sublimit"); plus     (2) the lesser of (A) the sum of: (i) 50% of the Net Value of the Borrower's Hyaluronate Division's Eligible Inventory comprised of aseptic fill finished goods inventory; plus (ii) 20% of the Net Value of the Borrower's Hyaluronate Division's Eligible Inventory comprised of raw materials inventory; plus (iii) an amount of the Hyaluronate Division's Eligible Inventory comprised of hyaluronate powder to the extent subject to a contract between the Borrower and Alcon Laboratories ("Alcon") requiring Alcon to purchase such amount of hyaluronate powder but in no event shall the Borrowing Base amount of hyaluronate powder exceed $1,100,000; or (B) $2,000,000, such dollar amount is hereinafter called the "Hyaluronate Division's Inventory Availability Sublimit;" and together with the Oral Restorative Division's Inventory Availability Sublimit being sometimes hereinafter referred to as an Inventory Availability Sublimit").     2.3  Letter of Credit Sublimit.  Intentionally Deleted.     2.4  Termination Date.  The term "Termination Date" shall mean the earliest of (i) December 29, 2001, or (ii) the date on which the Credit is terminated pursuant to Section 7.2 of the Credit Agreement. --------------------------------------------------------------------------------     3.  Interest; Fees.       3.1  Loans.       (a) Interest Rate. The unpaid principal balance of the Loans (other than Overdraft Loans and Over Advances) shall bear interest at the Reference Rate.     (b) Default Rate. The rate per annum equal to 2.00% in excess of the Reference Rate from time to time in effect.     (c) Minimum Interest Charge. If the aggregate interest accrued on the Loans during any Loan Year is less than $96,000, then the Borrower shall pay the difference between $96,000 and the actual interest accrued on the Loans during such Loan Year. The amount payable under this Section is immediately due and payable upon the Lender's submission of an invoice therefor.     3.2  Overdraft Loans; Over Advances.  Overdraft Loans and Over Advances shall bear interest at the rate(s) determined pursuant to Section 2.7 or Section 2.8 of the Credit Agreement, as applicable.     3.3  Unused Credit Fee.  The Unused Credit Fee shall be an amount equal to 0.25% per annum of the average Daily Unused Credit Amount, calculated on the basis of actual days elapsed over a year of 360 days and twelve 30-day months. The Unused Credit Fee shall be and is payable quarterly in arrears on the last day of each March, June, September and December, commencing on the first such day to occur after the date hereof, and on the date the Credit terminates.     3.4  Letter of Credit Commission.  Intentionally Deleted.     3.5  Credit Termination Fee.  Upon termination or cancellation of the Credit prior to the stated Termination Date described in Section 2.4(i) of this Supplement A, the Borrower shall pay to the Lender a termination fee in an amount equal to: (a) two percent percent (2.00%) of the Credit Amount in the event that the Credit is terminated or cancelled during the first Loan Year, and (b) one percent (1.00%) of the Credit Amount thereafter; provided, that no credit termination fee is payable if Lender refinances the credit facility provided by the Credit Agreement.     4.  Eligible Account Receivable Requirements.  The Account Receivable, other than an Installment Account Receivable, cannot be payable in installments. The Account Receivable, other than an Installment Account Receivable, must not be unpaid on the date that is the earlier of 91 days after the date of the invoice evidencing such Account Receivable or 60 days after the original due date stated in such invoice or, if such unpaid, such Account Receivable shall cease to be an Eligible Account Receivable. If any installment on any Installment Account Receivable remains unpaid more than 31 days past its original due date, then such Installment Account Receivable shall cease to be an Eligible Account Receivable in its entirety. If 10% or more of the unpaid net amount of all Accounts Receivable from any one Account Debtor cease to be Eligible Accounts Receivable pursuant to this Section 4 where such percentage is calculated based on all of such Account Debtor's Accounts Receivable regardless of type, then all of such Account Debtor's Accounts Receivable shall cease to be Eligible Accounts Receivable.     5.  Eligible Inventory Requirements.  Inclusion of hyaluronate powder in the Borrowing Base is conditioned upon the existence of a contract between the Borrower and Alcon requiring Alcon to purchase hyaluronate powder.     6.  Eligible Equipment Requirements.  Intentionally Deleted.     7.  Additional Covenants.  From the date of this Supplement A and thereafter until all of the Borrower's Obligations under the Credit Agreement are paid in full, the Borrower agrees that, unless -------------------------------------------------------------------------------- the Lender shall otherwise consent in writing, it will not, and will not permit any Subsidiary to, do any of the following:     7.1  Net Worth  Permit at any time the Borrower's Net Worth to be less than the sum of: (a) (i) from the Closing Date through and including June 30, 1999, $51,000,000; or (ii) at any time thereafter, the sum of: (A) $51,000,000; plus (B) 50% of the Borrower's cumulative after-tax net income (without any deduction for losses) earned on or after July 1, 1998; plus (b) 100% of the book value increase resulting from the issuance of any capital stock including, without limitation, any increase in paid-in-capital resulting from such issuance.     7.2  Capital Expenditures.  Make Capital Expenditures in an amount exceeding on a consolidated basis: (a) $2,000,000 during the Borrower's 1999 fiscal year; (b) $3,000,000 during the Borrower's 2000 fiscal year; or (c) $4,500,000 during the Borrower's 2001 fiscal year.     7.5  Interest Coverage Ratio.  As of the last day of any fiscal quarter, commencing with the fiscal quarter ending on June 30, 1999, through and including the fiscal quarter ending on March 31, 2000, permit the ratio of: (a) the Borrower's EBIT for the 12 consecutive fiscal months ending on that date to (b) its consolidated interest expense (including, without limitation, imputed interest expense on Capitalized Leases) for the same period to be less than 1.0 to 1.0. [Remainder of this page intentionally blank] --------------------------------------------------------------------------------     7.6  Fixed Charge Coverage Ratio.  (a) As of the last day of any fiscal quarter, permit the ratio of: (a) the Borrower's EBITDA for the period of consecutive months indicated (the "FCC Calculation Period") on the following table (the "FCC Table") and ending on such date to (b) the sum of its consolidated interest expense (including, without limitation, imputed interest expense on Capitalized Leases) plus scheduled payments of long term debt (excluding the note payable to Bridger Biomed), cash payments for taxes, dividends paid, and Capital Expenditures for the same period (such ratio being the "FCC Ratio") to be less than the ratio specified on the FCC Table: Fiscal Quarter End --------------------------------------------------------------------------------   Minimum FCC Ratio --------------------------------------------------------------------------------   FCC Calculation Period -------------------------------------------------------------------------------- June 30, 2000   1.05:1.00   12 months September 30,2000   1.05:1.00   3 months December 31, 2000   0.85:1.00   6 months March 31, 2001   1.10:1.0   9 months June 30, 2001 and any subsequent fiscal quarter end   1.10:1.0   12 months Borrower's Initials:   DJA         --------------------------------------------------------------------------------     Lender's Initials:   KAC         --------------------------------------------------------------------------------     Date:   As of July 21, 2000 -------------------------------------------------------------------------------- QUICKLINKS AMENDMENT NO. 2 TO CREDIT AND SECURITY AGREEMENT RECITALS: SUPPLEMENT A (Amended 7/2000) to CREDIT AND SECURITY AGREEMENT Between U.S. BANK NATIONAL ASSOCIATION (the " Lender ") and LIFECORE BIOMEDICAL, INC. (the " Borrower ")

QuickLinks -- Click here to rapidly navigate through this document AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT     THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of October 31, 2000, by and among Avocent Employment Services Co. (formerly known as Polycon Investments, Inc.), a Texas corporation ("Employer"), Avocent Corporation, a Delaware corporation, and Douglas E. Pritchett (the "Employee"). RECITALS     WHEREAS, the Employer is a direct or indirect subsidiary of Avocent Corporation engaged in the business of leasing employees to Avocent Corporation and its affiliates, including Apex Inc. ("Apex") and Cybex Computer Products Corporation ("Cybex");     WHEREAS, Avocent Corporation and its affiliates (collectively referred to in this Agreement as "Avocent") are engaged in the business of designing, manufacturing, and selling stand-alone console/ KVM switching systems, console/KVM remote access products, and integrated server cabinet solutions for the client/server computing market;     WHEREAS, Employee, Employer, and Cybex entered into that certain Employment and Noncompetition Agreement dated July 1, 1999, as amended by that certain First Amendment dated March 7, 2000 (collectively, the "Original Employment Agreement"); and     WHEREAS, on March 8, 2000, Apex, Cybex, and Avocent Corporation entered into an Agreement and Plan of Reorganization dated March 8, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, (i) Apex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Apex on July 1, 2000 (the "Apex Merger"), and upon the Apex Merger, Apex became a wholly-owned subsidiary of Avocent, and (ii) Cybex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Cybex (the "Cybex Merger") on July 1, 2000, and upon the Cybex Merger, Cybex also became a wholly-owned subsidiary of Avocent; and     WHEREAS, for and in consideration of an increase in base pay, certain incentive bonus eligibility and awards, and an award of stock options that would not otherwise be made to Employee, Employer, Employee, Cybex, and Avocent now wish to amend and restate the Original Employment Agreement with this Amended and Restated Employment and Noncompetition Agreement. AGREEMENT     THE PARTIES HERETO AGREE AS FOLLOWS:     1.  DUTIES.  During the term of this Agreement, the Employee agrees to be employed by Employer and to serve Avocent as its Senior Vice President of Finance, Chief Financial Officer, Treasurer, and Assistant Secretary, and Employer agrees to employ the Employee and lease the Employee to Avocent to serve Avocent in such capacities. The Employee shall devote such of his business time, energy, and skill to the affairs of Avocent and Employer as shall be necessary to perform the duties of Senior Vice President of Finance, Chief Financial Officer, Treasurer, and Assistant Secretary. The Employee shall report to the President of the Employer, Cybex, and Avocent Corporation and to the Boards of Directors of the Employer, Cybex, and Avocent Corporation, and at all times during the term of this Agreement, the Employee shall have powers and duties at least commensurate with his position as Senior Vice President of Finance, Chief Financial Officer, Treasurer, and Assistant Secretary of Avocent Corporation. --------------------------------------------------------------------------------     2.  TERM OF EMPLOYMENT.       2.1  DEFINITIONS.  For purposes of this Agreement the following terms shall have the following meanings:     (a) "TERMINATION FOR CAUSE" shall mean termination by the Employer of the Employee's employment by the Employer by reason of the Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the Employer or Avocent or by reason of the Employee's willful material breach of this Agreement which has resulted in material injury to the Employer or Avocent.     (b) "TERMINATIONS OTHER THAN FOR CAUSE" shall mean termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than in a Termination for Cause) and shall include any constructive termination of the Employee's employment by reason of material breach of this Agreement by the Employer or Avocent, such constructive termination to be effective upon thirty (30) days written notice from the Employee to the Employer of such constructive termination.     (c) "VOLUNTARY TERMINATION" shall mean termination by the Employee of the Employee's employment by the Employer other than (i) constructive termination as described in subsection 2.1(b), (ii) "Termination Upon a Change in Control" as described in Section 2.1(e), and (iii) termination by reason of the Employee's disability or death as described in Sections 2.5 and 2.6.     (d) "TERMINATION UPON A CHANGE IN CONTROL" shall mean (i) a termination by the Employee of the Employee's employment with the Employer or services to Avocent within six (6) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement), or (ii) any termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than a Termination for Cause) within eighteen (18) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement).     (e) "CHANGE IN CONTROL" shall mean any one of the following events:      (i) Any person (other than Avocent) acquires beneficial ownership of Employer's, Cybex's, or Avocent Corporation's securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of Employer's, Cybex's, or Avocent Corporation's then outstanding stock. For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Employer's, Cybex's, or Avocent Corporation's securities would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.     (ii) Within any twenty-four (24) month period, the individuals who were Directors of Avocent Corporation at the beginning of any such period, together with any other Directors first elected as directors of Avocent Corporation pursuant to nominations 2 -------------------------------------------------------------------------------- approved or ratified by at least two-thirds (2/3) of the Directors in office immediately prior to any such election, cease to constitute a majority of the Board of Directors of Avocent Corporation.     (iii) Avocent Corporation's stockholders approve:     (1) any consolidation or merger of Avocent Corporation in which Avocent Corporation is not the continuing or surviving corporation or pursuant to which shares of Avocent Corporation common stock would be converted into cash, securities or other property, other than a merger or consolidation of Avocent Corporation in which the holders of Avocent Corporation's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Avocent Corporation. Notwithstanding subparagraphs (e)(iii)(1) and (e)(iii)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Avocent Corporation is owned, directly or indirectly, by a holding company, and the holders of Avocent Corporation's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     (iv) Cybex's stockholders approve:     (1) any consolidation or merger of Cybex in which Cybex is not the continuing or surviving corporation or pursuant to which shares of Cybex common stock would be converted into cash, securities or other property, other than a merger or consolidation of Cybex (including a merger of Cybex into Avocent Corporation) in which the holders of Cybex's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Cybex. Notwithstanding subparagraphs (e)(iv)(1) and (e)(iv)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Cybex is owned, directly or indirectly, by a holding company, and the holders of Cybex's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     2.2  BASIC TERM.  The term of employment of the Employee by the Employer shall be for the period beginning immediately prior to the closing of the Cybex Merger (as described in the Reorganization Agreement) on July 1, 2000, and ending on December 31, 2004, unless terminated earlier pursuant to this Section 2. At any time before December 31, 2004, the Employer and the Employee may by mutual written agreement extend the Employee's employment under the terms of this Agreement for such additional periods as they may agree.     2.3  TERMINATION FOR CAUSE.  Termination For Cause may be effected by the Employer at any time during the term of this Agreement and shall be effected by thirty (30) days written notification to the Employee from the Boards of Directors of Employer and Avocent 3 -------------------------------------------------------------------------------- Corporation stating the reason for termination. Upon Termination For Cause, the Employee immediately shall be paid all accrued salary, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.4  TERMINATION OTHER THAN FOR CAUSE.  Notwithstanding anything else in this Agreement, the Employer may effect a Termination Other Than For Cause at any time upon giving thirty (30) days written notice to the Employee of such termination. Upon any Termination Other Than For Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.2, but no other compensation or reimbursement of any kind.     2.5  TERMINATION BY REASON OF DISABILITY.  If, during the term of this Agreement, the Employee, in the reasonable judgment of the Board of Directors of Avocent, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than six (6) consecutive months, the Employer shall have the right to terminate the Employee's employment hereunder by delivery of written notice to the Employee at any time after such six month period and payment to the Employee of all accrued salary, bonus compensation in an amount equal to the average annual bonus earned by the Employee as an employee of Avocent and its affiliates and predecessors in the two (2) years immediately preceding the date of termination, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of this Agreement, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.6  TERMINATION BY REASON OF DEATH.  In the event of the Employee's death during the term of this Agreement, the Employee's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Employer shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the 4 -------------------------------------------------------------------------------- Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.7  VOLUNTARY TERMINATION.  Notwithstanding anything else in this Agreement, the Employee may effect a Voluntary Termination at any time upon giving thirty (30) days written notice to the Employer of such termination. In the event of a Voluntary Termination, the Employer shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.8  TERMINATION UPON A CHANGE IN CONTROL.  In the event of a Termination Upon a Change in Control, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.1, but no other compensation or reimbursement of any kind. Employee acknowledges and agrees that the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger do not constitute, and shall not be construed retroactively or otherwise as constituting, a "Change in Control" as defined in Section 2.1(e) and that any future termination of Employee's employment with Employer will not constitute a "Termination Upon A Change in Control" under Section 2.1(d) or this Section 2.8 unless there is a Change in Control as defined in Section 2.1(e) of this Agreement after the date of this Agreement.     3.  SALARY, BENEFITS AND BONUS COMPENSATION.       3.1  BASE SALARY.  Effective July 1, 2000, as payment for the services to be rendered by the Employee as provided in Section 1 and subject to the terms and conditions of Section 2, the Employer agrees to pay to the Employee a "Base Salary" at the rate of $215,000 per annum, payable in equal bi-weekly installments. The Base Salary for each calendar year (or proration thereof) beginning January 1, 2001 shall be determined by the Board of Directors of Avocent Corporation upon a recommendation of the Compensation Committee of Avocent Corporation (the "Compensation Committee"), which shall authorize an increase in the Employee's Base Salary in an amount which, at a minimum, shall be equal to the cumulative cost-of-living increment on the Base Salary as reported in the "Consumer Price Index, Huntsville, Alabama, All Items," published by the U.S. Department of Labor (using July 1, 2000, as the base date for computation prorated for any partial year). The Employee's Base Salary shall be reviewed annually by the Board of Directors and the Compensation Committee of Avocent Corporation.     3.2  BONUSES.  The Employee shall be eligible to receive a bonus for each calendar year (or portion thereof) during the term of this Agreement and any extensions thereof, with the actual amount of any such bonus to be determined in the sole discretion of the Board of Directors of Avocent Corporation based upon its evaluation of the Employee's performance during such year. All such bonuses shall be payable during the last month of the fiscal year or within forty-five 5 -------------------------------------------------------------------------------- (45) days after the end of the fiscal year to which such bonus relates. All such bonuses shall be reviewed annually by the Compensation Committee of Avocent Corporation.     3.3  ADDITIONAL BENEFITS.  During the term of this Agreement, the Employee shall be entitled to the following fringe benefits:     (a) THE EMPLOYEE BENEFITS. The Employee shall be eligible to participate in such of Avocent's benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of or Avocent, including, without limitation, stock option plans, Section 401(k) plan, profit sharing plans, annual physical examinations, dental and medical plans, personal catastrophe and disability insurance, retirement plans and supplementary executive retirement plans, if any. For purposes of establishing the length of service under any benefit plans or programs of Cybex or Avocent, the Employee's employment with the Employer (or any successor) will be deemed to have commenced on the date that Employee first commenced employment with Cybex, which was September 16, 1998.     (b) VACATION. The Employee shall be entitled to vacation in accordance with the Avocent Corporation's vacation policy but in no event less than three weeks during each year of this Agreement.     (c) LIFE INSURANCE. For the term of this Agreement and any extensions thereof, the Employer shall at its expense procure and keep in effect term life insurance on the life of the Employee, payable to such beneficiaries as the Employee may from time to time designate, in an aggregate amount equal to the lesser of (i) three times the Employee's Base Salary or (ii) $500,000. Such policy shall be owned by the Employee or by any person or entity with an insurable interest in the life of the Employee.     (d) REIMBURSEMENT FOR EXPENSES. During the term of this Agreement, the Employer or Avocent Corporation shall reimburse the Employee for reasonable and properly documented out-of-pocket business and/or entertainment expenses incurred by the Employee in connection with his duties under this Agreement.     4.  SEVERANCE COMPENSATION.       4.1  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL.  In the event the Employee's employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of termination of this Agreement, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.1 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.1. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate of 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated. The Employee shall be provided with 6 -------------------------------------------------------------------------------- medical plan benefits under any health plans of Avocent or Employer in which the Employee is a participant to the full extent of the Employee's rights under such plans for a period of 12 months from the date of termination of this Agreement; provided, however, that the benefits under any such plans of Employer or Avocent in which the Employee is a participant, including any such perquisites, shall cease upon employment by a new employer.     4.2  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE.  In the event the Employee's employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of such termination, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.2 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Other Than for Cause, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.2. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate on 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated.     4.3  NO SEVERANCE COMPENSATION UNDER OTHER TERMINATION.  In the event of a Voluntary Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to Section 2.5, or termination by reason of the Employee's death pursuant to Section 2.6, the Employee or his estate shall not be paid any severance compensation.     5.  NON-COMPETITION OBLIGATIONS.  Unless waived or reduced by the Employer or Avocent, during the term of this Agreement and for a period of 12 months thereafter, the Employee will not, without the Employer's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity in the United States, Canada, or Europe which is substantially similar to or in direct competition with any of the business activities of or services provided by the Employer at such time. Notwithstanding the foregoing, the ownership by the Employee of not more than five percent (5%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on The Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions of this Section 5.     6.  MISCELLANEOUS.       6.1  PAYMENT OBLIGATIONS.  If litigation after a Change in Control shall be brought to enforce or interpret any provision contained herein, the Employer and Avocent Corporation, to the extent permitted by applicable law and the Employer's and Avocent Corporation's Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for the Employee's reasonable attorneys' fees and disbursements incurred in such litigation.     6.2  GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable guarantees the payment obligations of the Employer under this Agreement, including, without limitation, the Employer's obligations under Section 6.1 hereof. 7 --------------------------------------------------------------------------------     6.3  WITHHOLDINGS.  All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.     6.4  WAIVER.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.     6.5  ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral with respect to the subject matter hereof including without limitation, the Original Employment Agreement, and any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to the Employee from the Employer or Avocent Corporation. In particular, Employee acknowledges and agrees that the terms and conditions of this Agreement (and not the Original Employment Agreement) shall apply to all stock option awards granted to Employee under any Cybex or Avocent stock option plan (including, without limitation, Employee's September 18, 2000 stock option award from Avocent Corporation). All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.     6.6  NOTICES.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon hand delivery to an officer of the Employer or the Employee, as the case may be, or upon three (3) days after mailing to the respective persons named below: If to the Employer/Avocent: Avocent Corporation 4991 Corporate Drive Huntsville, AL 35805 Attn: Executive Vice President Copy to General Counsel   If to the Employee:   Douglas E. Pritchett [          ] [          ]     Any party may change such party's address for notices by notice duly given pursuant to this Section 6.6.     6.7  HEADINGS.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.     6.8  GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in accordance with the laws of the State of Alabama. The Employee, the Employer, and Avocent Corporation each hereby expressly consents to the exclusive venue of the state and federal courts located in Huntsville, Madison County, Alabama, for any lawsuit arising from or relating to this Agreement.     6.9  ARBITRATION.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in Huntsville, Alabama, in accordance with the Rules of the American Arbitration Association, and judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. There shall be three (3) arbitrators, one (1) to be chosen directly by each party at will, and the third arbitrator to be 8 -------------------------------------------------------------------------------- selected by the two (2) arbitrators so chosen. To the extent permitted by the Rules of the American Arbitration Association, the selected arbitrators may grant equitable relief. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The cost of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne equally by the parties.     6.10  SEVERABILITY.  If a court or other body of competent jurisdiction determines that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.     6.11  SURVIVAL OF EMPLOYER'S OBLIGATIONS.  The Employer's and Avocent Corporation's obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to the Employer or Avocent Corporation. This Agreement shall not be terminated by any merger or consolidation or other reorganization of the Employer or Avocent Corporation. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Employer (except to an affiliate of the Employer (including Avocent Corporation) in which event the Employer shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by the Employee.     6.12  COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.     6.13  INDEMNIFICATION.  In addition to any rights to indemnification to which the Employee is entitled to under the Employer's Articles of Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify the Employee at all times during and after the term of this Agreement to the maximum extent permitted under the corporation laws of the State of Delaware and any other applicable state law, and shall pay the Employee's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws.     6.14  INDEMNIFICATION FOR SECTION 4999 EXCISE TAXES.  In the event that it shall be determined that any payment or other benefit paid by the Employer or Avocent Corporation to or for the benefit of the Employee under this Agreement or otherwise, but determined without regard to any additional payments required under this Amendment (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employer and Avocent Corporation shall indemnify the Employee for such Excise Tax in accordance with the following:     (a) The Employee shall be entitled to receive an additional payment from the Employer and/or Avocent Corporation equal to (i) one hundred percent (100%) of any Excise Tax actually paid or finally or payable by the Employee in connection with the Payments, plus (ii) an additional payment in such amount that after all taxes, interest and penalties incurred in connection with all payments under this Section 2(a), the Employee retains an amount equal to one hundred percent (100%) of the Excise Tax.     (b) All determinations required to be made under this Section shall be made by the Avocent Corporation's primary independent public accounting firm, or any other nationally 9 -------------------------------------------------------------------------------- recognized accounting firm reasonably acceptable to the Avocent Corporation and the Employee (the "Accounting Firm"). Avocent Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Employer and the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. For purposes of making the calculations required by this Section, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Internal Revenue Code, provided the Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Internal Revenue Code). The payments to which the Employee is entitled pursuant to this Section shall be paid by the Employer and/or Avocent Corporation to the Employee in cash and in full not later than thirty (30) calendar days following the date the Employee becomes subject to the Excise Tax.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     AVOCENT EMPLOYMENT SERVICES, INC.:           By:   /s/ JULIE YARBROUGH    --------------------------------------------------------------------------------     Its: President --------------------------------------------------------------------------------           AVOCENT CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Executive Vice President --------------------------------------------------------------------------------           EMPLOYEE:           /s/ DOUGLAS E. PRITCHETT    -------------------------------------------------------------------------------- Douglas E. Pritchett 10 -------------------------------------------------------------------------------- QUICKLINKS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT RECITALS AGREEMENT

EXHIBIT 10.2   THIRD AMENDED AND RESTATED  REVOLVING CREDIT AGREEMENT Dated as of May 16, 2000 by and among WASTE CONNECTIONS, INC. AND ITS SUBSIDIARIES (the "Borrowers") THE LENDING INSTITUTIONS PARTY HERETO (the "Banks") and FLEET NATIONAL BANK, as Administrative Agent  BANKERS TRUST COMPANY,  as Syndication Agent and WELLS FARGO BANK, N.A., LASALLE BANK NATIONAL ASSOCIATION,  UNION BANK OF CALIFORNIA, N.A.  each as Managing Agent CHASE BANK OF TEXAS, COMERICA BANK - CALIFORNIA  each as Co-Agent With FLEETBOSTON ROBERTSON STEPHENS INC., as Lead Arranger DEUTSCHE BANK SECURITIES, INC., as Co-Lead Arranger -------------------------------------------------------------------------------- TABLE OF CONTENTS §1. DEFINITIONS AND RULES OF INTERPRETATION. 1              §1.1. Definitions. 1              §1.2. Rules of Interpretation. 16 §2. THE REVOLVING CREDIT FACILITY. 17            §2.1. Commitment to Lend. 17            §2.2. Reduction and Increase of Total Commitment. 17            §2.2.2. Increase of Total Commitment. 18            §2.3. The Revolving Credit Notes. 18            §2.4. Interest on Loans. 18            §2.5. Election of Eurodollar Rate; Notice of Election; Interest Periods;              Minimum Amounts. 18            §2.6. Requests for Revolving Credit Loans. 19            §2.7. Funds for Revolving Credit Loans. 20            §2.8. Maturity of the Loans. 21            §2.9. Mandatory Repayments of the Loans. 21            §2.10. Optional Prepayments or Repayments of Loans. 21            §2.11. Swing Line Loans; Settlements. 21 §3. LETTERS OF CREDIT. 23            §3.1. Letter of Credit Commitments. 23            §3.2. Reimbursement Obligation of the Borrowers. 24            §3.3. Letter of Credit Payments. 25            §3.4. Obligations Absolute. 25            §3.5. Reliance by Administrative Agent. 26 §4. FEES, PAYMENTS, AND COMPUTATIONS; JOINT AND SEVERAL   LIABILITY. 26            §4.1. Fees. 26            §4.2. Payments. 27            §4.3. Computations. 28            §4.4. Capital Adequacy. 28            §4.5. Certificate. 28            §4.6. Interest on Overdue Amounts. 28            §4.7. Interest Limitation. 29            §4.8. Eurodollar Indemnity. 29            §4.9. Illegality; Inability to Determine Eurodollar Rate. 29            §4.10. Additional Costs, Etc. 30            §4.11. Replacement of Banks. 30            §4.12. Concerning Joint and Several Liability of the Borrowers. 31 §5. REPRESENTATIONS AND WARRANTIES. 32            §5.1. Corporate Authority. 33            §5.2. Governmental Approvals. 33            §5.3. Title to Properties; Leases. 33            §5.4. Financial Statements; Solvency. 33            §5.5. No Material Changes, Etc. 34            §5.6. Permits, Franchises, Patents, Copyrights, Etc. 34            §5.7. Litigation. 34            §5.8. No Materially Adverse Contracts, Etc. 34            §5.9. Compliance With Other Instruments, Laws, Etc. 34            §5.10. Tax Status. 35 -------------------------------------------------------------------------------- -ii-            §5.11. No Event of Default. 35            §5.12. Holding Company and Investment Company Acts. 35            §5.13. Absence of Financing Statements, Etc. 35            §5.14. Employee Benefit Plans. 35            §5.15. Use of Proceeds. 36                      §5.15.1. General. 36                      §5.15.2. Regulations U and X. 36                      §5.15.3. Ineligible Securities. 36            §5.16. Environmental Compliance. 37            §5.17. Perfection of Security Interests. 38            §5.18. Transactions with Affiliates. 38            §5.19. Subsidiaries. 38            §5.20. True Copies of Charter and Other Documents. 38            §5.21. Disclosure. 39            §5.22. Capitalization. 39 §6. AFFIRMATIVE COVENANTS OF THE BORROWERS. 39            §6.1. Punctual Payment. 39            §6.2. Maintenance of Offices. 39            §6.3. Records and Accounts. 39            §6.4. Financial Statements, Certificates and Information. 40            §6.5. Corporate Existence and Conduct of Business. 41            §6.6. Maintenance of Properties. 41            §6.7. Insurance. 41            §6.8. Taxes. 42            §6.9. Inspection of Properties, Books, and Contracts. 42            §6.10. Compliance with Laws, Contracts, Licenses and Permits;              Maintenance of Material Licenses and Permits. 42            §6.11. Environmental Indemnification. 42            §6.12. Further Assurances. 43            §6.13. Notice of Potential Claims or Litigation. 43            §6.14. Notice of Certain Events Concerning Insurance and Environmental              Claims. 43            §6.15. Response Actions. 44            §6.16. Notice of Default. 44            §6.17. New Subsidiaries. 44            §6.18. Employee Benefit Plans. 44            §6.19. Notice of Loss of Material Contracts. 44 §7. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. 45            §7.1. Restrictions on Indebtedness. 45            §7.2. Restrictions on Liens. 45            §7.3. Restrictions on Investments. 47            §7.4. Merger, Consolidation and Disposition of Assets. 47                      §7.4.1. Mergers and Acquisitions. 47                      §7.4.2. Disposition of Assets. 49            §7.5. Sale and Leaseback. 49            §7.6. Restricted Distributions and Redemptions. 49            §7.7. Employee Benefit Plans. 50            §7.8. Negative Pledges. 50            §7.9. Business Activities. 50 ii -------------------------------------------------------------------------------- -iii-            §7.10. Transactions with Affiliates. 50            §7.11. Subordinated Debt. 51 §8. FINANCIAL COVENANTS. 51            §8.1. Leverage Ratio. 51            §8.2. Funded Debt to Capitalization Ratio. 51            §8.3. Interest Coverage Ratio. 51            §8.4. Profitable Operations. 51            §8.5. Capital Expenditures. 52 §9. CLOSING CONDITIONS. 52            §9.1. Corporate Action. 52            §9.2. Loan Documents, Etc. 52            §9.3. Certificate of Secretary; Good Standing Certificates. 52            §9.4. Validity of Liens. 52            §9.5. Perfection Certificates and UCC Search Results. 52            §9.6. Certificates of Insurance. 53            §9.7. Legal Opinions. 53            §9.8. Environmental Permit Certificate. 53            §9.9. Payment of Fees. 53            §9.10. Closing Certificate. 53 §10. CONDITIONS OF ALL LOANS. 53            §10.1. Representations True; No Event of Default. 53            §10.2. Performance; No Event of Default. 54            §10.3. No Legal Impediment. 54            §10.4. Governmental Regulation. 54            §10.5. Proceedings and Documents. 54 §11. COLLATERAL SECURITY. 54 §12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF   COMMITMENT. 55            §12.1. Events of Default and Acceleration. 55            §12.2. Termination of Commitments. 57            §12.3. Remedies. 57 §13. SETOFF. 58 §14. THE ADMINISTRATIVE AGENT. 58            §14.1. Appointment of Administrative Agent, Powers and Immunities. 58            §14.2. Actions By Administrative Agent. 59            §14.3. INDEMNIFICATION. 59            §14.4. Reimbursement. 60            §14.5. Documents. 60                       §14.5.1. Closing Documentation. 60                       §14.5.2. Other Documents. 60            §14.6. Non-Reliance on Administrative Agent and Other Banks. 61            §14.7. Resignation or Removal of Administrative Agent. 61            §14.8. Consents, Amendments, Waivers, Etc. 62            §14.9. Delinquent Banks. 62            §14.10. Syndication Agent. 63 §15. EXPENSES AND INDEMNIFICATION. 63            §15.1. Expenses. 63            §15.2. Indemnification. 63            §15.3. Survival. 64 iii -------------------------------------------------------------------------------- -iv- §16. SURVIVAL OF COVENANTS, ETC. 64 §17. ASSIGNMENT AND PARTICIPATION. 64 §18. PARTIES IN INTEREST. 65 §19. NOTICES, ETC. 66 §20. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. 66            §20.1. Sharing of Information with Section 20 Subsidiary. 66            §20.2. Confidentiality. 66            §20.3. Prior Notification. 67            §20.4. Other. 67 §21. MISCELLANEOUS. 67 §22. ENTIRE AGREEMENT, ETC. 67 §23. WAIVER OF JURY TRIAL. 68 §24. GOVERNING LAW. 68 §25. SEVERABILITY. 68     Schedules & Exhibits     Exhibit A Form of Revolving Credit Note Exhibit B Form of Loan and Letter of Credit Request Exhibit C Form of Swing Line Note Exhibit D Form of Compliance Certificate Exhibit E Form of Environmental Compliance Certificate Exhibit F Form of Assignment and Acceptance         Schedule 1 Banks; Addresses; Commitment Percentages Schedule 2 Subsidiaries Schedule 3.1 Letters of Credit Schedule 5.7 Litigation Schedule 5.9 Material Contracts Schedule 5.16 Environmental Matters Schedule 5.18 Transactions with Affiliates Schedule 7.2 Existing Liens Schedule 7.3 Existing Investments iv -------------------------------------------------------------------------------- THIRD AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT      This THIRD AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of May 16, 2000 (the "Credit Agreement"), by and among (a) WASTE CONNECTIONS, INC., a Delaware corporation (the "Parent"), the subsidiaries of the Parent identified on Schedule 2 hereto (the "Subsidiaries," and collectively with the Parent, the "Borrowers"), (b) FLEET NATIONAL BANK (f/k/a BankBoston, N.A.) a national banking association having a place of business at 100 Federal Street, Boston, Massachusetts 02110 (acting in its individual capacity, "Fleet") and the other banks and lending institutions which are identified on Schedule 1 attached hereto (collectively, the "Banks"), (c) FLEET NATIONAL BANK, as administrative agent for the Banks (the "Administrative Agent"), (d) WELLS FARGO BANK, N.A., LASALLE BANK NATIONAL ASSOCIATION and UNION BANK OF CALIFORNIA, N.A., each as a managing agent for the Banks (each a "Managing Agent" and collectively, the "Managing Agents"), (e) CHASE BANK OF TEXAS and COMERICA BANK — CALIFORNIA, each as a co-agent for the Banks (each a "Co-Agent" and collectively, the "Co-Agents"), and (f) BANKERS TRUST COMPANY, as syndication agent for the Banks (the "Syndication Agent"). W I T N E S S E T H:      WHEREAS, the Borrowers and the Administrative Agent are party to that certain Second Amended and Restated Revolving Credit Agreement dated as of March 30, 1999, (as amended and in effect as of the date hereof, the "Prior Credit Agreement"); and      WHEREAS, the Borrowers have requested, among other things, additional financing and the Banks are willing to provide such financing on the terms and conditions set forth herein;      NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements set forth herein below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that on the Closing Date, the Prior Credit Agreement shall be amended and restated in its entirety by this Credit Agreement, the terms of which are as follows: §1. DEFINITIONS AND RULES OF INTERPRETATION.      §1.1. Definitions. The following terms shall have the meanings set forth in this §1 or elsewhere in the provisions of this Credit Agreement referred to below:      Accountants. An independent accounting firm of national standing reasonably acceptable to the Banks and the Administrative Agent.     Affected Bank. See §4.11.     Administrative Agent. See Preamble.     Affiliates. Any Person that would be considered to be an affiliate of any Borrower under Rule 144(a) of the Rules and Regulations of the Securities and 1 -------------------------------------------------------------------------------- Exchange Commission, as in effect on the date hereof, if the Borrower were issuing securities.      Applicable Base Rate Margin. The applicable margin with respect to Base Rate Loans as set forth in the Pricing Table.      Applicable Commitment Rate. The applicable rate with respect to the Commitment Fee as set forth in the Pricing Table.      Applicable Eurodollar Margin. The applicable margin with respect to Eurodollar Loans as set forth in the Pricing Table.      Applicable Laws. See §6.10.      Applicable L/C Margin. The applicable margin with respect to the Letter of Credit Fee as set forth in the Pricing Table.      Assignment and Acceptance. See §17.       Balance Sheet Date. December 31, 1999.       Banks. See Preamble.      Base Rate. The higher of (a) the variable annual rate of interest so designated from time to time by Fleet as its "prime rate," such rate being a reference rate and not necessarily representing the lowest or best rate being charged to any customer or (b) one-half of one percent (1/2%) above the overnight federal funds effective rate, as published by the Board of Governors of the Federal Reserve System, as in effect from time to time. Changes in the Base Rate resulting from any changes in Fleet's "prime rate" shall take place immediately without notice or demand of any kind on the effective day of such change.      Base Rate Loans. Loans bearing interest calculated by reference to the Base Rate.       Borrowers. See Preamble.      Boston Office. The Administrative Agent's office located at 100 Federal Street, Boston, Massachusetts 02110, or such other location as the Administrative Agent may designate from time to time.      Business Day. Any day on which banking institutions in Boston, Massachusetts or New York, New York are open for the transaction of banking business.      Capital Assets. Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and goodwill); provided that Capital Assets shall not include (a) any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with generally accepted accounting principles, or (b) any item obtained through an acquisition permitted by §7.4 hereof.      Capital Expenditures. Amounts paid or indebtedness incurred by the Borrowers and their Subsidiaries in connection with (i) the purchase or lease of Capital Assets that 2 -------------------------------------------------------------------------------- would be required to be capitalized and shown on the balance sheet of such Person in accordance with GAAP or (ii) the lease of any assets by the Borrowers or any Subsidiary as lessee under any Synthetic Lease to the extent that such assets would have been Capital Assets had the Synthetic Lease been treated for accounting purposes as a Capitalized Lease.      Capitalized Leases. Leases under which any Borrower is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP.      CERCLA. See definition of Release.      Certified. With respect to the financial statements of any Person, such statements as audited by a firm of independent auditors, whose report expresses the opinion, without qualification, that such financial statements present fairly the financial position of such Person.      CFO. See §6.4(b).      Closing Date. The date on which the conditions precedent set forth in §9 are satisfied.      Co-Agent(s). See preamble.      Code. The Internal Revenue Code of 1986, as amended and in effect from time to time.      Collateral. All of the property, rights and interests of the Borrowers that are or are intended to be subject to the security interests created by the Security Documents.      Columbia Bond. The $13,000,000 Solid Waste Transfer Station Revenue Bonds, Columbia Resource Company Project, Series 1991, issued by the Industrial Revenue Bond Public Corporation of Clark County, Washington.      Columbia Bond Documents. The documentation executed in connection with the Columbia Bond.      Columbia Issuing Bank. U.S. Bank National Association, a national banking association and a Bank hereunder.      Columbia Letter of Credit. The direct pay letter of credit issued by the Columbia Issuing Bank to support the Columbia Bond in the original stated amount of $13,598,805.32, as such face amount is reduced pursuant to the terms of such letter of credit from time to time.      Columbia Security Documents. The security agreements and mortgages securing the Columbia Letter of Credit and Columbia Bond.      Commitment. With respect to each Bank, the amount determined by multiplying such Bank's Commitment Percentage by the Total Commitment specified in §2.1 hereof, as the same may be reduced from time to time. 3 --------------------------------------------------------------------------------      Commitment Fee. See §4.1.      Commitment Percentage. With respect to each Bank, the percentage initially set forth beside its name on Schedule 1 (subject to adjustment in accordance with §§2.2.2 and 17).      Compliance Certificate. See §6.4(c).      Consolidated or consolidated. With reference to any term defined herein, shall mean that term as applied to the accounts of the Borrowers and their Subsidiaries consolidated in accordance with GAAP.      Consolidated Earnings Before Interest and Taxes or EBIT. For any period, the Consolidated Net Income (or Deficit) of the Borrowers determined in accordance with GAAP, plus (a) interest expense, (b) income taxes, (c) non-cash stock compensation charges of up to $260,000 in the aggregate taken during the four (4) fiscal quarters ending March 31, 2000 and no more than $110,000 in the aggregate thereafter, to the extent that each was deducted in determining Consolidated Net Income (or Deficit), all as determined in accordance with GAAP, (d) non-cash special charges for interest expense attributable to loan fees paid to Fleet and the Lenders in connection with the refinancing of the then existing credit facilities of up to $180,000 in the aggregate taken during the fiscal quarter ended March 31, 1999, (e) non-cash special charges relating to the "Allied Swap" in an aggregate amount not to exceed $833,000 and taken during the fiscal quarter ending June 30, 2000, (f) pooling charges taken in connection with any acquisition permitted under §7.4.1 hereof to the extent such pooling charges were deducted in determining Consolidated Net Income (or deficit), and (g) EBIT (plus nonrecurring company expenses that are (i) discontinued or adjusted upon acquisition by any of the Borrowers, such as owner compensation and adjustments to depreciation to conform to the Parent's accounting treatment, and (ii) approved by the Administrative Agent) for the prior twelve (12) months of any company acquired (either through an acquisition of such company's stock or through an acquisition of all or substantially all of such company's assets) during the period reported in a Compliance Certificate and other appropriate documentation (including, without limitation, historical financial results and balance sheets of the acquired companies), in form and substance satisfactory to the Administrative Agent, delivered to the Administrative Agent and the Banks pursuant to §§6.4 or 7.4.1(a) shall be included in the calculation of EBIT if (x) the financial statements of such acquired Subsidiaries have been audited, or (y) the Administrative Agent consents to such inclusion after being furnished with other acceptable financial statements and (z) the Compliance Certificate delivered to the Administrative Agent and the Banks for the period in which such acquisition was made shall report such acquisition.      Consolidated Earnings Before Interest, Taxes, Depreciation, and Amortization or EBITDA. For any period (without duplication), EBIT plus the depreciation expense and amortization expense, to the extent that each was deducted in determining Consolidated Net Income (or Deficit), determined in accordance with GAAP, plus the depreciation expense and amortization expense (without duplication) of any company whose EBIT was included as an adjustment as set forth in the definition of EBIT. 4 --------------------------------------------------------------------------------      Consolidated Net Income (or Deficit). The consolidated net income (or deficit) of the Borrowers after deduction of all expenses, taxes, and other proper charges (including, without limitation, pooling charges taken in connection with acquisitions permitted under §7.4.1), determined in accordance with GAAP.      Consolidated Net Worth. The excess of Consolidated Total Assets over Consolidated Total Liabilities, less, to the extent otherwise includable in the computation of Consolidated Net Worth, any subscriptions receivable.      Consolidated Total Assets. All assets of the Borrowers and their Subsidiaries determined on a consolidated basis in accordance with GAAP, plus (i) without duplication, all assets leased by the Borrowers or any Subsidiary as lessee under any Synthetic Lease to the extent that such assets would have been consolidated balance sheet assets had the Synthetic Lease been treated for accounting purposes as a Capitalized Lease, plus (ii) without duplication, all sold receivables referred to in clause (vii) of the definition of the term "Indebtedness" to the extent that such receivables would have been consolidated balance sheet assets had they not been sold.      Consolidated Total Interest Expense. For any period, the aggregate amount of interest required to be paid or accrued by the Borrowers and their Subsidiaries during such period on all Indebtedness of the Borrowers and their Subsidiaries outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including payments consisting of interest in respect of any Capitalized Lease or any Synthetic Lease and including commitment fees, agency fees, facility fees, balance deficiency fees and similar fees or expenses in connection with the borrowing of money, but excluding non-cash charges for amortized financing expenses (such as closing fees and similar fees and expenses) arising in connection with the Credit Agreement or the Prior Credit Agreement.      Consolidated Total Liabilities. All liabilities of the Borrowers determined on a consolidated basis in accordance with GAAP and classified as such on the consolidated balance sheet of the Borrowers.      Converted Wasco Bond. The Wasco Bond converted from a variable rate to a fixed rate.      Credit Agreement. See Preamble.       Default. See §12.      Delinquent Bank. See §14.9.      Disposal (or Disposed). See definition of Release.      Distribution. The declaration or payment of any dividend or distribution on or in respect of any shares of any class of capital stock, any partnership interests or any membership interests of any Person (other than dividends or other distributions payable solely in shares of common stock, partnership interests or membership units of such Person, as the case may be); the purchase, redemption, or other retirement of any shares of any class of capital stock, partnership interests or membership units of such Person, directly or indirectly through a Subsidiary or otherwise; the return of equity capital by 5 -------------------------------------------------------------------------------- any Person to its shareholders, partners or members as such; or any other distribution on or in respect of any shares of any class of capital stock, partnership interest or membership unit of such Person.      Dollars or $. Dollars in lawful currency of the United States of America.      Drawdown Date. The date on which any Revolving Credit Loan or Swing Line Loan is made or is to be made, and the date on which any Revolving Credit Loan is converted or continued in accordance with §2.5.      Eligible Assignee. Any of (a) a commercial bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having total assets in excess of $1,000,000,000; (b) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a net worth of at least $100,000,000, calculated in accordance with generally accepted accounting principles; (c) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (d) the central bank of any country which is a member of the OECD; (e) any Bank and any affiliate of any Bank and any fund that invests in loans and is managed by such Bank or by the same investment advisor of such Bank or by an affiliate of such investment advisor (and treating all such funds so managed as a single Eligible Assignee); and (f) any other bank, insurance company, commercial finance company or other financial institution approved by the Administrative Agent.      Eligible Foreign Bank. (a) Any commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country,provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; or (b) the central bank of any country which is a member of the OECD.      Employee Benefit Plan. Any employee benefit plan within the meaning of §3(3) of ERISA maintained or contributed to by the Borrowers or any ERISA Affiliate, other than a Guaranteed Pension Plan or a Multi-employer Plan.      Environmental Laws. See §5.16(a).       EPA. See §5.16(b).      Equipment Financing. Indebtedness of the Borrowers with respect to equipment leases or equipment chattel mortgages, including any such Indebtedness assumed in connection with an acquisition permitted under §7.4.      ERISA. The Employee Retirement Income Security Act of 1974, as amended and in effect from time to time.      ERISA Affiliate. Any Person which is treated as a single employer with the Borrowers under §414 of the Code. 6 --------------------------------------------------------------------------------      ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of §4043 of ERISA and the regulations promulgated thereunder.      Eurodollar Business Day. Any Business Day on which dealings in foreign currency and exchange are carried on among banks in London, England.      Eurodollar Interest Determination Date. For any Interest Period, the date two Eurodollar Business Days prior to the first day of such Interest Period.      Eurodollar Loans. Revolving Credit Loans bearing interest calculated by reference to the Eurodollar Rate.      Eurodollar Offered Rate. The rate per annum at which deposits of dollars are offered to the Administrative Agent by prime banks in whatever Eurodollar interbank market may be selected by the Administrative Agent, in its sole discretion, acting in good faith, at or about 11:00 a.m. local time in such interbank market, on the Eurodollar Interest Determination Date, for a period equal to the requested Interest Period in an amount substantially equal to the principal amount requested to be loaned at or converted to a rate based on the Eurodollar Rate.      Eurodollar Rate. The rate per annum, rounded upwards to the nearest 1/16 of 1%, determined by the Administrative Agent with respect to an Interest Period in accordance with the following formula: Eurodollar Rate = Eurodollar Offered Rate   1 - Reserve Rate      Event of Default. See §12.      Excluded Assets. The containers, vehicles, equipment and inventory in which the Banks are precluded from taking a security interest pursuant to any Scheduled Contract during the term of such Scheduled Contract.      Excluded Contracts. The Single Family Recyclables Collection Contract between City of Vancouver and Browning Ferris Industries of Washington, Inc., dated as of December 2, 1996, as amended and in effect from time to time.      Financial Letter of Credit. A Letter of Credit where the event which triggers payment is financial, such as the failure to pay money, and not performance-related, such as failure to ship a product or provide a service, as set forth in greater detail in the letter dated March 30, 1995 from the Board of Governors of the Federal Reserve System or in any applicable directive or letter ruling of the Board of Governors of the Federal Reserve System issued subsequent thereto.      Fleet. See Preamble.      Funded Debt. Consolidated Indebtedness of the Borrowers for borrowed money, the net present value (using the Base Rate as the discount rate) of every obligation of such Person issued or assumed as the deferred purchase price of property, including the Wichita Adjustment, or services (including securities repurchase agreements but 7 -------------------------------------------------------------------------------- excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are not overdue or which are being contested in good faith), and guarantees of such Indebtedness, recorded on the Consolidated balance sheet of the Borrowers, including reimbursement obligations of the Borrowers with respect to letters of credit and the amount of any Indebtedness of such Persons for Capitalized Leases which corresponds to principal.       generally accepted accounting principles or GAAP. When used in general, generally accepted accounting principles means (a) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal year ended on the Balance Sheet Date, as shall be concurred in by independent certified public accountants of recognized standing whose report expresses an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been applied; and (b) when used with reference to the Borrowers, such principles shall include (to the extent consistent with such principles) the accounting practices reflected in the consolidated financial statements for the year ended on the Balance Sheet Date.      Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of §3(2) of ERISA maintained or contributed to by the Borrowers or any ERISA Affiliate, the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan.      Hazardous Substances. See §5.16(b).      Indebtedness. As to any Person and whether recourse is secured by or is otherwise available against all or only a portion of the assets of such Person and whether or not contingent, but without duplication:  >             (i) every obligation of such Person for money borrowed,  > >             (ii) every obligation of such Person evidenced by bonds, > debentures, notes or other similar instruments, including obligations incurred > in connection with the acquisition of property, assets or businesses,  > >             (iii) every reimbursement obligation of such Person with respect > to letters of credit, bankers' acceptances or similar facilities issued for > the account of such Person,  > >             (iv) the net present value (using the Base Rate as the discount > rate) of every obligation of such Person issued or assumed as the deferred > purchase price of property or services (including securities repurchase > agreements but excluding (A) trade accounts payable or accrued liabilities > arising in the ordinary course of business which are not overdue or which are > being contested in good faith and (B) contingent purchase price obligations > solely to the extent that the contingency upon which such obligation is > conditioned has not yet occurred),  > >             (v) every obligation of such Person under any Capitalized Lease,  > >             (vi) every obligation of such Person under any Synthetic Lease, 8 -------------------------------------------------------------------------------- >            (vii) all sales by such Person of (A) accounts or general > intangibles for money due or to become due, (B) chattel paper, instruments or > documents creating or evidencing a right to payment of money or (C) other > receivables (collectively, "receivables"), whether pursuant to a purchase > facility or otherwise, other than in connection with the disposition of the > business operations of such Person relating thereto or a disposition of > defaulted receivables for collection and not as a financing arrangement, and > together with any obligation of such Person to pay any discount, interest, > fees, indemnities, penalties, recourse, expenses or other amounts in > connection therewith, provided, however, that sales referred to in clauses (B) > and (C) shall not constitute Indebtedness to the extent that such sales are > non-recourse to such Person;  > >            (viii) every obligation of such Person (an "equity related purchase > obligation") to purchase, redeem, retire or otherwise acquire for value any > shares of capital stock of any class issued by such Person, any warrants, > options or other rights to acquire any such shares, or any rights measured by > the value of such shares, warrants, options or other rights,  > >             (ix) every obligation of such Person under any forward contract, > futures contract, swap, option or other financing agreement or arrangement > (including, without limitation, caps, floors, collars and similar agreements), > the value of which is dependent upon interest rates, currency exchange rates, > commodities or other indices,  > >             (x) every obligation in respect of Indebtedness of any other > entity (including any partnership in which such Person is a general partner) > to the extent that such Person is liable therefor as a result of such Person's > ownership interest in or other relationship with such entity, except to the > extent that the terms of such Indebtedness provide that such Person is not > liable therefor and such terms are enforceable under applicable law,  > >             (xi) every obligation, contingent or otherwise, of such Person > guaranteeing, or having the economic effect of guarantying or otherwise acting > as surety for, any obligation of a type described in any of clauses (i) > through (x) (the "primary obligation") of another Person (the "primary > obligor"), in any manner, whether directly or indirectly, and including, > without limitation, any obligation of such Person (A) to purchase or pay (or > advance or supply funds for the purchase of) any security for the payment of > such primary obligation, (B) to purchase property, securities or services for > the purpose of assuring the payment of such primary obligation, or (C) to > maintain working capital, equity capital or other financial statement > condition or liquidity of the primary obligor so as to enable the primary > obligor to pay such primary obligation.      The "amount" or "principal amount" of any Indebtedness at any time of determination represented by (v) any Indebtedness, issued at a price that is less than the principal amount at maturity thereof, shall be the amount of the liability in respect thereof determined in accordance with generally accepted accounting principles, (w) any Capitalized Lease shall be the principal component of the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof that is not subject to termination by the lessee, (x) any sale of receivables shall be the amount of unrecovered capital or principal investment of the purchaser (other than the Borrowers) 9 -------------------------------------------------------------------------------- thereof, excluding amounts representative of yield or interest earned on such investment, (y) any Synthetic Lease shall be the stipulated loss value, termination value or other equivalent amount and (z) any equity related purchase obligation shall be the maximum fixed redemption or purchase price thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or purchase price.      Ineligible Securities. Securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1993 (12 U.S.C. §24, Seventh), as amended.      Interest Period. With respect to each Eurodollar Loan:          (a)     initially, the period commencing on the date of the making of a Eurodollar Loan or the conversion from a Base Rate Loan into a Eurodollar Loan and ending one (1), two (2), three (3), or six (6) months thereafter, as selected by the Borrowers in a Loan and Letter of Credit Request; and           (b)     thereafter, each subsequent Interest Period shall begin on the last day of the preceding Interest Period and shall end one (1), two (2), three (3), or six (6) months thereafter, as selected by the Borrowers in a Loan and Letter of Credit Request;          provided, however, that whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.      Lead Arranger. FleetBoston Robertson Stephens Inc.      Letter of Credit Applications. Letter of Credit Applications in such form as may be agreed upon by the Borrowers and the Administrative Agent from time to time which are entered into pursuant to §3 hereof, as such Letter of Credit Applications are amended, varied or supplemented from time to time.      Letter of Credit Fee. See §4.1(b).      Letter of Credit Participation. See §3.1(b).      Letters of Credit. Standby Letters of Credit, the Madera Letter of Credit, the Columbia Letter of Credit, the Wasco Letter of Credit, issued or to be issued by the Administrative Agent or, with respect to the Columbia Letter of Credit, the Columbia Issuing Bank, under §3 hereof for the account of the Borrowers.      Leverage Ratio. See §8.1.      Loan and Letter of Credit Request. See §2.6.      Loan Documents. This Credit Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, and the Security Documents, each as amended and in effect from time to time.     Loans. Collectively, the Revolving Credit Loans and Swing Line Loans. 10 --------------------------------------------------------------------------------      Madera. Madera Disposal Systems, Inc., a California corporation and a wholly-owned Subsidiary of the Parent.      Madera Bond. The $1,800,000 Variable Rate Demand Solid Waste Disposal Revenue Bonds, Madera Disposal Systems, Inc. Project, Series 1998A, issued by the California Pollution Control Financing Authority.      Madera Bond Documents. The documentation executed in connection with the Madera Bond.      Madera Letter of Credit. The direct pay letter of credit to support the Madera Bond.      Majority Banks. As of any date, the Banks holding fifty-one percent (51%) of the outstanding principal amount of the Revolving Credit Loans on such date; and if no such principal is outstanding, the Banks whose aggregate Commitments constitute fifty-one percent (51%) of the Total Commitment.      Managing Agent(s). See preamble.       Material Acquisition. See §7.4.1.      Material Contract. Any contract, franchise agreement or G Permit from which the Borrowers derived more than five percent (5%) of their consolidated revenues for the fiscal year most recently ending.       Maturity Date. May 16, 2005.      Maximum Drawing Amount. The maximum aggregate amount from time to time that the beneficiaries may draw under outstanding Letters of Credit.      Maximum Rate. With respect to each Bank, the maximum lawful nonusurious rate of interest (if any) which under Applicable Law such Bank may charge the Borrowers on the Loans and other Obligations from time to time.      Membership Interest Pledge Agreement. The Amended and Restated Membership Interest Pledge Agreement, to be dated as of the Closing Date, as amended from time to time, by and between the Parent and the Administrative Agent, pursuant to which the Parent pledges all of its membership interests in Republic Services of Oregon I, LLC to the Administrative Agent for the benefit of the Banks.      Multiemployer Plan. Any multiemployer plan within the meaning of §3(37) of ERISA maintained or contributed to by the Borrowers or any ERISA Affiliate.      Notes. Collectively, the Revolving Credit Notes and Swing Line Notes.      Obligations. All indebtedness, obligations and liabilities of the Borrowers to any of the Banks or the Administrative Agent, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under 11 -------------------------------------------------------------------------------- this Credit Agreement or any of the other Loan Documents, or under any Swap Contract between the Borrowers and any Bank (or affiliate thereof), or in respect of any of the Loans made or Reimbursement Obligations incurred or the Letters of Credit, the Notes or any other instrument at any time evidencing any thereof.      Parent Stock Pledge Agreement. The Third Amended and Restated Stock Pledge Agreement, to be dated as of the Closing Date, as amended and in effect from time to time, between the Parent and the Administrative Agent, pursuant to which 100% of the capital stock of the Subsidiaries is pledged to the Administrative Agent for the benefit of the Banks.      Partnership Pledge Agreements. Collectively, (a) the Partnership Pledge Agreement, to be dated as of the Closing Date, as amended and in effect from time to time, by and between Madera Disposal Systems, Inc., as limited partner, and the Administrative Agent, pursuant to which Madera Disposal Systems, Inc. pledges its partnership interests in El Paso Disposal, L.P. to the Agent for the benefit of the Banks, (b) the Partnership Pledge Agreement, to be dated as of the Closing Date, as amended and in effect from time to time, by and between Waste Connections of Texas, Inc., as general partner and a limited partner, and the Administrative Agent, pursuant to which Waste Connections of Texas, Inc. pledges its partnership interests in El Paso Disposal, L.P. to the Agent for the benefit of the Banks, (c) the Amended and Restated Partnership Pledge Agreement, to be dated as of the Closing Date, as amended and in effect from time to time, by and between RH Financial Corporation, as limited partner, and the Administrative Agent, pursuant to which RH Financial Corporation pledges its partnership interests in Columbia Resource Co., L.P. and Finley-Buttes Limited Partnership to the Agent for the benefit of the Banks, and (d) the Amended and Restated Partnership Pledge Agreement, to be dated as of the Closing Date, as amended and in effect from time to time, by and between Management Environmental National, Inc., as general partner, and the Administrative Agent, pursuant to which Management Environmental National, Inc. pledges its partnership interests in Columbia Resource Co., L.P. and Finley-Buttes Limited Partnership to the Agent for the benefit of the Banks.      PBGC. The Pension Benefit Guaranty Corporation created by §4002 of ERISA and any successor entity or entities having similar responsibilities.      Performance Letter of Credit. A Letter of Credit which is not a Financial Letter of Credit.      Permitted Liens. See §7.2.      Person. Any individual, corporation, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. 12 --------------------------------------------------------------------------------       Pricing Table: Level Leverage  Ratio Applicable Eurodollar Margin  (per annum) Applicable  Base Rate  Margin  (per annum) Applicable L/C Margin  (per annum) Applicable  Commitment Rate  (per annum) I. Less than 2.00:1 1.50% 0.00% 1.50% 0.250% II. Greater than  or equal to 2.00:1 but less than 2.50:1 1.75% 0.25% 1.75% 0.375% III. Greater than  or equal to 2.50:1 but less than 3.00:1 2.00% 0.50% 2.00% 0.375% IV. Greater than or equal to 3.00:1 but less than 3.50:1 2.25% 0.75% 2.25% 0.50% V. Greater than or equal to 3.50:1 but less than 3.75:1 2.50% 1.00% 2.50% 0.50% VI. Greater than or equal to 3.75:1 2.75% 1.25% 2.75% 0.50% Any change in the applicable margin shall become effective on the first day after receipt by the Banks of financial statements delivered pursuant to §6.4(a) or (b) which indicate a change in the Leverage Ratio. If at any time such financial statements are not delivered within the time periods specified in §6.4(a) or (b), the applicable margin shall be the highest rate set forth in the respective column of the Pricing Table, subject to adjustment upon actual receipt of such financial statements. Notwithstanding the above, the pricing set forth for Level VI in the table above shall be effective until the Borrowers deliver to the Administrative Agent a Compliance Certificate for the fiscal quarter ending June 30, 2000.      Pro Forma Interest Expense (as used in a Compliance Certificate delivered in connection with a Material Acquisition). The annual interest obligations at the current rates of interest on existing Indebtedness of the Borrowers and the Indebtedness to be assumed or incurred in connection with an acquisition.      Prior Credit Agreement. See preamble.       RCRA. See definition of Release.      Real Property. All real property heretofore, now, or hereafter owned or leased by the Borrowers.      Reimbursement Obligation. The Borrowers' obligation to reimburse the Administrative Agent and the Banks on account of any drawing under any Letter of Credit as provided in §3.2. 13 --------------------------------------------------------------------------------      Release. Shall have the meaning specified in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§9601 et seq. ("CERCLA") and the term "Disposal" (or "Disposed") shall have the meaning specified in the Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§6901 et seq. ("RCRA") and regulations promulgated thereunder; provided that in the event either CERCLA or RCRA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply as of the effective date of such amendment and provided further, to the extent that the laws of a state wherein the property lies establishes a meaning for "Release" or "Disposal" which is broader than specified in either CERCLA or RCRA, such broader meaning shall apply.      Replacement Bank. See §4.11.      Replacement Notice. See §4.11.      Reserve Rate. The rate, expressed as a decimal, at which the Banks would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any subsequent or similar regulation relating to such reserve requirements) against "Eurocurrency Liabilities" (as such term is defined in Regulation D), or against any other category of liabilities which might be incurred by the Banks to fund Eurodollar Loans, if such liabilities were outstanding.      Revolving Credit Loans. Revolving credit loans made or to be made by the Banks to the Borrowers pursuant to §2.      Revolving Credit Notes. The promissory notes of the Borrowers evidencing the Revolving Credit Loans hereunder, dated as of the date hereof and in substantially the form of Exhibit A hereto.      Scheduled Contracts. The certain contracts referenced in Schedule 7.2(i) to this Credit Agreement, on terms and conditions and as in effect on the date hereof.      Section 20 Subsidiary. A subsidiary of the bank holding company controlling any Bank, which subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities.      Security Agreement. The Third Amended and Restated Security Agreement among the Borrowers and the Administrative Agent, to be dated as of the Closing Date, as amended and in effect from time to time.      Security Documents. The Security Agreement, Stock Pledge Agreements, Membership Interest Pledge Agreement, Partnership Pledge Agreements, the Columbia Security Documents and any other instruments or documents evidencing or perfecting the Administrative Agent's (or collateral agent's) lien on the assets of the Borrowers for the benefit of the Banks.      Seller Debt. Indebtedness of the Borrowers, including assumed obligations, incurred in connection with acquisitions of any stocks of, partnership or joint venture interests in, or assets of any Person and owing to the seller(s) of such stocks, partnership or joint venture interests, or assets (excluding Indebtedness of acquired companies which 14 -------------------------------------------------------------------------------- is discharged within 30 days of such acquisition); provided that such acquisitions are otherwise permitted pursuant to §7.4.      Settlement. The making or receiving of payments, in immediately available funds, by the Banks to or from the Administrative Agent in accordance with §2.11 hereof to the extent necessary to cause each such Bank s actual share of the outstanding amount of the Revolving Credit Loans to be equal to such Bank s Commitment Percentage of the outstanding amount of such Revolving Credit Loans, in any case when, prior to such action, the actual share is not so equal.      Settlement Amount. See §2.11(b).      Settlement Date. See §2.11(b).       Settling Bank. See §2.11(b).      Stock Pledge Agreements. The Parent Stock Pledge, to be dated as of the Closing Date, and any other stock pledge agreement required to be entered into by the terms of this Credit Agreement, as amended and in effect from time to time.      Subordinated Debt. Unsecured Indebtedness of the Borrowers that is expressly subordinated and made junior to the payment and performance in full of the Obligations, and evidenced as such by a written instrument containing subordination provisions on terms and in form and substance acceptable to the Administrative Agent and Majority Banks.      Subsidiary. Any corporation, association, trust, or other business entity of which any Borrower shall at any time own directly, or indirectly through a Subsidiary or Subsidiaries, at least a majority of the outstanding capital stock or other interest entitled to vote generally.      Swap Contracts. Any agreement (including any master agreement and any agreement, whether or not in writing, relating to any single transaction) that is an interest rate swap agreement, basis swap, forward rate agreement, commodity swap, commodity option, equity or equity index swap or option, bond option, interest rate option, forward foreign exchange agreement, rate cap, collar or floor agreement, currency swap agreement, cross-currency rate swap agreement, swaption, currency option or other similar agreement (including any option to enter into any of the foregoing).      Swing Line Loan(s). See §2.11(a).      Swing Line Note. See §2.11(b).      Syndication Agent. See preamble.      Synthetic Lease. Any lease treated as an operating lease under generally accepted accounting principles and as a loan or financing for U.S. income tax purposes.      Total Commitment. See §2.1. 15 --------------------------------------------------------------------------------      Wasco Bond. The $13,600,000 variable rate Solid Waste Disposal Revenue Bonds, Waste Connections, Inc. Project, Series 1999, issued by Wasco County, Oregon.      Wasco Bond Documents. The documentation executed in connection with the Wasco Bond.      Wasco Collateral. The municipal waste landfill located near the City of The Dalles, Wasco County, Oregon (including all real estate, personal property, equipment, revenues, and project funds), to be pledged to a third party lender on terms satisfactory to the Administrative Agent in connection with the Converted Wasco Bond and the cancellation of the Wasco Letter of Credit.      Wasco Funds. The amount of funds in the Construction Fund (as defined in the Wasco Bond Documents) outstanding from time to time, so long as there is no Default or Event of Default under the Wasco Bond and so long as the Administrative Agent holds a security interest in such funds for the benefit of the Banks.      Wasco Letter of Credit. The direct pay Letter of Credit issued by the Administrative Agent to support the Wasco Bond.      Wichita Adjustment. The amount of the working capital adjustment set forth in Section 2.2(b) of the Wichita Acquisition Documents.      Wichita Acquisition. The acquisition of the Wichita, Kansas collection operations of Allied Waste Industries, Inc. ( Allied ) pursuant to the Wichita Acquisition Documents. Wichita Acquisition Documents. The Asset Purchase Agreement, dated as of April 17, 2000, by and among Finney County Landfill, Inc., the Parent, BFI Waste Systems of North America, Inc. and Allied Waste Industries, Inc., the Stock Purchase Agreement, dated as of April 17, 2000, by and among the Parent, BFI Waste Systems of North America, Inc. and Allied Waste Industries, Inc., and all agreements and documents required to be entered into or delivered pursuant thereto or in connection with the Wichita Acquisition, each in form and substance satisfactory to the Administrative Agent.       §1.2. Rules of Interpretation.                  (a)      A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement.                  (b)      The singular includes the plural and the plural includes the singular.                  (c)      A reference to any law includes any amendment or modification to such law.                  (d)      A reference to any Person includes its permitted successors and permitted assigns. 16 --------------------------------------------------------------------------------                  (e)     Accounting terms capitalized but not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer.                  (f)       The words "include," "includes" and "including" are not limiting.                  (g)      All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have the meanings assigned to them therein.                  (h)     Reference to a particular "§" refers to that section of this Credit Agreement unless otherwise indicated.                  (i)     The words "herein," "hereof," "hereunder" and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement.                  (j)     Unless otherwise expressly indicated, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including."      §2. THE REVOLVING CREDIT FACILITY.      §2.1. Commitment to Lend. Subject to the terms and conditions set forth in this Credit Agreement, each of the Banks severally, but not jointly, agrees to lend to the Borrowers, and the Borrowers may borrow, repay, and reborrow from time to time from the Closing Date to the Maturity Date, upon notice by the Borrowers to the Administrative Agent given in accordance with §2.6, its Commitment Percentage of the Revolving Credit Loans as are requested by the Borrowers, provided that the outstanding amount of Revolving Credit Loans, Swing Line Loans, unpaid Reimbursement Obligations, and the Maximum Drawing Amount shall not exceed the maximum aggregate amount outstanding as set forth on Schedule 1 at any time, as such amount may be reduced or increased, as the case may be, pursuant to §2.2 hereof (the "Total Commitment"). The Revolving Credit Loans shall be made pro rata in accordance with each Bank's Commitment Percentage. Each request for a Loan hereunder shall constitute a representation and warranty by the Borrowers that the conditions set forth in §9 and §10, as the case may be, have been satisfied on the date of such request.      §2.2. Reduction and Increase of Total Commitment.       §2.2.1. Reduction of Total Commitment.      (a)     The Borrowers shall have the right at any time and from time to time upon five (5) Business Days' prior written notice to the Administrative Agent to reduce by $1,000,000 or integral multiples of $500,000 in excess thereof, or terminate entirely, the Total Commitment, whereupon the Commitments of the Banks shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated. The Administrative Agent will notify the  17 -------------------------------------------------------------------------------- Banks promptly after receiving any notice of the Borrowers delivered pursuant to this §2.2.1.      (b)      No reduction or termination of the Commitments once made may be revoked; the portion of the Commitments reduced or terminated may not be reinstated; and amounts in respect of such reduced or terminated portion may not be reborrowed.      §2.2.2. Increase of Total Commitment. Unless a Default or Event of Default has occurred and is continuing, the Borrowers may request, subject to the approval of the Administrative Agent, that the Total Commitment be increased, provided that the Total Commitment shall not, except with the consent of the Majority Banks, in any event exceed $425,000,000 hereunder, provided, however, that (i) any Bank which is a party to this Credit Agreement prior to such increase shall have the first option, and may elect, to fund its pro rata share of the increase, thereby increasing its Commitment hereunder, but no Bank shall have any obligation to do so, (ii) in the event that it becomes necessary to include a new Bank to provide additional funding under this §2.2.2, such new Bank must be reasonably acceptable to the Administrative Agent and the Borrowers, and (iii) the Banks' Commitment Percentages shall be correspondingly adjusted, as necessary, to reflect any increase in the Total Commitment andSchedule 1 shall be amended to reflect such adjustments.      §2.3. The Revolving Credit Notes. The Revolving Credit Loans shall be evidenced by separate promissory notes of the Borrowers in substantially the form of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the Closing Date and completed with appropriate insertions. One Revolving Credit Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Commitment or, if less, the outstanding amount of all Revolving Credit Loans made by such Bank, plus interest accrued thereon, as set forth below. The Borrowers irrevocably authorize each Bank to make or cause to be made, in connection with a Drawdown Date of any Revolving Credit Loan or at the time of receipt of any payment of principal on such Bank's Revolving Credit Note, an appropriate notation on such Bank's records reflecting the making of such Loan or the receipt of such payment (as the case may be). The outstanding amount of the Loans set forth on such Bank's record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount shall not limit or otherwise affect the obligation of the Borrowers hereunder or under any Revolving Credit Note to make payments of principal of or interest on any Revolving Credit Note when due.      §2.4. Interest on Loans. The outstanding principal amount of the Loans shall bear interest at the rate per annum equal to (a) the Base Rateplus the Applicable Base Rate Margin on Base Rate Loans or (b) the Eurodollar Rate plus the Applicable Eurodollar Margin on Eurodollar Loans. Interest shall be payable (i) quarterly in arrears on the first Business Day of each calendar quarter, commencing July 1, 2000, on Base Rate Loans, (ii) on the last day of the applicable Interest Period, and if such Interest Period is longer than three (3) months, also on the day which is three (3) months after the commencement of such Interest Period, on Eurodollar Loans, and (iii) on the Maturity Date for all Revolving Credit Loans and Swing Line Loans.      §2.5. Election of Eurodollar Rate; Notice of Election; Interest Periods; Minimum Amounts. 18 --------------------------------------------------------------------------------      (a)      At the Borrowers' option, so long as no Default or Event of Default has occurred and is then continuing, the Borrowers may (i) elect to convert any Revolving Credit Loan which is a Base Rate Loan or a portion thereof to a Eurodollar Loan, (ii) at the time of any Loan and Letter of Credit Request, specify that a requested Revolving Credit Loan shall be a Eurodollar Loan, or (iii) upon expiration of the applicable Interest Period, elect to maintain an existing Eurodollar Loan as such, provided that the Borrowers give notice to the Administrative Agent pursuant to §2.5(b) hereof. Upon determining any Eurodollar Rate, the Administrative Agent shall forthwith provide notice thereof to the Borrowers and the Banks, and each such notice to the Borrowers and the Banks shall be considered prima facie correct and binding, absent manifest error.      (b)      Three (3) Eurodollar Business Days prior to the making of any Eurodollar Loan or the conversion of any Base Rate Loan to a Eurodollar Loan, or, in the case of an outstanding Eurodollar Loan, the expiration date of the applicable Interest Period, the Borrowers shall give telephonic notice (confirmed by telecopy on the same Eurodollar Business Day) to the Administrative Agent not later than 11:00 a.m. (Boston time) of their election pursuant to §2.5(a). Each such notice delivered to the Administrative Agent shall specify the aggregate principal amount of the Loans to be borrowed or maintained as or converted to Eurodollar Loans and the requested duration of the Interest Period that will be applicable to such Eurodollar Loan, and shall be irrevocable and binding upon the Borrowers. If the Borrowers shall fail to give the Administrative Agent notice of their election hereunder together with all of the other information required by this §2.5(b) with respect to any Revolving Credit Loan, such Loan shall be deemed a Base Rate Loan. In the event that the Borrowers fail to provide any such notice with respect to the continuation of any Eurodollar Loan as such, then such Eurodollar Loan shall be automatically converted to a Base Rate Loan at the end of the then expiring Interest Period relating thereto.      (c)      Notwithstanding anything herein to the contrary, the Borrowers may not specify an Interest Period that would extend beyond the Maturity Date.      (d)      All Revolving Credit Loans shall be in a minimum amount of $1,000,000 or integral multiples of $500,000 in excess thereof. In no event shall the Borrowers have more than six (6) different maturities of Eurodollar Loans outstanding at any time.      §2.6. Requests for Revolving Credit Loans. The Borrowers shall give to the Administrative Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed by telecopy on the same Business Day in the form of Exhibit B hereto) of each Revolving Credit Loan requested hereunder (a "Loan and Letter of Credit Request") not later than (a) 11:00 a.m. Boston time one (1) Business Day prior to the proposed Drawdown Date of any Base Rate Loan, or (b) 11:00 a.m. Boston time three (3) Eurodollar Business Days prior to the proposed Drawdown Date of any Eurodollar Loan. Each such notice shall be given by the Borrowers and shall specify the principal amount of the Revolving Credit Loan requested and shall include a current Loan and Letter of Credit Request reflecting the aggregate amount of Revolving Credit Loans and Swing Line Loans outstanding and the Maximum Drawing Amount. Each Loan and Letter of Credit Request shall be irrevocable and binding on the Borrowers and shall obligate the Borrowers to accept the Revolving Credit Loan requested from the Banks on  19 -------------------------------------------------------------------------------- the proposed Drawdown Date. Each of the representations and warranties made by or on behalf of the Borrowers to the Banks or the Administrative Agent in this Credit Agreement or any other Loan Document shall be true and correct in all material respects when made and shall, for all purposes of this Credit Agreement, be deemed to be repeated on and as of the date of the submission of any Loan and Letter of Credit Request and on and as of the Drawdown Date of such Loan, or the date of issuance of such Letter of Credit (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, or to the extent that such representations and warranties expressly relate solely to an earlier date). The Administrative Agent shall promptly notify each Bank of each Loan and Letter of Credit Request received by the Administrative Agent.      §2.7. Funds for Revolving Credit Loans.      (a)      Not later than 1:00 p.m. (Boston time) on the proposed Drawdown Date of any Revolving Credit Loan, each of the Banks will make available to the Administrative Agent, at the Administrative Agent's Head Office, in immediately available funds, the amount of such Bank's Commitment Percentage of the amount of the requested Revolving Credit Loans. Upon receipt from each Bank of such amount, and upon receipt of the documents required by §§9 and 10 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Administrative Agent will make available to the Borrowers in immediately available funds the aggregate amount of such Revolving Credit Loans made available to the Administrative Agent by the Banks. The failure or refusal of any Bank to make available to the Administrative Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Revolving Credit Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Administrative Agent the amount of such other Bank's Commitment Percentage of any requested Revolving Credit Loans.      (b)      The Administrative Agent may, unless notified to the contrary by any Bank prior to a Drawdown Date, assume that such Bank has made available to the Administrative Agent on such Drawdown Date the amount of such Bank's Commitment Percentage of the Revolving Credit Loans to be made on such Drawdown Date, and the Administrative Agent may (but shall not be required to), in reliance upon such assumption, make available to the Borrowers a corresponding amount. If any Bank makes available to the Administrative Agent such amount on a date after such Drawdown Date, such Bank shall pay to the Administrative Agent on demand an amount equal to the product of (i) the average computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (ii) the amount of such Bank's Commitment Percentage of such Revolving Credit Loans, times (iii) a fraction, the numerator of which is the number of days that elapse from and including such Drawdown Date to the date on which the amount of such Bank's Commitment Percentage of such Revolving Credit Loans shall become immediately available to the Administrative Agent, and the denominator of which is 365. A statement of the Administrative Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be prima facie evidence, absent manifest error, of the amount due and owing to the Administrative Agent by such Bank. If the amount of such Bank's Commitment Percentage of such Revolving Credit Loans is not made available to the  20 -------------------------------------------------------------------------------- Administrative Agent by such Bank within three (3) Business Days following such Drawdown Date, the Administrative Agent shall be entitled to recover such amount from the Borrowers on demand, with interest thereon at the rate per annum applicable to the Revolving Credit Loans made on such Drawdown Date.      §2.8. Maturity of the Loans. The Loans shall be due and payable on the Maturity Date. The Borrowers jointly and severally promise to pay on the Maturity Date all Loans outstanding on such date, together with any and all accrued and unpaid interest thereon.      §2.9. Mandatory Repayments of the Loans. If at any time the outstanding amount of the Revolving Credit Loans plus Swing Line Loans plus the Maximum Drawing Amount plus unpaid Reimbursement Obligations exceeds the Total Commitment, whether by reduction of the Total Commitment or otherwise, then the Borrowers shall immediately pay the amount of such excess to the Administrative Agent for application to the Revolving Credit Loans, or if no Revolving Credit Loans shall be outstanding, to the Swing Line Loans, or if no Swing Line Loans shall be outstanding, to be held by the Administrative Agent as collateral security for the Reimbursement Obligations, provided, however, that if the amount of cash collateral held by the Administrative Agent pursuant to this §2.9 exceeds the amount of the Obligations, the Administrative Agent shall return such excess to the Borrowers.      §2.10. Optional Prepayments or Repayments of Loans. The Borrowers shall have the right, at their election, to repay or prepay the outstanding amount of the Loans, as a whole or in part, at any time without penalty or premium (other than the obligation to reimburse the Banks and the Administrative Agent pursuant to §4.8 hereof). The Borrowers shall give written notice to the Administrative Agent (or telephonic notice confirmed in writing) no later than (a) 1:00 p.m. (Boston time) on the Business Day of the proposed prepayment or repayment of any Base Rate Loan or (b) 1:00 p.m. (Boston time) three (3) Eurodollar Business Days prior to the proposed prepayment or repayment of any Eurodollar Loan, in each case specifying the proposed date of prepayment or repayment of Loans and the principal amount to be paid. Each such partial repayment of the Loans shall be $500,000 or integral multiples of $500,000 in excess thereof, and shall be accompanied by the payment of accrued interest on the principal prepaid to the date of repayment and shall be applied, in the absence of instruction by the Borrowers, first to the principal of Base Rate Loans and then to the principal of Eurodollar Loans. Each partial prepayment shall be allocated among the Banks, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Bank's Revolving Credit Loans, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion.      §2.11. Swing Line Loans; Settlements.      (a)      So long as Fleet has not received written notice from the Borrowers of an Event of Default and otherwise made in accordance with the provisions of this Credit Agreement, solely for ease of administration of the Revolving Credit Loans, Fleet may, upon receipt of a Loan and Letter of Credit Request no later than 2:00 p.m. (Boston time) on the proposed date of funding, but shall not be required to, fund Base Rate Loans ("Swing Line Loans") for periods not to exceed seven (7) days in any one case, bearing interest as set forth for Base Rate Loans in §2.4. The Swing Line Loans shall be  21 -------------------------------------------------------------------------------- evidenced by a promissory note of the Borrowers in substantially the form of Exhibit C hereto (the Swing Line Note ) dated as of the Closing Date, and shall each be in a minimum amount of $500,000 or integral multiples of $100,000 in excess thereof, provided that the outstanding amount of Swing Line Loans advanced by Fleet hereunder shall not exceed $15,000,000 at any time. Each Bank shall remain severally, but not jointly, and unconditionally liable to fund its pro rata share (based upon each Bank's Commitment Percentage) of such Swing Line Loans on each Settlement Date and, in the event Fleet chooses not to fund all Base Rate Loans requested on any date, to fund its Commitment Percentage of the Base Rate Loans requested, subject to satisfaction of the provisions hereof relating to the making of Base Rate Loans. Prior to each Settlement, all payments or repayments of the principal of, and interest on, Swing Line Loans shall be credited to the account of Fleet.      (b)      The Banks shall effect Settlements on (i) the Business Day immediately following any day which the Administrative Agent gives written notice to the Banks to effect a Settlement, (ii) the Business Day immediately following the Administrative Agent's becoming aware of the existence of any Default or Event of Default, (iii) the Maturity Date, (iv) any date on which the Borrowers wish to convert a Swing Line Loan into a Base Rate Loan, and (v) in any event, the seventh day on which any Swing Line Loan remains outstanding (each such date, a "Settlement Date"). One (1) Business Day prior to each such Settlement Date, the Administrative Agent shall give telephonic notice to the Banks of (A) the respective outstanding amount of Revolving Credit Loans made by each Bank as at the close of business on the prior day, (B) the amount that any Bank, as applicable (a "Settling Bank"), shall pay to effect a Settlement (a "Settlement Amount"). A statement of the Administrative Agent submitted to the Banks with respect to any amounts owing hereunder shall be prima facie evidence of the amount due and owing. Each Settling Bank shall, not later than 1:00 p.m. (Boston time) on each Settlement Date, effect a wire transfer of immediately available funds to the Administrative Agent at the Administrative Agent's Head Office in the amount of such Bank's Settlement Amount. All funds advanced by any Bank as a Settling Bank pursuant to this §2.11 shall for all purposes be treated as a Base Rate Loan to the Borrowers.      (c)      The Administrative Agent may (unless notified to the contrary by any Settling Bank by 12:00 noon (Boston time) one (1) Business Day prior to the Settlement Date) assume that each Settling Bank has made available (or will make available by the time specified in §2.8(b)) to the Administrative Agent its Settlement Amount, and the Administrative Agent may (but shall not be required to), in reliance upon such assumption, effect Settlements. If the Settlement Amount of such Settling Bank is made available to the Administrative Agent on a date after such Settlement Date, such Settling Bank shall pay the Administrative Agent on demand an amount equal to the product of (i) the average, computed for the period referred to in clause (iii) below, of the weighted average annual interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period times (ii) such Settlement Amount times (iii) a fraction, the numerator of which is the number of days that elapse from and including such Settlement Date to but not including the date on which such Settlement Amount shall become immediately available to the Administrative Agent, and the denominator of which is 365. Upon payment of such amount such Settling Bank shall be deemed to have delivered its Settlement Amount on the Settlement Date and shall become entitled to interest payable by the Domestic Borrowers with  22 -------------------------------------------------------------------------------- respect to such Settling Bank's Settlement Amount as if such share were delivered on the Settlement Date. If such Settlement Amount is not in fact made available to the Administrative Agent by such Settling Bank within five (5) Business Days of such Settlement Date, the Administrative Agent shall be entitled to recover such amount from the Borrowers, with interest thereon at the Base Rate.      (d)      After any Settlement Date, any payment by the Borrowers of Swing Line Loans hereunder shall be allocated pro rata among the Banks, in accordance with such Bank's Commitment Percentage.      (e)      If, prior to the making of a Revolving Credit Loan pursuant to paragraph (b) of this §2.11, a Default or Event of Default has occurred and is continuing, each Bank will, on the date such Revolving Credit Loan was to have been made, purchase an undivided participating interest in the outstanding Swing Line Loans in an amount equal to its Commitment Percentage of such Swing Line Loans. Each Bank will immediately transfer to the Administrative Agent, in immediately available funds, the amount of its participation and upon receipt thereof the Administrative Agent will deliver to such Bank a Swing Line participation certificate dated the date of receipt of such funds and in such amount.      (f)      Whenever, at any time after the Administrative Agent has received from any Bank such Bank's participating interest in the Swing Line Loans pursuant to clause (e) above, the Administrative Agent receives any payment on account thereof, the Administrative Agent will distribute to such Bank its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded) in like funds as received; provided, however, that in the event that such payment received by the Administrative Agent is required to be returned, such Bank will return to the Administrative Agent any portion thereof previously distributed by the Administrative Agent to it in like funds as such payment is required to be returned by the Administrative Agent.      (h)      Each Bank's obligation to purchase participating interests pursuant to clause (e) above shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank may have against the Administrative Agent, the Borrowers or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Borrowers or any other Person; (iv) any breach of this Credit Agreement by the Borrowers or any other Bank or Administrative Agent; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.      §3. LETTERS OF CREDIT.       §3.1. Letter of Credit Commitments.      (a)     Subject to the terms and conditions hereof and the execution and receipt of a Loan and Letter of Credit Request reflecting the Maximum Drawing Amount of all Letters of Credit (including the requested Letter of Credit) and a Letter of Credit  23 -------------------------------------------------------------------------------- Application, the Administrative Agent on behalf of the Banks and in reliance upon the agreement of the Banks set forth in §3.1(b) and upon the representations and warranties of the Borrowers contained herein, agrees to issue standby letters of credit in such form as may be requested from time to time by the Borrowers and agreed to by the Administrative Agent; provided, however, that, after giving effect to such request, the Maximum Drawing Amount shall not exceed the lesser of (i) $40,000,000 or (ii) the Total Commitment minus the aggregate outstanding amount of the Revolving Credit Loans and Swing Line Loans. No Letter of Credit shall have an expiration date later than thirty (30) days prior to the Maturity Date and in addition no Letter of Credit (other than the Madera Letter of Credit or the Columbia Letter of Credit) shall have an expiration date later than one (1) year after the date of issuance of such Letter of Credit (which may incorporate automatic renewals for periods of up to one (1) year, provided that the Administrative Agent may, upon 30 days' notice to the beneficiary, cancel such Letter of Credit which has been renewed beyond its initial one (1) year term).      (b)      Each Bank severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any other condition precedent whatsoever, to the extent of such Bank's Commitment Percentage thereof, to reimburse the Administrative Agent or, with respect to the Columbia Letter of Credit, the Columbia Issuing Bank on demand for the amount of each draft paid by the Administrative Agent or the Columbia Issuing Bank (as the case may be) under each Letter of Credit issued in accordance with the terms hereof to the extent that such amount is not reimbursed by the Borrowers pursuant to §3.2 (such agreement for a Bank being called herein the "Letter of Credit Participation" of such Bank).      (c)       Each such payment made by a Bank shall be treated as the purchase by such Bank of a participating interest in the Borrowers' Reimbursement Obligation under §3.2 in an amount equal to such payment. Each Bank shall share in accordance with its participating interest in any interest which accrues pursuant to §3.2.      (d)      The parties hereby agree that the letters of credit issued under the Prior Credit Agreement and listed on Schedule 3.1 hereto shall be Letters of Credit under this Credit Agreement. In addition, this Credit Agreement shall constitute the Reimbursement Agreement referred to in the Madera Bond Documents, the Columbia Bond Documents and Credit Agreement referred to in the Wasco Bond Documents.      §3.2. Reimbursement Obligation of the Borrowers. In order to induce the Administrative Agent or the Columbia Issuing Bank (as the case may be) to issue, extend and renew each Letter of Credit and the Banks to participate therein, the Borrowers hereby agree to reimburse or pay to the Administrative Agent or the Columbia Issuing Bank (as the case may be) with respect to each Letter of Credit issued, extended or renewed by the Administrative Agent or the Columbia Issuing Bank hereunder as follows:               (a)      on each date that any draft presented under any Letter of Credit is honored by the Administrative Agent or the Columbia Issuing Bank or the Administrative Agent or the Columbia Issuing Bank otherwise makes payment with respect thereto, (i) the amount paid by the Administrative Agent or the Columbia Issuing Bank under or with respect to such Letter of Credit, and (ii) the amount of any taxes, fees, charges or other  24 -------------------------------------------------------------------------------- costs and expenses whatsoever incurred by the Administrative Agent, the Columbia Issuing Bank or any Bank in connection with any payment made by the Administrative Agent, the Columbia Issuing Bank or any Bank under, or with respect to, such Letter of Credit; provided however, if the Borrowers do not reimburse the Administrative Agent or the Columbia Issuing Bank (as the case may be) on the Drawdown Date, such amount shall, provided that no Event of Default under §§12.1(h) or 12.1(i) has occurred, become automatically a Revolving Credit Loan which is a Base Rate Loan advanced hereunder in an amount equal to such sum; and              (b)      upon the Maturity Date, or the termination of the Total Commitment, or the acceleration of the Reimbursement Obligations in accordance with §12, an amount equal to the Maximum Drawing Amount, which amount shall be held by the Administrative Agent for the benefit of the Columbia Issuing Bank, the Banks and the Administrative Agent as cash collateral for all Reimbursement Obligations.      §3.3. Letter of Credit Payments. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Administrative Agent or the Columbia Issuing Bank (as the case may be) shall notify the Borrowers of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment. On the date that such draft is paid or other payment is made by the Administrative Agent or the Columbia Issuing Bank, the Administrative Agent shall promptly notify the Banks of the amount of any unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next following the receipt of such notice, each Bank shall make available to the Administrative Agent, at the Administrative Agent's Head Office, in immediately available funds, such Bank's Commitment Percentage of such Reimbursement Obligation, together with an amount equal to the product of (a) the weighted average, computed for the period referred to in clause (c) below, of the interest rate paid by the Administrative Agent or the Columbia Issuing Bank (as the case may be) for federal funds acquired by the Administrative Agent or the Columbia Issuing Bank during each day included in such period, times (b) the amount equal to such Bank's Commitment Percentage of such unpaid Reimbursement Obligation, times (c) a fraction, the numerator of which is the number of days that have elapsed from and including the date the Administrative Agent or the Columbia Issuing Bank paid the draft presented for honor or otherwise made payment until the date on which such Bank's Commitment Percentage of such unpaid Reimbursement Obligation shall become immediately available to the Administrative Agent or the Columbia Issuing Bank, and the denominator of which is 365. The responsibility of the Administrative Agent or the Columbia Issuing Bank to the Borrowers and the Banks shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit.      §3.4. Obligations Absolute. The Borrowers' obligations under this §3 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which the Borrowers may have or have had against the Administrative Agent, the Columbia Issuing Bank or any Bank or any beneficiary of a Letter of Credit. Subject to the obligations of the Banks pursuant to Article V of the Uniform Commercial Code and the obligations of the Administrative Agent and the Columbia Issuing Bank pursuant to the last sentence of §3.3, the  25 -------------------------------------------------------------------------------- Borrowers further agree with the Administrative Agent, the Columbia Issuing Bank and the Banks that the Administrative Agent, the Columbia Issuing Bank and the Banks shall not be responsible for, and the Borrowers' Reimbursement Obligations under §3.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrowers, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrowers against the beneficiary of any Letter of Credit or any such transferee. The Administrative Agent, the Columbia Issuing Bank and the Banks shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. The Borrowers agree that any action taken or omitted by the Administrative Agent, the Columbia Issuing Bank or any Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon the Borrowers and shall not result in any liability on the part of the Administrative Agent, the Columbia Issuing Bank or any Bank to the Borrowers.      §3.5. Reliance by Administrative Agent. To the extent not inconsistent with §3.4, the Administrative Agent and the Columbia Issuing Bank shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants or other experts selected by the Administrative Agent.      §4.      FEES, PAYMENTS, AND COMPUTATIONS; JOINT AND SEVERAL LIABILITY.      §4.1. Fees.               (a)      Closing. The Borrowers jointly and severally agree to pay to the Administrative Agent, for the respective accounts of each Bank, a fee as set forth in the Closing Fee Letter, dated May 16, 2000, among the Borrowers and the Administrative Agent.               (b)      Administrative Agent s Fee and Arrangement Fees. The Borrowers jointly and severally agree to pay to the Administrative Agent and the Lead Arranger those fees set forth in the Administrative Agent s Fee and Arrangement Fee Letter, dated May 16, 2000, among the Borrowers and the Administrative Agent.               (c)       Commitment Fee. The Borrowers jointly and severally agree to pay to the Administrative Agent, for the respective account of each Bank, a fee (the "Commitment Fee") equal to the Applicable Commitment Rate multiplied by the average daily amount of the unused portion of such Bank's Commitment during each calendar quarter or portion thereof from the Closing Date to the Maturity Date (or to the date of termination in full of the Total Commitment, if earlier). The Commitment Fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately  26 -------------------------------------------------------------------------------- preceding calendar quarter commencing on July 1, 2000, with a final payment on the Maturity Date.               (d)      Letter of Credit Fees. The Borrowers shall pay a fee (the "Letter of Credit Fee") equal to (i) the Applicable L/C Margin multiplied by the Maximum Drawing Amount of each Financial Letter of Credit or (ii) 50% of the Applicable L/C Margin multiplied by the Maximum Drawing Amount of each Performance Letter of Credit. Such Letter of Credit Fee shall be payable to the Administrative Agent for the account of the Banks, to be shared pro rata by the Banks in accordance with their respective Commitment Percentages. The Borrowers shall also pay a fee (the "Issuance Fee") to the Administrative Agent or the Columbia Issuing Bank (as the case may be), for its own account, equal to 0.125% per annum on the Maximum Drawing Amount of all Letters of Credit issued by such Bank, plus its customary administrative charges. The Letter of Credit Fee and the Issuance Fee shall be payable for the number of days each Letter of Credit is outstanding, and shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter, and on the Maturity Date.      §4.2. Payments.                 (a)      All payments of principal, interest, Reimbursement Obligations, fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Administrative Agent, for the respective accounts of the Banks and the Administrative Agent, to be received at the Administrative Agent's Head Office in immediately available funds by 12:00 p.m. (Boston time) on any due date.                 (b)     All payments by the Borrowers hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Borrowers are compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrowers with respect to any amount payable by them hereunder or under any of the other Loan Documents, the Borrowers will pay to the Administrative Agent, for the account of the Banks or (as the case may be) the Administrative Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks or the Administrative Agent to receive the same net amount which the Banks or the Administrative Agent would have received on such due date had no such obligation been imposed upon the Borrowers. In the event that the Borrowers are required to make such deduction or withholding as a result of the fact that a Bank is organized outside of the United States, such Bank shall use its reasonable best efforts to transfer its Loans to an affiliate organized within the United States if such transfer would have no adverse effect on such Bank or the Loans. The Borrowers will deliver promptly to the Bank certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrowers hereunder or under such other Loan Document.               (c)      Whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such  27 -------------------------------------------------------------------------------- payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension; provided that any Interest Period for any Eurodollar Loan which ends on a day that is not a Eurodollar Business Day shall end on the next succeeding Eurodollar Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Eurodollar Business Day.               §4.3.      Computations. All computations of interest on Base Rate Loans and of Commitment Fees, Letter of Credit Fees or other fees shall, unless otherwise expressly provided herein, be based on a 365-day year (or 366-day year, as applicable) and paid for the actual number of days elapsed. All computations of interest on Eurodollar Loans shall, unless otherwise expressly provided herein, be based on a 360-day year and paid for the actual number of days elapsed.              §4.4.      Capital Adequacy. If any present or future law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) or the interpretation thereof by a court or governmental authority with appropriate jurisdiction affects the amount of capital required or expected to be maintained by any Bank or the Administrative Agent or any corporation controlling such Bank or the Administrative Agent, and such Bank or the Administrative Agent determines that the amount of capital required to be maintained by it is increased by or based upon the existence of such Bank's or the Administrative Agent's Loans, Letter of Credit Participations or Letters of Credit, or commitment with respect thereto, then such Bank or the Administrative Agent may notify the Borrowers of such fact. To the extent that the costs of such increased capital requirements are not reflected in the Base Rate (if relating to Base Rate Loans), the Borrowers and such Bank or (as the case may be) the Administrative Agent shall thereafter attempt to negotiate in good faith, within thirty (30) days of the day on which the Borrowers receive such notice, an adjustment payable hereunder that will adequately compensate such Bank or the Administrative Agent in light of these circumstances. If the Borrowers and such Bank or the Administrative Agent are unable to agree to such adjustment within thirty (30) days of the date on which the Borrowers receive such notice, then commencing on the date of such notice (but not earlier than the effective date of any such increased capital requirement), the fees payable hereunder shall increase by an amount that will, in such Bank's or the Administrative Agent's reasonable determination, provide adequate compensation. Each Bank and the Administrative Agent shall allocate such cost increases among its customers in good faith and on an equitable basis.             §4.5.      Certificate. A certificate setting forth any additional amounts payable pursuant to §4.4 and a reasonable explanation of such amounts which are due, submitted by any Bank or the Administrative Agent to the Borrowers, shall be conclusive, absent manifest error, that such amounts are due and owing.             §4.6.      Interest on Overdue Amounts. Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum equal to the Base Rate plus the Applicable Base Rate Margin plus two (2) percentage points (2.00%) until such amount shall be paid in full (after, as well as before, judgment). 28 --------------------------------------------------------------------------------             §4.7.     Interest Limitation. Notwithstanding any other term of this Credit Agreement or any Note or any other document referred to herein or therein, the maximum amount of interest which may be charged to or collected from any person liable hereunder or under any Note by any Bank shall be absolutely limited to, and shall in no event exceed, the maximum amount of interest which could lawfully be charged or collected under applicable law (including, to the extent applicable, the provisions of Section 5197 of the Revised Statutes of the United States of America, as amended, 12 U.S.C. Section 85, as amended), so that the maximum of all amounts constituting interest under applicable law, howsoever computed, shall never exceed as to any Person liable therefor such lawful maximum, and any term of this Credit Agreement, the Notes, the Letter of Credit Applications, or any other document referred to herein or therein which could be construed as providing for interest in excess of such lawful maximum shall be and hereby is made expressly subject to and modified by the provisions of this paragraph.           §4.8.      Eurodollar Indemnity. The Borrowers agree to indemnify the Banks and the Administrative Agent and to hold them harmless from and against any loss, cost or expenses (including loss of anticipated profits) that the Banks and the Administrative Agent may sustain or incur as a consequence of (a) default by the Borrowers in payment of the principal amount of or any interest on any Eurodollar Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by any Bank or the Administrative Agent to lenders of funds obtained by it in order to maintain its Eurodollar Loans, (b) a prepayment of principal on any Eurodollar Loan, including prepayments which are the result of acceleration by the Banks, or (c) default by the Borrowers in making a borrowing or conversion after the Borrowers have given (or are deemed to have given) notice pursuant to §2.5 or §2.6, the making of any payment of a Eurodollar Loan or the making of any conversion of any such Eurodollar Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by any Bank to lenders of funds obtained by it in order to maintain any such Loans.           §4.9.      Illegality; Inability to Determine Eurodollar Rate. Notwithstanding any other provision of this Credit Agreement, if (a) the introduction of, any change in, or any change in the interpretation of, any law or regulation applicable to the Administrative Agent or any Bank shall make it unlawful, or any central bank or other governmental authority having jurisdiction thereof shall assert that it is unlawful, for any Bank or the Administrative Agent to perform its obligations in respect of any Eurodollar Loans, or (b) if any Bank or the Administrative Agent shall reasonably determine with respect to Eurodollar Loans that (i) by reason of circumstances affecting any Eurodollar interbank market, adequate and reasonable methods do not exist for ascertaining the Eurodollar Rate which would otherwise be applicable during any Interest Period, or (ii) deposits of Dollars in the relevant amount for the relevant Interest Period are not available to such Bank or the Administrative Agent in any Eurodollar interbank market, or (iii) the Eurodollar Rate does not or will not accurately reflect the cost to such Bank or the Administrative Agent of obtaining or maintaining the applicable Eurodollar Loans during any Interest Period, then such Bank or the Administrative Agent shall promptly give telephonic, telex or cable notice of such determination to the Borrowers (which notice shall be conclusive and binding upon the Borrowers). Upon such notification by such Bank or the Administrative Agent, the obligation of such Bank or the Administrative Agent to make Eurodollar Loans shall be suspended until such Bank or the Administrative Agent determines that such circumstances no longer exist, and the  29 -------------------------------------------------------------------------------- outstanding Eurodollar Loans shall continue to bear interest at the applicable rate based on the Eurodollar Rate until the end of the applicable Interest Period, and thereafter shall be deemed converted to Base Rate Loans in equal principal amounts.           §4.10.      Additional Costs, Etc. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Bank by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall impose on any Bank any tax, levy, impost, duty, charge fees, deduction or withholdings of any nature or requirements with respect to this Credit Agreement, the other Loan Documents, the Loans, such Bank's Commitment, the Letters of Credit or any class of loans or commitments or letters of credit of which any of the Loans, the Commitments or the Letters of Credit forms a part, and the result of any of the foregoing is:                            (i) to increase the cost to such Bank of making, funding, issuing, renewing, extending or maintaining the Loans, such Bank's Commitment, or the Letters of Credit; or                             (ii) to reduce the amount of principal, interest or other amount payable to such Bank hereunder on account of such Bank's Commitment, the Loans, or drawings under the Letters of Credit, or                            (iii) to require such Bank to make any payment or to forego any interest or other sum payable hereunder, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank from the Borrowers hereunder, then, and in each such case, the Borrowers will, upon demand made by such Bank at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank such additional amounts as will be sufficient to compensate such Bank for such additional cost, reduction, payment or foregone interest or other sum (after such Bank shall have allocated the same fairly and equitably among all customers of any class generally affected thereby).           §4.11.      Replacement of Banks. If any Bank (an "Affected Bank") (i) makes demand upon the Borrowers for (or if the Borrowers are otherwise required to pay) amounts pursuant to §§4.4 or 4.10 or (ii) is unable to make or maintain Eurodollar Loans as a result of a condition described in §4.9, the Borrowers may, within 90 days of receipt of such demand or notice (or the occurrence of such other event causing the Borrowers to be required to pay such compensation or causing §4.9 to be applicable), by notice in writing to the Administrative Agent and such Affected Bank (a "Replacement Notice") (A) request the Affected Bank to cooperate with the Borrowers in obtaining a replacement bank satisfactory to the Administrative Agent and the Borrowers (the "Replacement Bank"); (B) request the non-Affected Banks to acquire and assume all of the Affected Bank's Loans and Commitment, as provided herein, but none of such Banks shall be under an obligation to do so; or (C) designate a Replacement Bank reasonably satisfactory to the Administrative Agent. If any satisfactory Replacement Bank shall be  30 -------------------------------------------------------------------------------- obtained, and/or any of the non-Affected Banks shall agree to acquire and assume all of the Affected Bank's Loans and Commitment, then such Affected Bank shall, so long as no Event of Default shall have occurred and be continuing, assign, in accordance with §17, all of its Commitment, Loans, Notes and other rights and obligations under this Credit Agreement and all other Loan Documents to such Replacement Bank or non-Affected Banks, as the case may be, in exchange for payment of the principal amount so assigned and all interest and fees accrued on the amount so assigned, plus all other Obligations then due and payable to the Affected Bank; provided, however, that (i) such assignment shall be without recourse, representation or warranty and shall be on terms and conditions reasonably satisfactory to such Affected Bank and such Replacement Bank and/or non-Affected Banks, as the case may be, and (ii) prior to any such assignment, the Borrowers shall have paid to such Affected Bank all amounts properly demanded and unreimbursed under §§4.4, 4.8, 4.9 and 4.10. Upon the effective date of such assignment, the Borrowers shall issue replacement Notes to such Replacement Bank and/or non-Affected Banks, as the case may be, and such institution shall become a "Bank" for all purposes under this Credit Agreement and the other Loan Documents.           §4.12.      Concerning Joint and Several Liability of the Borrowers.            (a) Each of the Borrowers is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Banks under this Credit Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers and in consideration of the undertakings of each other Borrower to accept joint and several liability for the Obligations.            (b) Each of the Borrowers, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers with respect to the payment and performance of all of the Obligations (including, without limitation, any Obligations arising under this §4.12), it being the intention of the parties hereto that all of the Obligations shall be the joint and several Obligations of each of the Borrowers without preferences or distinction among them.           (c) If and to the extent that any of the Borrowers shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Borrowers will make such payment with respect to, or perform, such Obligation.           (d) The Obligations of each of the Borrowers under the provisions of this §4.12 constitute full recourse Obligations of each of the Borrowers enforceable against each such corporation to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Credit Agreement or any other circumstance whatsoever.          (e) Except as otherwise expressly provided in this Credit Agreement, each of the Borrowers hereby waives notice of acceptance of its joint and several liability, notice of any Loans made under this Credit Agreement, notice of any action at any time taken or omitted by the Banks under or in respect of any of the Obligations, and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Credit Agreement. Each of the Borrowers hereby assents to,  31 -------------------------------------------------------------------------------- and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Banks at any time or times in respect of any default by any of the Borrowers in the performance or satisfaction of any term, covenant, condition or provision of this Credit Agreement, any and all other indulgences whatsoever by the Banks in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any of the Borrowers. Without limiting the generality of the foregoing, each of the Borrowers assents to any other action or delay in acting or failure to act on the part of the Banks with respect to the failure by any of the Borrowers to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this §4.12, afford grounds for terminating, discharging or relieving any of the Borrowers, in whole or in part, from any of its Obligations under this §4.12, it being the intention of each of the Borrowers that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of such Borrowers under this §4.12 shall not be discharged except by performance and then only to the extent of such performance. The Obligations of each of the Borrowers under this §4.12 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, re-construction or similar proceeding with respect to any of the Borrowers or the Banks. The joint and several liability of the Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any of the Borrowers or the Banks.         (f) The provisions of this §4.12 are made for the benefit of the Banks and their successors and assigns, and may be enforced in good faith by them from time to time against any or all of the Borrowers as often as the occasion therefor may arise and without requirement on the part of the Banks first to marshal any of their claims or to exercise any of their rights against any other Borrower or to exhaust any remedies available to them against any other Borrower or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy. The provisions of this §4.12 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied. If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Banks upon the insolvency, bankruptcy or reorganization of any of the Borrowers, or otherwise, the provisions of this §4.12 will forthwith be reinstated in effect, as though such payment had not been made.         §5.      REPRESENTATIONS AND WARRANTIES. The Borrowers jointly and severally represent and warrant to the Banks that on and as of the date of this Credit Agreement, each Drawdown Date, and the date of issuance of any Letter of Credit (with any disclosure on a schedule pursuant to this §5 applying to all relevant representations and warranties, regardless of whether such schedule is referenced in each relevant representation): 32 --------------------------------------------------------------------------------         §5.1.      Corporate Authority.         (a)          Incorporation; Good Standing. Each Borrower (i) is a corporation duly organized, validly existing and in good standing or in current status under the laws of its respective state of incorporation, (ii) has all requisite corporate power to own its property and conduct its business as now conducted and as presently contemplated, and (iii) is in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction in which its property or business as presently conducted or contemplated makes such qualification necessary except where a failure to be so qualified would not have a material adverse effect on the business, assets or financial condition of such Borrower.      (b)             Authorization. The execution, delivery and performance of the Loan Documents and the transactions contemplated hereby and thereby (i) are within the corporate authority of each Borrower, (ii) have been duly authorized by all necessary corporate proceedings, (iii) do not conflict with or result in any material breach or contravention of any provision of law, statute, rule or regulation to which any Borrower is subject or any judgment, order, writ, injunction, license or permit applicable to any Borrower so as to materially adversely affect the assets, business or any activity of the Borrowers, and (iv) do not conflict with any provision of the corporate charter or bylaws of any Borrower or any agreement or other instrument binding upon them.       (c)            Enforceability. The execution, delivery and performance of the Loan Documents will result in valid and legally binding obligations of the Borrowers enforceable against each in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought.      §5.2.       Governmental Approvals. The execution, delivery and performance by the Borrowers of the Loan Documents and the transactions contemplated hereby and thereby do not require any approval or consent of, or filing with, any governmental agency or authority other than those already obtained.      §5.3.       Title to Properties; Leases. The Borrowers own all of the assets reflected in the consolidated balance sheets as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date), subject to no mortgages, capitalized leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens.       §5.4.      Financial Statements; Solvency.      (a)          There has been furnished to the Banks audited consolidated financial statements of the Borrowers dated the Balance Sheet Date. Said financial statements have been prepared in accordance with GAAP and fairly present in all material respects the financial condition of the Borrowers on a consolidated basis, as at the close of business on the date thereof and the results of operations for the period then  33 -------------------------------------------------------------------------------- ended. There are no contingent liabilities of the Borrowers involving material amounts, known to the officers of the Borrowers, which have not been disclosed in said balance sheets and the related notes thereto or otherwise in writing to the Banks.      (b)        The Borrowers on a consolidated basis (both before and after giving effect to the transactions contemplated by this Credit Agreement) are and will be solvent (i.e., they have assets having a fair value in excess of the amount required to pay their probable liabilities on their existing debts as they become absolute and matured) and have, and expect to have, the ability to pay their debts from time to time incurred in connection therewith as such debts mature.      §5.5.      No Material Changes, Etc. Since the Balance Sheet Date, there have occurred no material adverse changes in the financial condition or businesses of the Borrowers, taken as a whole, as shown on or reflected in the consolidated balance sheet of the Borrowers as of the Balance Sheet Date, or the consolidated statement of income for the fiscal year then ended. Since the Balance Sheet Date, there have not been any Distributions other than as permitted by §7.6 hereof.      §5.6.     Permits, Franchises, Patents, Copyrights, Etc. Each Borrower possess all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of their businesses substantially as now conducted without known conflict with any rights of others.      §5.7.      Litigation. Except as shown on Schedules 5.7 and 5.16 hereto, there are no actions, suits, proceedings or investigations of any kind pending or, to the knowledge of any Borrower, threatened against any Borrower before any court, tribunal or administrative agency or board which, if adversely determined, might, either in any individual case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of the Borrowers, taken as a whole, or materially impair the right of the Borrowers, taken as a whole, to carry on business substantially as now conducted, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet or which question the validity of any of the Loan Documents or any action taken or to be taken pursuant hereto or thereto.      §5.8.      No Materially Adverse Contracts, Etc. No Borrower is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Borrowers' officers has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of the Borrowers, taken as a whole. No Borrower is a party to any contract or agreement which in the judgment of the Borrowers' officers has or is expected to have any materially adverse effect on the business of the Borrowers, taken as a whole, except as otherwise reflected in adequate reserves.      §5.9.      Compliance With Other Instruments, Laws, Etc. No Borrower is violating any provision of its charter documents or by-laws or any agreement or instrument by which any of them may be subject or by which any of them or any of their properties may be bound or any decree, order, judgment, or any statute, license, rule or regulation, in a manner which could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of any  34 -------------------------------------------------------------------------------- Borrower. All Material Contracts (a complete and accurate list of which is attached hereto as Schedule 5.9) are in full force and effect, and no default or event of default has occurred and is continuing under any Material Contract.      §5.10.      Tax Status. Each Borrower has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which any of them is subject (unless and only to the extent that such Borrower has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes); and have paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith; and have set aside on their books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Borrowers know of no basis for any such claim.      §5.11.      No Event of Default. No Default or Event of Default has occurred and is continuing as of the date of this Credit Agreement.      §5.12.      Holding Company and Investment Company Acts. No Borrower is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935; nor is any of them a "registered investment company," or an "affiliated company" or a "principal underwriter" of a "registered investment company," as such terms are defined in the Investment Company Act of 1940, as amended.      §5.13.      Absence of Financing Statements, Etc. Other than Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry, or other public office, which purports to cover, affect or give notice of any present or possible future lien on, or security interest in, any assets or property of any Borrower, or any rights relating thereto.      §5.14.     Employee Benefit Plans.      (a)           Each Employee Benefit Plan and each Guaranteed Pension Plan has been maintained and operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions and the bonding of fiduciaries and other persons handling plan funds as required by §412 of ERISA. Each Borrower has heretofore delivered to the Administrative Agent the most recently completed annual report, Form 5500, with all required attachments, and actuarial statement required to be submitted under §103(d) of ERISA, with respect to each Guaranteed Pension Plan.      (b)          No Employee Benefit Plan, which is an employee welfare benefit plan within the meaning of §3(1) or §3(2)(B) of ERISA, provides benefit coverage subsequent to termination of employment, except as required by Title I, Part 6 of ERISA or the applicable state insurance laws. A Borrower may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in  35 -------------------------------------------------------------------------------- the discretion of such Borrower without liability to any Person other than for claims arising prior to termination.      (c)           Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of §302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan, and no Borrower nor any ERISA Affiliate is obligated to or has posted security in connection with an amendment to a Guaranteed Pension Plan pursuant to §307 of ERISA or §401(a)(29) of the Code. No liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by any Borrower or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event (other than an ERISA Reportable Event as to which the requirement of 30 days notice has been waived), or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within twelve months of the date of this representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of §4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans, disregarding for this purpose the benefit liabilities and assets of any Guaranteed Pension Plan with assets in excess of benefit liabilities.      (d)          No Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under §4201 of ERISA or as a result of a sale of assets described in §4204 of ERISA. No Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of §4241 or §4245 of ERISA or is at risk of entering reorganization or becoming insolvent, or that any Multiemployer Plan intends to terminate or has been terminated under §4041A of ERISA.      §5.15.      Use of Proceeds.                      §5.15.1.    General. The proceeds of the Loans shall be used solely as follows: (a) to refinance existing Indebtedness of the Borrowers under the Prior Credit Agreement, (b) to finance the Wichita Acquisition and acquisitions permitted pursuant to §7.4; and (c) for capital expenditures, working capital, and general corporate purposes.                      §5.15.2.     Regulations U and X. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.                     §5.15.3.      Ineligible Securities. No portion of the proceeds of any Loans is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of (a) knowingly purchasing, or providing credit support for the purchase of, Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20  36 -------------------------------------------------------------------------------- Subsidiary makes a market in such Ineligible Securities, (b) knowingly purchasing, or providing credit support for the purchase of, during the underwriting or placement period, any Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (c) making, or providing credit support for the making of, payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Borrowers or other Affiliate of the Borrowers.                   §5.16.        Environmental Compliance. Each Borrower has investigated the past and present condition and usage of the Real Property and the operations conducted thereon and, based upon such diligent investigation, has determined that, except as shown on Schedule 5.16:                   (a)             No Borrower, nor any operator of the Borrowers' properties, is in violation, or alleged violation, of any judgment, decree, order, law, permit, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under RCRA, CERCLA, the Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment (the "Environmental Laws"), which violation would have a material adverse effect on the business, assets or financial condition of the Borrowers on a consolidated basis.                  (b)             No Borrower has received notice from any third party, including, without limitation: any federal, state or local governmental authority, (i) that any of the Borrowers has been identified by the United States Environmental Protection Agency ("EPA") as a potentially responsible party under CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C. §6903(5), any hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) or any toxic substance, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws ("Hazardous Substances") which any of the Borrowers has generated, transported or disposed of has been found at any site at which a federal, state or local agency or other third party has conducted or has ordered that any Borrower conduct a remedial investigation, removal or other response action pursuant to any Environmental Law; or (iii) that it is or shall be a named party to any claim, action, cause of action, complaint, legal or administrative proceeding arising out of any third party's incurrence of costs, expenses, losses or damages of any kind whatsoever in connection with the release of Hazardous Substances.                 (c)             Except where it would not have a material adverse effect on the value of the Real Property, (i) no portion of the Real Property has been used for the handling, processing, storage or disposal of Hazardous Substances; and no underground tank or other underground storage receptacle for Hazardous Substances is located on such properties; (ii) in the course of any activities conducted by the Borrowers, or operators of the Real Property, no Hazardous Substances have been generated or are being used on such properties; (iii) there have been no unpermitted Releases or threatened Releases of Hazardous Substances on, upon, into or from the Real Property; (iv) to the best of the Borrowers' knowledge, there have been no Releases on, upon, from or into any real property in the vicinity of the Real Property which, through soil or groundwater 37 -------------------------------------------------------------------------------- contamination, may have come to be located on such properties; and (v) in addition, when required under applicable Environmental Laws, any Hazardous Substances that have been generated on the Real Property have been transported offsite only by carriers having an identification number issued by the EPA, treated or disposed of only by treatment or disposal facilities maintaining valid permits as required under applicable Environmental Laws, which transporters and facilities, to the best of the Borrowers' knowledge, have been and are operating in material compliance with such permits and applicable Environmental Laws.                (d)              None of the Real Property is or shall be subject to any applicable environmental clean-up responsibility law or environmental restrictive transfer law or regulation, by virtue of the transactions set forth herein and contemplated hereby.                 §5.17.        Perfection of Security Interests. All filings, assignments, pledges and deposits of documents or instruments to be made by the Borrowers have been made and all other actions have been taken that are necessary or advisable under applicable law to establish and perfect the Administrative Agent's security interest in the Collateral. The Collateral and the Administrative Agent's rights with respect to the Collateral are not subject to any setoff, claims, withholdings or other defenses.                 §5.18.        Transactions with Affiliates. Except as disclosed in Schedule 5.18 or filings made by the Borrowers under the Securities Exchange Act of 1934 prior to the Closing Date, and except for arm's length transactions pursuant to which a Borrower makes payments in the ordinary course of business upon terms no less favorable than such Borrower could obtain from third parties, none of the officers, directors, or employees of any Borrower is presently a party to any transaction with another Borrower (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of any Borrower, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.                 §5.19.       Subsidiaries. Schedule 2 sets forth a complete and accurate list of the Subsidiaries of the Parent, including the name of each Subsidiary, the location of its chief executive office, and its jurisdiction of incorporation, together with the number of authorized and outstanding shares of each Subsidiary. Each Subsidiary listed on Schedule 2 is (a) wholly owned by the Parent (except as noted in such Schedule) and (b) is a Borrower hereunder, 100% of the assets and stock of which have been pledged to the Administrative Agent on behalf of the Banks (subject to Permitted Liens) pursuant to the Security Documents. The Parent has good and marketable title to all of the shares it purports to own of the stock of each such Subsidiary, and each other Borrower has good and marketable title to all of the shares it purports to own of the stock of such Subsidiary, free and clear in each case of any lien. All such shares have been duly issued and are fully paid and non-assessable.                §5.20.       True Copies of Charter and Other Documents. Each Borrower has furnished the Administrative Agent copies, in each case true and complete as of the  38 -------------------------------------------------------------------------------- Closing Date, of its (a) charter and other incorporation documents and (b) by-laws, each including any amendments thereto.               §5.21.        Disclosure. Neither this Credit Agreement, nor any of the other Loan Documents, nor any document or information furnished by the Borrowers in connection therewith contains any untrue statement of a material fact or omits to state a material fact (known to any Borrower in the case of any document or information not furnished by the Borrowers) necessary in order to make the statements herein or therein not misleading. There is no fact known to any Borrower which materially adversely affects, or which is reasonably likely in the future to materially adversely affect, the business, assets, or financial condition of any Borrower, exclusive of effects resulting from changes in general economic conditions, legal standards or regulatory conditions.              §5.22.        Capitalization. (a) As of March 31, 2000, the authorized capital stock of the Parent consists of 50,000,000 shares of common stock (par value $0.01 per share) of which 21,417,440 shares were outstanding as of such date. All of such outstanding shares are fully paid and non-assessable. In addition, as of March 31, 2000, the Board of Directors of the Parent has duly reserved 725,399 shares of the Parent's common stock for issuance pursuant to outstanding warrants, and has reserved twelve percent (12%) of shares of the Parent's common stock outstanding at any given time for issuance upon the exercise of employee stock options granted pursuant to the Parent s stock option plan.             (b) The shares of the capital stock of the Subsidiaries pledged to the Administrative Agent pursuant to the Stock Pledge Agreements are held of record as set forth on the respective Annex A to each Stock Pledge Agreement. Such capital stock constitutes, of record, 100% of the outstanding capital stock of each such Subsidiary, and, to our knowledge, on a fully-diluted basis, 100% of such outstanding capital stock.             §6.           AFFIRMATIVE COVENANTS OF THE BORROWERS. The Borrowers jointly and severally covenant and agree that, so long as any Loan or Note is outstanding or the Banks have any obligation to make Loans or the Administrative Agent has any obligation to issue, extend, or renew any Letters of Credit hereunder:            §6.1.          Punctual Payment. The Borrowers will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, fees and other amounts provided for in this Credit Agreement and the other Loan Documents, all in accordance with the terms of this Credit Agreement and such other Loan Documents.           §6.2.          Maintenance of Offices. The Parent will maintain its chief executive offices at 620 Coolidge Drive, Suite 350, Folsom, California 95630-3155, and each Subsidiary will maintain its chief executive offices at the location set forth on Schedule 2, or at such other place in the United States as the Borrowers shall designate upon 30 days' prior written notice to the Administrative Agent.           §6.3.         Records and Accounts. Each Borrower will (i) keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles, (ii) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties, contingencies, and other reserves, and  39 -------------------------------------------------------------------------------- (iii) at all times engage the Accountants as the independent certified public accountants of the Borrowers.           §6.4.        Financial Statements, Certificates and Information. The Borrowers will deliver to the Banks:            (a)             as soon as practicable, but, in any event not later than 90 days after the end of each fiscal year of the Borrowers, the consolidated and consolidating balance sheets of the Borrowers as at the end of such year, statements of cash flows, and the related consolidated and consolidating statements of operations, each setting forth in comparative form the figures for the previous fiscal year, all such consolidated and consolidating financial statements to be in reasonable detail, prepared in accordance with GAAP and, with respect to the consolidated financial statements, certified by the Accountants. In addition, simultaneously therewith, the Borrowers shall use reasonable efforts to provide the Banks with a written statement from the Accountants to the effect that the Borrowers are in compliance with the covenants set forth in §8 hereof, and that, in making the examination necessary to said certification, nothing has come to the attention of the Accountants that would indicate that any Default or Event of Default exists, or, if the Accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; provided that the Accountants shall not be liable to the Banks for failure to obtain knowledge of any Default or Event of Default;            (b)            as soon as practicable, but in any event not later than 45 days after the end of each fiscal quarter of the Borrowers, copies of the consolidated and consolidating balance sheets and statement of operations of the Borrowers as at the end of such quarter, subject to year end adjustments, and the related statement of cash flows, all in reasonable detail and prepared in accordance with GAAP, with a certification by the principal financial or accounting officer of the Borrowers (the "CFO") that the consolidated financial statements are prepared in accordance with GAAP and fairly present the consolidated financial condition of the Borrowers as at the close of business on the date thereof and the results of operations for the period then ended;           (c)             simultaneously with the delivery of the financial statements referred to in (a) and (b) above, a statement in the form of Exhibit D hereto (the "Compliance Certificate") certified by the CFO that the Borrowers are in compliance with the covenants contained in §§6, 7 and 8 hereof as of the end of the applicable period setting forth in reasonable detail computations evidencing such compliance, provided that if the Borrowers shall at the time of issuance of such certificate or at any other time obtain knowledge of any Default or Event of Default, the Borrowers shall include in such certificate or otherwise deliver forthwith to the Banks a certificate specifying the nature and period of existence thereof and what action the Borrowers propose to take with respect thereto and a certificate of the Borrowers' Chief Operating Officer in the form attached hereto as Exhibit E with respect to environmental matters;          (d)              contemporaneously with or promptly following the delivery thereof to the boards of directors of the Borrowers, copies of the financial statements, financial projections and annual budget concerning the Borrowers in substantially the same form in which such information is supplied to the boards of directors of the Borrowers;  40 --------------------------------------------------------------------------------         (e)              contemporaneously with, or promptly following, the filing or mailing thereof, copies of all material of a financial nature filed with the Securities and Exchange Commission or sent to the stockholders of the Borrowers; and           (f)              from time to time, such other financial data and other information (including accountants' management letters) as the Banks may reasonably request.          The Borrowers hereby authorize the Banks to disclose any information obtained pursuant to this Credit Agreement to all appropriate governmental regulatory authorities where required by law; provided, however, that this authorization shall not be deemed to be a waiver of any rights to object to the disclosure by the Banks of any such information which the Borrowers have or may have under the federal Right to Financial Privacy Act of 1978, as in effect from time to time.           §6.5.      Corporate Existence and Conduct of Business. Each Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, corporate rights and franchises; effect and maintain its foreign qualifications, licensing, domestication or authorization except as terminated by such Borrower's Board of Directors in the exercise of its reasonable judgment and except where the failure of a Borrower to remain so qualified would not materially adversely impair the financial condition of the Borrowers on a consolidated basis; use its best efforts to comply with all applicable laws; and shall not become obligated under any contract or binding arrangement which, at the time it was entered into would materially adversely impair the financial condition of the Borrowers on a consolidated basis. Each Borrower will continue to engage primarily in the businesses now conducted by it and in related businesses.          §6.6.      Maintenance of Properties. The Borrowers will cause all material properties used or useful in the conduct of their businesses to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Borrowers may be necessary so that the businesses carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this section shall prevent the Borrowers from discontinuing the operation and maintenance of any of their properties if such discontinuance is, in the judgment of the Borrowers, desirable in the conduct of their business and which does not in the aggregate materially adversely affect the businesses of the Borrowers on a consolidated basis.          §6.7.    Insurance. The Borrowers will maintain with financially sound and reputable insurance companies, funds or underwriters' insurance of the kinds, covering the risks (other than risks arising out of or in any way connected with personal liability of any officers and directors thereof) and in the relative proportionate amounts usually carried by reasonable and prudent companies conducting businesses similar to that of the Borrowers, but in no event less than that required under §7 of the Security Agreement. In addition, the Borrowers will furnish from time to time, upon the Administrative Agent's request, a summary of the insurance coverage of each of the Borrowers, which summary shall be in form and substance satisfactory to the Administrative Agent and, if requested by the Administrative Agent, will furnish to the Administrative Agent copies of the applicable policies. 41 --------------------------------------------------------------------------------      §6.8. Taxes. The Borrowers will duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges (other than taxes, assessments and other governmental charges imposed by foreign jurisdictions which in the aggregate are not material to the business or assets of any Borrower on an individual basis or of the Borrowers on a consolidated basis) imposed upon it and its real properties, sales and activities, or any material part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies, which if unpaid might by law become a lien or charge upon any material portion of its property, unless such lien is a Permitted Lien;provided,however, that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if such Borrower shall have set aside on its books adequate reserves with respect thereto; and provided,further, that the Borrowers will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor.      §6.9. Inspection of Properties, Books, and Contracts. The Borrowers will permit the Banks, the Administrative Agent or any of their designated representatives, upon reasonable notice and during normal business hours, to visit and inspect any of their properties, to examine their books of account (including the making of periodic accounts receivable reviews), or contracts (and to make copies thereof and extracts therefrom), and to discuss their affairs, finances and accounts with, and to be advised as to the same by, their officers, all at such times and intervals as the Banks may reasonably request.      §6.10. Compliance with Laws, Contracts, Licenses and Permits; Maintenance of Material Licenses and Permits. The Borrowers will (i) comply with the provisions of their charter documents and by-laws and all agreements and instruments by which they or any of their properties may be bound; and (ii) comply with all applicable laws and regulations (including Environmental Laws), decrees, orders, judgments, licenses and permits, including, without limitation, all environmental permits hereto ("Applicable Laws"), except where noncompliance with such Applicable Laws would not have a material adverse effect in the aggregate on the consolidated financial condition, properties or businesses of the Borrowers. If at any time while the Notes, or any Loan or Letter of Credit is outstanding or any Bank or the Administrative Agent has any obligation to make Loans or issue Letters of Credit hereunder, any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrowers may fulfill any of their obligations hereunder, the Borrowers will immediately take or cause to be taken all reasonable steps within the power of the Borrowers to obtain such authorization, consent, approval, permit or license and furnish the Banks with evidence thereof.     §6.11. Environmental Indemnification. Each Borrower covenants and agrees that it will indemnify and hold the Banks harmless from and against any and all claims, expense, damage, loss or liability incurred by the Banks (including all costs of legal representation incurred by the Banks) relating to (a) any release or threatened release of hazardous substances on the Real Property; (b) any violation of any Environmental Laws with respect to conditions at the Real Property or the operations conducted thereon; or (c) the investigation or remediation of offsite locations at which any Borrower or its predecessors are alleged to have directly or indirectly disposed of hazardous substances. It is expressly acknowledged by each Borrower that this covenant of indemnification  42 -------------------------------------------------------------------------------- shall include claims, expense, damage, loss or liability incurred by the Banks based upon the Banks' negligence, and this covenant shall survive any foreclosure or any modification, release or discharge of the Loan Documents or the payment of the Loans and shall inure to the benefit of the Banks, their successors and assigns.      §6.12. Further Assurances. The Borrowers will cooperate with the Banks and execute such further instruments and documents as the Banks shall reasonably request to carry out to the Banks' satisfaction the transactions contemplated by this Credit Agreement and the Loan Documents.      §6.13. Notice of Potential Claims or Litigation. The Borrowers will deliver to the Banks, within 30 days of receipt thereof, written notice of the initiation of any action, claim, complaint, or any other notice of dispute or potential litigation (including without limitation any alleged violation of any Environmental Law), wherein the potential liability is in excess of $750,000, together with a copy of each such notice received by any Borrower.     §6.14. Notice of Certain Events Concerning Insurance and Environmental Claims.          (a)    The Borrowers will provide the Banks with written notice as to any material cancellation or material change in any insurance of the Borrowers within ten (10) Business Days after the Borrowers' receipt of any notice (whether formal or informal) of such cancellation or change by any of their insurers.          (b)    The Borrowers will promptly notify the Banks in writing of any of the following events:                 (i)    upon any Borrower obtaining knowledge of any violation of any Environmental Law regarding the Real Property or any Borrower's operations, which violation could have a material adverse effect on the Real Property or on such Borrower's operations; (ii) upon any Borrower obtaining knowledge of any potential or known Release or threat of Release of any Hazardous Substance at, from, or into the Real Property which any Borrower reports in writing or is reportable by it in writing to any governmental authority and which is material in amount or nature or which could materially affect the value of the Real Property; (iii) upon any Borrower's receipt of any notice of violation of any Environmental Laws or of any Release or threatened Release of Hazardous Substances, including a notice or claim of liability or potential responsibility from any third party (including without limitation any federal, state or local governmental officials) and including notice of any formal inquiry, proceeding, demand, investigation or other action with regard to (A) any Borrower's or any Person's operation of the Real Property, (B) contamination on, from or into the Real Property, or (C) investigation or remediation of offsite locations at which any Borrower or any of its predecessors is alleged to have directly or indirectly Disposed of Hazardous Substances, which violation or Release in any such case could have a material adverse effect on the Real Property or on any Borrower's operations; or (iv) upon any Borrower obtaining knowledge that any material expense or loss has been incurred by such governmental authority in connection with the assessment, containment, removal or remediation of any Hazardous Substances with respect to which any Borrower may be liable or for which a lien may be imposed on the Real Property. 43 --------------------------------------------------------------------------------      §6.15. Response Actions. The Borrowers covenant and agree that if any Release or Disposal of Hazardous Substances shall occur or shall have occurred on the Real Property, the Borrowers will cause the prompt containment and removal of such Hazardous Substances and remediation of the Real Property as necessary to comply with all Environmental Laws or to preserve the value of the Real Property.      §6.16. Notice of Default. The Borrowers will promptly notify the Banks in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Credit Agreement or any other note, evidence of Indebtedness, indenture or other obligation evidencing Indebtedness in excess of $750,000 as to which any Borrower is a party or obligor, whether as principal or surety, the Borrowers shall forthwith give written notice thereof to the Banks, describing the notice of action and the nature of the claimed default.     §6.17. New Subsidiaries.     (a)     Any newly-created or acquired Subsidiaries permitted under §7.4 shall become Borrowers hereunder by (i) signing a joinder agreement or entering into an amendment to this Credit Agreement and the Security Documents, as applicable, with the other parties hereto and thereto, in form and substance satisfactory to the Administrative Agent, providing that such Subsidiary shall become a Borrower hereunder, 100% of the stock and assets of which shall be pledged to the Administrative Agent for the benefit of the Banks (subject to Permitted Liens), and (ii) providing such other documentation as the Banks or the Administrative Agent may reasonably request, including, without limitation, documentation with respect to the conditions specified in §9 hereof. In such event, the Administrative Agent is hereby authorized by the parties to amend Schedule 2 to include such new Subsidiary.     (b)     The Parent shall at all times directly or indirectly through a Subsidiary own all of the shares of capital stock of each of the Subsidiaries which are corporations, and such shares shall at all times be pledged to the Administrative Agent pursuant to the Stock Pledge Agreements. The Parent shall at all times directly or indirectly through a Subsidiary own all of the partnership or joint venture interests in each of the Subsidiaries which are partnerships or joint ventures, and such interests shall at all times be pledged to the Administrative Agent pursuant to a partnership pledge agreement in form and substance satisfactory to the Administrative Agent.      §6.18. Employee Benefit Plans. The Borrowers will (i) promptly upon filing the same with the Department of Labor or Internal Revenue Service, upon request of the Administrative Agent, furnish to the Administrative Agent a copy of the most recent actuarial statement required to be submitted under §103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to the Administrative Agent any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under §§302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under §§4041A, 4202, 4219, 4242, or 4245 of ERISA.     §6.19. Notice of Loss of Material Contracts. The Borrowers will  promptly (and in any event within fifteen (15) Business Days after the occurrence thereof) notify  44 -------------------------------------------------------------------------------- the Banks in writing of the termination, or (if earlier) the receipt of a notice of termination of, or any default by any Borrower under, any Material Contract.    §7.  CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. Each Borrower agrees that, so long as any Loan or any Note or other Obligation is outstanding or the Banks have any obligation to make Loans or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit hereunder:    §7.1. Restrictions on Indebtedness. No Borrower shall become or be a guarantor or surety of, or otherwise create, incur, assume, or be or remain liable, contingently or otherwise, with respect to any Indebtedness, or become or be responsible in any manner (whether by agreement to purchase any obligations, stock, assets, goods or services, or to supply or advance any funds, assets, goods or services or otherwise) with respect to any undertaking or Indebtedness of any other Person, or incur any Indebtedness other than:     (a)    Indebtedness to the Banks and the Administrative Agent arising under this Credit Agreement or the Loan Documents;     (b)    incurrence of guaranty, suretyship or indemnification obligations in connection with the Borrowers' performance of services for their respective customers in the ordinary course of their businesses;     (c)    Indebtedness of one Borrower to another Borrower;     (d)    Equipment Financing (subject to §8.5), Seller Debt, the Converted Wasco Bond and other Indebtedness, in an aggregate amount not to exceed the lesser of (i) EBITDA for the four fiscal quarters most recently ended multiplied by 0.75 (calculated on a pro forma basis assuming any acquisition that closed during such period had been completed at the beginning of such period) or (ii) $70,000,000; and     (e)    Indebtedness of the Borrowers with respect to performance bonds existing as of the Closing Date, including extensions and renewals thereof, in an aggregate amount not to exceed $8,000,000; and      §7.2. Restrictions on Liens. No Borrower shall create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any property or assets of any character, whether now owned or hereafter acquired, or upon the income or profits therefrom; or transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; or acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; or suffer to exist for a period of more than 30 days after the same shall have been incurred any Indebtedness or claim or demand against it which if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles or chattel paper, with or without recourse, except as follows (the "Permitted Liens"): 45 --------------------------------------------------------------------------------     (a)    Liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue;     (b)    Deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations;     (c)    Liens in respect of judgments or awards which have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the applicable Borrower shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review and in respect of which such Borrower maintains adequate reserves;     (d)    Liens of carriers, warehousemen, mechanics and materialmen, and other like liens, in existence less than 120 days from the date of creation thereof in respect of obligations not overdue, provided that such liens may continue to exist for a period of more than 120 days if the validity or amount thereof shall currently be contested by the applicable Borrower in good faith by appropriate proceedings and if such Borrower shall have set aside on its books adequate reserves with respect thereto as required by GAAP and provided further that such Borrower will pay any such claim forthwith upon commencement of proceedings to foreclose any such lien;     (e)    Encumbrances on Real Property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which any Borrower is a party, and other minor liens or encumbrances none of which in the opinion of such Borrower interferes materially with the use of the property affected in the ordinary conduct of the business of such Borrower, which defects do not individually or in the aggregate have a material adverse effect on the business of such Borrower individually or of the Borrowers on a consolidated basis;     (f)    Liens securing Equipment Financing permitted under §7.1(d) incurred in connection with the lease or acquisition of property or fixed assets useful or intended to be used in carrying on the business of the Borrowers, provided that such Liens shall encumber only the property or assets so acquired and shall not exceed the fair market value thereof, and Liens on the Wasco Collateral with respect to the Converted Wasco Bond;     (g)    First-priority liens securing Seller Debt and other Indebtedness permitted by §7.1(d),provided that liens securing Seller Debt shall encumber only the property or assets so acquired or the property or assets of any Subsidiary whose stock is so acquired and shall not exceed the fair market value thereof;     (h)    Liens in favor of the Administrative Agent for the benefit of the Banks and the Administrative Agent under the Loan Documents; and     (i)    Liens granted in favor of certain governmental entities pursuant to any Scheduled Contract listed on Schedule 7.2(i); provided, that such liens (i) encumber only 46 --------------------------------------------------------------------------------  the containers, bins, carts and vehicles used in connection with such Scheduled Contract and (ii) are promptly released as soon as such release is not prohibited under the terms of such Scheduled Contract.     §7.3.  Restrictions on Investments. No Borrower shall purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or other obligations or securities of, or any interest in, any other Person, or make or commit to make any acquisition under §7.4, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any other Person, other than:     (a)    marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase;     (b)    demand deposits, certificates of deposit, bankers acceptances and time deposits of United States banks or Eligible Foreign Banks having unimpaired capital and surplus in excess of $250,000,000;     (c)    securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's Investors Service, Inc., and not less than "A 1" if rated by Standard and Poor's Rating Group;     (d)    extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business;     (e)    investments existing on the date hereof and listed on Schedule 7.3;     (f)    loans and advances by any Borrower to another Borrower;     (g)    investments with respect to Seller Debt permitted under §7.1(d);     (h)    investments permitted under §7.4;     (i)    (i)     loans to employees of the Parent for the purpose of financing such employees' acquisition of equity of the Parent (through the exercise of stock options or otherwise) or for relocation costs and expenses in an aggregate principal amount not to exceed $750,000 at any time outstanding.     §7.4.  Merger, Consolidation and Disposition of Assets.                 §7.4.1.  Mergers and Acquisitions. The Borrowers will not become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) except the merger or consolidation of, or asset or stock acquisitions between existing Borrowers, and except as otherwise provided in this §7.4.1. The Borrowers may purchase or otherwise acquire all or substantially all of the assets or stock or other equity interests of any other Person provided that: 47 --------------------------------------------------------------------------------     (a)    the Borrowers are in current compliance with and, giving effect to the proposed acquisition (including any borrowings made or to be made in connection therewith), will continue to be in compliance with all of the covenants in §8 hereof on a pro forma historical combined basis as if the transaction occurred on the first day of the period of measurement; provided, that, in the case of transactions involving cash consideration to be paid by the Borrowers (including cash deferred payments, contingent or otherwise, and the aggregate amount of all Funded Debt assumed) in excess of $20,000,000, the Administrative Agent and the Banks shall have received a Compliance Certificate demonstrating compliance with §§8.1-8.3 on a pro forma historical combined basis as if the transaction occurred on the first day of the period of measurement;     (b)    at the time of such acquisition, no Default or Event of Default has occurred and is continuing, and such acquisition will not otherwise create a Default or an Event of Default hereunder;     (c)    the business to be acquired is predominantly in the same lines of business as the Borrowers, or businesses reasonably related or incidental thereto (e.g., non-hazardous solid waste collection, transfer, hauling, recycling, or disposal);     (d)     the business to be acquired operates predominantly in the continental United States;     (e)    all of the assets to be acquired shall be owned by an existing or newly created Subsidiary of the Parent which Subsidiary shall be a Borrower, 100% of the assets and stock or other equity interests of which have been or, simultaneously with such acquisition, will be pledged to the Administrative Agent on behalf of the Banks (subject to Permitted Liens) or, in the case of a stock or other equity interest acquisition, the acquired company, simultaneously with such acquisition, shall become a Borrower or shall be merged with and into a wholly owned Subsidiary that is a Borrower and such newly acquired or created Subsidiary shall otherwise comply with the provisions of §6.17 hereof;      (f)    not later than seven (7) days prior to the proposed acquisition date, a copy of the purchase agreement and financial projections, together with audited (if available, or otherwise unaudited) financial statements for any Subsidiary to be acquired or created, for the preceding two (2) fiscal years or such shorter period of time as such Subsidiary has been in existence shall have been furnished to the Administrative Agent, only in cases of Material Acquisitions or upon request by the Administrative Agent;      (g)    not later than seven (7) days prior to the proposed acquisition date, (1) a summary of the Borrowers' results of their standard due diligence review, and (2) in the case of a landfill acquisition, a review by a Consulting Engineer and a copy of the Consulting Engineer's report shall have been furnished to the Administrative Agent, only in cases of Material Acquisitions or upon request by the Administrative Agent;      (h)    the board of directors and (if required by applicable law) the shareholders, or the equivalent thereof, of the business to be acquired has approved such acquisition;  48 --------------------------------------------------------------------------------     (i)    if such acquisition is made by a merger, a Borrower, or a wholly-owned Subsidiary of the Parent which shall become a Borrower in connection with such merger, shall be the surviving entity;       (j)    cash consideration to be paid by such Borrower in connection with any such acquisition or series of related acquisitions (including cash deferred payments, contingent or otherwise, and the aggregate amount of all Funded Debt assumed), shall not exceed $25,000,000 without the consent of the Administrative Agent and the Majority Banks (any acquisition requiring cash consideration in excess of $25,000,000 being referred to as a "Material Acquisition"); and     (k)    after taking into account any borrowings to be made in connection with any acquisition, (a) the Borrowers shall have at least $10,000,000 of borrowing availability under §2.1 and (b) a pro-forma Leverage Ratio shall be calculated including an additional $10,000,000 of Funded Debt and shall be within the covenant levels required under §8.1.             Notwithstanding the foregoing, the Administrative Agent and the Banks hereby approve the Witchita Acquisition provided that (a) the Borrowers shall have delivered to the Administrative Agent a report prepared by Arthur Andersen that details the financial projections and the pro forma revenue and EBITDA of the Wichita Acquisition, in form and substance reasonably acceptable to the Administrative Agent, (b) the Borrowers shall complete the Wichita Acquisition pursuant to the terms of the Wichita Acquisition Documents and otherwise on terms that are reasonably satisfactory to the Administrative Agent in all respects, including that the aggregate purchase price paid in connection with the Wichita Acquisition shall not exceed, in the aggregate, $68,500,000 plus or minus working capital adjustments in accordance with the Wichita Acquisition Documents, (c) after taking into account any borrowings to be made in connection with the Wichita Acquisition, (i) the Borrowers shall have at least $10,000,000 of borrowing availability under §2.1 and (ii) the pro forma Leverage Ratio, which shall be calculated by including an additional $10,000,000 of Funded Debt, shall be within the covenant levels required under §8.1, and (d) the Borrowers shall have delivered any other documents required by this §7.4.1 or as reasonably requested by the Administrative Agent.      §7.4.2. Disposition of Assets. No Borrower will become a party to or agree to or effect any disposition of assets in excess of $250,000 in the aggregate (the "Basket"), provided that the proceeds of any such disposition shall be applied toward repayment of the Revolving Credit Loans. Notwithstanding the foregoing, the sale of inventory, the licensing of intellectual property and the disposition of obsolete assets, in each case in the ordinary course of business consistent with past practices, are permitted hereunder without being charged against the Basket.      §7.5. Sale and Leaseback. The Borrowers shall not enter into any arrangement, directly or indirectly, whereby any Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property which such Borrower intends to use for substantially the same purpose as the property being sold or transferred, without the prior written consent of the Majority Banks.      §7.6. Restricted Distributions and Redemptions. The Borrowers shall not redeem, convert, retire or otherwise acquire shares of any class of its capital stock, or  49 -------------------------------------------------------------------------------- make any Distributions, except that (a) any Borrower may make Distributions to another Borrower and (b) the Parent may purchase up to $7,500,000 of its stock during the term of this Agreement provided that at the time of any such stock repurchase the Leverage Ratio, taking into account such purchase, shall not exceed 3.50:1. In addition, the Borrowers shall not effect or permit any change in or amendment to any document or instrument Borrowers shall not effect or permit any change in or amendment to any document or instrument pertaining to the terms of any Borrower's capital stock. Notwithstanding the foregoing, no Borrower shall make any Distribution under this §7.6 if a Default or Event of Default exists or would be created by the making of such Distribution.      §7.7. Employee Benefit Plans. No Borrower nor any ERISA Affiliate will:      (a)    engage in any "prohibited transaction" within the meaning of §406 of ERISA or §4975 of the Code which could result in a material liability for any Borrower; or     (b)    permit any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as such term is defined in §302 of ERISA, whether or not such deficiency is or may be waived; or     (c)    fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could result in the imposition of a lien or encumbrance on the assets of any Borrower pursuant to §302(f) or §4068 of ERISA; or     (d)    amend any Guaranteed Pension Plan in circumstances requiring the posting of security pursuant to §307 of ERISA or §401(a)(29) of the Code; or     (e)    permit or take any action which would result in the aggregate benefit liabilities (within the meaning of §4001 of ERISA) of all Guaranteed Pension Plans exceeding the value of the aggregate assets of such Plans, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities.      §7.8. Negative Pledges. Except as required by any Scheduled Contract in effect on the date hereof, no Borrower shall enter into or permit to exist any arrangement or agreement, enforceable under applicable law, which directly or indirectly prohibits such Borrower from creating or incurring any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest in favor of the Administrative Agent for the benefit of the Banks and the Administrative Agent under the Loan Documents other than customary anti-assignment provisions in leases and licensing agreements entered into by such Borrower in the ordinary course of its business.      §7.9. Business Activities. No Borrower will engage directly or indirectly (whether through Subsidiaries or otherwise) in any type of business other than the businesses conducted by such Borrower on the Closing Date and in related businesses.      §7.10. Transactions with Affiliates. No Borrower will engage in any transaction with any Affiliate (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or  50 -------------------------------------------------------------------------------- from, or otherwise requiring payments to or from any such Affiliate or, to the knowledge of the Borrowers, any corporation, partnership, trust or other entity in which any such Affiliate has a substantial interest or is an officer, director, trustee or partner, on terms more favorable to such Person than would have been obtainable on an arm's-length basis in the ordinary course of business.      §7.11. Subordinated Debt. No Borrower will amend, supplement or otherwise modify the terms of any of the Subordinated Debt or any of the documents evidencing such Subordinated Debt or prepay, redeem or repurchase any of the Subordinated Debt; provided, however, so long as no Default or Event of Default has occurred and is continuing, the Borrowers shall be permitted to make regularly scheduled payments of interest and principal on the Subordinated Debt.      §8. FINANCIAL COVENANTS. The Borrowers covenant and agree that, so long as any Loan, any Note, or any Reimbursement Obligation is outstanding or the Banks have any obligation to make Loans or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit hereunder:     §8.1. Leverage Ratio. As of the end of any fiscal quarter of the Borrowers commencing with the fiscal quarter ending March 31, 2000, the Borrowers will not permit the ratio of Funded Debt to EBITDA (the "Leverage Ratio") to exceed 4.00:1 for any fiscal quarter ending during the period March 31, 2000 through March 31, 2001 or exceed 3.75:1 for any fiscal quarter ending during the period from June 30, 2001 through March 31, 2002 or exceed 3.50:1 for any fiscal quarter ending thereafter. For the purposes of this §8.1, the Wasco Funds shall be deducted from Funded Debt and EBITDA shall be calculated for the four fiscal quarters ending on such date.      §8.2. Funded Debt to Capitalization. The Borrowers shall not at any time permit the percentage of (a) Funded Debt to (b) the sum of Funded Debt plus Consolidated Net Worth to exceed 70% at any time prior to the fiscal quarter ending on June 30, 2001, at which time and thereafter such percentage shall not exceed 65%.      §8.3. Interest Coverage Ratio. As of the end of any fiscal quarter of the Borrowers commencing with the fiscal quarter ending March 31, 2000, the ratio of (a) EBIT to (b) Consolidated Total Interest Expense shall not be less than 2.00:1; provided, that, any adjustments made pursuant to clause (f) of the definition of EBIT shall not be included in the calculation of this §8.3. The Interest Coverage Ratio shall be calculated for the four fiscal quarters ending on such date.      §8.4. Profitable Operations. The Borrowers will not permit Consolidated Net Income to be less than $1.00 for any fiscal quarter, provided that Consolidated Net Income may exclude (a) non-cash charges for interest expense attributable to loan fees paid to Fleet and the Lenders in connection with the refinancing of the then existing credit facilities of up to 180,000 in the aggregate taken in the fiscal quarter ended March 31, 1999, (b) non-cash special charges relating to the "Allied Swap" in an aggregate amount not to exceed $833,000 and taken during the fiscal quarter ending June 30, 2000, (c) non-cash stock compensation charges of up to $260,000 in the aggregate taken during the four (4) fiscal quarters ending March 31, 2000 and no more than $110,000 in the aggregate thereafter (to the extent deducted in determining Consolidated Net Income),  51 -------------------------------------------------------------------------------- and (d) pooling charges taken in connection with any acquisition permitted under §7.4.1 hereof to the extent such pooling charges were deducted in determining Consolidated Net Income (or deficit).      §8.5. Capital Expenditures. The Borrowers will not make Capital Expenditures in any fiscal year in excess of, in the aggregate, 2.0 times the actual depreciation expenses for such fiscal year.      §9. CLOSING CONDITIONS. The obligations of the Banks to make the Loans and the Administrative Agent to issue Letters of Credit on the Closing Date and otherwise be bound by the terms of this Credit Agreement shall be subject to the satisfaction of each of the following conditions precedent:     §9.1. Corporate Action. All corporate action necessary for the valid execution, delivery and performance by the Borrowers of the Loan Documents shall have been duly and effectively taken, and satisfactory evidence thereof shall have been provided to the Administrative Agent.      §9.2. Loan Documents, Etc. Each of the Loan Documents shall have been duly and properly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect in a form satisfactory to the Banks.      §9.3. Certificate of Secretary; Good Standing Certificates. The Administrative Agent shall have received from each Borrower a certificate as to the good standing of each from the Secretary of State or other appropriate official of the state of its organization, dated no earlier than April 27, 2000. The Administrative Agent shall also have received from each Borrower a certificate of its Secretary certifying the following attachments thereto: (a) a copy of its certificate or articles of incorporation or constitutive documents, in each case as amended to date, certified by the Secretary of State or other appropriate official of the state of its organization, (b) a true and correct copy of its bylaws, including all amendments thereto, (c) a true and correct copy of the resolutions of its board of directors authorizing the transactions contemplated hereunder and under the other Loan Documents. Such Secretary's Certificate shall also give the name and bear a specimen signature of each individual who shall be authorized (i) to sign the Loan Documents on behalf of the Borrowers; (ii) to make Loan and Letter of Credit Requests; and (iii) to give notices and to take other action on the Borrowers' behalf under the Loan Documents.      §9.4. Validity of Liens. The Security Documents shall be effective to create in favor of the Administrative Agent a legal, valid and enforceable first (except for Permitted Liens entitled to priority under applicable law) security interest in and lien upon the Collateral. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Administrative Agent to protect and preserve such security interests shall have been duly effected. The Administrative Agent shall have received evidence thereof in form and substance satisfactory to the Administrative Agent.      §9.5. Perfection Certificates and UCC Search Results. The Administrative Agent shall have received from each Borrower a completed and fully executed Perfection Certificate and the results of UCC searches with respect to the Collateral, indicating no  52 -------------------------------------------------------------------------------- liens other than Permitted Liens and otherwise in form and substance satisfactory to the Administrative Agent.      §9.6. Certificates of Insurance. The Administrative Agent shall have received a certificate of insurance signed by the insurer or an Administrative Agent authorized to bind the insurer dated as of the Closing Date, or within 15 days prior thereto, identifying insurers, types of insurance, insurance limits, and policy terms, and otherwise describing the Borrowers' insurance coverage obtained in accordance with the provisions of the Security Agreement.      §9.7. Legal Opinions. The Administrative Agent shall have received a favorable legal opinion from counsel to each of the Borrowers, addressed to the Administrative Agent and the Banks, dated as of the Closing Date, in form and substance satisfactory to the Administrative Agent.      §9.8. Environmental Permit Certificate. The Banks shall have received an environmental permit certificate in substantially the form of Exhibit E from the Borrowers satisfactory to the Administrative Agent concerning principal operating permits at the Borrowers' principal operating facilities.      §9.9. Payment of Fees. The Borrowers shall have paid any fees (including, without limitation, those fees set forth in §4.1) owing to any of the Banks, the Administrative Agent or the Lead Arranger.      §9.10. Closing Certificate. The Borrowers shall have delivered to the Administrative Agent a certificate, dated as of the Closing Date, stating that, as of such date (a) the representations and warranties set forth herein or in any other Loan Document are true and correct (b) no Default or Event of Default has occurred and is continuing, (c) each Material Contract is in full force and effect, and no default or event of default has occurred and is continuing under any Material Contract, and (d) that Schedule 2 attached hereto lists all of the Subsidiaries of the Parent as of the Closing Date.      §10. CONDITIONS OF ALL LOANS. The obligations of the Banks to make any Loan (including without limitation the obligation of the Administrative Agent to issue, extend or renew any Letter of Credit) on and subsequent to the Closing Date is subject to the following conditions precedent:      §10.1. Representations True; No Event of Default. Each of the representations and warranties of the Borrowers contained in this Credit Agreement or in any document or instrument delivered pursuant to or in connection with this Credit Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of any Drawdown Date or the issuance of any Letter of Credit with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and changes occurring in the ordinary course of business which singly or in the aggregate are not materially adverse, or to the extent that such representations and warranties relate solely and expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. 53 --------------------------------------------------------------------------------      §10.2. Performance; No Event of Default. The Borrowers shall have performed and complied with all terms and conditions herein required to be performed or complied with by the Borrowers prior to or at the time of any Loan, and at the time of any Loan, there shall exist no Event of Default or condition which would result in an Event of Default upon consummation of such Loan (including without limitation any amounts to be drawn under a Letter of Credit). Each request by the Borrowers for a Loan (including without limitation each request for issuance of a Letter of Credit) subsequent to the first Loan shall constitute certification by the Borrowers that the conditions specified in §§10.1 and 10.2 will be duly satisfied on the date of such Loan or Letter of Credit issuance.    §10.3.No Legal Impediment. No change shall have occurred in any law or regulations thereunder or interpretations thereof which in the reasonable opinion of the Banks would make it illegal for the Banks to make Loans hereunder.    §10.4. Governmental Regulation.  The Banks shall have received such statements in form and substance reasonably satisfactory to the Banks as they shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System.    §10.5.Proceedings and Documents.  All proceedings in connection with the transactions contemplated by this Credit Agreement and all documents incident thereto shall have been delivered to the Banks as of the date hereof in form and substance satisfactory to the Banks, including without limitation a Loan and Letter of Credit Request in the form attached hereto as Exhibit B, and the Banks shall have received all information and such counterpart originals or certified or other copies of such documents as the Banks may reasonably request.     §11. COLLATERAL SECURITY.             (a)    The Obligations shall be secured by a (i) perfected first priority security interest (subject only to Permitted Liens) in all of the assets of the Borrowers, whether now owned or hereafter acquired, pursuant to the terms of the Security Documents to which the Borrowers are a party, and (ii) a pledge of all of the stock of each Subsidiary pursuant to the terms of the Stock Pledge Agreements.             (b)    The Borrowers hereby acknowledge that (i) any and all Uniform Commercial Code financing statements filed in connection with the Prior Credit Agreement naming BankBoston, N.A., as Agent, as secured party, and such Borrower, as debtor, shall be effective to perfect the Administrative Agent's security interest granted by such Borrower pursuant to this Credit Agreement to the extent that such security interest may be perfected by the filing of Uniform Commercial Code financing statements and (ii) such prior filings represent pre-filings of Uniform Commercial Code financing statements for purposes of so perfecting the security interest granted by the Borrowers hereunder. Until all of the Obligations have been finally paid and satisfied in full, the provisions of this §11(b) shall continue to apply, and such pre-filings shall continue to be effective and not subject to any right of termination in respect of the security interests granted herein, whether any obligations under the Prior Credit Agreement are to be discharged with the proceeds of any of the Loans or are to continue independently or otherwise. 54 --------------------------------------------------------------------------------     §12. EVENTS OF DEFAULT; ACCELERATION; TERMINATION OF COMMITMENT.             §12.1. Events of Default and Acceleration. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice and/or lapse of time, "Defaults") shall occur:             (a)    if the Borrowers shall fail to pay any principal of the Loans or any Reimbursement Obligation when the same shall become due and payable, whether at the Maturity Date or any accelerated date of maturity or at any other date fixed for payment;             (b)    if the Borrowers shall fail to pay any interest or fees or other amounts owing hereunder within five (5) Business Days after the same shall become due and payable whether at the Maturity Date or any accelerated date of maturity or at any other date fixed for payment;             (c)    if the Borrowers shall fail to comply with the covenants contained in §§6.1, 6.7, 6.8, 6.10, 6.13, 6.14, 6.16, 6.17, 6.19, 7 or 8;             (d)    if the Borrowers shall fail to comply with the covenants contained in (i) §§6.2, 6.3, 6.5, 6.6, 6.9, 6.11, 6.12, 6.15, or 6.18 within thirty (30) days of the Borrowers' knowledge of a violation of such covenants or (ii) §6.4 within five (5) days of the Borrowers' knowledge of a violation of such covenant;             (e)    if the Borrowers shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified in subsections (a), (b), (c) and (d) above) within 30 days after written notice of such failure has been given to the Borrowers by the Administrative Agent or any Bank;             (f)    if any representation or warranty contained in this Credit Agreement or in any document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been false in any material respect upon the date when made or repeated;             (g)    if any Borrower shall fail to pay at maturity, or within any applicable period of grace, any and all obligations for borrowed money (other than the Obligations) or any guaranty with respect thereto in an aggregate amount greater than $750,000 or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money in an aggregate amount greater than $750,000 for such period of time as would, or would have permitted (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof, unless the same shall have been waived by the holder(s) thereof; or             (h)    if any Borrower makes an assignment for the benefit of creditors, or admits in writing its inability to pay or generally fails to pay its debts as they mature or become due, or petitions or applies for the appointment of a trustee or other custodian, liquidator or receiver of any Borrower or of any substantial part of the assets of any Borrower or commences any case or other proceeding relating to any Borrower under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or  55 -------------------------------------------------------------------------------- liquidation or similar law of any jurisdiction, now or hereafter in effect, or takes any action to authorize or in furtherance of any of the foregoing, or if any such petition or application is filed or any such case or other proceeding is commenced against any Borrower or such Borrower indicates its approval thereof, consent thereto or acquiescence therein, or such petition or application shall not have been dismissed within sixty (60) days following the filing thereof;            (i)    a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating any Borrower bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any Borrower in an involuntary case under federal bankruptcy laws as now or hereafter constituted;             (j)    if there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against any Borrower which, with other outstanding final judgments against the Borrowers, exceeds in the aggregate $750,000 after taking into account any undisputed insurance coverage;             (k)    any Borrower or any ERISA Affiliate incurs any liability to the PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate amount exceeding $750,000, or any Borrower or any ERISA Affiliate is assessed withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan requiring aggregate annual payments exceeding $750,000, or any of the following occurs with respect to a Guaranteed Pension Plan: (i) an ERISA Reportable Event, or a failure to make a required installment or other payment (within the meaning of §302(f)(1) of ERISA), provided that the Administrative Agent determines in its reasonable discretion that such event (A) could be expected to result in liability of any Borrower to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $750,000 and (B) could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan or for the imposition of a lien in favor of such Guaranteed Pension Plan; or (ii) the appointment by a United States District Court of a trustee to administer such Guaranteed Pension Plan; or (iii) the institution by the PBGC of proceedings to terminate such Guaranteed Pension Plan;              (l)    if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded or the Administrative Agent's security interests or liens in a substantial portion of the Collateral shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Banks, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of any Borrower or any stockholder of any Borrower who is an officer or director of such Borrower, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof;              (m)    (i) the Parent shall at any time, legally or beneficially own less than one hundred percent (100%) of the shares of the capital stock of each other Borrower  56 -------------------------------------------------------------------------------- (directly or indirectly in accordance with §6.17), or (ii) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) other than existing shareholders of the Parent as of the Closing Date shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 20% or more of the outstanding shares of common stock of the Parent; or, during any period of twelve consecutive calendar months, individuals who were directors of the Parent on the first day of such period shall cease to constitute a majority of the board of directors; provided, however, that any such change of control resulting from an acquisition permitted under §7.4 shall not constitute a Default or an Event of Default hereunder; or              (n)    the early termination or cancellation of, or any material default by a Borrower under, any Material Contract;  then, and in any such event, so long as the same may be continuing, the Administrative Agent may, and at the request of the Majority Banks shall, by notice in writing to the Borrowers, declare all amounts owing with respect to this Credit Agreement, the Notes and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers; provided that in the event of any Event of Default specified in §§12.1(h) or 12.1(i), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Bank. Upon demand by the Banks after the occurrence of any Event of Default, the Borrowers shall immediately provide to the Administrative Agent cash in an amount equal to the Maximum Drawing Amount, to be held by the Administrative Agent as collateral security for the Obligations, provided that in the event of any Event of Default specified in §§12.1(h) or 12.1(i), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Bank.      §12.2. Termination of Commitments. If any Event of Default shall occur, the Administrative Agent may, and at the request of the Majority Banks shall, by notice to the Borrowers, terminate the unused portion of the Total Commitment hereunder, and upon such notice being given, such unused portion of the Total Commitment hereunder shall terminate immediately and the Banks shall be relieved of all further obligations to make Loans to or issue Letters of Credit for the account of the Borrowers hereunder, provided that in the event of any Event of Default specified in §§12.1(h) or 12.1(i), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Bank. No termination of any portion of the Total Commitment hereunder shall relieve the Borrowers of any of their existing Obligations to the Banks hereunder or elsewhere.      §12.3. Remedies. Subject to §13, in case any one or more Events of Default shall have occurred and be continuing, and whether or not the Banks shall have accelerated the maturity of the Loans and other Obligations pursuant to §12.1, each Bank may, after giving the Borrowers and Administrative Agent written notice three Business Days before such suit, action or other proceeding, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement  57 -------------------------------------------------------------------------------- and the other Loan Documents or any instrument pursuant to which the Obligations to such Bank are evidenced, including, without limitation, as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any legal or equitable right of such Bank, provided that, if any of the Collateral is located in California, Louisiana or any other state or province having a one form of action rule or any rule which might impair the Collateral, then prior to initiating any such proceeding, such Bank shall have supplied the Administrative Agent with opinions of nationally recognized law firms specializing in California law, Louisiana law, and the law of any other state or province, as applicable, having a one form of action rule to the effect that actions by such Bank under such circumstances shall not constitute an action for purposes of such state's or province's one form of action rule or in any other way impair the Collateral. No remedy herein conferred upon any Bank, the Administrative Agent or the holder of any Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law.      §13. SETOFF. Regardless of the adequacy of any collateral, during the continuance of an Event of Default, any deposits or other sums credited by or due from any Bank to the Borrowers and any securities or other property of the Borrowers in the possession of such Bank may be applied to or set off against the payment of the Obligations and any and all other liabilities, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrowers to the Banks. The Banks agree among themselves that, if a Bank shall obtain payment on any Obligation outstanding under this Credit Agreement through the exercise of a right of offset, banker's lien or counterclaim, or from any other source including under §12.3 (other than by way of a pro rata payment under this Credit Agreement), it shall promptly make such adjustments with the other Banks as shall be equitable to the end that all the Banks shall share the benefits of such payments pro rata in accordance with the aggregate unpaid amount of the Revolving Credit Notes held by each Bank immediately prior to the payment obtained by such Bank as aforesaid. The Banks further agree among themselves that if any payment to a Bank obtained by such Bank through the exercise of a right of offset, banker's lien or counterclaim, or from any other source (other than by way of a pro rata payment) as aforesaid shall be rescinded or must otherwise be restored, the Banks who shall have shared the benefit of such payment shall return their share of that benefit to the Bank whose payment shall have been rescinded or otherwise restored.     §14. THE ADMINISTRATIVE AGENT.      §14.1. Appointment of Administrative Agent, Powers and Immunities. Each Bank hereby irrevocably appoints and authorizes the Administrative Agent to act as its agent hereunder and under the other Loan Documents, provided, however, the Administrative Agent is hereby authorized to serve only as an administrative and collateral agent for the Banks and to exercise such powers as are reasonably incidental thereto and as are set forth in this Credit Agreement and the other Loan Documents. The Administrative Agent hereby acknowledges that it does not have the authority to negotiate any agreement which would bind the Banks or agree to any amendment, waiver or modification of any of the Loan Documents or bind the Banks except as set forth in this Credit Agreement or the Loan Documents. Except as provided in this §14 and in the  58 -------------------------------------------------------------------------------- other Loan Documents, the Administrative Agent shall take action or refrain from acting only upon instructions of the Banks and no action taken or failure to act without the consent of the Banks shall be binding on any Bank which has not consented. Each Bank irrevocably authorizes the Administrative Agent to execute the Security Documents and all other instruments relating thereto and to take such action on behalf of each of the Banks and to exercise all such powers as are expressly delegated to the Administrative Agent under the Loan Documents and all related documents, together with such other powers as are reasonably incidental thereto. It is agreed that the duties, rights, privileges and immunities of Fleet and the Columbia Issuing Bank, in their capacity as issuers of Letters of Credit hereunder, shall be identical to their duties, rights, privileges and immunities as a Bank as provided in this §14. The Administrative Agent shall not have any duties or responsibilities or any fiduciary relationship with any Bank except those expressly set forth in this Credit Agreement. Neither the Administrative Agent nor any of its affiliates shall be responsible to the Banks for any recitals, statements, representations or warranties made by the Borrowers or any other Person whether contained herein or otherwise or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Credit Agreement, the other Loan Documents or any other document referred to or provided for herein or therein or for any failure by the Borrowers or any other Person to perform its obligations hereunder or thereunder or in respect of the Notes. The Administrative Agent may employ agents (including the Columbia Issuing Bank as detailed below) and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agent or attorneys-in-fact selected by it with reasonable care. The Administrative Agent shall exercise the same care in administering the Loans as it exercises with respect to similar transactions entered into solely for its own account; however, neither the Administrative Agent nor any of its directors, officers, employees or agents shall be responsible for any action taken or omitted to be taken in good faith by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct. The Administrative Agent in its separate capacity as a Bank shall have the same rights and powers hereunder as any other Bank.      The Banks acknowledge and agree that the Columbia Issuing Bank is acting as the Administrative Agent's special collateral agent with respect to the collateral securing the Columbia Letter of Credit and shall be entitled to the right of indemnification granted to the Administrative Agent when acting as the special collateral agent, except in instances of its own gross negligence or willful misconduct.      §14.2. Actions By Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement as it reasonably deems appropriate unless it shall first have received such advice or concurrence of the Banks and shall be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Credit Agreement or any of the Loan Documents in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and all future holders of the Notes or any Letter of Credit Participation.      §14.3. INDEMNIFICATION. Without limiting the obligations of the Borrowers under this Credit Agreement or any other Loan Document, the Banks ratably  59 -------------------------------------------------------------------------------- agree hereby to indemnify and hold harmless the Administrative Agent, the Lead Arranger, and their affiliates from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Administrative Agent, the Lead Arranger or such affiliate has not been reimbursed by the Borrowers as required by §15), and liabilities of every nature and character arising out of or related to this Credit Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Administrative Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Administrative Agent's willful misconduct or gross negligence, it being the intent of the parties hereto that all such indemnified parties shall be indemnified for their ordinary sole or contributory negligence.      §14.4. Reimbursement. Without limiting the provisions of §14.3, the Banks and the Administrative Agent hereby agree that the Administrative Agent shall not be obliged to make available to any Person any sum which the Administrative Agent is expecting to receive for the account of that Person until the Administrative Agent has determined that it has received that sum. The Administrative Agent may, however, disburse funds prior to determining that the sums which the Administrative Agent expects to receive have been finally and unconditionally paid to the Administrative Agent, if the Administrative Agent wishes to do so. If and to the extent that the Administrative Agent does disburse funds and it later becomes known that the Administrative Agent did not then receive a payment in an amount equal to the sum paid out, then any Person to whom the Administrative Agent made the funds available shall, on demand from the Administrative Agent, refund to the Administrative Agent the sum paid to that Person. If, in the opinion of the Administrative Agent, the distribution of any amount received by it in such capacity hereunder or under the Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court.     §14.5.  Documents.                  §14.5.1. Closing Documentation. For purposes of determining compliance with the conditions set forth in §9, each Bank that has executed this Credit Agreement shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document and matter either sent, or made available, by the Administrative Agent or the Lead Arranger to such Bank for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Bank, unless the Administrative Agent shall have received notice from such Bank prior to the Closing Date specifying such Bank's objection thereto and such objection shall not have been withdrawn by notice to the Administrative Agent to such effect on or prior to the Closing Date.                  §14.5.2. Other Documents. The Administrative Agent will forward to each Bank, promptly after the Administrative Agent's receipt thereof, a copy of each notice or other document furnished to the Administrative Agent for such Bank hereunder;  60 -------------------------------------------------------------------------------- provided, however, that notwithstanding the foregoing, the Administrative Agent may furnish to the Banks a monthly summary with respect to Letters of Credit issued hereunder in lieu of copies of the related Letter of Credit Applications.     §14.6. Non-Reliance on Administrative Agent and Other Banks. Each Bank represents that it has, independently and without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of the financial condition and affairs of the Borrowers and decision to enter into this Credit Agreement and the other Loan Documents and agrees that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decisions in taking or not taking action under this Credit Agreement or any other Loan Document. The Administrative Agent shall not be required to keep informed as to the performance or observance by the Borrowers of this Credit Agreement, the other Loan Documents or any other document referred to or provided for herein or therein or by any other Person of any other agreement or to make inquiry of, or to inspect the properties or books of, any Person. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning any person which may come into the possession of the Administrative Agent or any of its affiliates. Each Bank shall have access to all documents relating to the Administrative Agent's performance of its duties hereunder at such Bank's request. Unless any Bank shall promptly object to any action taken by the Administrative Agent hereunder (other than actions to which the provisions of §14.8 are applicable and other than actions which constitute gross negligence or willful misconduct by the Administrative Agent), such Bank shall conclusively be presumed to have approved the same.     §14.7. Resignation or Removal of Administrative Agent. The Administrative Agent may resign at any time by giving 60 days' prior written notice thereof to the Banks and the Borrowers. Upon any such resignation, the Banks shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Banks (and, provided that no Default or Event of Default shall have occurred and be continuing, approved by the Borrowers, such approval not to be unreasonably withheld) and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a financial institution having a combined capital and surplus in excess of $150,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation, the provisions of this Credit Agreement shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. Any new Administrative Agent appointed pursuant to this §14.7 shall immediately issue new Letters of Credit in place of Letters of Credit previously issued by the Administrative Agent (to the extent such Letters of Credit are returned by the beneficiaries for purposes of such exchange). 61 --------------------------------------------------------------------------------     §14.8. Consents, Amendments, Waivers, Etc. Any consent or approval required or permitted by this Credit Agreement to be given by the Banks may be given, and any term of this Credit Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrowers of any terms of this Credit Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrowers and the written consent of the Majority Banks, provided however, that the Administrative Agent may, in its reasonable discretion, release Collateral with an aggregate value of $500,000 or less in any calendar year. Notwithstanding the foregoing, no amendment, waiver or consent shall do any of the following unless in writing and signed by the Borrowers and each of the Banks affected thereby: (a) increase the Commitment of any Bank or subject any Bank to any additional obligations (other than in accordance with §2.2.2 hereof), or (b) reduce the principal of or the rate of interest on the Notes (including, without limitation, interest on overdue amounts) or any fees payable hereunder; and further, no amendment, waiver or consent shall do any of the following unless in writing and signed by all of the Banks: (c) postpone the Maturity Date or any date fixed for any payment in respect of principal or interest (including, without limitation, interest on overdue amounts) on the Notes, (d) change the definition of "Majority Banks" or the percentage of Banks which shall be required for the Banks or any of them to take any action under the Loan Documents; (e) amend this §14.8; (f) except as otherwise permitted by the terms of this Credit Agreement, release any Collateral with an aggregate value exceeding $500,000 in any calendar year or (g) release any Borrower from its obligations hereunder.      No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Administrative Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrowers shall entitle the Borrowers to other or further notice or demand in similar or other circumstances.     §14.9. Delinquent Banks. Notwithstanding anything to the contrary contained in this Credit Agreement or any of the other Loan Documents, any Bank that fails (i) to make available to the Administrative Agent its pro rata share of any Loan or to purchase any Letter of Credit Participation or (ii) to comply with the provisions of §13 with respect to making dispositions and arrangements with the other Banks, where such Bank's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrowers, whether on account of outstanding Loans, Reimbursement Obligations, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Reimbursement Obligations. The Delinquent Bank hereby authorizes the Administrative Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans and Reimbursement Obligations. A Delinquent Bank shall be deemed to have satisfied in full 62 -------------------------------------------------------------------------------- a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans and Reimbursement Obligations of the nondelinquent Banks, the Banks' respective pro rata shares of all outstanding Loans and Reimbursement Obligations have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency.    §14.10. Syndication Agent. The Syndication Agent shall not have any right, power, obligation, liability, responsibility or duty under this Credit Agreement other than those applicable to all Banks as such. Without limiting the foregoing, the Syndication Agent shall not have or be deemed to have any fiduciary relationship with any Bank. Each Bank acknowledges that it has not relied, and will not rely, on the Syndication Agent in deciding to enter into this Credit Agreement or not taking any action hereunder.     §15. EXPENSES AND INDEMNIFICATION.     §15.1. Expenses. Whether or not the transactions contemplated herein shall be consummated, the Borrowers agree to pay (a) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (b) any taxes (including any interest and penalties in respect thereto) payable by the Administrative Agent or any of the Banks (other than taxes based upon the Administrative Agent's or any Bank's net income) on or with respect to the transactions contemplated by this Credit Agreement (the Borrowers hereby agreeing to indemnify the Administrative Agent and each Bank with respect thereto), (c) the reasonable fees, expenses and disbursements of counsel to the Administrative Agent incurred in connection with the preparation, syndication, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, any amendments, modifications, approvals, consents or waivers hereto or hereunder, or the cancellation of any Loan Document upon payment in full in cash of all of the Obligations or pursuant to any terms of such Loan Document providing for such cancellation, (d) the reasonable fees, expenses and disbursements of the Administrative Agent, the Lead Arranger, or any of their affiliates incurred by the Administrative Agent, the Lead Arranger, or such affiliate in connection with the preparation, syndication, administration or interpretation of the Loan Documents and other instruments mentioned herein, including all title insurance premiums and surveyor, engineering and appraisal charges, (e) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs, which attorneys may be employees of any Bank or the Administrative Agent, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Bank or the Administrative Agent in connection with (i) the enforcement of or preservation of rights under any of the Loan Documents against the Borrowers or the administration thereof after the occurrence of a Default or Event of Default and (ii) any litigation, proceeding or dispute whether arising hereunder or under any of the other Loan Documents, in any way related to any Bank's or the Administrative Agent's relationship with the Borrowers and (f) all reasonable fees, expenses and disbursements of the Administrative Agent incurred in connection with UCC searches and UCC filings.      §15.2. Indemnification. The Borrowers agree to indemnify and hold harmless the Administrative Agent, the Lead Arranger, the Banks and each of their respective affiliates, shareholders, officers, directors, employees and Administrative Agents from and against any and all claims, actions and suits whether groundless or otherwise, and  63 -------------------------------------------------------------------------------- from and against any and all liabilities, losses, damages and expenses of every nature and character arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (a) any actual or proposed use by the Borrowers of the proceeds of any of the Loans or Letters of Credit, (b) the Borrowers entering into or performing this Credit Agreement or any of the other Loan Documents or (c) with respect to the Borrowers and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding. In litigation, or the preparation therefor, the Banks and the Administrative Agent, the Lead Arranger, and their affiliates shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrowers agree to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrowers under this §15.2 are unenforceable for any reason, the Borrowers hereby agree to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law.      §15.3. Survival. The covenants contained in this §15 shall survive payment (including payment in connection with an assignment under §17) or satisfaction in full of all other Obligations.      §16. SURVIVAL OF COVENANTS, ETC. Unless otherwise stated herein, all covenants, agreements, representations and warranties made herein, in the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrowers pursuant hereto shall be deemed to have been relied upon by the Banks and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any amount due under this Credit Agreement, any Letter of Credit or the Notes remains outstanding and unpaid or any Bank has any obligation to make any Loans or issue any Letters of Credit hereunder. All statements contained in any certificate or other paper delivered by or on behalf of the Borrowers pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrowers hereunder.      §17. ASSIGNMENT AND PARTICIPATION. It is understood and agreed that each Bank shall have the right to assign at any time all or a portion of its Commitment and interests in the risk relating to any Loans and outstanding Letters of Credit hereunder in an amount equal to or greater than $2,500,000 (which assignment shall be of an equal percentage of such Bank's Commitment, the Revolving Credit Loans and outstanding Letters of Credit) to Eligible Assignees with the prior written consent of the Administrative Agent and, unless a Default or an Event of Default shall have occurred and be continuing, the Borrowers, which approvals shall not be unreasonably withheld or delayed. It is further agreed that each Eligible Assignee which executes and delivers to the Banks and the Borrowers an Assignment and Acceptance in substantially the form of Exhibit F (an "Assignment and Acceptance") shall, on the date specified in  64 -------------------------------------------------------------------------------- such Assignment and Acceptance, become a party to this Credit Agreement and the other Loan Documents for all purposes of this Credit Agreement and the other Loan Documents, and its Commitment shall be as set forth in such Assignment and Acceptance. Upon the execution and delivery of such Assignment and Acceptance and payment by the assigning bank of an assignment fee in the amount of $3,500 to the Administrative Agent, (a) the Borrowers shall issue to such Eligible Assignee a Revolving Credit Note in the amount of such Eligible Assignee's Commitment dated the Closing Date or such other date as may be specified by the Administrative Agent and otherwise completed in substantially the form of Exhibit A hereto and, to the extent any assigning Bank has retained a portion of its obligations hereunder, a replacement Revolving Credit Note to the assigning Bank; (b) the Administrative Agent shall distribute to the Borrowers, the Banks and such Eligible Assignee a schedule reflecting such changes; (c) this Credit Agreement shall be appropriately amended to reflect (i) the status of such Eligible Assignee as a party hereto and (ii) the status and rights of the Banks and Administrative Agent hereunder; and (d) the Borrowers shall take such action as the Administrative Agent may reasonably request to perfect any security interests in favor of the Banks, including any Eligible Assignee which becomes a party to this Credit Agreement. It is understood and agreed that each Bank shall have the right to sell participations to one or more banks or other entities in all or a portion of such Bank's rights and obligations under this Credit Agreement and the other Loan Documents. The documents evidencing any such participation may provide that, except with the consent of the participant party thereto, such Bank will not consent to (A) the reduction in or forgiveness of the stated principal of or rate of interest on or Commitment Fee with respect to the portion of any Loan subject to such participation or assignment, (B) the extension or postponement of any stated date fixed for payment of principal or interest or Commitment Fee with respect to the portion of any Loan subject to such participation or assignment, or (C) the waiver or reduction of any right to indemnification of such Bank hereunder. The Borrowers also agree that each participant shall be entitled to the benefits of Sections 4.4, 4.8 and 4.10 with respect to its participation as if it were a Bank. To the extent permitted by law, each participant also shall be entitled to the benefits of Section 13 as though it were a Bank, provided such participant agrees to be subject to the terms thereof as though it were a Bank. A participant shall not be entitled to receive any greater payment under Section 4.4, 4.8 or 4.10 than the applicable Bank would have been entitled to receive with respect to the participation sold to such participant. Notwithstanding the foregoing, no syndication or participation shall operate to increase the Total Commitment hereunder or otherwise alter the substantive terms of this Credit Agreement, except as contemplated under §2.2.2. Anything contained in this §17 to the contrary notwithstanding, any Bank may at any time pledge all or any portion of its interest and rights under this Credit Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act, 12 U.S.C. §341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents.      §18. PARTIES IN INTEREST. All the terms of this Credit Agreement and the other Loan Documents shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto and thereto; provided that the Borrowers shall not assign or transfer their rights hereunder without the prior written consent of each Bank. 65 --------------------------------------------------------------------------------      §19. NOTICES, ETC. Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the other Loan Documents shall be in writing and shall be delivered in hand, mailed by United States first-class mail, postage prepaid, or sent by telex or facsimile and confirmed by letter, addressed as follows:     (a)    if to the Borrowers, at Waste Connections, Inc., 620 Coolidge Drive, Suite 350, Folsom, California 95630-3155, Attention: Steven F. Bouck, Executive Vice President and Chief Financial Officer, telephone number 916-608-8200, fax number 916-351-5607;     (b)    if to the Administrative Agent or Fleet, at 100 Federal Street, Boston, Massachusetts 02110, Attention: Timothy M. Laurion, Managing Director, telephone number 617-434-9689, telecopy number 617-434-2160;      or such other address for notice as shall have last been furnished in writing to the Person giving the notice.     Any such notice or demand shall be deemed to have been duly given or made and to have become effective (a) if delivered by hand to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer, (b) if sent by registered or certified first-class mail, postage prepaid, five Business Days after the posting thereof, (c) if sent by telex or cable, at the time of the dispatch thereof, if in normal business hours in the country of receipt, or otherwise at the opening of business on the following Business Day, and (d) if sent by facsimile, when transmitted, confirmation received.     §20. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.              §20.1. Sharing of Information with Section 20 Subsidiary. The Borrowers acknowledge that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrowers, in connection with this Credit Agreement or otherwise, by a Section 20 Subsidiary. The Borrowers hereby authorize (a) such Section 20 Subsidiary to share with the Administrative Agent and each Bank any information delivered to such Section 20 Subsidiary by the Borrowers, and (b) the Administrative Agent and each Bank to share with such Section 20 Subsidiary any information delivered to the Administrative Agent or such Bank by the Borrowers pursuant to this Credit Agreement, or in connection with the decision of such Bank to enter into this Credit Agreement; it being understood, in each case, that any such Section 20 Subsidiary receiving such information shall be bound by the confidentiality provisions of this Credit Agreement. Such authorization shall survive the payment and satisfaction in full of all of the Obligations.              §20.2. Confidentiality. Each of the Banks and the Administrative Agent agrees, on behalf of itself and each of their affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Borrowers pursuant to this Credit Agreement that is identified by such Person as being confidential at the time the same is delivered to the Banks or the  66 -------------------------------------------------------------------------------- Administrative Agent, provided that nothing herein shall limit the disclosure of any such information (a) after such information shall have become public other than through a violation of this §20, (b) to the extent required by statute, rule, regulation or judicial process, (c) to counsel for any of the Banks or the Administrative Agent, (d) to bank examiners or any other regulatory authority having jurisdiction over any Bank or the Administrative Agent, or to auditors or accountants, (e) to the Administrative Agent, any Bank or any Section 20 Subsidiary, (f) in connection with any litigation to which any one or more of the Banks, the Administrative Agent or any Section 20 Subsidiary is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Loan Document, (g) to a subsidiary or affiliate of such Bank as provided in §20.1 or (h) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant agrees to be bound by the provisions of this §20.              §20.3. Prior Notification. Unless specifically prohibited by applicable law or court order, each of the Banks and the Administrative Agent shall, prior to disclosure thereof, notify the Borrowers of any request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Bank by such governmental agency) or pursuant to legal process.              §20.4. Other. In no event shall any Bank or the Administrative Agent be obligated or required to return any materials furnished to it or any Section 20 Subsidiary by the Borrowers. The obligations of each Bank under this §20 shall supersede and replace the obligations of such Bank under any confidentiality letter in respect of this financing signed and delivered by such Bank to the Borrowers prior to the date hereof and shall be binding upon any assignee of, or purchaser of any participation in, any interest in any of the Loans or Reimbursement Obligations from any Bank.      §21. MISCELLANEOUS. The rights and remedies herein expressed are cumulative and not exclusive of any other rights which the Banks or Administrative Agent would otherwise have. The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof. This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, but all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.      §22. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in §14.8. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or omission on the part of the Administrative Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrowers shall entitle the Borrowers to other or further notice or demand in similar or other circumstances. 67 --------------------------------------------------------------------------------      §23. WAIVER OF JURY TRIAL. EACH BORROWER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWERS (a) CERTIFY THAT NO REPRESENTATIVE, ADMINISTRATIVE AGENT OR ATTORNEY OF ANY BANK OR THE ADMINISTRATIVE AGENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE ADMINISTRATIVE AGENT WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (b) ACKNOWLEDGE THAT THE ADMINISTRATIVE AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE A PARTY BECAUSE OF, AMONG OTHER THINGS, THE BORROWERS' WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.      §24. GOVERNING LAW. This Credit Agreement and each of the other Loan Documents are contracts under the laws of the Commonwealth of Massachusetts and shall for all purposes be construed in accordance with and governed by the laws of said commonwealth (excluding the laws applicable to conflicts or choice of law). The Borrowers consent to the jurisdiction of any of the federal or state courts located in the Commonwealth of Massachusetts in connection with any suit to enforce the rights of any Bank or the Administrative Agent under this Credit Agreement or any of the other Loan Documents.      §25. SEVERABILITY. The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction. 68 --------------------------------------------------------------------------------      IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement under seal as of the date first set forth above. THE BORROWERS: WASTE CONNECTIONS, INC. WASTE CONNECTIONS OF WASHINGTON, INC.  MADERA DISPOSAL SYSTEMS, INC. WASTE CONNECTIONS OF WYOMING, INC.  WASTE CONNECTIONS OF UTAH, INC.  WASTE CONNECTIONS OF OKLAHOMA, INC.  RED CARPET LANDFILL, INC. ARROW SANITARY SERVICE, INC.  CURRY TRANSFER & RECYCLING, INC.  WASTE CONNECTIONS OF NEBRASKA, INC.  COLUMBIA SANITARY SERVICE, INC.  MORELAND SANITARY SERVICE, INC.  AMADOR DISPOSAL SERVICE, INC.  CITY SANITATION, INC. BUTLER COUNTY LANDFILL, INC.  ROCHE & SONS, INC. MURREY'S DISPOSAL COMPANY, INC.  AMERICAN DISPOSAL COMPANY, INC.  D.M. DISPOSAL CO., INC. TACOMA RECYCLING COMPANY, INC.  WASTE CONNECTIONS OF MINNESOTA, INC.  MANAGEMENT ENVIRONMENTAL NATIONAL, INC.  RH FINANCIAL CORPORATION KINGSBURG DISPOSAL SERVICE, INC.  SUPERIOR REFUSE REMOVAL CORPORATION  SALINA WASTE SYSTEMS, INC. MAMMOTH DISPOSAL COMPANY  G & P DEVELOPMENT, INC.  NEBRASKA ECOLOGY SYSTEMS, INC.  REFUSE REMOVAL, INC. WASTE CONNECTIONS OF IOWA, INC.  NOVAK ENTERPRISES, INC. WASTE CONNECTIONS OF TEXAS, INC.  CAMINO REAL ENVIRONMENTAL CENTER, INC.  WASTE CONNECTIONS OF COLORADO, INC. By:   -------------------------------------------------------------------------------- Ronald J. Mittelstaedt  President      69 -------------------------------------------------------------------------------- DENVER REGIONAL LANDFILL, INC.  NOBLES COUNTY LANDFILL, INC. SWEET HOME SANITATION SERVICE WASTE CONNECTIONS TRANSPORTATION COMPANY, INC.  COOK'S WASTEPAPER & RECYCLING, INC. FINNEY COUNTY LANDFILL, INC. WASTE CONNECTIONS OF NEW MEXICO, INC.  WASTE CONNECTIONS OF MONTANA, INC.  OKLAHOMA CITY WASTE DISPOSAL, INC. By:   --------------------------------------------------------------------------------   Ronald J. Mittelstaedt   President COLUMBIA RESOURCE CO., L.P.     By:  Management Environmental National, Inc.,   its General Partner By:   --------------------------------------------------------------------------------   Ronald J. Mittelstaedt   President FINLEY-BUTTES LIMITED PARTNERSHIP     By:  Management Environmental National, Inc.,   its General Partner By:   --------------------------------------------------------------------------------   Ronald J. Mittelstaedt   President REPUBLIC SERVICES OF OREGON I, LLC     By: Arrow Sanitary Service, Inc.   its Manager By:   --------------------------------------------------------------------------------   Ronald J. Mittelstaedt   President EL PASO DISPOSAL, L.P.     By: Waste Connections of Texas, Inc.   its General Partner By:   --------------------------------------------------------------------------------   Ronald J. Mittelstaedt   President 70 -------------------------------------------------------------------------------- THE LENDERS: FLEET NATIONAL BANK (f/k/a BankBoston, N.A.),      individually and as Agent By: -------------------------------------------------------------------------------- Timothy M. Laurion, Managing Director 71 -------------------------------------------------------------------------------- UNION BANK OF CALIFORNIA, N.A. By: -------------------------------------------------------------------------------- Name: Title: 72 -------------------------------------------------------------------------------- COMERICA BANK — CALIFORNIA By: -------------------------------------------------------------------------------- Name: Title: 73 -------------------------------------------------------------------------------- LASALLE BANK NATIONAL ASSOCIATION By: -------------------------------------------------------------------------------- Name: Title: 74 -------------------------------------------------------------------------------- CITY NATIONAL BANK By: -------------------------------------------------------------------------------- Name: Title: 75 -------------------------------------------------------------------------------- FIRST BANK OF CALIFORNIA By: -------------------------------------------------------------------------------- Name: Title: 76 -------------------------------------------------------------------------------- U.S. BANK NATIONAL ASSOCIATION By: -------------------------------------------------------------------------------- Name: Title: 77 -------------------------------------------------------------------------------- BANKERS TRUST COMPANY By: -------------------------------------------------------------------------------- Name: Title: 78 -------------------------------------------------------------------------------- CHASE BANK OF TEXAS By: -------------------------------------------------------------------------------- Name: Title: 79 -------------------------------------------------------------------------------- CIBC INC., as Lender By: -------------------------------------------------------------------------------- Name: Title: 80 -------------------------------------------------------------------------------- WELLS FARGO BANK, N.A. By: -------------------------------------------------------------------------------- Name: Title: 81 -------------------------------------------------------------------------------- GUARANTY FEDERAL BANK, F.S.B. By: -------------------------------------------------------------------------------- Name: Title: 82 --------------------------------------------------------------------------------

  EXHIBIT 10.3   MAINFRAME EQUIPMENT USE AGREEMENT           This Mainframe Equipment Use Agreement (“Agreement”) is made as of July 1, 2000 between Peritus Software Services, Inc., a Massachusetts corporation, having its principal place of business at 112 Turnpike Road, Suite 111, Westborough, Massachusetts 01581 (“Peritus”) and Rocket Software, Inc., a Massachusetts corporation, having its principal place of business at Two Apple Hill Drive, Natick, Massachusetts 01760 (“Rocket”).           Whereas, Peritus wishes to obtain access to Rocket’s Mainframe computer and related equipment and software located at Two Apple Hill Drive, Natick, Massachusetts 01760 or such other location to which it may be transferred (the “Mainframe Equipment”) and Rocket is willing to provide such access subject to the terms and conditions set forth herein.           Now, therefore, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:           1.    Term.    The initial term of this Agreement shall be for a period of one year commencing on July 1, 2000 and ending on June 30, 2001 and shall be automatically renewed for successive one year periods thereafter, unless terminated in accordance with the provisions set forth in Section 7 below.           2.    Access.    During the term of this Agreement, Rocket agrees to allow Peritus access to at least 500 megabytes of space on the Mainframe Equipment, during normal business hours or as may be reasonably requested by Peritus, for purposes of storing, removing, accessing, retrieving, and manipulating programs, data, records and other information related to Peritus’ business (collectively, the “Data”). Rocket reserves the right to make changes, additions and replacements to the Mainframe Equipment at its discretion, provided there is no material degradation in the current performance levels of the Mainframe Equipment.           3.    Equipment and Software.    Peritus shall provide, at its expense, all of its own personal computer equipment, terminals and lines necessary to access the Mainframe Equipment and shall obtain the right to use any third party software necessary for use of the Mainframe Equipment by Peritus other than the software (the “ Software”) listed on Schedule A attached hereto and incorporated herein by reference. Rocket, at its expense, will obtain all required third party consents, licenses and permits allowing Peritus to rightfully access and use the Mainframe Equipment and Software as provided herein and will provide Peritus with copies or written notification of any restrictions on use of the Mainframe Equipment and Software. In addition, Rocket, at its expense, will implement all appropriate security measures required to restrict access to the Data residing on the Mainframe Equipment to designated Peritus employees only.           4.    Peritus Responsibilities.    Peritus will comply with all operating instructions provided in writing from time to time by Rocket related to the use of the Mainframe Equipment. Peritus shall be responsible for inputting all Data on the Mainframe Equipment and for verifying the accuracy of all Data so inputted. Rocket shall not be responsible for any errors resulting from errors in Peritus’ inputting of Data or from Peritus’ failure to comply with Rocket’s written operating instructions. Peritus represents and agrees that it will use the Mainframe Equipment hereunder only for its own business use in accordance with all applicable Federal, State and local laws and regulations.           5.    Consideration.    In consideration of the access provided hereunder, Peritus shall loan to Rocket for the duration of this Agreement one (1) RS6000 computer with an R390 card (collectively, the “Loaned Equipment”). The Loaned Equipment shall be provided by Peritus on an “as is” and “where is” basis without maintenance or support services of any kind. PERITUS PROVIDES NO WARRANTIES, EXPRESS OR IMPLIED, IN CONNECTION WITH THE LOANED EQUIPMENT, INCLUDING BUT NOT LIMITED TO, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Rocket shall maintain the Loaned Equipment in good condition, reasonable wear and tear excepted.           6.    Indemnification.    Rocket shall, at Rocket’s expense, defend or settle any action brought against Peritus based on a claim that the Software or Mainframe Equipment infringes a third party’s United States patent, copyright, or trade secret right and will pay all costs and damages finally awarded against Peritus in any such action which are attributable to such claim; provided that (i) Peritus promptly notifies Rocket in writing of the claim; (ii) Rocket shall have sole control of the settlement and defense of any action to which this indemnity relates; and (iii) Peritus cooperates with Rocket in every reasonable way to facilitate such defense or settlement. Rocket shall not be liable for any infringement or claim thereof based upon the use of the Software or Mainframe Equipment or any element thereof in combination with products not supplied by Rocket or its licensor, or upon any modifications to the Software or Mainframe Equipment made by any party other than Rocket or its licensor.           THE FOREGOING PARAGRAPH OF THIS SECTION 6 STATES THE ENTIRE LIABILITY OF ROCKET FOR ANY LOSS AND DAMAGES WHATSOEVER AS A RESULT OF THE INFRINGEMENT OF ANY COPYRIGHT, PATENT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHTS.           Rocket shall indemnify, defend and hold harmless Peritus from and against any fine, penalty, cost, loss, damage, injury, obligation, demand, assessment, claim, expense or liability, including reasonable attorney’s fees and expenses, asserted against or incurred by Peritus arising out of any breach by Rocket of its obligations set forth in Sections 3, 11 and 12 of this Agreement.           Peritus shall indemnify, defend and hold harmless Rocket from and against any fine, penalty, cost, loss, damage, injury, obligation, demand, assessment, claim, expense or liability, including reasonable attorney’s fees and expenses, asserted against or incurred by Rocket arising out of Peritus’ use of the Mainframe Equipment in violation of this Agreement.           7.    Termination.    This Agreement may be terminated by either party (i) without cause at the end of the initial term or any renewal term thereafter by providing the other party with at least thirty (30) days written notice prior to the end of such term or (ii) at any time effective immediately upon written notice to the other party, if the other party fails to perform any of its obligations under this Agreement and fails to remedy such breach within thirty (30) days following the receipt of written notice of the breach from the non-breaching party. Upon the termination of this Agreement for any reason, Rocket shall return the Loaned Equipment provided to Rocket pursuant to Section 5 of this Agreement and Peritus shall discontinue its use of the Software and the Mainframe Equipment and shall remove all Data therefrom. Upon such removal, Rocket shall delete all copies of the Data, back-up or otherwise, residing on the Mainframe Computer and shall return (or, at Peritus’ request, destroy) any and all copies of Peritus’ Confidential Information in its possession or control. The terms set forth in Sections 6, 7, 8, 11, 12, 15, 16, 17, 18, and 19 shall survive the expiration or any termination of this Agreement.           8.    Limitation of Liability.    EXCEPT FOR THE PROVISIONS SET FORTH IN PARAGRAPH 1 OF SECTION 6, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OR LOST PROFITS ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE MAINFRAME EQUIPMENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.   9.    Maintenance and Repair.    Rocket shall use reasonable efforts to maintain, at its expense, the Mainframe Equipment in good working order and shall have the right, upon reasonable notice to Peritus, to limit Peritus’ access to the Mainframe Equipment from time to time in order to perform all maintenance and repairs or replacements deemed necessary by Rocket. Provided Rocket uses reasonable efforts to maintain the Mainframe Equipment in good working order, Rocket shall have no liability to Peritus for any limitation of Peritus’ access to the Mainframe Equipment due to the performance of any such maintenance, repairs or replacements.   10.    Force Majeure.    Rocket shall not be liable to Peritus in any manner for any failure or delay in the fulfillment of any part of this Agreement because of acts of God, governmental orders or restrictions, or any other cause or circumstance beyond its reasonable control.   11.    Warranties.    Rocket warrants that it has the right to permit the use of the Mainframe Equipment and Software by Peritus as provided hereunder. EXCEPT FOR THE WARRANTY SET FORTH IN THIS PARAGRAPH, ROCKET DOES NOT MAKE ANY WARRANTIES WITH RESPECT TO THE MAINFRAME EQUIPMENT OR THE SOFTWARE AND EXPLICITLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.   12.    Confidential Information.    Rocket acknowledges that Peritus retains all title, copyrights, patents and other proprietary rights in and to the Data, including any and all copies, updates, modifications, translations and other derivative works that duplicate or are based thereon. Nothing in this Agreement shall be deemed to implicitly or explicitly grant any ownership rights, or license or other right to Rocket to own the Data or to use or copy the Data other than for back-up purposes only.   As a result of Peritus’ use of the Mainframe Equipment under this Agreement, Rocket may have access to Data that is confidential to Peritus. Rocket shall treat all Data to which it may have access under this Agreement, whether such Data resides on the Mainframe Equipment or is otherwise provided to Rocket by Peritus hereunder, as confidential information of Peritus (“Confidential Information”) and shall take all steps necessary to protect such Confidential Information from disclosure. Rocket shall not disclose such Confidential Information, or allow access to such Confidential Information, to any third party or to any individual employee other than an employee having a need for such access in order to perform Rocket’s obligations hereunder and who is bound in writing to protect such Confidential Information in at least as restrictive a manner as set forth in this Agreement. The foregoing shall not apply to information which (i) is publicly known through no breach of the confidentiality provisions of this Agreement by Rocket, (ii) was previously in the possession of Rocket without an obligation of confidentiality, (iii) is independently developed by Rocket without use of confidential or proprietary information of Peritus, (iv) is approved for release by written authorization by Peritus, or (v) is released by Rocket pursuant to a good faith adherence to a court order or as otherwise required by law, of which Peritus has been provided the maximum notice, and Rocket has used its best-efforts to obtain confidential treatment of the confidential information.   13.    Independent Contractors.    The relationship between Peritus and Rocket is that of independent contractors, and nothing in this Agreement shall be construed to create a relationship of employer and employee, agency, joint venturers or partners between the parties. Neither party shall have the right, power or authority to enter into agreements of any kind on behalf of the other party, or to create any obligation or responsibility, express or implied, on behalf of or in the name of the other party.   14.    Assignment.    This Agreement may not be assigned by either party, whether by merger, consolidation, sale of assets or otherwise, without the prior written consent of the other party.   15.    Notices.    Notices given under this Agreement shall be in writing and shall be effective upon receipt if delivered by certified mail, return receipt requested, by a recorded delivery service or by other means of delivery requiring a signed receipt to the following addresses or such other address as the addressee may have specified in a notice duly given to the sender as provided herein:   If to Peritus:    112 Turnpike Street, Suite 111 Westborough, Massachusetts 01581 Attn.: John Giordano, President and C.E.O. Telephone No. (508) 870-0963   If to Rocket:    Two Apple Hill Drive Natick, Massachusetts 01760 Attn: Johan Magnusson, Chief Operating Officer Telephone No. (508) 655-4321   16.    Severability.    If for any reason one or more of the provisions of this Agreement are deemed by a court of competent jurisdiction to be unenforceable or otherwise void by operation of law, the remainder of this Agreement will be unaffected thereby and will be deemed to be void, binding and enforceable.   17.    Waiver of Breach.    No waiver by either party of any breach of this Agreement by the other party shall be deemed to be a waiver of any other breach of the same or of any other provision.   18.    Governing Law.    This Agreement will be governed by, and construed and enforced in accordance with, the substantive law of the Commonwealth of Massachusetts, U.S.A. The parties hereby agree to submit to the exclusive jurisdiction and venue of the state and federal courts sitting in The Commonwealth of Massachusetts concerning any disputes under this Agreement.   19.    Entire Agreement.    This Agreement and Schedule A set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersede any and all oral and prior written agreements, understandings and quotations relating thereto. No alteration, modification, or cancellation of any of the provisions of this Agreement shall be binding unless made in writing and signed by officers of the parties.   IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives.   Rocket Software, Inc.   By  -------------------------------------------------------------------------------- (Authorized Signature)   Name:  --------------------------------------------------------------------------------   Title:  --------------------------------------------------------------------------------   Date:  --------------------------------------------------------------------------------   Peritus Software Services, Inc.   By:  -------------------------------------------------------------------------------- (Authorized Signature)   Name:  --------------------------------------------------------------------------------   Title:  --------------------------------------------------------------------------------   Date:  --------------------------------------------------------------------------------   SCHEDULE A           1)    The Software listed below shall be made available to Peritus by Rocket on the Mainframe Equipment at a mutually agreed upon time, but no later than July 1, 2000, in accordance with Section 2 of the Mainframe Equipment Use Agreement between the parties.   COBOL COMPILER ASSEMBLER JCL & UTILITIES TSO ISPF           2)    The Software listed below shall be made available to Peritus by Rocket on the Mainframe Equipment no later than September 30, 2000 in accordance with Section 2 of the Mainframe Equipment Use Agreement between the parties.   DB2 IMS CISC           3)    The Software listed below shall be made available to Peritus by Rocket on the Mainframe Equipment no later than December 31, 2000, in accordance with Section 2 of the Mainframe Equipment Use Agreement between the parties.   JAVA WEB SPHERE REMOTE PRINTING   Rocket Software, Inc.   By  -------------------------------------------------------------------------------- (Authorized Signature)   Name:  --------------------------------------------------------------------------------   Title:  --------------------------------------------------------------------------------   Date:  -------------------------------------------------------------------------------- Peritus Software Services, Inc.   By:  -------------------------------------------------------------------------------- (Authorized Signature)   Name:  --------------------------------------------------------------------------------   Title:  --------------------------------------------------------------------------------   Date:  --------------------------------------------------------------------------------

EXHIBIT 10.5 EMPLOYMENT AGREEMENT SAKS INCORPORATED AND SUBSIDIARIES EMPLOYMENT AGREEMENT     This Employment Agreement ("Agreement") is entered into as of the 1st day of November 2000, by and between Saks Incorporated (the "Company"), and James A. Coggin ("Executive").     Company and Executive agree as follows:     1. Employment. Company hereby employs Executive as President and Chief Operating Officer of Company or in such other capacity with Company and its subsidiaries as Company's Board of Directors shall designate.     2. Duties. During his employment, Executive shall devote substantially all of his working time, energies, and skills to the benefit of Company's business. Executive agrees to serve Company diligently and to the best of his ability and to use his best efforts to follow the policies and directions of Company's Board of Directors.     3. Compensation. Executive's compensation and benefits under this Agreement shall be as follows:         (a) Base Salary. Company shall pay Executive a base salary ("Base Salary") at a rate of no less than $750,000 per year. Executive's Base Salary shall be paid in installments in accordance with Company's normal payment schedule for its senior management. All payments shall be subject to the deduction of payroll taxes and similar assessments as required by law.         (b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long as he holds the position stated in paragraph 1, for a yearly cash bonus with a maximum target of 70% of Base Salary based upon his performance in accordance with specific annual objectives, set in advance, all as approved by the Board of Directors.         (c) New Option Grant. Executive is granted a non-qualified option ("Option") to purchase 600,000 shares of Company common stock at an option price equal to the closing price of the stock at the close of business on November 1, 2000 (the "Grant Date"), as reported in the Wall Street Journal. The Option is granted pursuant to the Company's 1994 Amended and Restated Long-Term Incentive Plan ("1994 LTIP"), and shall be subject to the terms and conditions thereof. The Option shall be exercisable at the following times: to the extent of 20% on May 1, 2001, 20% on November 1, 2001, 20% on November 1, 2002, 20% on November 1, 2003, and 20% on November 1, 2004. The Option may be exercised up to ten (10) years from the Grant Date; provided, however, that 100% of the option shall be exercisable at the time the closing price of the Company common stock reaches $22 per share on any day, and Executive shall then have 6 months to exercise the option or it shall expire.         (d) Vesting of Restricted Stock Grants. Company has declared earned the 70,000 unvested shares of restricted stock granted under the TARSAP programs in 1996 and 1998. One third of those shares shall vest on each of the first three anniversaries of this Agreement provided that Executive remains employed by Company on those dates.         (e) Effect of Change of Control on Options. In the event of a Change of Control (as defined in the Company's 1994 Plan), any Options granted to Executive prior to such Change of Control shall immediately vest.     4. Insurance and Benefits. Company shall allow Executive to participate in each employee benefit plan and to receive each executive benefit that Company provides for senior executives at the level of Executive's position.     5. Term. The term of this Agreement shall be for three years, provided, however, that Company may terminate this Agreement at any time upon thirty (30) days' prior written notice (at which time this Agreement shall terminate except for Section 9, which shall continue in effect as set forth in Section 9). In the event of such termination by Company without Cause, as defined below, Executive shall be entitled to receive his Base Salary (at the rate in effect at the time of termination) through the end of the term of this Agreement. Such Base Salary shall be paid in one lump sum.     In addition, this Agreement shall terminate upon the death of Executive, except as to: (a) Executive's estate's right to exercise any unexercised stock options pursuant to Company's stock option plan then in effect, (b) other entitlements under this contract that expressly survive death, and (c) any rights which Executive's estate or dependents may have under COBRA or any other federal or state law or which are derived independent of this Agreement by reason of his participation in any employee benefit arrangement or plan maintained by Company.     6. Termination by Company for Cause. (a) Company shall have the right to terminate Executive's employment under this Agreement for Cause, in which event no salary or bonus shall be paid after termination for Cause. Termination for cause shall be effective immediately upon notice sent or given to Executive. For purposes of this Agreement, the term "Cause" shall mean and be strictly limited to: (i) conviction of Executive, after all applicable rights of appeal have been exhausted or waived, for any crime that materially discredits Company or is materially detrimental to the reputation or goodwill of Company; (ii) commission of any material act of fraud or dishonesty by Executive against Company or commission of an immoral or unethical act that materially reflects negatively on Company, provided that Executive shall first be provided with written notice of the claim and with an opportunity to contest said claim before the Board of Directors; or (iii) Executive's willful and continual material breach of his obligations under paragraph 2 of the Agreement, as so determined by the Board of Directors.         (b) In the event that Executive's employment is terminated, Executive agrees to resign as an officer and/or director of Company (or any of its subsidiaries or affiliates), effective as of the date of such termination, and Executive agrees to return to Company upon such termination any of the following which contain confidential information: all documents, instruments, papers, facsimiles, and computerized information which are the property of Company or such subsidiary or affiliate.     7. Change in Control. If Executive's employment is terminated by Executive for "Good Reason" after a Change in Control, or by Company in any way connected with a Change in Control of Company or a Potential Change in Control of Company, as defined below, Executive shall receive a sum equal to three times his Base Salary then in effect, continuation in the Company's health plans for three years at no cost, and vesting in Company's Supplemental Savings Plan at the retirement rate. The phrase "Good Reason" shall mean: (1) a mandatory relocation from the Jackson, Mississippi area, (2) a reduction in duties or status within the combined company as a result of or after the Change in Control, or (3) any time during the 13th month after a Change in Control the Executive terminates employment and deems it to be for Good Reason. If any payment, right or benefit provided for in this Agreement or otherwise paid to Executive by Company is treated as an "excess parachute payment" under Section 280(G)(b) of the Internal Revenue Code of 1986, as amended, (the "Code"), Company shall indemnify and hold harmless and make whole, on an after-tax basis, Executive for any adverse tax consequences, including but not limited to providing to Executive on an after-tax basis the amount necessary to pay any tax imposed by Code Section 4999.     As used herein, the term "Change in Control" means the happening of any of the following:         (a) Any person or entity, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, other than Company, a subsidiary of Company, or any employee benefit plan of Company or its subsidiaries, becomes the beneficial owner of Company's securities having 25 percent or more of the combined voting power of the then outstanding securities of Company that may be cast for the election for directors of Company (other than as a result of an issuance of securities initiated by Company in the ordinary course of business); or         (b) As the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, less than a majority of the combined voting power of the then outstanding securities of Company or any successor corporation or entity entitled to vote generally in the election of directors of Company or such other corporation or entity after such transaction, are held in the aggregate by holders of Company's securities entitled to vote generally in the election of directors of Company immediately prior to such transactions; or         (c) During any period of two consecutive years, individuals who at the beginning of any such period constitute the Board of Directors of Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Company's stockholders, of each director of Company first elected during such period was approved by a vote of at least two-thirds of the directors of Company then still in office who were directors of Company at the beginning of any such period.     As used herein, the term "Potential Change in Control" means the happening of any of the following:         (a) The approval by stockholders of an agreement by Company, the consummation of which would result in a Change of Control of Company; or         (b) The acquisition of beneficial ownership, directly or indirectly, by any entity, person or group (other than Company, a wholly-owned subsidiary thereof or any employee benefit plan of Company or its subsidiaries (including any trustee of such plan acting as trustee)) of securities of Company representing 5 percent or more of the combined voting power of Company's outstanding securities and the adoption by the Board of Directors of Company of a resolution to the effect that a Potential Change in Control of Company has occurred for purposes of this Agreement.     8. Disability. If Executive becomes disabled at any time during the term of this Agreement, he shall after he becomes disabled continue to receive all payments and benefits provided under the terms of this Agreement for a period of twelve consecutive months, or for the remaining term of this Agreement, whichever period is shorter. For purposes of this Agreement, the term "disabled" shall mean the inability of Executive (as the result of a physical or mental condition) to perform the duties of his position under this Agreement with reasonable accommodation and which inability is reasonably expected to last at least one (1) full year.     9. Non-competition; Unauthorized Disclosure.         (a) Non-competition. During the period Executive is employed under this Agreement, and for a period of one year thereafter, Executive:             (i) shall not engage in any activities, whether as employer, proprietor, partner, stockholder (other than the holder of less than 5% of the stock of a corporation the securities of which are traded on a national securities exchange or in the over-the-counter market), director, officer, employee or otherwise, in competition with (i) the businesses conducted at the date hereof by Company or any subsidiary or affiliate, or (ii) any business in which Company or any subsidiary or affiliate is substantially engaged at any time during the employment period;             (ii) shall not do business with any vendor that is one of the top 100 vendors of the businesses conducted by Company or its affiliates at the date hereof or at any time during the term of this Agreement; and             (iii) shall not induce or attempt to persuade any employee of Company or any of its divisions, subsidiaries or then present affiliates to terminate his or his employment relationship.         (b) Unauthorized Disclosure. During the period Executive is employed under this Agreement, and for a further period of one year thereafter, Executive shall not, except as required by any court or administrative agency, without the written consent of the Board of Directors, or a person authorized thereby, disclose to any person, other than an employee of Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of his duties as an executive for Company, any confidential information obtained by him while in the employ of Company; provided, however, that confidential information shall not include any information now known or which becomes known generally to the public (other than as a result of unauthorized disclosure by Executive).         (c) Scope of Covenants; Remedies. The following provisions shall apply to the covenants of Executive contained in this Section 9:             (i) the covenants contained in paragraph (i) and (ii) of Section 9(a) shall apply within all the territories in which Company or its affiliates or subsidiaries are actively engaged in the conduct of business while Executive is employed under this Agreement;             (ii) without limiting the right of Company to pursue all other legal and equitable remedies available for violation by Executive of the covenants contained in this Section 9, it is expressly agreed by Executive and Company that such other remedies cannot fully compensate Company for any such violation and that Company shall be entitled to injunctive relief to prevent any such violation or any continuing violation thereof; provided, however, Company shall be entitled to injunctive relief only to protect itself from unfair competition of the type protected under Tennessee law.             (iii) each party intends and agrees that if, in any action before any court or agency legally empowered to enforce the covenants contained in this Section 9, any term, restriction, covenant or promise contained therein is found to be unreasonable and accordingly unenforceable, then such term, restriction, covenant or promise shall be deemed modified to the extent necessary to make it enforceable by such court or agency; and             (iv) the covenants contained in this Section 9 shall survive the conclusion of Executive's employment by Company.     10. General Provisions.         (a) Notices. Any notice to be given hereunder by either party to the other may be effected in writing by personal delivery, mail, electronic mail, overnight courier, or facsimile. Notices shall be addressed to the parties at the addresses set forth below, but each party may change his or its address by written notice in accordance with this Section 10 (a). Notices shall be deemed communicated as of the actual receipt or refusal of receipt.         If to Executive:  James A. Coggin                                                              3455 Highway 80 West                           Jackson, MS 39209         (b) Partial Invalidity. If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall, nevertheless, continue in full force and without being impaired or invalidated in any way.         (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee.         (d) Entire Agreement. Except for any prior grants of options, restricted stock, or other forms of incentive compensation evidenced by a written instrument or by an action of the Board or Directors, this Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to employment of Executive by Company and contains all of the covenants and agreements between the parties with respect to such employment. Each party to this Agreement acknowledges that no representations, inducements or agreements, oral or otherwise, that have not been embodied herein, and no other agreement, statement or promise not contained in this Agreement, shall be valid or binding. Any modification of this Agreement will be effective only if it is in writing signed by the party to be charged.         (e) No Conflicting Agreement. By signing this Agreement, Executive warrants that he is not a party to any restrictive covenant, agreement or contract which limits the performance of his duties and responsibilities under this Agreement or under which such performance would constitute a breach.         (f) Headings. The Section, paragraph, and subparagraph headings are for convenience or reference only and shall not define or limit the provisions hereof.         (g) Attorney's Fees. If Executive brings any action to enforce his purported rights under this Agreement after a Change in Control, Company shall reimburse Executive for his reasonable costs, including attorney's fees, incurred. Company shall reimburse Executive as the costs are incurred and without regard to the outcome of the action.     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.                             SAKS INCORPORATED                               BY: _____________________                                                                              Brian J. Martin                                                                              Executive Vice President                                   _____________________                                                                              James A. Coggin                                                                              Executive  

EX-10.1 2 ex1018.htm PLAN Exhibit 10.1 2000 Option Plan - Ramp Networks Exhibit No. 10.1 RAMP NETWORKS, INC. 2000 NON-STATUTORY STOCK OPTION PLAN   1. Purposes of the Plan. The purposes of this 2000 Non-Statutory Stock Option Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to the Employees and Consultants of the Company and its Subsidiaries to promote the success of the Company's business. Options granted hereunder shall be Nonstatutory Stock Options. 2. Definitions. As used herein, the following definitions shall apply: (a) "Administrator" means the Board or any of its Committees appointed pursuant to Section 4 of the Plan. (b) "Affiliate" means an entity other than a Subsidiary in which the Company owns a significant interest directly or indirectly, as determined in the discretion of the Administrator, or which, together with the Company, is under common control of a third person or entity. (c) "Applicable Laws" means the legal requirements relating to the administration of stock option plans under applicable U.S. state corporate laws, U.S. federal and applicable state securities laws, the Code, any Stock Exchange rules and regulations and the applicable laws of any other country or jurisdiction where Options are granted under the Plan, as such laws, rules, regulations and requirements shall be in place from time to time; provided, however, that to the extent permitted under such laws, rules, regulations and requirements, the rights of any participant under the Plan shall be determined in accordance with the law of the State of California, without giving effect to principles of conflict of law. (d) "Board" means the Board of Directors of the Company. (e) "Change of Control" means a sale of all or substantially all of the Company's assets, or any merger or consolidation of the Company with or into another corporation other than a merger or consolidation in which the holders of more than 50% of the shares of capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by the voting securities remaining outstanding or by their being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company, or such surviving entity, outstanding immediately after such transaction. (f) "Code" means the Internal Revenue Code of 1986, as amended. (g) "Committee" means the Committee appointed by the Board in accordance with paragraph (a) of Section 4 of the Plan, if one is appointed. (h) "Common Stock" means the Common Stock of the Company. (i) "Company" means Ramp Networks, Inc., a Delaware corporation. (j) "Consultant" means any person who is engaged by the Company or any Parent, Subsidiary or Affiliate to render consulting services and is compensated for such consulting services, excluding Officers, Named Executives and Directors. (k) "Continuous Service Status" means the absence of any interruption or termination of service as an Employee or Consultant to the Company or a Parent, Subsidiary or Affiliate. Continuous Service Status shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Administrator, provided that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) transfers between locations of the Company or between the Company, its Parent(s), Subsidiaries or Affiliates or their respective successors. Unless otherwise determined by the Administrator, a change in status from an Employee to a Consultant or from a Consultant to an Employee will not constitute termination or interruption of Continuous Service Status. (l) "Corporate Transaction" means a sale of all or substantially all of the Company's assets, or a merger, consolidation or other capital reorganization of the Company with or into another corporation. (m) "Director" means a member of the Board. (n) "Employee" means any person who is employed by the Company or any Parent, Subsidiary or Affiliate of the Company, excluding Officers, Named Executives and Directors. Notwithstanding the foregoing, an Officer who was not previously employed by the Company and for whom an Option grant is an inducement essential to the Officer's entering into an employment relationship or contract with the Company shall be treated as an Employee for purposes of the Option grant made to the Officer in connection with commencement of the Officer's employment with the Company. (o) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (p) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system including without limitation the National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported), as quoted on such system or exchange on the date of determination, or if no trading occurred on the date of determination, on the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is quoted on the Nasdaq System (but not on the National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or if no bids occurred on the date of determination, on the last trading day prior to the date of determination) as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. (q) "Named Executive" means any individual who, on the last day of the Company's fiscal year, is the chief executive officer of the Company (or is acting in such capacity) or among the four highest compensated officers of the Company (other than the chief executive officer). Such officer status shall be determined pursuant to the executive compensation disclosure rules under the Exchange Act. (r) "Nonstatutory Stock Option" means an Option not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code, as designated in the applicable Option Agreement. (s) "Officer" means a person who is appointed or elected by the Board of Directors as an officer of the Company, including but not limited to a person who is an officer within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (t) "Option" means a Non-Statutory Stock Option granted pursuant to the Plan. (u) "Option Agreement" means a written document, the form(s) of which shall be approved from time to time by the Administrator, reflecting the terms of an Option granted under the Plan and includes any documents attached to or incorporated into such Option Agreement, including, but not limited to, a notice of stock option grant and a form of exercise notice. (v) "Optioned Stock" means the Common Stock subject to an Option. (w) "Optionee" means an Employee or Consultant who receives an Option. (x) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (y) "Plan" means this 2000 Non-Statutory Stock Option Plan. (z) "Share" means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan. (aa) "Subsidiary" means a "subsidiary corporation," whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is 2,500,000 shares of Common Stock. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares that were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. In addition, any Shares of Common Stock that are retained by the Company upon exercise of an Option in order to satisfy the exercise or purchase price for such Option or any withholding taxes due with respect to such exercise shall be treated as not issued and shall continue to be available under the Plan. Notwithstanding any other provision of the Plan, shares issued under the Plan and later repurchased by the Company shall not become available for future grant or sale under the Plan. 4. Administration of the Plan. (a) Composition of Administrator. The Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. If a Committee has been appointed pursuant to this Section 4(a), such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of any Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies (however caused) and remove all members of a Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws. (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, the specific duties delegated by, or limitations of authority imposed by, the Board to or on such Committee, the Administrator shall have the authority, in its discretion: (i) to grant Options under the Plan; (ii) to determine, upon review of relevant information and in accordance with Section 2(o) of the Plan, the Fair Market Value of the Common Stock; (iii) to determine the exercise price per share of Options to be granted, which exercise price shall be determined in accordance with Section 10(a) of the Plan; (iv) to determine the Employees or Consultants to whom, and the time or times at which, Options shall be granted and the number of shares to be represented by each Option; (v) to interpret the Plan; (vi) to approve forms of agreement for use under the Plan; (vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder, which terms and conditions include but are not limited to the exercise or purchase price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option, Optioned Stock or Restricted Stock, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (vii) to determine whether and under what circumstances an Option may be settled in cash under Section 9(f) instead of Common Stock; (viii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option was granted and to make any other amendments or adjustments to any Option that the Administrator determines, in its discretion and under the authority granted to it under the Plan, to be necessary or advisable, provided however that no amendment or adjustment to an Option that would materially and adversely affect the rights of any Optionee shall be made without the prior written consent of the Optionee; (x)  to initiate an Option Exchange Program; (xi)  to construe and interpret the terms of the Plan and awards granted under the Plan; and (xii) in order to fulfill the purposes of the Plan and without amending the Plan, to modify grants of Options to Participants who are foreign nationals or employed outside of the United States in order to recognize differences in local law, tax policies or customs. (e) Effect of Administrator's Decision. All decisions, determinations and interpretations of the Administrator shall be final and binding on all Participants. 5. Eligibility. (a) Recipients of Grants. Options may be granted only to Employees and Consultants. An Employee or Consultant who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options. (b) Type of Option. Each Option shall be designated in the Option Agreement as a Nonstatutory Stock Option. (c) At-Will Relationship. The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with such holder's right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause. 6. Term of Plan. The Plan shall become effective upon its adoption by the Board of Directors. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 15 of the Plan. 7. Term of Option. The term of each Option shall be ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. 8. Exercise Price and Consideration. (a) The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Administrator. (b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist entirely of (1) cash, (2) check, (3) delivery or optionee's promissory note with such recourse, interest, security and redemption provisions as the Administrator determines to be appropriate (subject to provisions of Applicable Law, (4) cancellation of indebtedness, (5) surrender of other Shares which (i) either have been owned by the Optionee for more than six (6) months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (ii) have a fair market value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (6) delivery of a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds required to pay the exercise price, (7) any combination of such methods of payment, (8) any combination of the foregoing methods of payment; or (9) such other consideration and method of payment for the issuance of Shares to the extent permitted under the Applicable Laws. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company, and the Administrator may refuse to accept a particular form of consideration at the time of any Option exercise if, in its sole discretion, acceptance of such form of consideration is not in the best interests of the Company at such time. 9. Exercise of Option. (a) Vesting. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, consistent with the terms of the Plan and reflected in the Option Agreement, including vesting requirements and/or performance criteria with respect to the Company and/or the Optionee. (b) Procedure for Exercise. An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Administrator, consist of any consideration and method of payment allowable under Section 8(b) of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares that thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (c) Rights as a Shareholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 of the Plan. (d) Termination of Continuous Service Status. In the event of termination of an Optionee's Continuous Service Status, such Optionee's right to exercise the Option shall cease and the Option shall forthwith become void and cease to have effect, except as set forth specifically in the Option Agreement. If required by the Applicable Laws, an Option shall be exercisable by the Optionee for a period of time following the termination of the Optionee's Continuous Service as follows: (i) In the event of termination of Continuous Service Status for reasons other than the Optionee's disability or death, the Option shall be exercisable by the Optionee following such termination for a period of not less than thirty (30) days, as is determined by the Administrator after the date of such termination of Continuous Service (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), to the extent that the Optionee was entitled to exercise it at the date of such termination. To the extent that the Optionee was not entitled to exercise the Option at the date of such termination, or if the Optionee does not exercise the Option to the extent so entitled within the time specified above, the Option shall terminate and the Optioned Stock underlying the unexercised portion of the Option shall revert to the Plan. (ii) In the event of termination of Continuous Service Status as a result of Optionee's disability, such Optionee may, but only within six (6) months (or such longer period of time as is determined by the Administrator), from the date of such termination (but in no event later than the date of expiration of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent he or she was entitled to exercise it at the date of such termination. To the extent that the Optionee was not entitled to exercise the Option at the date of termination, or if the Optionee does not exercise the Option to the extent so entitled within the time specified herein, the Option shall terminate and the Optioned Stock underlying the unexercised portion of the Option shall revert to the Plan. (iii) In the event of the death of an Optionee prior to termination of his or her Continuous Service Status, the Option may be exercised at any time within six (6) months (or such longer period of time as is determined by the Administrator), following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement) by such Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of death or, if earlier, the date of termination of the Optionee's Continuous Service. To the extent that the Optionee was not entitled to exercise the Option at the date of death or termination, as the case may be, or if the Optionee does not exercise such Option to the extent so entitled within the time specified above, the Option shall terminate and the Optioned Stock underlying the unexercised portion of the Option shall revert to the Plan. (e) Extension of Exercise Period. The Administrator shall have full power and authority to extend the period of time for which an Option is to remain exercisable following termination of an Optionee's Continuous Service Status from the periods set forth in Sections 9(d)(i), (ii) or (iii) above or in the Option Agreement to such greater time as the Board shall deem appropriate, provided, that in no event shall such Option be exercisable later than the date of expiration of the term of such Option as set forth in the Option Agreement. (f) Buy-Out Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted under the Plan, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time such offer is made. 10. Taxes. (a) As a condition of the exercise of an Option granted under the Plan, the Optionee (or in the case of the Optionee's death, the person exercising the Option) shall make such arrangements as the Administrator may require for the satisfaction of any applicable federal, state, local or foreign withholding tax obligations that may arise in connection with the exercise of an Option and the issuance of Shares. The Company shall not be required to issue any Shares under the Plan until such obligations are satisfied. (b) In the case of an Employee and in the absence of any other arrangement, the Employee shall be deemed to have directed the Company to withhold or collect from his or her compensation an amount sufficient to satisfy such tax obligations from the next payroll payment otherwise payable after the date of an exercise of the Option. (c) In the case of a Optionee other than an Employee (or in the case of an Employee where the next payroll payment is not sufficient to satisfy such tax obligations, with respect to any remaining tax obligations), in the absence of any other arrangement and to the extent permitted under the Applicable Laws, the Optionee shall be deemed to have elected to have the Company withhold from the Shares to be issued upon exercise of the Option that number of Shares having a Fair Market Value determined as of the applicable Tax Date (as defined below) equal to the minimum statutory amount required to be withheld. For purposes of this Section 10, the Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined under the Applicable Laws (the "Tax Date"). (d) If permitted by the Administrator, in its discretion, a Optionee may satisfy his or her tax withholding obligations upon exercise of an Option by surrendering to the Company Shares that (i) in the case of Shares previously acquired from the Company, have been owned by the Optionee for more than six months on the date of surrender, and (ii) have a Fair Market Value determined as of the applicable Tax Date equal to the minimum statutory amount required to be withheld. (e) Any election or deemed election by a Optionee to have Shares withheld to satisfy tax withholding obligations under Section 10(c) or (d) above shall be irrevocable as to the particular Shares as to which the election is made and shall be subject to the consent or disapproval of the Administrator. Any election by an Optionee under Section 11(d) above must be made on or prior to the applicable Tax Date. (f) In the event an election to have Shares withheld is made by a Optionee and the Tax Date is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Optionee shall receive the full number of Shares with respect to which the Option is exercised but such Optionee shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date. 11. Non-Transferability of Options. The Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution; provided, that the Administrator may in its discretion grant transferable Options pursuant to option agreements specifying (i) the manner in which such Options are transferable and (ii) that any such transfer shall be subject to the Applicable Laws. The designation of a beneficiary by an Optionee will not constitute a transfer. An Option may be exercised, during the lifetime of the Optionee, only by the Optionee or a transferee permitted by this Section 11. 12. Adjustments Upon Changes in Capitalization, Corporate Transaction and Other Transaction. (a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option, and the number of shares of Common Stock that have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option and the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock (including any change in the number of Shares of Common Stock effected in connection with a change of domicile of the Company), or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. (b) Dissolution or Liquidation. In the event of the dissolution or liquidation of the Company that is not a Corporate Transaction, each outstanding Option will terminate immediately upon the consummation of such dissolution or liquidation, unless otherwise provided by the Administrator. (c) Corporate Transactions; Change of Control. In the event of a Corporate Transaction, including a Change of Control, the Administrator shall, as to outstanding Options, either (i) provide that such Options shall be assumed by the successor corporation or a Parent or Subsidiary of such successor corporation (such entity, the "Successor Corporation") or that the Successor Corporation shall substitute with respect to such Options equivalent options; (ii) provide upon notice to Optionees that all Options, to the extent then exercisable or to be exercisable as a result of the Change of Control, must be exercised on or before a specified date (which date shall be at least five (5) days from the date of the notice), after which the Options shall terminate; or (iii) terminate each Option in its entirety in exchange for a payment of cash, securities and/or other property equal to the excess of the Fair Market Value of the Shares with respect to which the Option is vested and exercisable immediately prior to the consummation of the transaction over the aggregate exercise price thereof. In the event of a Change of Control, all conditions and restrictions with respect to Restricted Shares shall lapse, except to the extent such conditions and restrictions are assigned to the successor corporation (or its Parent) in connection with the Change of Control. For purposes of this Section 12(c), an Option shall be considered assumed, without limitation, if, at the time of issuance of the stock or other consideration upon a Corporate Transaction, each Optionee would be entitled to receive upon exercise of an Option the same number and kind of shares of stock or the same amount of property, cash or securities as the Optionee would have been entitled to receive upon the occurrence of such transaction if the Optionee had been, immediately prior to the transaction, the holder of the number of Shares of Common Stock covered by the Option at such time (after giving effect to any adjustments in the number of Shares covered by the Option as provided for in this Section 12); provided however that if such consideration received in the transaction is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon exercise of the Option to be solely common stock of the successor corporation or its Parent equal to the Fair Market Value of the per Share consideration received by holders of Common Stock in the transaction. (d) Certain Distributions. In the event of any distribution to the Company's shareholders of securities of any other entity or other assets (other than dividends payable in cash or stock of the Company) without receipt of consideration by the Company, the Administrator may, in its discretion, appropriately adjust the price per Share of Common Stock covered by each outstanding Option to reflect the effect of such distribution. 13. Time of Granting Options. The date of grant of an Option shall, for all purposes, be the date on which the Administrator makes the determination granting such Option. Notice of the determination shall be given to each Employee or Consultant to whom an Option is so granted within a reasonable time after the date of such grant. 14. Amendment and Termination of the Plan. (a) Amendment and Termination. The Board may amend or terminate the Plan from time to time in such respects as the Board may deem advisable (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan shall not adversely affect Options already granted (except to the extent contemplated by such Options) and such Options shall remain in full force and effect, unless mutually agreed otherwise between the Optionee and the Board (or other body then administering the Plan), which agreement must be in writing and signed by the Optionee and the Company. 15. Conditions Upon Issuance of Shares. Notwithstanding any other provision of the Plan or any agreement entered into by the Company pursuant to the Plan, the Company shall not be obligated, and shall have no liability for failure, to issue or deliver any Shares under the Plan unless such issuance or delivery would comply with the Applicable Laws, with such compliance determined by the Company in consultation with its legal counsel. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by the Applicable Laws. 16. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 17. Option Agreements. Options shall be evidenced by Option Agreements in such forms as the Administrator shall from time to time approve. --------------------------------------------------------------------------------

LABONE, INC. 2000 STOCK PURCHASE LOAN PROGRAM 1. Program The LabOne, Inc. 2000 Stock Purchase Loan Program (the "Program") provides for the extension of loans ("Loans") to certain officers of LabOne, Inc. ("LabOne") and its subsidiaries (the " Company") to purchase shares of common stock of LabOne ("Common Stock"). 2. Purpose. The purpose of the Program is to further the earnings of the Company by: (a) assisting the Company in attracting, retaining and motivating officers of high caliber and potential and (b) enabling such officers to increase their ownership of Common Stock by financing their purchases, thereby better aligning their interests with the interests of the shareholders of LabOne. 3. Eligibility. Officers of the Company who are designated by the Board of Directors as "Executive Officers" for purposes of Section 16 of the Securities Exchange Act of 1934 shall be eligible to receive Loans under the Program. 4. Administration. (a) The Compensation Committee of the Board of Directors (the "Committee") shall administer the Program. The Committee shall have full and final power and authority to administer and interpret the Program. In addition to such general power and authority, and subject to the provisions of the Program, the Committee shall have full and final authority to: (i) determine the amounts to be loaned to any such Executive Officer, (ii) determine the terms and conditions of Loans under the Program and the terms and conditions of any agreement or instrument evidencing a Loan, (iii) authorize the sale of shares of Common Stock pursuant to Loans granted under the Program, (iv) interpret, construe and administer the Program and any instrument or agreement relating to or evidencing a Loan under the Program, (v) establish, amend, suspend or waive rules and guidelines relating to the Program and Loans hereunder, (vi) correct any defect, supply any omission and reconcile any inconsistency in the Program and (vii) make any other determination or take any other action that it deems necessary or desirable for administration of the Program or any Loan hereunder. (b) Decisions of the Committee shall be final, binding and conclusive on all persons, including the Company and any person receiving a Loan. The Committee may hold meetings and otherwise take action in the manner permitted under applicable provisions of the Articles of Incorporation and By-laws of LabOne, resolutions of the Board of Directors and state and federal law. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Program or any Loan under the Program. 5. Maximum and Minimum Loan Amounts. The maximum aggregate amount of Loans under the Program to all Executive Officers of the Company as a group shall be an amount sufficient to enable them to purchase 25,000 shares of Common Stock; provided, however, that in no event shall (a) the amount loaned by the Company under the Program during any calendar quarter exceed $200,000 or (b) the amount of Loans under the Program outstanding at any time exceed $500,000. The maximum amount of Loans under the Program to any individual Executive Officer of the Company shall be an amount sufficient to enable such individual to purchase 5,000 shares of Common Stock. The minimum amount of Loans under the program to any individual Executive Officer of the Company shall be an amount sufficient to enable such individual to purchase 1,000 shares of Common Stock. 6. Purchase of Shares of Common Stock (a) Shares of Common Stock may be purchased with the proceeds of Loans in the open market or directly from LabOne, as determined by the Committee in its sole discretion. Any shares of Common Stock sold by LabOne pursuant to the Program shall be sold (i) from its treasury shares and (ii) at a price per share equal to the last sale price reported on the Nasdaq National Market on the trading day immediately prior to the day the Loan is granted, as reported in the Wall Street Journal, or the last bid price so reported if there are no reported sales on such trading day. (b) The Company may place on any certificate representing shares of Common Stock acquired pursuant to the Program any legend deemed desirable by LabOne's counsel to comply with federal and state securities laws and to disclose the restrictions, if any, on the disposition of such shares imposed by the Committee. 7. Terms of Loans. Each Loan made under the Program shall be evidenced by a collateral note executed and delivered to LabOne by the Executive Officer of the Company receiving the Loan (the "Participant"), substantially in the form attached hereto as Exhibit A (the "Note"). The Note evidencing a Loan shall comply in all respects with the provisions of the Program and must be executed by the Participant before the Loan is funded. Each Participant shall be required to execute and deliver such other documents and instruments as determined by the Committee in its sole discretion. Each Loan shall be subject to the following terms and conditions: Full Recourse Loan . The Participant shall be personally liable for the repayment in full of all principal and interest on the Loan. Interest Rate. Each Loan shall provide for the payment of interest at an annual rate equal to the prime rate as of the date the Note is issued, as determined by the Committee, provided that the interest rate shall not be less than the applicable federal rate, as determined under Section 1274(d) of the Internal Revenue Code, at the time the Loan is made. Repayment of Principal and Interest. Each Loan shall provide that, commencing the calendar month after the month in which the Loan is funded and the Note is issued, the Participant shall pay biweekly, commencing on the first pay period in that month and continuing on each pay period thereafter, by means of automatic payroll deductions, in one hundred thirty (130) equal installments including principal and interest in accordance with the amortization schedule to be annexed to the Note, the outstanding principal balance of the Loan and all accrued interest thereon. Also, upon the maturity date of the Note, the Company shall have the right to offset the outstanding principal and accrued interest under the Loan against any compensation owing to the Participant, including but not limited to any salary payments, severance payments and benefits, accrued vacation pay, business expense reimbursements and any other payments due the Company by the Participant under the Employment Agreement between the Company and the Participant; provided, however, that any outstanding principal and accrued interest remaining after any such offset shall remain immediately due and payable. Collateral. Each Loan shall be secured by (i) the shares of Common Stock acquired with the proceeds of the Loan and (ii) all other assets of the Participant held as collateral by the Company pursuant to any other agreement entered into between the Participant and the Company. Lab One will hold possession of any certificates representing the Common Stock pledged as collateral until the Loan is paid in full. Maturity Date. The outstanding principal and accrued interest of each Loan shall become due and fully payable on the first to occur of the following events: i. Termination of employment of the Participant for any reason other than death; ii. 180 days after the death of the Participant; iii. The fifth anniversary of the date the Note is issued; or iv. Such other events as are specified in the Note (any one of which shall be the "maturity date"). 8. Restrictions on Transfer of Common Stock. The Participant shall be prohibited from selling or otherwise disposing of the shares of Common Stock acquired with the Loan for a period of one (1) year following the date of their purchase by the Participant. At the time a Loan is made, the Committee may impose additional restrictions on a Participant's ability to sell, encumber or otherwise dispose of the shares of Common Stock acquired with the Loan. 9. Amendment of Terms of Outstanding Loans. At any time, the Committee may, in its sole discretion, and subject to such conditions as it may impose or authorize, extend the time for repayment of any Loan, forgive the repayment of any or all of the principal and/or interest of any Loan or amend or modify any other terms and provisions of any Loan, provided that a change to a Loan shall not, without the consent of the Participant, adversely affect a Participant's rights under such Loan. 10. Miscellaneous. (a) No term of the Program shall be construed to confer on any Participant the right to continue in the employ of the Company for any period of time or to restrict the right of the Company to terminate or change the terms of any Participant's employment with the Company at any time, including without limitation any Participant's position or rate of compensation. (b) The recipient of any Loan shall have no rights as a shareholder with respect thereto unless and until certificates for shares of Common Stock are delivered to the recipient, and the receipt of shares of Common Stock shall confer no retroactive right to dividends. (c) No right or interest of any Participant in any Loan or in the Program shall be assignable or transferable, except by will or the laws of descent and distribution. (d) The Program shall be governed by, and shall be construed, enforced and administered in accordance with, the laws of the State of Missouri, except to the extent that such laws may be superseded by any Federal law. 11. Termination, Modification. If not sooner terminated by the Board of Directors of LabOne, the Program shall terminate at the close of business on September 30, 2010. The Board of Directors may amend or terminate the Program at any time and from time to time in such respects as it deems advisable. An amendment or termination of the Program shall not, without the consent of the Participant, adversely affect the Participant's rights under a previously granted Loan. -------------------------------------------------------------------------------- EXHIBIT A FORM OF COLLATERAL NOTE Date: ____________         Principal Amount $____________ FOR VALUE RECEIVED, the undersigned, __________________ (the "Maker") promises to pay to the order of LabOne, Inc., a Missouri corporation (the "Company"), on the dates specified below, the principal sum of _________________________ ($____________), and to pay interest on the principal amount of this Note outstanding from time to time at the rate of _____% per annum. Interest shall be calculated on a daily basis (computed on the actual number of days elapsed over a year of 360 days). Commencing the calendar month after the month in which this Note was originally issued by Maker to the Company, Maker shall pay bi-weekly, commencing on the first pay period in that month and continuing on each pay period thereafter, by means of automatic payroll deduction, in one hundred thirty (130) equal installments including principal and interest in accordance with the amortization schedule attached to this Note as Annex A, the outstanding principal balance of this Note and all accrued interest thereon. All payments of principal and interest shall be in lawful money of the United States of America and made at the principal office of the Company located at 10101 Renner Road, Lenexa, Kansas or at such other place as the holder hereof may designate in writing. All payments made under this Note shall be applied first to the payment of any costs, fees or expenses due under this Note, second to the payment of accrued and unpaid interest hereon, and third and finally, to the reduction of the outstanding principal balance of this Note. The principal amount of this Note is payable in full upon the earliest to occur of: (i) termination of Maker's employment with the Company and its subsidiaries for any reason other than death; (ii) 180 days after the death of Maker; or (iii) the fifth anniversary date of the date the Note is issued. Unpaid accrued interest on this Note shall be payable in full on the same date as the principal amount becomes payable. This Note may be prepaid in full at any time or in part from time to time without penalty. The Maker hereby waives presentment, demand for payment, notice of dishonor, protest and notice of protest, notice of acceleration, any and all other notices and demands in connection with this Note, and any defense by reason of extension of time for payment or other indulgence granted by the holder hereof. The following events shall constitute an Event of Default hereunder: (a) if any installment of principal and interest on this Note shall not be paid when due; (b) if Maker defaults in any payment of principal or interest on any other obligation for money borrowed beyond any period of grace provided with respect thereto, or defaults in any material respect in the performance of any other agreement, term or condition contained in any material agreement under which any such obligation is created (or if any other default under any such material agreement shall occur and be continuing), if the effect of any such default is to cause, or permit the holder or holders of any such obligation (or a trustee on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity; (c) if Maker defaults in any material respect in the performance of any agreement, term or condition set forth in any agreement between Maker and the Company, including, but not limited to, any other note, any employment agreement and any confidentiality or non-competition agreement; (d) if an order, judgment or decree is entered adjudicating Maker bankrupt or insolvent; or Maker shall commence any case, proceeding or other action relating to Maker in bankruptcy or seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment of Maker's debts, or for any other relief, under any bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, composition, readjustment of debt or other similar act or law of any jurisdiction, domestic or foreign, now or hereafter existing; or if Maker shall apply for a receiver, custodian or trustee of Maker or for all or a substantial part of the property of Maker; or if Maker shall make an assignment for the benefit of creditors; or if Maker shall be unable to, or shall admit in writing the inability to, pay the debts of Maker as they become due; or if Maker shall become insolvent; or if Maker shall take any action indicating Maker's consent to, approval of, or acquiescence in, or in furtherance of, any of the foregoing; or (e) if any case, proceeding or other action against Maker shall be commenced in bankruptcy or seeking reorganization, liquidation, dissolution, winding-up arrangement, composition or readjustment of its debts, or any other relief, under any bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, composition, readjustment of debt or other similar act or law of any jurisdiction, domestic or foreign, now or hereafter existing; or if a receiver, custodian or trustee of Maker or for all or a substantial part of the properties of Maker shall be appointed; or if a warrant of attachment, execution or distraint, or similar process, shall be issued against any substantial part of the property of Maker; and if in each such case such condition shall continue for a period of 30 days with being dismissed or discharged. IF ANY ONE OR MORE EVENTS OF DEFAULT SHALL OCCUR AND BE CONTINUING FOR ANY REASON WHATSOEVER (AND WHETHER SUCH OCCURRENCE SHALL BE VOLUNTARY OR INVOLUNTARY OR COME ABOUT OR BE EFFECTED BY OPERATION OF LAW OR OTHERWISE), THEN IN ADDITION TO ANY RIGHT, POWER OR REMEDY PERMITTED UNDER THIS NOTE, OR BY LAW OR EQUITY OR OTHERWISE, THE HOLDER HEREOF SHALL HAVE AND MAY EXERCISE FROM TIME TO TIME THE FOLLOWING RIGHTS AND REMEDIES (I) THE RIGHT TO DECLARE THE ENTIRE OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE, ALL ACCRUED AND UNPAID INTEREST THEREON AND OTHER AMOUNTS OWED TO THE HOLDER HEREOF UNDER THIS NOTE AND UNDER ANY OTHER PROMISSORY NOTE EXECUTED AND DELIVERED BY MAKER TO THE COMPANY TO BE IMMEDIATELY DUE AND PAYABLE; (II) ALL OF THE RIGHTS AND REMEDIES OF A SECURED PARTY UNDER THE UNIFORM COMMERCIAL CODE OR UNDER OTHER APPLICABLE LAW, AND ALL OTHER LEGAL AND EQUITABLE RIGHTS TO WHICH THE COMPANY MAY BE ENTITLED AS A SECURED PARTY, ALL OF WHICH RIGHTS AND REMEDIES SHALL BE CUMULATIVE, AND NONE OF WHICH SHALL BE EXCLUSIVE; AND (III) THE RIGHT TO OFFSET THE OUTSTANDING PRINCIPAL AND ACCRUED INTEREST UNDER THE NOTE AGAINST ANY AND ALL MONIES AT ANY TIME HELD AND ANY OTHER INDEBTEDNESS (WHETHER MATURED OR UNMATURED) OWING BY THE COMPANY TO OR FOR THE BENEFIT OF MAKER AND AGAINST COMPENSATION OWING TO MAKER, INCLUDING BUT NOT LIMITED TO ANY SALARY PAYMENTS, SEVERANCE PAYMENTS AND BENEFITS, ACCRUED VACATION PAY, ANY BUSINESS EXPENSE REIMBURSEMENTS AND ANY OTHER PAYMENTS DUE THE COMPANY BY THE MAKER UNDER THE EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND THE MAKER; PROVIDED, HOWEVER, THAT ANY OUTSTANDING PRINCIPAL AND ACCRUED INTEREST REMAINING AFTER ANY SUCH OFFSET SHALL REMAIN IMMEDIATELY DUE AND PAYABLE. THE FOREGOING RIGHT OF SET OFF SHALL BE IN ADDITION TO ANY OTHER RIGHTS OF SET OFF THE HOLDER HEREOF MAY HAVE AT LAW, IN EQUITY OR BY AGREEMENT. INTEREST WILL COMPOUND MONTHLY AFTER DEFAULT. The Maker grants to the Company a security interest in the Collateral (as defined below) for the payment of all amounts due under this Note and all renewals and extensions hereof and for the performance and payment of any and all obligations and indebtedness of the Maker to the Company hereunder. The following certificates, registered in the name of the Maker, with stock powers duly endorsed in blank and otherwise in proper form for transfer, are delivered together with this Note to the Company: Certificate No. _______, representing _______ shares of the common stock of LabOne , Inc. The term "Collateral" as used herein shall mean (a) the above-described shares of the common stock of LabOne, Inc. ("Shares") and any and all accessions and accruals thereto, including those by way of dividend, corporate reorganization, liquidation, split or change in capital structure, all of which will be promptly delivered to the Company with stock powers and other forms of assignment duly endorsed in blank, if endorsement is required, and otherwise in proper form for transfer and (b) all products and proceeds of the foregoing (whether in the form of cash, instruments, documents, general intangibles, contract rights, accounts, chattel paper, inventory, equipment, goods or otherwise). The Company shall not have the right to vote or to receive dividends on shares of stock pledged hereunder unless and until an Event of Default shall have occurred hereunder. Notwithstanding the pledge of Collateral by the Maker hereunder, the Maker shall be personally liable for the repayment in full of all amounts payable under this Note. Maker represents to the Company that Maker is purchasing the Shares for Maker's own account and for investment purposes only, and has no present intention, agreement or arrangement for the distribution, transfer, assignment, resale or subdivision thereof. Maker understands that the Shares are intended to be exempt from registration under the Securities Act of 1933, as amended, and applicable state securities laws. Maker understands and agrees that the Shares shall not be offered, sold, transferred, pledged or hypothecated to any person or entity for a period of six months from and after the date hereof, or thereafter in the absence of federal and state registration, or an opinion of counsel satisfactory to the Company that said registration is not required due to the availability of an applicable exemption from federal and state registration. Maker agrees that any certificate representing the Shares shall have imprinted on it a legend substantially the same as the following: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws. Such securities cannot be resold or transferred for one year after the date of transfer of such securities by the Company to the holder of this certificate, and cannot be resold or transferred thereafter unless they are registered under said Act and such laws or unless an exemption from registration is available in the opinion of counsel satisfactory to the Company.   If this Note or any principal or interest payment hereon is not paid when due or at maturity, whether by reason of acceleration or otherwise, and this Note is placed in the hands of an attorney or attorneys for collection (including attorneys who are employees of the Company or affiliates of the Company), whether litigation is commenced or not, for foreclosure of any security interest securing payment hereof, or for representation of the holder hereof in connection with bankruptcy or insolvency proceedings, Maker promises to pay, in addition to the amounts due hereon, all reasonable costs and expenses of such collection, foreclosure and representation, including reasonable attorneys' fees. Whenever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Note. No forbearance on the part of the holder hereof and no extension of the time for the payments due hereunder shall operate to release, discharge, modify, change or affect the original liability of Maker, nor shall such forbearance by the holder hereof act as a waiver of any of the holder's rights. Any waiver, permit, consent or approval of any kind or character on the part of the holder hereof of any breach or default under this Note must be in writing and shall be effective only to the extent specifically set forth in such writing. No right or remedy herein conferred upon the holder hereof is intended to be exclusive of any other right or remedy contained herein, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or by statute or otherwise. Time is of the essence with respect to all of Maker's obligations under this Note. This Note shall be governed by and construed in accordance with the substantive laws of the State of Missouri. IN WITNESS WHEREOF, each of the undersigned, intending to be legally bound, has executed this Note as of the day and year first above written. MAKER:  

QuickLinks -- Click here to rapidly navigate through this document EMPLOYMENT AGREEMENT     This Employment Agreement ("Agreement") is made effective April 3, 2000, by and between Jore Corporation, a Montana corporation ("Jore") and Monte Giese ("Employee").     NOW, THEREFORE, the parties hereto agree as follows: 1.  Employment.     Jore hereby agrees to continue to employ Employee as its Chief Financial Officer, and Employee hereby accepts such employment in accordance with the terms of this Agreement and the terms of employment applicable to employees of Jore. In the event of any conflict or ambiguity between the terms of this Agreement and terms of employment applicable to Jore employees in general, the terms of this Agreement shall control. 2.  Duties of Employee.     The duties of Employee shall include the performance of all of the duties typical of the office held by Employee as described in the bylaws of Jore, if applicable, and such other duties and projects as may be assigned by a superior officer of Jore, or the board of directors of Jore. Employee shall devote his full time productive time, ability and attention to the business of Jore and shall perform all duties in a professional, ethical and businesslike manner. Employee will not, during the term of this Agreement, directly or indirectly engage in any other business, either as an employee, employer, consultant, principal, officer, director, advisor, or in any other capacity, either with or without compensation, that would be in conflict with Employee's duties on Jore's behalf. 3.  Compensation.     A.  Base Compensation.  Employee will be paid compensation during this Agreement at a base salary of $140,000 per year, payable in installments according to Jore's regular payroll schedules.     B.  Incentive Compensation.  Employee will be paid such incentive compensation as may be agreed upon from time to time between Employee and Jore management. Unless otherwise provided herein, any bonus or other incentive compensation will be calculated on a calendar quarter basis, with the requirement Employee be employed on the last day of such quarter to qualify for the bonus. 4.  Benefits.     A.  Holidays, Vacation and Personal Days.  Employee will be entitled to paid holidays, vacation days, and personal days each calendar year, as set out in the Jore employee handbook, or, as to corporate officers, as set forth in Jore employee compensation guidelines as adopted and modified from time to time ("Jore's Compensation Guidelines"). Jore will notify Employee on or about the beginning of each calendar year with respect to the holiday schedule for the coming year. Vacation days will be scheduled in advance subject to requirements of Jore. Such holidays must be taken during the calendar year and cannot be carried forward into the next year.     B.  Life Insurance, Disability, and Medical Plan.  Jore agrees to include Employee in the group medical plan of Jore and, if applicable to the office of Employee pursuant to Jore's Compensation Guidelines, to provide voluntary life insurance and disability insurance for Employee in the amounts and under the terms and conditions set forth in Jore's Compensation Guidelines as in effect on the date hereof. Employee shall be responsible for payment of any federal or state income tax imposed upon these benefits.     C.  Stock Option Grant.  Executive shall be granted stock options for shares of common stock of Jore pursuant to separate stock option agreements executed between Executive and Jore. Specifically, Page 1 -------------------------------------------------------------------------------- an initial grant of options exercisable for 80,000 shares will be made on the effective date hereof. All options will be exercisable at a price equal to the fair market value of such shares on the date of grant, and will vest in accordance with the standard vesting policy of Jore.     D.  Expense Reimbursement.  Employee shall be entitled to reimbursement for all reasonable and customary expenses, including travel and entertainment, incurred by Employee in the performance of Employee duties. Employee will maintain records and written receipts as required by Jore's internal policies and reasonably requested by Jore to substantiate such expenses. Any anticipated out of the ordinary expenses must be pre-approved by senior management of Jore. 5.  Term and Termination.     A.  The Initial Term of this Agreement shall commence on the date hereof and it shall continue in effect for a period of five (5) years. Thereafter, the Agreement shall be renewed upon the mutual agreement of Employee and Jore for successive one-year terms, unless terminated in accordance herewith.     B.  This Agreement and Employee's employment may be terminated at Jore's discretion without cause during the Initial Term with 30 days prior written notice to Employee. If the termination is without cause, Jore shall pay to Employee base compensation through the date which is one hundred twenty (120) days from the date on which the termination is to be effective as per the timely delivered notice. In addition, Employee shall be entitled to a pro rata share of incentive compensation as provided in section 3.B. through and including the effective date of termination (but not including the period of continuing compensation under this subsection).     C.  This Agreement may be terminated by Employee at Employee's discretion by providing at least thirty (30) days prior written notice to Jore. In the event of termination by Employee pursuant to this subsection, Jore may immediately relieve Employee of all duties and immediately terminate this Agreement, provided that Jore shall pay Employee at the then applicable base salary rate to the termination date included in Employee original termination notice, but in no event in excess of thirty (30) days from the date Jore receives such notice. Any incentive compensation which has accrued through such date, but has not been paid, shall be forfeited by Employee in this event, and shall not be paid.     D.  In the event that Employee is in breach of any material obligation owed Jore under this Agreement, habitually neglects the duties to be performed under this Agreement, becomes permanently disabled and is no longer able to perform the essential functions of the position with reasonable accommodation, engages in any conduct which is dishonest, damages the reputation or standing of Jore, is convicted of a serious criminal act or engages in any act listed as cause for dismissal in the Jore Employee Handbook, then Jore may terminate this Agreement upon five (5) days notice to Employee. In event of termination of the agreement pursuant to this subsection, Employee shall be paid only at the then applicable base salary rate up to and including the date of termination. Employee shall not be paid any incentive compensation or other additional compensation, prorated or otherwise.     E.  In the event Jore is acquired, or is the non-surviving party in a merger, or sells all or substantially all of its assets, this Agreement shall not be terminated and Jore agrees to use its best efforts to ensure that the transferee or surviving entity is bound by the provisions of this Agreement. Page 2 -------------------------------------------------------------------------------- 6.  Notices.     Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or by certified mail, postage prepaid, or recognized overnight delivery services; If to Jore: Jore Corporation 45000 Highway 93 South Ronan, Montana 59864 Attention: General Counsel If to Employee: Monte Giese 44253 Highway 93 South Ronan, Montana 59864 7.  Final Agreement.     This Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. Only a further writing that is duly executed by both parties may modify this Agreement. 8.  Governing Law.     This Agreement shall be construed and enforced in accordance with the laws of the state of Montana. 9.  Headings.     Headings used in this Agreement are provided for convenience only and shall not be used to construe meaning or intent. 10. Assignment.     Neither this Agreement nor any or interest in this Agreement may be assigned by Employee without the prior express written approval of Jore, which may be withheld by Jore at Jore's absolute discretion. Jore may assign or delegate all or any part of its rights or obligations under this Agreement to a direct or indirect subsidiary or parent or by merger, consolidation, sale or transfer of all or substantially all of its assets, provided any resulting assignee or transferee succeeds to the obligations of Jore hereunder, and provided that at least eighty percent (80%) of the ultimate ownership of such assignee or transferee immediately after such transfer or assignment is held or owned, directly or indirectly, by the same parties owning or holding immediately prior to the transfer or assignment. All references to Jore shall include any permitted assignee or successor to Jore. 11. Preparation of Agreement.     Employee acknowledges that this Agreement was prepared by attorneys representing Jore, and that the terms of this Agreement will have tax consequences to Employee. Employee has been advised to consult with an attorney and tax advisor of his choice before entering into this Agreement and has done so, or has waived the opportunity to do so. Employee acknowledges that he has not relied upon any legal or tax advice of Jore's attorneys in connection with this Agreement. Page 3 -------------------------------------------------------------------------------- 12. Severability.     If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included. 13. Arbitration.     The parties agree that they will use their best efforts to amicably resolve any dispute arising out of or relating to this Agreement. Any controversy, claim or dispute that cannot be so resolved shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Any such arbitration shall be conducted in Lake County, Montana, or such other place as may be mutually agreed upon by the parties. Within fifteen (15) days after the commencement of the arbitration, each party shall select one person to act as arbitrator, and the two arbitrators so selected shall select a third arbitrator within ten (10) days of their appointment. Each party shall bear its own costs and expenses and an equal share of the arbitrator's expenses and administrative fees of arbitration.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Jore Corporation   Employee:   By:               --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   Matt Jore   Monte Giese   President     Page 4 -------------------------------------------------------------------------------- QUICKLINKS EMPLOYMENT AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10 BIOJECT MEDICAL TECHNOLOGIES INC. RESTATED 1992 STOCK INCENTIVE PLAN      As Amended as of September 14, 2000     1. Purpose.  The purpose of this Restated 1992 Stock Incentive Plan (the "Plan") is to enable Bioject Medical Technologies Inc., an Oregon corporation (the "Company"), to attract and retain the services of (a) selected employees, officers and directors of the Company or of any parent or subsidiary corporation of the Company, and (b) selected nonemployee agents, consultants, advisers and independent contractors of the Company or any parent or subsidiary.     2. Shares Subject to the Plan.  Subject to adjustment as provided below and in paragraph 11, up to 1,700,000 shares of Common Stock of the Company (the "Shares") shall be offered and issued under the Plan. If an option or a stock appreciation right granted under the Plan expires, terminates or is cancelled, the unissued Shares subject to such option or stock appreciation right shall again be available under the Plan. If Shares sold or awarded as a bonus under the Plan are forfeited to the Company or repurchased by the Company, the number of Shares forfeited or repurchased shall again be available under the Plan.     3. Effective Date and Duration of Plan.           (a)  Effective Date. The Plan shall become effective when adopted by the Board of Directors of the Company (the "Board"). However, no option granted under the Plan shall become exercisable until the Plan is approved by the affirmative vote of the holders of a majority of the Common Stock of the Company represented at a shareholder meeting at which a quorum is present, and any such awards under the Plan prior to such approval shall be conditioned on and subject to such approval. Subject to this limitation, options and stock appreciation rights may be granted and Shares may be awarded as bonuses or sold under the Plan at any time after the effective date and before termination of the Plan.         (b)  Duration. No options or stock appreciation rights may be granted under the Plan, no stock bonuses may be awarded under the Plan, and no Shares may be sold pursuant to paragraph 8 of the Plan on or after June 30, 2010. However, the Plan shall continue in effect until all Shares available for issuance under the Plan have been issued and all restrictions on such Shares have lapsed. The Board may suspend or terminate the Plan at any time, except with respect to options, stock appreciation rights and Shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding options, stock appreciation rights, any right of the Company to repurchase Shares or the forfeitability of Shares issued under the Plan.     4. Administration.           (a)  The Plan shall be administered by a committee appointed by the Board consisting of not less than two directors (the "Committee"). The Committee shall determine and designate from time to time the individuals to whom awards shall be made, the amount of the awards, and the other terms and conditions of the awards; provided, however, that only the Board may amend or terminate the Plan as provided in paragraphs 3 and 14. At any time when the officers and directors of the Company are subject to Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the Committee shall consist solely of "non-employee" directors as such term is defined from time to time in SEC Rule 16b-3(b)(3)(i) or successor rule. No member of the Committee shall be eligible to receive any award under the Plan while such person serves as a Committee member, except pursuant to paragraph 10.         (b)  Subject to the provisions of the Plan, the Committee may from time to time adopt and amend rules and regulations relating to administration of the Plan, advance the lapse of any waiting period, accelerate any vesting or exercise date, waive or modify any restriction applicable to Shares -------------------------------------------------------------------------------- (except those restrictions imposed by law) and make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Committee shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency.         (c)  The Board of Directors may delegate to any officer or officers of the Company authority to grant awards under the Plan, subject to any restrictions imposed by the Board of Directors.     5. Types of Awards; Eligibility.  The Committee may, from time to time, take the following actions under the Plan: (i) grant Incentive Stock Options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as provided in paragraph 6(b); (ii) grant options other than Incentive Stock Options ("Nonstatutory Stock Options") as provided in paragraph 6(c); (iii) award stock bonuses as provided in paragraph 7; (iv) sell Shares as provided in paragraph 8; and (v) grant stock appreciation rights as provided in paragraph 9. Any such awards may be made to employees (including employees who are officers or directors) of the Company or of any parent or subsidiary corporation of the Company, and to other individuals described in paragraph 1 who the Committee believes have made or will make an important contribution to the Company or its parent or subsidiaries; provided, however, that only employees of the Company or a parent or subsidiary shall be eligible to receive Incentive Stock Options under the Plan, and, provided further, that directors who are not employees shall receive awards only pursuant to paragraph 10. The Committee shall select the individuals to whom awards shall be made and shall specify the action taken with respect to each individual to whom an award is made under the Plan. At the discretion of the Committee, an individual may be given an election to surrender an award in exchange for the grant of a new award. No employee may be granted options or stock appreciation rights under the Plan for more than 200,000 shares of Common Stock in any calendar year.     6. Option Grants           (a)  Grant. Each option granted under the Plan shall be evidenced by a stock option agreement in such form as the Committee shall prescribe from time to time in accordance with the Plan. With respect to each option grant, the Committee shall determine the number of Shares subject to the option, the option price, the period of the option, and the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Nonstatutory Stock Option.         (b)  Incentive Stock Options. Incentive Stock Options granted under the Plan shall be subject to the following terms and conditions:     (i)  No employee may be granted Incentive Stock Options under the Plan such that the aggregate fair market value, on the date of grant, of the Shares with respect to which Incentive Stock Options are exercisable for the first time by that employee during any calendar year under the Plan and under any other incentive stock option plan (within the meaning of Section 422 of the Code) of the Company or of any parent or subsidiary corporation of the Company exceeds $100,000.     (ii) An Incentive Stock Option may be granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary corporation of the Company only if the option price is at least 110 percent of the fair market value, as described in paragraph 6(b)(iv), of the Shares subject to the option on the date it is granted, and the option by its terms is not exercisable more than five years from the date of grant. 3 --------------------------------------------------------------------------------     (iii) Subject to paragraphs 6(b)(ii) and 6(d), Incentive Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee, except that no Incentive Stock Option shall be exercisable more than 10 years from the date of grant.     (iv) The option price per Share shall be determined by the Committee at the time of grant. Subject to paragraph 6(b)(ii), the option price shall not be less than 100 percent of the fair market value of the Shares covered by the Incentive Stock Option at the date the option is granted. The fair market value shall be deemed to be the average of the closing bid and asked prices for the Common Stock of the Company as reported on the National Association of Securities Dealers, Inc. Automated Quotation System on the day preceding the day the option is granted, or if there has been no sale on that date, on the last preceding date on which a sale occurred, or such other reported value of the Common Stock of the Company as shall be specified by the Committee.     (v) The Committee may at any time without the consent of the optionee convert an Incentive Stock Option into a Nonstatutory Stock Option.         (c)  Nonstatutory Stock Options. Nonstatutory Stock Options shall be subject to the following additional terms and conditions:     (i)  The option price for Nonstatutory Stock Options shall be determined by the Committee at the time of grant. The option price may not be less than 75 percent of the fair market value of the Shares covered by the Nonstatutory Stock Option on the date of grant. The fair market value of the Shares covered by a Nonstatutory Stock Option shall be determined pursuant to paragraph 6(b)(iv).     (ii) Nonstatutory Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee.         (d)  Exercise of Options. Except as provided in paragraphs 6(e) and (f) or as determined by the Committee, no option granted under the Plan may be exercised unless at the time of such exercise the optionee is employed by or in the service of the Company or any parent or subsidiary corporation of the Company and shall have been so employed or have provided such service continuously since the date such option was granted. Absence on leave or on account of illness or disability under rules established by the Committee shall not, however, be deemed an interruption of employment for purposes of the Plan. Unless otherwise determined by the Committee, vesting of options shall not continue during an absence on leave (including an extended illness) or on account of disability. Except as provided in paragraphs 6(f), 11 and 12, options granted under the Plan may vest and be exercised from time to time over the period stated in each option in such amounts and at such times as shall be prescribed by the Committee, provided that options shall not be exercised for fractional shares. Unless otherwise determined by the Committee, if the optionee does not exercise an option in any one year with respect to the full number of Shares to which the optionee is entitled in that year, the optionee's rights shall be cumulative and the optionee may purchase those Shares in any subsequent year during the term of the option.         (e)  Restrictions on Transfer. Each option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the optionee's domicile at the time of death, and each option by its terms shall be exercisable during the optionee's lifetime only by the optionee; provided, however, that, with the consent of the Committee, which consent may be withheld in its sole discretion or conditioned on such requirements as the Committee shall deem appropriate, an officer or director of the Company who is subject to Section 16(b) of the Exchange Act may assign or transfer without consideration all or any portion of a Nonstatutory Stock Option granted under the Plan to such officer's or director's spouse (or former spouse) pursuant to a qualified 4 -------------------------------------------------------------------------------- domestic relations order. The holder of any Nonstatutory Stock Option that has been transferred pursuant to this paragraph 6(e) may be subject to treatment under tax and securities laws with respect to the transferred option which differs from the treatment to which the applicable officer or director was subject with respect to the option prior to the transfer.         (f)  Termination of Employment or Service.     (i)  In the event the employment or service of the optionee by the Company or a parent or subsidiary corporation of the Company terminates for any reason other than because of death or physical disability, the option may be exercised at any time prior to the expiration date of the option or the expiration of three months (one year in the case of officers and two years in the case of directors) after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination.     (ii) In the event of the termination of the optionee's employment or service with the Company or a parent or subsidiary corporation of the Company because the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code), the option may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such termination, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination.     (iii) In the event of the death of an optionee while employed by or providing service to the Company or a parent or subsidiary corporation of the Company, the option may be exercised at any time prior to the expiration date of the option or the expiration of one year after the date of such death, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option on the date of death, and only by the person or persons to whom such optionee's rights under the option shall pass by the optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death.     (iv) The Committee, at the time of grant or at any time thereafter, may extend the three-month and one-year expiration periods any length of time not later than the original expiration date of the option, and may increase the portion of an option that is exercisable, subject to such terms and conditions as the Committee may determine.     (v) To the extent that the option of any deceased optionee or of any optionee whose employment or service terminates is not exercised within the applicable period, all further rights to purchase Shares pursuant to such option shall cease and terminate.         (g)  Purchase of Shares. Unless the Committee determines otherwise, Shares may be acquired pursuant to an option only upon receipt by the Company of notice in writing from the optionee of the optionee's intention to exercise, specifying the number of Shares as to which the optionee desires to exercise the option and the date on which the optionee desires to complete the transaction, and, if required to comply with the Securities Act of 1933, as amended, or state securities laws, the notice shall include a representation that it is the optionee's present intention to acquire the Shares for investment and not with a view to distribution. The certificates representing the Shares shall bear any legends required by the Committee. Unless the Committee determines otherwise, on or before the date specified for completion of the purchase of Shares pursuant to an option, the optionee must have paid the Company the full purchase price of such Shares in cash (including, with the consent of the Committee, cash that may be the proceeds of a loan from the Company), or, with the consent of the Committee, in whole or in part, in Shares valued at fair market value, as determined pursuant to paragraph 6(b)(iv). Unless the Committee determines otherwise, all payments made to the Company in connection with the exercise of an option must be made by a certified or cashier's bank check or by the 5 -------------------------------------------------------------------------------- transfer of immediately available federal funds. No Shares shall be issued until full payment therefor has been made. With the consent of the Committee, an optionee may request the Company to apply automatically the Shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option. Each optionee who has exercised an option shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Company on demand. If the optionee fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the optionee by the Company or the parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, an optionee may deliver Shares to the Company to satisfy the withholding obligation.     7. Stock Bonuses.  The Committee may award Shares under the Plan as stock bonuses. Shares awarded as a stock bonus shall be subject to such terms, conditions, and restrictions as shall be determined by the Committee, all of which shall be evidenced in a writing signed by the recipient prior to receiving the bonus Shares. The Committee may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements. The certificates representing the Shares awarded shall bear any legends required by the Committee. The Company may require any recipient of a stock bonus to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the recipient by the Company or the parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a recipient may deliver Shares to the Company to satisfy the withholding obligation.     8. Stock Sales.  The Committee may issue Shares under the Plan for such consideration (including promissory notes and services) as determined by the Committee, provided that in no event shall the consideration be less than 75 percent of the fair market value of the Shares at the time of issuance, determined pursuant to paragraph 6(b)(iv). Shares issued under this paragraph 8 shall be subject to the terms, conditions and restrictions determined by the Committee. The restrictions may include restrictions concerning transferability, repurchase by the Company and forfeiture of the Shares issued, together with such other restrictions as may be determined by the Committee. The certificates representing the Shares shall bear any legends required by the Committee. The Company may require any purchaser of stock issued under this paragraph 8 to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the purchaser fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the purchaser by the Company or any parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a purchaser may deliver Shares to the Company to satisfy the withholding obligation.     9. Stock Appreciation Rights.           (a)  Grant. Stock appreciation rights may be granted under the Plan by the Committee, subject to such rules, terms, and conditions as the Committee prescribes.         (b)  Exercise.     (i)  A stock appreciation right shall be exercisable only at the time or times established by the Committee. If a stock appreciation right is granted in connection with an option, the stock appreciation right shall be exercisable only to the extent and on the same conditions that the related option could be exercised. Upon exercise of a stock appreciation right, any option 6 -------------------------------------------------------------------------------- or portion thereof to which the stock appreciation right relates terminates. If a stock appreciation right is granted in connection with an option, upon exercise of the option, the stock appreciation right or portion thereof to which the option relates terminates.     (ii) The Committee may withdraw any stock appreciation right granted under the Plan at any time and may impose any conditions upon the exercise of a stock appreciation right or adopt rules and regulations from time to time affecting the rights of holders of stock appreciation rights. Such rules and regulations may govern the right to exercise stock appreciation rights granted before adoption or amendment of such rules and regulations as well as stock appreciation rights granted thereafter.     (iii) Each stock appreciation right shall entitle the holder, upon exercise, to receive from the Company in exchange therefor an amount equal in value to the excess of the fair market value on the date of exercise of one Share over its fair market value on the date of grant (or, in the case of a stock appreciation right granted in connection with an option, the option price per Share under the option to which the stock appreciation right relates), multiplied by the number of Shares covered by the stock appreciation right or the option, or portion thereof, that is surrendered. No stock appreciation right shall be exercisable at a time that the amount determined under this subparagraph is negative. Payment by the Company upon exercise of a stock appreciation right may be made in Shares valued at fair market value, in cash, or partly in Shares and partly in cash, all as determined by the Committee.     (iv) For purposes of this paragraph 9, the fair market value of the Shares shall be determined pursuant to paragraph 6(b)(iv), on the trading day preceding the date the stock appreciation right is exercised.     (v) No fractional Shares shall be issued upon exercise of a stock appreciation right. In lieu thereof, cash may be paid in an amount equal to the value of the fraction or, if the Committee shall determine, the number of Shares may be rounded downward to the next whole Share.     (vi) Each participant who has exercised a stock appreciation right shall, upon notification of the amount due, pay to the Company in cash amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the participant fails to pay the amount demanded, the Company or any parent or subsidiary corporation of the Company may withhold that amount from other amounts payable to the participant by the Company or any parent or subsidiary corporation, including salary, subject to applicable law. With the consent of the Committee, a participant may satisfy this obligation, in whole or in part, by having the Company withhold from any Shares to be issued upon the exercise that number of Shares that would satisfy the withholding amount due or by delivering Shares to the Company to satisfy the withholding amount.     (vii) Upon the exercise of a stock appreciation right for Shares, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares issued. Cash payments of stock appreciation rights shall not reduce the number of Shares reserved for issuance under the Plan.     10. Option Grants to Non-Employee Directors.           (a)  Automatic Grants. Immediately after the close of each annual shareholder meeting (commencing with the 1993 annual meeting), each person then serving as a Non-Employee Director, including any such person who is elected at such meeting, shall automatically be granted a Nonstatutory Stock Option to purchase 3,500 Shares. For purposes of this paragraph, a "Non-Employee Director" is a director of the Company who is not an employee of the Company or of any parent or subsidiary corporation of the Company on the date the option is granted. 7 --------------------------------------------------------------------------------         (b)  Terms of Options. The exercise price for options granted under this paragraph 10 shall be the fair market value of the Shares on the date of grant, determined pursuant to paragraph 6(b)(iv). Each such option shall have an eight-year term from the date of grant, unless earlier terminated as provided in paragraph 6(f), and shall vest and become exercisable with respect to 1,750 shares six months after the date of grant, with the remaining 1,750 shares vesting and becoming exercisable on the first anniversary of the date of grant.     11. Changes in Capital Structure.  If the outstanding shares of Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any recapitalization, reclassification, stock split, combination of shares or dividend payable in shares, the Committee shall make appropriate adjustments (i) in the number and kind of shares available for awards under the Plan and in all other share amounts set forth in the Plan; and (ii) in the number and kind of shares as to which outstanding options and stock appreciation rights, or portions thereof then unexercised, shall be exercisable, so that the participant's proportionate interest before and after the occurrence of the event is maintained, provided that this paragraph 11 shall not apply with respect to transactions referred to in paragraph 12. The Committee may also require that any securities issued in respect of or exchanged for Shares issued hereunder that are subject to restrictions be subject to similar restrictions. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee. Any such adjustment made by the Committee shall be conclusive.     12. Effect of Reorganization or Liquidation.           (a)  Cash, Stock or Other Property for Stock. Except as provided in paragraph 12(b), upon a merger, consolidation, reorganization, plan of exchange or liquidation involving the Company, as a result of which the shareholders of the Company receive cash, stock or other property in exchange for or in connection with their Common Stock (any such transaction to be referred to in this paragraph 12 as an "Accelerating Event"), any option or stock appreciation right granted hereunder shall terminate, but the optionee shall have the right during a 30-day period immediately prior to any such Accelerating Event to exercise his or her option or stock appreciation right, in whole or in part, without any limitation with respect to vesting or exercisability.         (b)  Stock for Stock. If the shareholders of the Company receive capital stock of another corporation ("Exchange Stock") in exchange for their Common Stock in any transaction involving a merger, consolidation, reorganization, or plan of exchange, all options granted hereunder shall be converted into options to purchase shares of Exchange Stock and all stock appreciation rights granted hereunder shall be converted into stock appreciation rights measured by the Exchange Stock, unless the Committee, in its sole discretion, determines that any or all such options or stock appreciation rights granted hereunder shall not be converted, but instead shall terminate in accordance with the provisions of paragraph 12(a). The amount and price of converted options and stock appreciation rights shall be determined by adjusting the amount and price of the options or stock appreciation rights granted hereunder to take into account the relative values of the Exchange Stock and the Common Stock in the transaction.         (c)  The rights set forth in this paragraph 12 shall be transferable only to the extent the related option or stock appreciation right is transferable.     13. Corporate Mergers, Acquisitions, Etc.  The Committee may also grant options, grant stock appreciation rights, award stock bonuses and sell stock under the Plan having terms, conditions and provisions that vary from those specified in the Plan; provided that any such awards are granted in substitution for, or in connection with the assumption of, existing options, stock appreciation rights, 8 -------------------------------------------------------------------------------- stock bonuses and stock sold or awarded by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a parent or subsidiary corporation of the Company is a party.     14. Amendment of Plan.  The Board may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason. Except as provided in paragraphs 6(b)(v), 11, 12 and 13, however, no change in an award already granted shall be made without the written consent of the holder of such award.     15. Approvals.  The obligations of the Company under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company shall not be obligated to issue or deliver Shares under the Plan if such issuance or delivery would violate applicable state or federal securities laws, or if compliance with such laws would, in the opinion of the Company, be unduly burdensome or require the disclosure of information which would not be in the Company's best interests.     16. Employment and Service Rights.  Nothing in the Plan or any award pursuant to the Plan shall (i) confer upon any employee any right to be continued in the employment of the Company or any parent or subsidiary corporation of the Company or shall interfere in any way with the right of the Company or any parent or subsidiary corporation of the Company by whom such employee is employed to terminate such employee's employment at any time, for any reason, with or without cause, or to increase or decrease such employee's compensation or benefits; or (ii) confer upon any person engaged by the Company or any parent or subsidiary corporation of the Company any right to be retained or employed by the Company or the parent or subsidiary or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company or the parent or subsidiary.     17. Rights as a Shareholder.  The recipient of any award under the Plan shall have no rights as a shareholder with respect to any Shares until the date of issue to the recipient of a stock certificate for such Shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 9 -------------------------------------------------------------------------------- QUICKLINKS BIOJECT MEDICAL TECHNOLOGIES INC. RESTATED 1992 STOCK INCENTIVE PLAN

DISTRIBUTION AGREEMENT THIS DISTRIBUTION AGREEMENT ("Agreement") is made and entered into this 13th day of July, 2000 by and between Derma Sciences, Inc., a corporation organized under the laws of the Commonwealth of Pennsylvania ("Derma") and Merit Medical Systems, Inc., a corporation organized under the laws of the State of Utah ("Merit"). W I T N E S S E T H: WHEREAS, Derma is engaged in the marketing, distribution and sale of certain catheter fasteners; WHEREAS, Derma desires to establish a source for the sale and distribution of its catheter fasteners to the acute care, long-term care and home health care markets in the United States; WHEREAS, Merit is skilled and experienced in the distribution and sale of products to the foregoing markets in the United States; and WHEREAS, Merit desires to act as a distributor for Derma's catheter fasteners to the foregoing markets in the United States; NOW, THEREFORE, the Parties hereto, in consideration of the premises, mutual covenants and undertakings herein contained, agree as follows: ARTICLE I 1.1 Definitions. As used in this Agreement, the following terms shall have the meanings specified in this Section 1.1: (a) "Products" shall mean the catheter fasteners set forth in Exhibit A hereto, as from time to time amended. (b) "Class I Markets" shall mean acute care facilities (hospitals). "Class II Markets" shall mean any other facilities and customers whatsoever. Without limiting the generality of the forgoing, Class II Markets shall include long-term care facilities (nursing homes) and home health care providers. Class I and Class II Markets are referred to collectively herein as "Markets." (c) "Territory" shall mean the "United States." 1 ARTICLE II 2.1 Appointment. Subject to the terms and conditions of this Agreement, Derma hereby appoints Merit, and Merit hereby accepts appointment, as Derma's sales distributor for the Products and in the Territory above defined. This appointment shall be on an exclusive basis with respect to Class I Markets and shall be on a non-exclusive basis with respect to Class II Markets. 2.2. Sales Promotion. Merit shall, at its sole expense: (i) provide and maintain a competent and aggressive organization for the promotion, marketing, sale and distribution of the Products in the Markets and the Territory; (ii) devote reasonable efforts to the diligent promotion, marketing, sale and distribution of the Products in the Markets and the Territory; and (iii) assure competent and prompt handling of inquiries, orders, shipments, billings, collections and returns of or with respect to the Products. 2.3 Sales Training. Derma shall, within thirty days (30) of execution hereof and thereafter not less often than annually, provide Merit with such sales personnel training with respect to the Products as the Parties may reasonably determine. Such training shall occur at Merit's corporate headquarters, South Jordan, Utah, or at a mutually agreed upon location. Additionally, Derma agrees to provide to Merit, at Derma's sole expense, reasonable quantities of Product literature and Product samples. Except for the foregoing, Derma and Merit shall assume and be responsible for their respective expenses relative to implementation of this Agreement. 2.4 Independent Contractors. During the Term of this Agreement, each Party shall have the status of independent contractor and shall not be considered a partner, employee, agent or servant of the other. As such, neither Party has any authority of any nature whatsoever to bind the other or incur any liability for or on behalf of the other. ARTICLE III 3.1 Payment. Merit shall pay to Derma, upon execution hereof, the sum of Two Hundred Fifty Thousand Dollars ($250,000) which sum shall constitute advance payment for the initial Eighty Three Thousand Three Hundred and Thirty Three (83,333) units of the PercuStay Products ordered by Merit to the extent of Three Dollars ($3.00) per unit. Pursuant to the foregoing, the amount payable by Merit to Derma 2 relative to the initial Eighty Three Thousand Three Hundred and Thirty Three (83,333) units of the PercuStay Products ordered by Merit shall be Two Dollars and Eighty-five cents ($2.85) per unit. 3.2 Scope of Activities. Merit is authorized, and agrees to promote, market, sell and distribute the Products to customers and potential customers within the Markets and the Territory for ultimate use within the Markets and the Territory. Merit will not, directly or indirectly, promote, market, sell, distribute or ship Products outside, or for ultimate use outside, the Markets or Territory. The authority relative to the Products granted hereby includes, but is not necessarily limited to, the authority to maintain inventory, solicit and accept orders, set prices, invoice customers, collect payments, compromise disputes and do all things necessary or desirable in furtherance of the foregoing. 3.3 Marketing Plan. Within thirty (30) days of execution hereof Merit will: (i) appoint, and maintain throughout the Term hereof, a Marketing-Sales Manager whose responsibilities shall include the marketing and sale of the Products, and (ii) with the cooperation and assistance of Derma, complete a written marketing plan relative to the Products. Within sixty (60) days of execution hereof, Merit will commence the implementation of the aforesaid marketing plan. 3.4 Directions to Distributors. Upon execution hereof, Derma will discontinue sale of the Products to the Class I Markets and will direct all of its distributors relative to the Class I Markets to purchase the Products from Merit. 3.5 Compliance with Regulations. All Products shall be advertised, marketed, sold and distributed by Merit in compliance with the rules and regulations of the United States and applicable state and local governmental authorities. In furtherance of the foregoing, Derma shall provide to Merit, within seven (7) days of execution hereof and on a continuing basis thereafter, all registration documents, including 510k and CE mark exhibits, relative to the Products. 3.6 Product Claims. Merit agrees not to make, or permit any of its employees, agents or representatives to make, any claims for properties or results relating to any of the Products unless such claims have been authorized by Derma. 3 3.7 Promotional Materials. Merit shall not use any label, advertisement or marketing material on, with respect to or relating to any of the Products unless such label, advertisement or marketing material has first been reviewed by Derma. 3.8 Competing Products. Merit agrees not to actively market, sell or distribute to any customers or potential customers in the Markets or the Territory any catheter fasteners which are competitive with the Products. The foregoing notwithstanding, Merit may sell competitive catheter fasteners pursuant to the request of a customer for "procedure trays" and/or "kits" of which the competitive fastener constitutes a specifically requested component. ARTICLE IV 4.1 Contract Price. Subject to the terms and conditions of this Agreement, Derma shall sell to Merit the Products at an initial price for each Product (the "Initial Contract Price") set forth in Exhibit A hereto. Derma may increase the price for each Product by one half of the annual increase, if any, imposed by Maersk with respect to such Product. Provided, however, any such increase shall be limited to 2 1/2% per annum per Product. 4.2 Minimum Purchases. Merit agrees to purchase from Derma, during each quarter of the initial 12-month period of the Term hereof, not less than the minimum number of units of each of the Products set forth in Exhibit A hereto. During each quarter of each succeeding twelve (12) month period of the Term hereof, Merit agrees to purchase from Derma that number of units of each Product which exceeds the previously established Quarterly Minimum relative to such Product by fifteen percent (15%). 4.3 Remedies. If Merit fails to meet the foregoing minimum purchase requirements, Derma's sole remedy shall be amendment of this Agreement to remove Merit's exclusive distribution rights relative to the Class I Markets. Provided, however, in no event shall Derma be required to refund to Merit any portion of the pre-payment made by Merit to Derma under Section 3.1 hereof. 4 4.4 Payment Terms. Merit shall make payment to Derma for the Products as follows: (a) Merit may take a discount in the amount of two percent (2%) of the Contract Price of the subject Products upon the condition that payment for such Products is received by Derma within twenty (20) days of the date of invoice thereof. (b) Merit shall, in all events, satisfy all invoices for Products not later than thirty (30) days from the date of invoice thereof. 4.5 Purchase Forecasts. Merit shall order the Products by submitting a purchase order to Derma describing the type and quantity of the Products to be purchased. Merit shall furnish to Derma, not later than the 10th day of each calendar month during the Term hereof, a "rolling" forecast of its anticipated purchases of the Products for the succeeding three month period. Merit shall confirm all purchases not later than ninety (90) days in advance of the anticipated date of delivery thereof to Merit. 4.6 Product Delivery. All shipments of the Products to Merit will be packaged in accordance with Derma's standard packaging procedures and shipped per Derma's existing distribution policy. In the event Derma requests that Products be drop-shipped by Maersk, any and all freight and shipping costs thereby saved will be credited to Merit. All Contract Prices are FOB, Old Forge, Pennsylvania or such other delivery point as the Parties may mutually designate. Ownership of and title to the Products and all risk of loss with respect thereto shall pass to Merit upon delivery of such Products by Derma to Merit's carrier at the designated delivery (FOB) point. Freight and insurance from the designated delivery point are the sole responsibility of Merit. 4.7 Limited Warranty. Derma warrants and guarantees that: (i) upon delivery by Derma the Products will comply with all specifications provided by Derma relative to the Products and will be of comparable quality to all samples delivered to Merit; (ii) the Products will not be altered or misbranded; (iii) the Products do not and will not infringe upon or violate any patent, copyright, trademark, tradename or, without limitation, any other intellectual property rights belonging to others; (iv) all weights, measures, sizes, legends, or descriptions printed, stamped, attached or otherwise indicated by Derma with regard to the Products are true and correct; and (v) the Products are not knowingly in violation of any other laws, 5 ordinances, statutes, rules, or regulations of the United States or any state or local government or any subdivision or agency thereof. Except as expressly stated in this Section 4.7 and except as may be expressly stated by Derma on the Product or on Derma's packaging or in Derma's information accompanying the Products at the time of shipment to Merit hereunder, DERMA MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND WITH RESPECT TO THE PRODUCTS, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. DERMA NEITHER ASSUMES NOR AUTHORIZES ANYONE TO ASSUME FOR IT ANY OBLIGATION OR LIABILITY IN CONNECTION WITH THE PRODUCTS. Merit shall not make any representation or warranty with respect to the Products that is more extensive than, or inconsistent with, the limited warranty set forth in this Section 4.7 or that is inconsistent with the policies or publications of Derma relating to the Products. MERIT'S EXCLUSIVE REMEDY FOR BREACH OF ANY WARRANTY HEREUNDER IS THE DELIVERY BY DERMA OF ADDITIONAL QUANTITIES OF THE PRODUCTS IN REPLACEMENT OF THE NON-CONFORMING PRODUCTS OR THE REFUND OF THE CONTRACT PRICE FOR THE PRODUCTS THAT ARE COVERED BY THE WARRANTY, AT MERIT'S OPTION. DERMA SHALL HAVE NO OTHER OBLIGATION OR LIABILITY FOR DAMAGES TO MERIT OR ANY OTHER PERSON, INCLUDING, BUT NOT LIMITED TO, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES, LOSS OF PROFITS OR OTHER COMMERCIAL OR ECONOMIC LOSS, OR ANY OTHER LOSS, DAMAGE OR EXPENSE, ARISING OUT OF OR IN CONNECTION WITH THE SALE, USE, LOSS OF USE, NONPERFORMANCE OR REPLACEMENT OF THE PRODUCTS. ARTICLE V 5.1 Maersk Agreement Termination. In the event the Derma-Maersk Agreement (defined below in Section 6.1 hereof) is terminated for any reason, and in the further event that Merit thereafter enters an agreement with Maersk relative to the distribution of catheter fasteners, then Merit shall pay to Derma a 6 fee of Two Hundred Thousand Dollars ($200,000) payable in forty eight (48) equal monthly installments of Four Thousand One Hundred Sixty Six Dollars and Sixty Seven Cents ($4,166.67) each. 5.2 Stand Still. Merit shall not, during the Term hereof and during the term of the Derma-Maersk Agreement, contact Maersk without Derma's express written approval. ARTICLE VI 6.1 Term. The initial Term of this Agreement shall begin upon the execution hereof by both Parties and terminate on November 19, 2003. Provided, however, in the event that certain agreement between Derma and Niko Surgical Limited ("Maersk") dated November 20, 1999 (the "Derma-Maersk Agreement") is renewed, the Term of this Agreement shall likewise renew and be extended for a like period. 6.2 Termination Upon Breach. Either Party shall have the absolute right to terminate this Agreement if the other Party fails to perform or breaches, in any material respect, any of the terms or provisions of this Agreement. 6.3 Notice of Breach. In the event Merit fails to perform or breaches any of the terms of this Agreement, Derma agrees to provide Merit notice of intention to terminate this Agreement. Merit shall have thirty (30) days from the date of receipt of such notice to remedy its breach and/or failure to perform in accordance with the terms and provisions of this Agreement. 6.4 Disposition of Inventory. During the one-year period following termination of this Agreement, any inventory of Products held by Merit at the termination of this Agreement may be sold by Merit to customers in the Territory in the ordinary course. Provided, however, that for the period required to liquidate such inventory, all of the provisions contained herein governing Merit's performance obligations and Derma's rights shall remain in effect. Notwithstanding the foregoing, if Merit terminates this Agreement other than by reason of Derma's material breach thereof, Derma shall have the option, but not the obligation, to repurchase all or any part of the remaining inventory of Products at the Contract Price thereof. 6.5 Customer Records. Upon execution hereof, Derma will provide to Merit complete records, including sales volume, relative to all customers of the Products. 7 ARTICLE VII 7.1 Ownership of Trademarks. All trademarks, trade names, service marks, logos and derivatives thereof relating to the Products (the "Trademarks"), and all patents, technology and other intellectual property relating to the Products, are the sole and exclusive property of Derma or its affiliates. Derma hereby grants Merit permission to use the Trademarks for the purpose of performing its obligations under this Agreement. 7.2 Use of Trademarks. Merit agrees to use the Trademarks in full compliance with the rules prescribed from time to time by Derma. Merit may not use any Trademark as part of any corporate name or with any prefix, suffix or other modifying words, terms, designs or symbols. In addition, Merit may not use any Trademark in connection with the sale of any unauthorized product or service or in any other manner not explicitly authorized in writing by Derma. ARTICLE VIII 8.1 Confidential Information. Each Party recognizes and acknowledges that both will have access to confidential information and trade secrets of the other relating to research, development, manufacturing, marketing, financial and other business-related activities ("Confidential Information"). Such Confidential Information constitutes valuable, special and unique property of each Party. Other than as necessary to perform the terms of this Agreement, neither Party shall, during and after the Term of this Agreement, make any use of such Confidential Information, or disclose any of such Confidential Information to any person or firm, corporation, association or other entity, for any reason or purpose whatsoever except as required by law or as specifically allowed in writing by an authorized representative of the other. In the event of a breach or threatened breach by either Party of the provisions of this Section 8.1, each Party shall be entitled to an injunction restraining the other Party from disclosing and/or using, in whole or in part, such Confidential Information. Nothing herein shall be construed as prohibiting either Party from pursuing other remedies available to it for such breach or threatened breach of this Section 8.1, including the recovery of damages from the other Party. The above does not apply to information or material that was: (i) disclosed to the receiving Party by a third Party under no obligation of confidentiality; 8 (ii) known to the public or generally available to the public prior to the date it was received by either Party; or (iii) required by law to be disclosed. ARTICLE IX 9.1 Force Majeure. Neither Merit nor Derma shall be liable hereunder if either is prevented from performing any of its obligations hereunder by reason of any factor beyond its reasonable control, including, without limitation, fire, explosion, accident, riot, flood, drought, storm, earthquake, lightning, frost, civil commotion, sabotage, vandalism, smoke, hail, embargo, act of God or the public enemy, other casualty, strike or lockout, or interference, prohibition or restriction imposed by any government or any officer or agent thereof ("Force Majeure"). Excepting delay of performance as reasonably necessary due to Force Majeure, Merit's and Derma's obligations shall not be suspended or canceled during the period of such Force Majeure. A Party shall give to the other Party prompt notice of any such Force Majeure, the date of commencement thereof and its probable duration and shall give a further notice in like manner upon the termination thereof. Each Party hereto shall endeavor with due diligence to resume compliance with its obligations hereunder at the earliest date and shall do all that it reasonably can to overcome or mitigate the effects of any such Force Majeure upon a Party's obligations under this Agreement. Should the Force Majeure continue for more than six (6) months, than either Party shall have the right to terminate this Agreement. 9.2 Right of First Refusal. Derma hereby accords to Merit a right of first refusal to act as Derma's sales distributor under this Agreement with respect to any new catheter fasteners or similar products which Derma develops or the rights to which it acquires. This right of first refusal shall be exercised by Merit, if at all, within thirty (30) days of the date of notification by Derma to Merit of Derma's acquisition of any such new catheter fastener or similar product. 9 ARTICLE X 10.1 Arbitration. Except as provided in Section 8.1, any dispute, controversy or claim arising out of or in relation to or in connection with this Agreement, the operations carried out under this Agreement or the relationship of the Parties created under this Agreement, shall be exclusively and finally settled by confidential arbitration. Any Party may submit such a dispute, controversy or claim to arbitration. The arbitration proceeding shall be held in New York, New York and shall be governed by the procedural rules of the American Arbitration Association (the "AAA") and by the substantive laws of the State of New Jersey and the substantive laws of the United States applicable therein. The decision of the arbitrators shall be final and binding upon the Parties. Judgment upon the award rendered may be entered in any court having jurisdiction over the person or the assets of the Party owing the judgment. Unless otherwise determined by the arbitrator, each Party involved in the arbitration shall bear the expense of its own counsel, experts and presentation of proof, and the expense of the arbitrator and the AAA (if any) shall be divided equally among the Parties. ARTICLE XI 11.1 Amendment. No modification alteration, addition or change in the terms thereof shall be binding on either Party thereto unless reduced in writing and executed by the duly authorized representative of each Party. 11.2 Entire Agreement. This Agreement shall supersede any and all prior agreements, understandings, arrangements, promises, representations, warranties, and/or any contracts of any form or nature whatsoever, whether oral or in writing and whether explicit or implicit, which may have been entered into prior to the execution hereof between the Parties, their officers, directors or employees as to the subject matter hereof. Neither of the Parties hereto has relied upon any oral representation or oral information given to it by any representative of the other Party. 11.3 Assignment. Neither this Agreement nor any of the rights or obligations hereunder shall be assigned by either Party without the prior written consent of the other. 10 11.4 Governing Law. Any controversy arising under this Agreement or in relation to this Agreement shall be governed and construed in accordance with the laws of the state of New Jersey and the laws of the United States applicable therein. Subject to Article 10 hereof, the Parties hereto submit to the exclusive jurisdiction of the courts of law in New Jersey, United States. 11.5 Notice. All notices, payments, demands, or consents required or permitted under this Agreement hall be in writing and shall be delivered personally or sent by certified or registered mail to the respective parties at the address set forth below or at such other address as shall be given by either party to the other in writing: To Merit: Merit Medical Systems, Inc. 1600 West Merit Parkway South Jordan, UT 84085 To Derma: Derma Sciences, Inc. 214 Carnegie Center Suite 100 Princeton, NJ 08540 11.6 Waiver. Either Party's failure to enforce, at any time, any of the provisions of this Agreement or any right with respect thereto shall not be considered a waiver of such provisions or rights or in any way affect the validity of same. Either Party's exercise of any of its rights shall not preclude or prejudice said Party thereafter from exercising the same or any other right it may have irrespective of any previous action by said Party. 11 IN WITNESS WHEREOF, the parties have hereunder set their hands and seals as of the date first hereinabove written. DERMA SCIENCES, INC. By: ------------------------------------------------ Stephen T. Wills, CPA, MST Vice President and Chief Financial Officer MERIT MEDICAL SYSTEMS, INC. By: ------------------------------------------------ Fred Lampropoulos President and Chief Executive Officer 12 DERMA SCIENCES, INC. MERIT MEDICAL, INC. DISTRIBUTION AGREEMENT Initial Initial Product Contract Price Quarterly Minimum ------- -------------- ----------------- PercuStay $5.85 per unit on the first 83,333 _______________________ units sold per year $5.00 per unit on all units over 83,333 sold per year Pleura Stay TBD TBD Epi Stay TBD TBD EXHIBIT A

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.37 Confidential Treatment has been requested for portions of this exhibit. The Copy filed herewith omits the information subject to the confidentiality request. Omissions are designated as *****. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission MANUFACTURING AND LICENSE AGREEMENT     This MANUFACTURING AND LICENSE AGREEMENT (this "Agreement") is made and entered into as of this 10th day of March, 2000 (the "Effective Date"), by and between OSTEX INTERNATIONAL, INC., a Washington corporation having its principal place of business at 2203 Airport Way South, Suite 400, Seattle, Washington 98134 ("Ostex"), and METRIKA, INC., a California corporation having its principal place of business at 510 Oakmead Parkway, Sunnyvale, California 94086 ("Metrika"). RECITALS     A.  Ostex and Metrika have entered into that certain Development and Distribution Agreement dated June 8, 1998, as amended by Amendment No. 1 dated September 27, 1999 (as so amended the "Development and Distribution Agreement"), pursuant to which Metrika agreed to develop, manufacture and sell to Ostex the NTx/DRx Device (as defined below).     B.  Ostex and Metrika wish to transfer, subject to the terms of this Agreement, to Ostex responsibility for the manufacturing of the NTx/DRx Device, and Metrika is willing to license certain additional proprietary rights to Ostex.     C.  Ostex and Metrika wish to set forth in this Agreement their respective understandings with respect to the transfer of such manufacturing function, the subsequent marketing and sale of the NTx/DRx Device, and the licensing of certain additional proprietary rights from Metrika to Ostex. AGREEMENT     In consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE I—DEFINITIONS     Capitalized terms used in this Agreement not separately defined herein shall have the meanings assigned to those terms in Exhibit A, and such meaning shall be applied equally to both the singularly and plural forms of the terms defined and to the feminine, masculine, or neuter, as the case may be, unless the context otherwise requires. ARTICLE II—PHASE I 2.1  Manufacturing by Metrika 2.1.1  Manufacturing     Subject to the terms and conditions of this Agreement, Metrika shall manufacture and sell exclusively to Ostex, and Ostex shall purchase from Metrika, during the Phase I of this Agreement, such quantities of the NTx/DRx Device as Ostex may, from time to time, order from Metrika. Metrika shall manufacture the NTx/DRx Device at its manufacturing facility located at 510 Oakmead Parkway, Sunnyvale, California (the "Manufacturing Facility"), shall use exclusively its full-time employees to manufacture the NTx/DRx Device (except temporary employees hired, on occasion, by Metrika to assemble the NTx/ DRx Device who will 1 -------------------------------------------------------------------------------- work under the direct supervision of full-time properly qualified Metrika employees), and shall be responsible for purchasing and procuring all parts necessary to manufacture the NTx/DRx Device. 2.1.2  Product Specifications; Quality Control Procedures     Metrika shall manufacture and produce all quantities of the NTx/DRx Device delivered under this Agreement in accordance with the Specifications set forth in Exhibit B. Metrika, in manufacturing the NTx/DRx Device, shall adhere to and comply with QSR. 2.1.3  Final Release Specifications and Testing Criteria     Before releasing for shipment the NTx/DRx Device to Ostex or customers designated by Ostex, Metrika shall ensure that the products to be released are in compliance with the final release specifications and testing criteria set forth in Exhibit C. 2.1.4  Product Warranty; Quality Control     Metrika warrants to Ostex that all NTx/DRx Devices manufactured by Metrika for Ostex hereunder shall (i) comply with the Specifications when used in accordance with applicable Metrika instructions, as may be modified by mutual agreement of the parties, (ii) be free from defects in material and workmanship, and (iii) comply with all applicable laws, rules and regulations related to the manufacture and distribution of such product (to the extent applicable to a manufacturer). Without limiting the generality of the foregoing, Metrika warrants that all NTx/DRx Devices manufactured and supplied for the United States market under this Agreement shall be manufactured, tested, documented, packaged, and transported in compliance with QSR and that all NTx/DRx Devices manufactured and supplied under this Agreement, regardless of intended market, shall be manufactured, tested, documented, packaged and transported in compliance with appropriate quality assurance requirements agreed to by the parties. Ostex or its designee shall have the right to audit and inspect Metrika facilities, books, and records, during normal business hours and upon reasonable notice to Metrika, but only to the extent reasonably necessary to confirm such compliance, and only in good faith. Metrika further represents that it is working toward compliance with the quality standards established by ISO 9001 and warrants that it will comply with such standards when legally required to do so. In the event that Ostex demonstrates that any NTx/DRx Device supplied pursuant to this Agreement fails to meet these specifications and warranties during the Shelf-Life of such NTx/DRx Device, Metrika shall, as Ostex's sole remedy for such failure, immediately replace said product (demonstrated by Ostex as non-conforming, in accordance with reasonable procedures), with product which conforms to the above specifications and warranties. These warranties shall not apply to any item that is subjected to abuse, stress, or misuse, or used in any manner inconsistent with applicable Metrika instructions. 2.2  Product Supply     Subject to the terms and conditions of this Agreement, during Phase I Metrika shall supply, and Ostex shall purchase from Metrika, all of Ostex's requirements for the NTx/DRx Device. 2.2.1  Basic Requirements     Metrika shall provide Ostex with ***** of the NTx/DRx Device, in quantities to be specified by Ostex and agreeable to Metrika, per each calendar month during Phase I. --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 2 -------------------------------------------------------------------------------- 2.2.2  Forecast of Demand     Prior to the execution of this Agreement, Ostex has delivered to Metrika a Rolling Forecast, by months, of the quantities of the NTx/DRx Device for which Ostex expects to submit purchase orders during the subsequent 12 months (the "Rolling Forecast"). Ostex shall, no later than 15 days prior to the beginning of each calendar month, commencing in April 2000, submit an updated Rolling Forecast covering the remaining term of Phase I. Ostex shall be obligated to submit purchase orders for the NTx/DRx Device in accordance with the quantities corresponding to the first three (3) months of each Rolling Forecast. The quantities forecasted for the remaining period of each Rolling Forecast shall be used by Metrika for planning purposes and shall not be binding on Ostex. 2.2.3  Order and Acceptance     All orders for the NTx/DRx Device shall be by means of signed written purchase orders by Ostex to Metrika, sent to Metrika at Metrika's address for notice hereunder specifying the required quantity and delivery address, and requesting a delivery date not less than thirty (30) days after Metrika's receipt of such purchase order. Orders may initially be placed by telephone or telecopy; provided, however, that a signed confirming purchase order is received in writing (which may include telecopy transmission) by Metrika. Notwithstanding anything herein to the contrary, no order shall be binding upon Metrika until accepted by Metrika in writing. Each party may cancel or reschedule purchase orders only with prior written approval of the other party. In the event of any conflict between this Agreement and the terms of any purchase order, this Agreement shall control. 2.2.4  Delivery     The NTx/DRx Device shall be delivered on the date specified in the purchase orders hereunder. Metrika agrees to deliver the NTx/DRx Device no later than one (1) month after its date of manufacture. All the NTx/DRx Devices delivered pursuant to the terms of this Agreement shall be delivered pre-labeled and packaged in a product box with a dropper and package insert. Metrika shall provide the NTx/DRx Device, foil pouched and labeled as specified by Ostex, and one dropper sealed in each pouch. Ostex shall provide the printed text and artwork for the product box, package insert and all other labels ("Packaging Materials") for Metrika's use in packaging the NTx/DRx Device as described hereunder. Metrika shall suitably pack the NTx/DRx Device for shipment by surface or air, at Ostex's discretion, in Metrika's standard shipping cartons. Metrika shall ship the NTx/DRx Device to Ostex or to such other party as Ostex may designate, using the carrier specified in the purchase order; provided, however, that if Ostex does not provide instructions with respect to the carrier to be used, Metrika shall select the carrier. The NTx/DRx Device shall be shipped F.O.B. Metrika's manufacturing facility in Sunnyvale, California. Ostex shall pay all freight and insurance. Title and risk of loss passes to Ostex when the product leaves Metrika's manufacturing facility. Ostex shall be solely responsible for the payment of all freight and insurance and other costs, expenses, fees, duties, imports and charges of whatever kind in nature arising from the shipment, delivery or importation of the NTx/DRx Device in the Territory. Ostex shall solely be responsible for taking all actions necessary to obtain clearance to import the NTx/DRx Device into and throughout the Territory and Ostex warrants that it will comply in all respects with any applicable export restrictions for the NTx/DRx Device. The parties will work together in the event of supply problems to ensure customers do not switch to alternative products. 3 -------------------------------------------------------------------------------- 2.3  Product Pricing 2.3.1  Pricing Formula     For all quantities of the NTx/DRx Device received and accepted by Ostex during each calendar quarter of Phase I, Ostex shall pay to Metrika an amount equal to the NTx/DRx COGS (i) plus ***** of the Net Profits, as defined in Exhibit A, or (ii) minus ***** of the Net Losses, as defined in Exhibit A, as the case may be. On a monthly basis, commencing in May 2000, Metrika shall, no later than the 15th day of each month, estimate the NTx/DRx COGS in the prior calendar month, and Ostex shall, no later than the 20th day of each month, estimate the Net Profits (Losses), as described in Section 2.3.2, of the NTx/ DRx Device in the prior calendar month. On or prior to the last day of such calendar month, Ostex shall pay to Metrika the estimated NTx/DRx COGS (i) plus ***** of the estimated Net Profits or (ii) minus ***** of the estimated Net Losses, as the case may be, which payment will be accompanied by a statement showing the computation of the estimate. Ostex may, however, credit against such monthly payments amounts advanced to Metrika under Section 2.3.3.     On a quarterly basis, Metrika agrees to provide to Ostex, no later than fifteen (15) days following the end of the calendar quarter, a statement reconciling the actual NTx/DRx COGS for such calendar quarter against the estimates of NTx/DRx COGS used to make the monthly payments to Metrika. Upon receipt of the NTx/DRx COGS reconciliation, Ostex shall compute the Net Profits (Losses) realized upon Sales of the NTx/DRx Device for the prior calendar quarter, and shall no later than twenty (20) days following the end of the calendar quarter submit to Metrika a statement reconciling the actual Net Profits (Losses) for such calendar quarter against the estimates of Net Profits (Losses) used to make the monthly payments to Metrika.     If in such reconciliation, the aggregate of the Net Profits (Losses) and NTx/DRx COGS over the estimates thereof, show an under payment to Metrika for such calendar quarter, Ostex shall, no later than ten (10) days after the reconciliation statement is submitted, pay to Metrika the additional amount owing. On the other hand, if in such reconciliation the aggregate of the Net Profits (Losses) and NTx/ DRx COGS over the estimates thereof show an over payment to Metrika for such calendar quarter, Ostex may either offset the overpayment made by Ostex against future payments due to Metrika or, in the event that no additional payments are due, may demand, and Metrika shall then pay, the amount of the overpayment no later than ten (10) days from demand for payment. 2.3.2  Estimates of Net Profits (Losses)     In computing the estimated monthly Net Profits (Losses), Ostex shall estimate Net Sales for such month by multiplying the number of accepted units received by Ostex during such month, less ***** of that number of units as a set-aside for control kits until such time as CLIA Waiver is obtained (the ***** offset to be inapplicable once CLIA Waiver is obtained), multiplied by a set unit price of ***** (which set unit price is subject to subsequent adjustment by Ostex based upon actual purchase orders received by Ostex). The estimated Net Profits (Losses) will be the excess (deficit) of the estimated Net Sales over the estimated NTx/DRx COGS. Estimated Net Sales will be adjusted to actual Net Sales on a quarterly basis. --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 4 -------------------------------------------------------------------------------- 2.3.3  Ostex Advances     Upon the execution of the MOU, Ostex agreed to advance, as and when needed, ***** of the amounts incurred by Metrika in purchasing from third-party vendors parts necessary for the production of the NTx/DRx Device. This commitment expires upon the execution of this Agreement, and does not apply as to any NTx/DRx Device orders made by Ostex after the date hereof. To the extent that Ostex has advanced funds to Metrika pursuant to that commitment, Ostex may offset the amount of such advances against any amounts subsequently payable to Metrika under this Section 2.3, until the entire amount of the Ostex advances have been repaid in full. 2.4  Critical Reagents for Manufacturing the NTx/DRx Device     Ostex will supply to Metrika in a timely manner the Critical Reagents required to manufacture the NTx/DRx Device during Phase I. Such Critical Reagents will be credited as direct material costs under Section 2.3.1 as follows: the Osteomark Laboratory Test Kits will be credited at ***** each, and the other Critical Reagents will be credited at Ostex' Reagent COGS. 2.5  Product Distribution     Subject to the terms of this Agreement, Ostex shall, upon the execution hereof, have the exclusive right (both as to third parties and Metrika) to market, promote, have marketed and promoted, sell, have sold, distribute and have distributed the NTx/DRx Device and all other Licensed DRx Devices. During the Term of this Agreement, Metrika shall not itself market or sell, or grant rights to third parties to market or sell, the NTx/DRx Device or any Licensed DRx Device. 2.6  Sharing of Additional Development and CLIA Waiver Costs     Ostex and Metrika will share ***** the costs that may be incurred by the parties after the date hereof (i) to compensate third-parties, such as consultants, reference laboratories and legal counsel, to assist in procuring CLIA Waiver of the NTx/DRx Device, and (ii) for mutually agreed costs incurred by Metrika or Ostex for additional development of the NTx/DRx Device. The parties will make such funds available subject to the following conditions: (i) prior review and approval of a budget for the proposed expenses, which consent may be conditioned upon either party imposing a maximum limit upon its obligation to fund budgeted expenses; (ii) a written agreement between Ostex and Metrika as to the scope of the development efforts to be undertaken, or, in the case of a CLIA Waiver, the nature of the engagement of the third-party consultants and legal counsel; (iii) a written agreement between Ostex and Metrika as to the procedures to be followed to assess, on a periodic basis, progress in achieving the desired goals, and to ensure that the actual expenses are within the approved budget guidelines; and (iv) such reasonable procedures as either party may request to confirm the actual expenditures incurred in pursuing such jointly approved plans. Any amounts advanced by Ostex or Metrika pursuant to this Section 2.6 may be credited by the parties against payments due the other party under Section 2.3. 2.7  Expiration of Phase I     Ostex hereby covenants and agrees to use its best efforts to manufacture the first lot of NTx/DRx Devices in accordance with the Specifications on or prior to *****. Accordingly, the parties have established ***** as the outside date for expiration of Phase I of this Agreement. If, however, Ostex is not ready to commence production of the NTx/DRx Device by such date, the parties will conduct good faith discussions to reasonably resolve the situation. Ostex shall keep Metrika reasonably advised as to its progress in setting up its manufacturing facility, so that the parties can reasonably anticipate whether manufacturing functions can be commenced prior to the targeted date. --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 5 -------------------------------------------------------------------------------- ARTICLE III—PHASE II 3.1  Manufacturing by Ostex     After expiration of Phase I, Ostex shall have no further obligation to purchase the NTx/DRx Device from Metrika, but shall have the right to manufacture, or caused to be manufactured for it, the NTx/ DRx Device as well as other Licensed DRx Devices. Third party manufacturers must be under confidentiality agreements reasonably approved by Metrika. 3.2  Exclusive Supply Arrangement with Metrika     Subject to the terms and conditions of this Section 3.2, Ostex grants to Metrika the right to be the exclusive supplier of the Plastic Parts and Electronic Parts to be used by Ostex in manufacturing the NTx/DRx Device (and other Licensed DRx Devices) after expiration of Phase I, and Metrika accepts such responsibility. Metrika shall take the lead in negotiating for the purchase and supply of such Plastic Parts and Electronic Parts from third-party vendors, and at all times during Phase I and Phase II of this Agreement Metrika shall keep Ostex fully informed and advised during all phases of such negotiations. 3.2.1  Forecast of Demand     Within sixty (60) days of the start of each calendar quarter, Ostex or its designated manufacturer(s) shall deliver to Metrika a "rolling" forecast of quantities of Plastic Parts and Electronic Parts to be purchased by Ostex and its designated manufacturer(s) and supplied by Metrika during specified months of the following quarter and each of the subsequent three quarters (the "Rolling Forecast"). Each Rolling Forecast shall be considered a purchase order with respect to the forecasted demand for Plastic Parts and Electronic Parts by month over the first three (3) months thereof. The forecasted demand for the remaining three quarters of each Rolling Forecast shall be used by Metrika for planning purposes, but shall not be binding on Ostex and its designated manufacturer(s). 3.2.2  Parts Pricing     Metrika shall sell the Plastic Parts and Electronic Parts to Ostex at Metrika's direct cost in purchasing such parts (without mark-up) plus Metrika's direct labor costs for receiving, quality control and inspecting such parts. Invoices sent to Ostex for such materials will itemize, in reasonable detail, the component costs, and Ostex shall have the right to audit such costs as provided in Section 3.2.5. Ostex's right to continue purchasing parts at Metrika's cost (as defined in the preceding sentence) shall continue, as long as Ostex has on a pro-rata basis contributed to any non-recurring engineering or capital equipment costs necessary to produce such materials and attain such costs. In the event that Ostex contributes to a non-recurring engineering or capital equipment cost, and Metrika does not, Metrika shall pay Ostex, upon demand, the difference in costs for such materials that Metrika uses. 3.2.3  Failure to Supply     If, due to a fault of Metrika, Metrika cannot or refuses to supply Ostex with the Plastic Parts and/or Electronic Parts ordered pursuant to Section 3.2, for any reason including supply, cost or quality, Ostex may thereafter order such Plastic Parts and/or Electronic Parts directly from Metrika's third-party suppliers or from other third-party suppliers as Ostex may choose. Metrika will make available the appropriate know-how for Ostex to perform incoming raw material inspection for purchasing such Plastic Parts and/or Electronic Parts directly.     In addition to the rights in the preceding paragraph, if Metrika's third-party suppliers are unable to supply Plastic Parts and/or Electronic Parts in sufficient quantity, at a competitive cost, or at the desired quality, Ostex and Metrika at Ostex's request shall work together to identify an alternate source(s) of supply. 6 -------------------------------------------------------------------------------- 3.2.4  Payment     Payment for each shipment of Plastic Parts and Electronic Parts accepted by Ostex or its designated manufacturer(s), shall be made within 30 days of the date of invoice, it being agreed that such invoice shall not be dated prior to the shipment of the parts to which such invoice relates. 3.2.5  Records; Audit     During the term of this Agreement and for a period of one (1) year thereafter, Metrika shall maintain full, complete and accurate books of account concerning its costs in supplying the Plastic Parts and Electronic Parts. Upon not less than ten (10) business days' advance written notice to Metrika by Ostex and not more frequently than once in any twelve (12) month period, Metrika will provide access to such records during Metrika's normal business hours to an independent accounting firm to which Metrika has no reasonable objection, furnished at Ostex's expense, in order to verify the accuracy of Metrika's computations in computing amounts owed to Metrika under this Section 3. The information contained in such records is confidential and proprietary to Metrika. Ostex will maintain the confidentiality of such information and will contractually obligate its accountants to not disclose such information to any third party without Metrika's prior consent and to not use such information for any purpose other than verification of the amounts payable under this Section 3. Ostex or Metrika, as appropriate, will promptly pay to the other party any underpayment or overpayment, as applicable, of the amounts due under this Section 3. 3.3  Metrika Engineering Support     During the first year of Phase II, Metrika shall, upon Ostex's request, provide engineering service support to Ostex at Metrika's cost. Metrika shall, however, not be required to provide such support in excess of ***** hours per month during such 12-month period, unless Metrika consents thereto. 3.4  Product Warranty; Quality Control     Ostex warrants to Metrika that all NTx/DRx Devices manufactured by Ostex hereunder shall (i) comply with the Specifications when used in accordance with applicable Ostex instructions, as may be modified by Ostex, (ii) be free from defects in material and workmanship, and (iii) comply with all applicable laws, rules and regulations related to the manufacture and distribution of such product (to the extent applicable to a manufacturer). Without limiting the generality of the foregoing, Ostex warrants that all NTx/ DRx Devices manufactured and supplied for the United States market under this Agreement shall be manufactured, tested, documented, packaged, and transported in compliance with QSR and that all NTx/DRx Devices manufactured and supplied under this Agreement, regardless of intended market, shall be manufactured, tested, documented, packaged and transported in compliance with appropriate quality assurance requirements agreed to by the parties. Metrika or its designee shall have the right to audit and inspect Ostex facilities, books, and records, during normal business hours and upon reasonable notice to Ostex, but only to the extent reasonably necessary to confirm such compliance, and only in good faith. Ostex further represents that it is working toward compliance with the quality standards established by ISO 9001 and warrants that it will comply with such standards when legally required to do so. These warranties shall not apply to any item that is subjected to abuse, stress, or misuse, or used in any manner inconsistent with applicable Ostex instructions. --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 7 -------------------------------------------------------------------------------- ARTICLE IV—TECHNOLOGY TRANSFERS AND LICENSES 4.1  Metrika License to Ostex     Metrika hereby grants to Ostex, from the Effective Date until the expiration of all Metrika Patent Rights, an exclusive, royalty bearing, license under the Metrika Patent Rights and Metrika Know-How to manufacture and sell, and to have manufactured and sold, the NTx/DRx Device and the other Licensed DRx Devices in the Territory within the Field of Use. This license is non-revocable except upon the earlier termination of this Agreement by Metrika under Section 10.2(b). Ostex may transfer its rights under this license only in connection with any Ostex Sale. In addition, Ostex may disclose Metrika Know-How and Confidential Information in its possession to third parties, such as third-party contract manufacturers, investment consultants, legal counsel, public accountants and others, provided that the party to whom such disclosure is made is subject to an appropriate confidentiality agreement designed to protect the confidential nature of such information, provided that Ostex shall have primary liability with respect to any breach of the confidentiality obligations by such third parties. 4.2  Ostex License to Metrika     Ostex hereby grants to Metrika, during Phase I of this Agreement, a nonexclusive license under the Ostex Patent Rights and Ostex Know-How to develop and manufacture the NTx/DRx Device under this Agreement. This license may not be sublicensed or transferred by Metrika to any third party. 4.3  Transfer of Metrika Know-How during Phase I     From the Effective Date through the expiration of Phase I, Metrika shall afford to Ostex's employees, agents, and authorized representatives reasonable access, upon request, to Metrika's Manufacturing Facility, properties, files, books, and records in order to permit Ostex to obtain such information regarding the Metrika Know-How, as Ostex may reasonably need, to understand and to be able to duplicate the manufacture, production and packaging of the NTx/DRx Device. This right of access will also include Ostex's right to make inquiries of key employees of Metrika and to duplicate and to retain copies of all manufacturing documents and know-how relating to the manufacture of the NTx/DRx Device. In exercising these rights, Ostex shall give Metrika reasonable advance notice of its desire to inspect Metrika's plants, properties, files, books, and records, or to have made available Metrika's key employees, to discuss and make information available with respect to the manufacturing of the NTx/ DRx Device. Ostex shall be entitled to use without restriction (excluding, however, improvements that Metrika is not allowed to share with Ostex due to contractual obligations) Metrika Know-How developed or used by Metrika in manufacturing the NTx/DRx Device and other DRx Devices. 4.4  Sharing of Know-How during Phase II     Upon commencement of Phase II, and every six months thereafter until the expiration of the Term, Ostex and Metrika shall each have the obligation to share with the other all improvements made by that party to the development and manufacturing of the DRx Device (collectively, the "Improvements"). A similar disclosure obligation will exist upon the occurrence of an Event of Bankruptcy or a Change of Control as to either of the parties. Each party's disclosure obligation will, however, exclude Improvements that such party is not allowed to share because of contractual obligations with unaffiliated third parties, each party, however, covenanting to take reasonable steps to avoid entering into such contractual obligations.     In discharging this obligation to share information, each party shall: (i) make available to the other party all data in its possession, whether such data is stored in written, computer readable form or otherwise, regarding its methods, information, procedures, processes or otherwise related to the Improvements; (ii) allow representatives of the other party, upon reasonable notice, to inspect, and as necessary, duplicate the other's data relating to the Improvements; (iii) allow the other's representatives to inspect 8 -------------------------------------------------------------------------------- and view the other's manufacturing facility, and its implementation of the Improvements, and to confer with appropriate executive officers, employees and technical consultants regarding the Improvements. Incidental costs incurred in connection with such sharing of information shall be borne by the party to whom such information is given.     Either party may use the Improvements within the scope of this Agreement, subject to an obligation to take reasonable steps to preserve the confidential nature of the disclosed information. 4.5  Royalty Payments on NTx/DRx Device during Phase II     As consideration for Metrika's significant efforts to develop the NTx/DRx Device, and the transfer of manufacturing rights to Ostex under this Agreement, subject to the limitations in Section 4.7, Ostex shall pay the following royalties to Metrika during Phase II:     (a) a ***** royalty on the Net Sales of the NTx/DRx Device by Ostex provided that the Plastic Parts and Electronic Parts for such NTx/DRx Devices are provided by Metrika or its third party manufacturers and are sold to Ostex at a total price equal to or less than ***** per device; and     (b) an additional ***** royalty on the Net Sales of all NTx/DRx Devices sold by Ostex on or after *****.     The royalties payable under this Section 4.5 shall be paid at the times and in the manner provided in Section 4.8. 4.6  Royalty Payments on Non-NTx Licensed DRx Devices     If, at any time during Phase II, Ostex manufactures and sells any other (i.e., non-NTx) Licensed DRx Device, subject to the limitations in Section 4.7, Ostex shall pay to Metrika a total royalty payment of ***** of the Net Sales of such Licensed DRx Devices received by Ostex. Such royalty payments shall be made at the times and in the manner provided for in Section 4.8. 4.7  Conditions to Royalty Payments     Ostex's obligation to make the royalty payments due to Metrika under Section 4.5 and Section 4.6 is subject to the following limitations:     (a) Ostex shall have no obligation to make royalty payments on the sale of any NTx/DRx Device or Licensed DRx Device, as the case may be, after the expiration of Metrika's U.S. patents covering such products sold by Ostex.     (b) Ostex's obligation to pay royalties on sales of the NTx/DRx Device and Licensed DRx Devices in any country in the world shall continue through the duration of Metrika's U.S. patents covering such products, as long as there is no Competing Product marketed in such country.     (c) If Ostex must pay a royalty to any third-party patentee alleging patent infringement based upon the manufacture and sale of the DRx Device per se (so long as such device has not been substantially altered from the DRx Device transferred to Ostex, and such alteration is directly related to such patent infringement), but not based on the NTx or other Connective Tissue Marker measured by such device, Ostex can offset against the royalties otherwise payable to Metrika hereunder ***** of the royalties that Ostex must pay to such third-party patentee. --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 9 --------------------------------------------------------------------------------     If at any time Ostex becomes aware of a third-party patentee alleging patent infringement, which is or might give rise to a right of offset under this Section 4.7(c), Ostex shall promptly give notice to Metrika of such actual or threatened claim, and Metrika shall take the lead in defending its position or negotiating a license from such third-party patentee. Metrika shall keep Ostex fully informed of the progress of such negotiations. 4.8  Timing of Royalty Payments     Royalties will be computed on a calendar-quarter basis (i.e., January through March, April through June, July through September, and October through December) based upon the Net Sales received by Ostex during such quarter. Within thirty (30) days after the end of any calendar quarter during the term of this Agreement, Ostex will deliver to Metrika a statement specifying the Net Sales received by Ostex during such quarter and the royalties payable to Metrika, along with payment of such royalties. 4.9  Records; Audit     During the term of this Agreement and for a period of one (1) year thereafter, Ostex shall maintain full, complete and accurate books of account concerning Net Sales. Upon not less than ten (10) business days' advance written notice to Ostex by Metrika and not more frequently than once in any twelve (12) month period, Ostex will provide access to such records during Ostex's normal business hours to an independent accounting firm to which Ostex has no reasonable objection, furnished at Metrika's expense, in order to verify the accuracy of Ostex's royalty computation, however, if audit reveals under payment of royalties due Metrika in excess of 5%, Ostex pays for audit. The information contained in such records is confidential and proprietary to Ostex. Metrika will maintain the confidentiality of such information and will contractually obligate its accountants to not disclose such information to any third party without Ostex's prior written consent and to not use such information for any purpose other than verification of the royalties due. Ostex or Metrika, as appropriate, will promptly pay to the other party any underpayment or overpayment, as applicable, of royalties made to Metrika under this Agreement. 4.10  Full Compensation     Payment of the amount specified in this Article IV will constitute full compensation to Metrika for the license rights granted to Ostex under this Agreement. ARTICLE V—GENERAL PROVISIONS 5.1  Representations to Customers     Ostex shall not incur any liability on behalf of Metrika, nor describe or hold itself out as an employee or representative of Metrika. During Phase I, Ostex will not make any claims, warranties or representations with respect to the NTx/DRx Device except as previously approved in writing by Metrika.     Metrika shall not incur any liability on behalf of Ostex, nor describe or hold itself out as an employee or representative of Ostex, nor make any claims, warranties or representations with respect to the NTx/ DRx Device and Licensed DRx Devices except as previously approved in writing by Ostex. 5.2  Serious Injury     Each party shall, within twenty-four hours, advise the other by telephone, (with follow-up hard copy, receipt confirmed) of any adverse effect or malfunction related to the NTx/DRx Device and Licensed DRx Devices or the Critical Reagents of which the notifying party gains knowledge during the Term of this Agreement that may have caused or contributed to, or should it reoccur is likely to cause or contribute to, serious injury, illness, or death. The notifying party shall include in the notification the name, address, and telephone number of the person or entity purchasing the product in question, the name, address, and telephone of the patient (if different), and the lot or serial number of the NTx/DRx Device, Licensed DRx Device, or Critical Reagent involved in the incident, as appropriate. 10 -------------------------------------------------------------------------------- 5.3  Product Recall     During Phase I, if either party believes that a recall of the NTx/DRx Device is necessary or appropriate, it will promptly notify the other, and the parties will (unless such recall is required by law) discuss whether such recall is necessary or appropriate, and shall discuss the manner in which any agreed or required recall shall be conducted. If a recall is not required by law and the parties cannot agree whether the recall is necessary or appropriate, either party may elect to conduct the recall in question. The parties shall cooperate with each other in conducting any such recall. All out of pocket costs of a required or agreed recall shall be shared equally by the parties, unless and to the extent that such recall is the result of a breach of the warranties hereunder by one party, in which case such costs shall be borne by the breaching party. All costs of a recall to which the parties have not agreed shall be borne by the party that elects to conduct the recall, provided that if a court of competent jurisdiction determines that said recall was caused by (i) the fact that any Critical Reagents are in violation of applicable law or the terms of this Agreement, or any error, defect or misrepresentation in the Packaging Material, then the costs and expenses of such recall as well as any reasonable attorneys' fees related to such determination shall be borne by Ostex, or (ii) the fact that the NTx/DRx Device as manufactured by Metrika is in violation of applicable law or the terms of this Agreement other than for reasons set forth in (i) above, then the costs and expenses of such recall as well as any reasonable attorneys' fees related to such determination shall be borne by Metrika. Each party shall maintain complete and accurate records of all products manufactured or sold by it for such periods as required by law. Nothing in this Section 5.3. shall be construed to modify or limit any legal obligation of either party with respect to any recall. 5.4  Corrective Action     If any government agency with jurisdiction shall request or order any corrective action with respect to the NTx/DRx Device, the Licensed DRx Devices, or the Critical Reagents, including but not limited to any recall, customer notice, restriction, change, market action, or modification of the product in question, and the cause or basis for such corrective action is primarily attributable to a condition, fact, or action that constitutes a breach by a party of any of its warranties, representations or covenants contained herein, then such party shall be liable for and shall reimburse the other party for all costs incurred as a result of such action, including replacement cost of any product affected thereby. 5.5  U.S. Foreign Corrupt Practices Act     Each party shall indemnify, defend and hold the other party, its subsidiaries and Affiliates, and the directors, officers, employees and agents of any of them, harmless from and against all and any claims, proceedings, losses, fines, expenses (including without limitation reasonable attorneys fees and expenses) and penalties incurred by said party arising out of any Prohibited Practice committed by said party or any of its officers, directors, shareholders, employees, or agents.     For purposes of this Section 5.5, the following shall be deemed a "Prohibited Practice"; the offer, payment, promise to pay, or authorization of the paying of any money, or the offer, giving, promise to give or authorization of the giving of anything of value to any officer or employee of any government or any department, agency or instrumentality thereof, or any person acting in an official capacity for or on behalf of any such government, department, agency or instrumentality, or any political party or official thereof; or any candidate for political office, or any intermediary for any such persons or party, in each case for purposes of (a) influencing any act or decision of any such persons or party in their or its official capacity, or (b) inducing any such person or party to do or omit to do any act in violation of the lawful duty of such person or party, or (c) inducing any such person or party to use their or its influence with any government or instrumentality thereof to affect or influence any act or decision of any such government or instrumentality, in each case (a), (b) and (c) in order to assist the applicable party hereto in obtaining or retaining business for, or with, or directing business to, any person or entity in violation of the U.S. Foreign Corrupt Practices Act. 11 -------------------------------------------------------------------------------- 5.6  Governmental Compliance     Each party shall obtain and maintain all required licenses, permits, certificates and authorizations needed to perform its obligations under this Agreement. 5.7  Marketing and Sale Expenses     Ostex shall be responsible for all marketing and distribution expenses incurred in the sale and distribution of the NTx/DRx Device and Licensed DRx Devices sold by Ostex. ARTICLE VI—PURCHASE OF CAPITAL EQUIPMENT 6.1  Capital Purchases     If, during Phase I, Ostex and Metrika agree to purchase jointly manufacturing equipment to be used in the production of the NTx/DRx Device, such purchases shall be made in accordance with the terms of this Article VI. The capital equipment shall be jointly owned by Ostex and Metrika. Each party shall be obligated to pay their pro rata share of the equipment costs as set forth in Section 6.2, and shall have the rights to purchase the other party's pro-rata interest in the equipment as set forth in Section 6.3. No capital equipment shall be jointly purchased unless and until Ostex and Metrika agree in writing as to the parties' respective right to use the acquired capital equipment for their own business activities. 6.2  Capital Equipment Financing     Ostex and Metrika shall equally share the initial up-front costs of acquiring mutually approved capital equipment. All subsequent periodic payments for such capital equipment, including but not limited to lease payments, financing charges, late fees, purchase option payments, etc., will be allocated, between Ostex and Metrika, based upon the respective use of the capital equipment by Ostex and Metrika (Ostex's use will, unless the parties otherwise agree, be based upon the cumulative parts that Ostex receives from the total actual output of such capital equipment). Monthly detailed records will be kept by the parties to measure the monthly usage of the capital equipment, and such monthly records will determine the parties' respective share of the costs attributable to that month. Any financing or leasing documents for such capital equipment shall specify that Ostex and Metrika are pro-rata owners of such capital equipment as set forth on an asset declaration. 6.3  Event of Bankruptcy     If, at any time, either of the parties has an Event of Bankruptcy, the other party shall have the right to purchase that party's interest in the jointly-owned capital equipment by assuming the other party's obligation to make future payments with respect to such capital equipment and by agreeing to be bound by any supply obligations that the other party has to third parties relating to items produced by such capital equipment. 6.4  Effects of a Change in Control     If, at any time after Ostex and Metrika have jointly purchased capital equipment under this Article VI, either Ostex or Metrika experiences a Change in Control, then: (i) the successor to the party that experiences the Change in Control must assume that party's obligations under the financing documents, and guarantee the other party continuing pro rata use of the capital equipment, or (ii) the other party can purchase the capital equipment at no more than the remaining financed cost. 12 -------------------------------------------------------------------------------- 6.5  Confidentiality 6.5.1  Obligation Not to Disclose Confidential Information     Recipient shall not at any time, and shall cause its permitted assigns and sublicensees to commit not to at any time for a period of seven (7) years following the termination of this Agreement, disclose or otherwise make known or available to any person, firm, corporation, or other entity other than Discloser any Confidential Information received from the Discloser without the express prior written consent of that Discloser. With respect to Confidential Information developed under this Agreement and which is not Confidential Information of one party only, neither party shall disclose or otherwise make such Confidential Information known or available to any person, firm, corporation, or other entity without the express prior written consent of the other party, not to be unreasonably withheld or delayed. Recipient shall utilize reasonable procedures to safeguard Confidential Information, including releasing Confidential Information only to those employees and legal representatives to whom disclosure is necessary or appropriate for the Recipient to undertake its responsibility pursuant to this Agreement. Notwithstanding the above, Recipient may disclose Confidential Information of Discloser to (i) its legal representatives, prospective investors (so long a such disclosure of Confidential Information is limited to the existence of this Agreement and its basic terms and conditions), permitted assigns and contract manufacturers under conditions as to assure the confidential treatment thereof by such persons, and (ii) as required by law or to comply with applicable governmental regulations or court orders. 6.5.2  Recipient's Own Use of Confidential Information     Recipient shall not make any use, directly or indirectly, of any Confidential Information of the Discloser except in the ordinary course of business pursuant to this Agreement or any other specific, written agreement entered into between Ostex and Metrika. 6.5.3  Specific Performance     The parties acknowledge that: (a) the covenants set forth in this Section 6.5 are essential to the activities contemplated by this Agreement; (b) but for the agreement of each party to comply with such covenants, neither party would have entered into such activities; (c) each party has consulted with or has had the opportunity to consult with counsel and has been advised in all respects concerning the reasonableness of such covenants as to time and scope; (d) Discloser may have no adequate remedy at law if Recipient violates or fails to perform under this Section 6.5; and (e) Discloser shall have the right, in addition to any other rights it may have, to seek from a court of competent jurisdiction preliminary and permanent injunctive relief to restrain any breach or threatened breach or otherwise to specifically enforce Recipient's obligations under this Section 6.5 if Recipient fails to perform in accordance herewith. ARTICLE VII—REPRESENTATIONS AND WARRANTIES OF OSTEX      Ostex represents and warrants to Metrika as follows: 7.1  Organization and Authority     As of the Effective Date of the Agreement, Ostex is a corporation duly organized, validly existing and in good standing under the laws of the State of Washington, has all requisite corporate power and authority to carry on its business and perform its obligations hereunder, and is duly qualified to do business in any of those jurisdictions in the United States of America where failure to qualify could have a material adverse effect on its ability to perform its obligations hereunder. The execution and delivery of this Agreement by Ostex, and the performance of the obligations of Ostex contemplated hereby, have been duly and validly authorized by all necessary legal action on its part, and this Agreement is legal, valid and binding against 13 -------------------------------------------------------------------------------- Ostex in accordance with its terms. Except as have been or will be obtained by Ostex, no permit, consent, approval or authorization of, or declaration to or filing with, any person, party or governmental or regulatory authority of the United States is required in connection with the delivery, consummation and/or performance by Ostex of this Agreement. 7.2  No Default     The execution, delivery and performance of this Agreement by Ostex does not and shall not conflict with, result in a breach of, or constitute a default under (with or without the giving of notice, or the passage of time, or both), any agreement or instrument to which Ostex is a party or by which it is bound. 7.3  Ostex's Disclaimer of Other Warranties     Ostex disclaims all implied warranties, including without limitation any warranty of merchantability or fitness for a particular purpose.     EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OSTEX MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. ARTICLE VIII—REPRESENTATIONS AND WARRANTIES OF METRIKA     Metrika represents and warrants to Ostex as follows. 8.1  Organization and Authority     As of the Effective Date of the Agreement, Metrika is duly organized, validly existing and in good standing under the laws of California, and has all requisite power and authority to carry on its business and the performance of its obligations hereunder, and is duly qualified to do business in any of those jurisdictions where failure to qualify could have a material adverse effect on its ability to perform its obligations hereunder. The execution and delivery of this Agreement by Metrika, and the performance of the obligations contemplated hereby, have been duly and validly authorized by all necessary legal action on its part, and this Agreement is legal, valid and binding against Metrika in accordance with its terms. Except as have been or will be obtained by Metrika, no permit, consent, approval or authorization of; or declaration to or filing with, any person, party or governmental or regulatory authority having jurisdiction is required in connection with the delivery, consummation and/or performance of this Agreement. 8.2  No Default     The execution, delivery and performance of this Agreement by Metrika does not and shall not conflict with, result in a breach of; or constitute a default under (with or without the giving of notice, or the passage of time, or both), any agreement or instrument to which Metrika is a party or by which it is bound. 8.3  Metrika's Disclaimer of Other Warranties     Metrika disclaims all implied warranties, including without limitation any warranty of merchantability or fitness for a particular purpose.     EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, METRIKA MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE 14 -------------------------------------------------------------------------------- ARTICLE IX—DEFENSE OF THIRD-PARTY CLAIMS 9.1  Metrika Defense of Third-Party Claims and Indemnity     To the extent that any claim, suit, or other legal proceeding is threatened or commenced against Ostex that is founded on an allegation that the DRx Device platform or MODM Technology as incorporated into the NTx/DRx Device or Licensed DRx Devices, or Ostex' use of Metrika Know-How pursuant to this Agreement, infringes any trade secret, patent, or copyright belonging to a third party, Ostex will give Metrika prompt written notice of such legal proceeding and Metrika may elect to assume sole control of the defense to or settlement of such dispute. Ostex shall cooperate fully with Metrika in any defense, settlement or compromise made by Metrika. Ostex shall not enter into any settlement agreement or other voluntary resolution of any such claim, suit, or other legal proceeding without obtaining Metrika's prior written consent thereto. If Ostex has complied fully with the procedures set forth in this Section 9.1, Metrika will indemnify and hold Ostex harmless from and against any loss, cost, damage, or other expenses, including reasonable attorneys' fees, incurred by Ostex as a result of such claim, suit or legal proceeding.     If a final injunction is obtained against Ostex's marketing and sale of the NTx/DRx Device or a Licensed DRx Device, or if in the opinion of Metrika the subject NTx/DRx Device or Licensed DRx Device is likely to become the subject of a successful claim of infringement, Metrika may, at its option and expense, (i) procure for Ostex the right to continue its performance under this Agreement (subject to the offset payment obligations provided in Section 4.7(c)), or (ii) modify the DRx Device platform or MODM Technology in the NTx/DRx Device or Licensed DRx Device so that they become non-infringing. This indemnification provision shall not apply and Metrika shall have no liability to the extent that the subject NTx/DRx Device or Licensed DRx Device has been altered as proscribed in Section 4.7(c), or if Ostex has any interest in the claim, suit or other legal proceeding, or any license to any right so asserted. 9.2  Ostex Defense of Third-Party Claims and Indemnity     To the extent that any claim, suit, or other legal proceeding is threatened or commenced against Metrika that is founded on an allegation that the Critical Reagents in the NTx/DRx Device, or use of the NTx/DRx Device specifically to assay NTx in urine, infringes any trade secret, patent, or copyright belonging to a third party, Metrika will give Ostex prompt written notice of such legal proceeding and Ostex may elect to assume sole control of the defense to or settlement of such dispute. Metrika shall cooperate fully with Ostex in any defense, settlement or compromise made by Ostex. Metrika shall not enter into any settlement agreement or other voluntary resolution of any such claim, suit, or other legal proceeding without obtaining Ostex's prior written consent thereto. If Metrika has complied fully with the procedures set forth in this Section 9.2, Ostex will indemnify and hold Metrika harmless from and against any loss, cost, damage, or other expenses including reasonable attorneys' fees incurred by Metrika as a result of such claim, suit or legal proceeding.     If a final injunction is obtained against Metrika's use of the Critical Reagents in the manufacture of the NTx/DRx Device, or if in the opinion of Ostex the Critical Reagents are likely to become the subject of a successful claim of infringement, Ostex may, at its option and expense, (i) procure for Metrika the right to continue using the Critical Reagents in accordance with terms of this Agreement, (ii) replace or modify the Critical Reagents so that it (they) becomes non-infringing, or (iii) if neither (i) or (ii) are reasonably available, accept return of the Critical Reagents held by Metrika in inventory, and terminate this Agreement without further obligation or liability. This indemnification provision shall not apply and Ostex shall have no liability to the extent that the Critical Reagents have been modified or tampered with in any way without the express written consent of Ostex, or if Metrika has any interest in the claim, suit or other legal proceeding, or any license to any right so asserted. 15 -------------------------------------------------------------------------------- 9.3  Shared Defense of Third-Party Claims     With respect to any claim, suit or other legal proceeding threatened or commenced against Metrika or Ostex that is founded, in whole or in part, on an allegation that the NTx/DRx Device or Licensed DRx Device infringes any trade secret, patent or copyright belonging to a third party, which claim, suit or other legal proceeding is not covered by the provisions of Sections 9.1 or 9.2 above, the parties agree to share control of the defense or settlement of such claim and shall share equally all costs and liabilities resulting from such claim, suit or other legal proceeding. 9.4  Third-Party Infringement     If, during the Term of this Agreement, either party becomes aware that one or more third parties are infringing or are threatening to infringe the Ostex Patent Rights or the Metrika Patent Rights, said party (the "Notifying Party") shall immediately provide to the other party all details in said party's knowledge or possession concerning the kind and character of the infringement and any other pertinent information that said party may have. ARTICLE X—TERM AND TERMINATION 10.1  Term     This Agreement shall commence upon the Effective Date and shall continue, unless terminated prior thereto under Section 10.2, until the expiration of all Metrika Patent Rights (the "Term"). 10.2  Termination     This Agreement may be terminated prior to the expiration of the period described in Section 10.1 upon the occurrence of any of the following events:     (a) By the written election of Ostex, if Metrika shall fail to perform any of its material obligations under this Agreement within 60 days after written notice from Ostex of the need for such performance, or if Metrika shall be in breach of any of its material representations and warranties under this Agreement;     (b) By written election of Metrika, if Ostex shall fail to perform any of its material obligations under this Agreement within 60 days after written notice from Metrika of the need for such performance, or if Ostex shall be in breach of any of its material representations and warranties under this Agreement;     (c) By the written notice of either party hereto, if the other party has suffered an Event of Bankruptcy;     (d) By the written notice of Ostex, which notice may be given at any time following the commencement of Phase II; provided, however, that, upon the giving of such notice, Ostex shall remain responsible for purchasing all Plastic Parts and Electronic Parts, if any, then reflected in the first three (3) months of any "rolling forecast" delivered to Metrika prior to Metrika's receipt of the election to terminate. 10.3  Effects of Termination     The following are the effects of the termination of this Agreement: 10.3.1  Payments     Upon termination of this Agreement, each party shall pay to the other all payments that are due and have accrued and are outstanding as of the date of termination. 16 -------------------------------------------------------------------------------- 10.3.2  Return of Materials     Within thirty (30) days following termination of this Agreement, each party having possession of or control over any Confidential Information of the other party shall return to such other party all written and otherwise recorded or stored matter containing such Confidential Information, including all original matter and all copies thereof; provided, however, that each party's legal department or outside counsel may retain one copy of the Confidential Information in its confidentially maintained files, solely for the purpose of identifying information to be protected pursuant to any applicable non-disclosure obligation. 10.3.3  NTx/Digital Response Devices Remaining     Upon termination of this Agreement, Ostex shall have the right to sell Product then remaining in its possession within a reasonable time after termination hereof. 10.3.4  Survival of Terms     Notwithstanding any other provision herein to the contrary, Sections 2.1.4, 2.6, 3.2.5, 3.4, 4.9, 5.2, 5.3, 5.4, 5.5, Article VI, and Article IX of this Agreement shall survive any termination or expiration hereof. The Metrika license to Ostex in Section 4.1 shall survive any termination of this Agreement except pursuant to Section 10.2(b) and Section 10.2(d). Except as set forth herein, all rights, duties and obligations of the parties hereunder shall terminate upon the termination or expiration of this Agreement. ARTICLE XI—MISCELLANEOUS 11.1  Assignment and Sublicense. 11.1.1  By Metrika     Except as specifically permitted by this Agreement, Metrika shall not assign, sublicense, delegate, or in any other manner transfer any of its rights, privileges, obligations or duties under this Agreement to any third party without the prior written consent of Ostex, which consent may be withheld in Ostex's sole and absolute discretion, provided that this provision shall not apply to any merger, consolidation, or sale of substantially all of the assets of Metrika, or any third-party acquisition of a majority of the business interests or voting shares of Metrika, provided that the surviving party shall within a reasonable period following the final closing of such transaction expressly agree in writing to be bound by this Agreement. Any attempt by Metrika to assign, sublicense, delegate or otherwise transfer any right, privilege, obligation or duty under this Agreement other than in accordance with this Section 11.1.1 shall be void and shall, at the option of Ostex, be cause for immediate termination of this Agreement and all licenses granted hereunder. 11.1.2  By Ostex     Except as specifically permitted by this Agreement, Ostex shall not assign, sublicense, delegate, or in any other manner transfer any of its rights, privileges, obligations or duties under this Agreement to any third party without the prior written consent of Metrika, which consent may be withheld in Metrika's sole and absolute discretion, provided that this provision shall not apply to any merger, consolidation, or sale of substantially all of the assets of Ostex, or any third-party acquisition of a majority of the business interests or voting shares of Ostex, provided that the surviving party shall within a reasonable period following the final closing of such transaction expressly agree in writing to be bound by this Agreement. Any attempt by Ostex to assign, sublicense, delegate or otherwise transfer any right, privilege, obligation or duty under this Agreement other than in accordance with this Section 11.1.2 shall be void and shall, at the option of Metrika, be cause for immediate termination of this Agreement and all licenses granted hereunder. 17 -------------------------------------------------------------------------------- 11.2  Arbitration. 11.2.1  Agreement to Settle Disputes by Arbitration     At the request through notice of either Ostex or Metrika, any controversy or claim arising between the parties and related to or arising out of the construction, interpretation, or enforcement of any term or condition of this Agreement or any transaction hereunder (including the decision to enter into this Agreement), which controversy or claim cannot first be settled amicably between the parties (including without limitation through utilization of optional third-party mediation agreed to by both parties), shall be submitted to arbitration. Such arbitration shall be conducted in Seattle, Washington, if initiated by Metrika, or in San Francisco, California, if initiated by Ostex, and in either case shall be conducted in accordance with the applicable Rules of the American Arbitration Association in effect on the date of such controversy or claim. 11.2.2  Appointment of Arbitrators     Within thirty (30) days after the delivery pursuant to Section 11.6 below of a notice of request for arbitration, Metrika and Ostex shall each appoint one independent person as an arbitrator to hear and determine the dispute. The two persons so chosen shall by agreement select a third, impartial arbitrator, which selection shall be final and conclusive upon both parties. Each arbitrator shall be experienced in international and domestic manufacturing and distribution of products similar to the NTx/DRx Device and Licensed DRx Devices. If either party fails to designate its arbitrator within sixty (60) days after the notice of arbitration is received, then the arbitrator designated by the one party shall act as the sole arbitrator and shall be deemed to be the single, mutually approved arbitrator to resolve the dispute. 11.2.3  Arbitrators' Powers.     The arbitrators shall have all the powers of a State or Federal Court located at the site of the arbitration, including the power to order specific enforcement of this Agreement and to order the production of relevant and non-privileged documents by one party for inspection and duplication by the other party prior to the arbitration hearing; provided, however, that the arbitrators shall be bound by this Agreement with regard to the restriction on consequential, incidental, and punitive damages as set forth in this Agreement. 11.2.4  Discovery     The arbitrators prior to the hearing shall grant discovery pursuant to the intendment of the Federal Rules of Civil Procedure, and as the arbitrators determine to be appropriate under the circumstances. 11.2.5  Protective Order     In the event of arbitration and at the request of either Ostex or Metrika, in order to protect Confidential Information and any other matter that either party would normally not reveal to third parties, the arbitrators shall enter a protective order in such form as the parties shall stipulate or as the arbitrators shall determine is suitable. Among other things, the protective order shall stipulate that the arbitrators themselves shall receive any information designated by either party as "confidential" solely for purposes of assessing the facts and law for purposes of the arbitration, and shall not otherwise use or disclose such matter. At the request of either party, the protective order shall be entered as an award of the arbitration panel and shall enable either party to obtain the assistance of a court of competent jurisdiction to enter equitable decrees or other relief to enforce the provisions of the order as if it had been entered by that court. 18 -------------------------------------------------------------------------------- 11.2.6  Effect of Decision     The decision of the arbitrators shall state the reason for the award and shall be final, binding and conclusive upon the parties. The parties shall comply with such decision in good faith as if it were a final decision of a court of competent jurisdiction. Judgment upon the award shall be entered in any court of competent jurisdiction. Any award made in connection with any arbitration shall be made in U.S. Dollars. 11.2.7  Rights of Third Parties     Notwithstanding the agreement to arbitrate any dispute between Ostex and Metrika, in the event that a controversy or claim between Ostex and Metrika involves an adjudication of the rights of a third party, and that third party does not agree to submit to arbitration and would under Rule 19(a) of the Federal Rules of Civil Procedure, if feasible, be joined as an indispensable party, then the dispute shall be brought to, and determined by, a court of the competent jurisdiction. 11.2.8  Interim Relief     Upon the application of either party to this Agreement, and whether or not an arbitration, mediation or attempt to settle amicably has yet been initiated, all courts having jurisdiction over one or more of the parties are authorized to: (i) issue and enforce in any lawful manner such temporary restraining orders, preliminary injunctions and other interim measures of relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate pending the conclusion of arbitration proceedings pursuant to this Agreement; and (ii) enter and enforce in any lawful manner such judgments for permanent equitable relief as may be necessary to prevent harm to a party's interests or as otherwise may be appropriate following the issuance of arbitral awards pursuant to this Agreement. 11.3  Responsibility for Claims     In order to distribute between themselves the responsibility for the handling and expense of claims arising out of the manufacture, distribution, sale or use of the NTx/DRx Device, the parties agree as follows: 11.3.1  Ostex Liability     With respect to NTx/DRx Devices manufactured during Phase I, Ostex shall defend, indemnify and hold harmless Metrika against any liability or damages from any claims, suits, proceedings, demands, recoveries or expenses ("Claims") to the extent that such Claims arises from or is based upon: (i) defects in the NTx/DRx Device to the extent that such defects are due to the Critical Reagents provided by Ostex or the use of such device to assay for NTx; or (ii) product claims or selling efforts whether written or oral, made or alleged to be made, by Ostex in its advertising, publicity, promotion, or Sale of the NTx/DRx where such product claims or selling efforts were not approved by Metrika; (iii) any breach by Ostex of any of its representations or warranties contained herein; or (iv) any negligent or intentionally wrongful acts or omissions on the part of Ostex or its distributors; provided that Metrika: (a) promptly notifies Ostex in writing of any such Claim which comes to its attention; (b) allows Ostex to control the defense or settlement of such Claim; (c) does not enter into any settlement or compromise of such Claim without the express authorization of Ostex; and (d) reasonably cooperates with Ostex in the defense of such Claim, subject to Ostex's payment of all expenses associated with such cooperation by Metrika. Metrika shall have the right to participate in a non-controlling fashion in such legal proceeding at its sole expense. 11.3.2  Metrika Liability     With respect to NTx/DRx Devices manufactured during Phase I, Metrika shall be liable for and shall indemnify and hold Ostex harmless against any liability or damages from any Claims to the extent that such Claims arises from or is based upon: (i) defects in the NTx/DRx Device (other than to the extent that such 19 -------------------------------------------------------------------------------- defects are due to the Critical Reagents or NTx assay); or (ii) any breach by Metrika of any of its representations or warranties contained herein or (iii) any negligent or intentionally wrongful acts or omissions on the part of Metrika or its designated manufacturer(s); provided that Ostex: (a) promptly notifies Metrika in writing of any such Claim which comes to its attention; (b) allows Metrika to control the defense or settlement of such Claim; (c) does not enter into any settlement or compromise of such Claim without the express authorization of Metrika; and (d) reasonably cooperates with Metrika in the defense of such Claim, subject to Metrika's payment of all expenses associated with such cooperation by Ostex. Ostex shall have the right to participate in a non-controlling fashion in such legal proceeding at its sole expense. 11.4  Consequential, Incidental and Punitive Damages     NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THIS AGREEMENT (INCLUDING BUT NOT LIMITED TO DAMAGES FOR LOSS OF SALES, POTENTIAL SALES, PROFITS OR BUSINESS), REGARDLESS OF WHETHER SUCH OTHER PARTY HAS BEEN INFORMED OF THE POSSIBILITY THAT SUCH DAMAGES MAY OCCUR. 11.5  Notice     Any notice given in regard to this Agreement shall be given in writing and shall be delivered personally, or shall be sent by first class mail or registered certified mail, postage and charges prepaid, to:     If to Ostex:           Ostex International, Inc.           2203 Airport Way South, Suite 400           Seattle, WA 98134           Attention: Thomas A. Bologna Chairman, President & CEO     Copy to:           Perkins Coie LLP           1201 Third Avenue, 40th Floor           Seattle, WA 98101           Attention: James R. Lisbakken     If to Metrika:           Metrika, Inc.           510 Oakmead Parkway           Sunnyvale, California 94086           Attention: Michael P. Allen CEO and Chairman     Copy to:           Manatt, Phelps and Phillips, LLP           3030 Hansen Way, Suite 100           Palo Alto, California 94304           Attention: Jerrold F. Petruzzelli     Any notice so given shall be effective upon the date of actual receipt by the addressee as evidenced by return receipt or other written confirmation. Either party may by advance notice given pursuant to this Section 11.6 designate a substitute address for receipt of future notices. 20 -------------------------------------------------------------------------------- 11.6  Governing Law     All claims or controversies asserted by Ostex against Metrika shall be construed and enforced in accordance with the laws of California. Any judicial action by Ostex relating to the relationship between the parties pursuant to this Agreement, or Product manufactured, purchased or licensed hereunder (together with any counterclaims asserted by Metrika), shall be brought and tried in the State or Federal Courts located in San Francisco, California. All claims or controversies asserted by Metrika against Ostex shall be construed and enforced in accordance with the laws of the State of Washington. Any judicial action by Metrika relating to the relationship between the parties pursuant to this Agreement, or Product manufactured, purchased or licensed hereunder (together with any counterclaims asserted by Ostex), shall be brought and tried in the State or Federal Courts located in Seattle, Washington. Notwithstanding the foregoing, interpretation and enforcement of the provisions of Section 11.2 shall be governed by and construed in accordance with the Federal Arbitration Act. 11.7  Integration and Termination of Development and Distribution Agreement     It is the desire and intent of the parties to provide certainty as to their future rights and undertakings herein. The parties in this Agreement have incorporated all representations, warranties, covenants, commitments and understandings on which they have relied in entering into this Agreement, and neither party makes any covenant or other commitment to the other concerning its future action. Accordingly, this Agreement (i) constitutes the entire agreement and understanding between the parties and there are no promises, representations, conditions, provisions or terms related thereto other than those contained in this Agreement and (ii) supersedes all previous undertakings, agreements and representation between the parties, written or oral, with respect to the subject matter hereof. No modification of, addition to, or waiver of any provisions of this Agreement shall be binding upon either party hereto unless the same shall be in writing duly executed by a duly authorized representative of both parties hereto. The parties agree that the Development and Distribution Agreement is hereby terminated and superseded in its entirety by this Agreement. 11.8  Modification     No modification to this Agreement shall be enforceable unless made in writing and signed by an authorized representative of each party. 11.9  Severability     In the event that any provision of this Agreement is determined to be invalid or unenforceable for any reason, such provision shall be deemed inoperative only to the extent that it violates or conflicts with law or public policy and shall be deemed modified to the extent necessary to conform thereto, and all other provisions hereof shall remain in full force and effect. 11.10  Waiver     No express or implied waiver by either party of any right or remedy with respect to a default by the other party under any provision of this Agreement shall be deemed, interpreted or construed as a waiver of any right or remedy with respect to any other default under the same or any other provision hereof. 11.11  Successors and Assigns     This Agreement shall be binding upon and shall inure to the benefit of the parties' respective successors and assigns, subject to the restrictions on assignment set forth in Section 11.1. 21 -------------------------------------------------------------------------------- 11.12  Standstill Provision     During the Term of this Agreement, Metrika shall not make any offer for, and shall not actually acquire any legal or beneficial interest in the common stock or other securities of Ostex without the prior written consent of Ostex' Board of Directors other than with respect to such interests already held by Metrika prior to the date hereof, and Ostex shall not make any offer for, and shall not actually acquire any legal or beneficial interest in the common stock or other securities of Metrika, other than with respect to such interests already held by Ostex prior to the date hereof, without the prior written consent of Metrika's Board of Directors. The parties each agree that any violation of this provision would cause irreparable harm to the other party. The parties each agree that the other party shall be entitled to all equitable remedies available to it to prevent violation of this provision, as well as all other legal remedies, and if successful in any claim, may recover from the violating party all reasonable costs and attorneys fees expended by it in seeking such remedy. 11.13  Independent Contractor     The relationship of Metrika and Ostex established by this Agreement is that of independent contractors, and nothing contained in this Agreement shall be construed to (i) give either party the power to direct or control the day-to-day activities of the other, (ii) constitute the parties as partners, joint venturers, co-owners or otherwise as participates in a joint or common undertaking, or (iii) allow a party to create or assume any obligation on behalf of the other party for any purpose whatsoever.     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement the day and year last written below.     "OSTEX"           OSTEX INTERNATIONAL, INC.           By:                 --------------------------------------------------------------------------------     Name: Thomas A. Bologna  Title: Chairman, President, & CEO            "METRIKA"           METRIKA, INC.           By:                 --------------------------------------------------------------------------------     Name: Michael P. Allen  Title: Chairman & CEO  22 -------------------------------------------------------------------------------- EXHIBIT A DEFINITIONS     As used in this Agreement, the following terms shall have the following meanings:     "Affiliate" means, with respect to any person or entity, any individual, corporation, company, firm, partnership or other entity controlled by, in control of, or under common control with, such person or entity, where "control" means direct or indirect legal or beneficial ownership of fifty percent (50%) or more of the shares, business interests, or voting securities of another corporation, company, firm, partnership or other entity.     "Change in Control" means, with respect to either of the parties hereto, (a) any consolidation or merger of the party in which the party is not the continuing or surviving corporation or pursuant to which shares of common stock of the party ("Common Stock") would be converted into the right to receive cash, securities or other property, other than a merger of the party in which the holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the party, (c) the adoption of any plan or proposal for liquidation or dissolution of the party, (d) the acquisition by any person (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), excluding, for this purpose, the party or any of its majority-owned subsidiaries) of any shares of Common Stock (or securities convertible into Common Stock), if after making such acquisition, such person is the beneficial owner (as such term is defined in Rule 13d-3 promulgated thereunder), directly or indirectly, of 50% or more of the outstanding Common Stock (calculated as provided in paragraph, or (d) of such Rule 13d-3 in the case of rights to acquire common stock).     "CLIA Waiver" means the receipt of a certificate from either the U.S. Center for Disease Control or the FDA confirming the waived status of the NTx/DRx Device for POC applications pursuant to the Clinical Laboratory Improvement Amendments of 1988 ("CLIA").     "Competing Product" means*****     "Confidential Information" means any and all non-public information communicated or disclosed by one party ("Discloser") to the other party ("Recipient"), including, but not limited to, information describing or relating to the Discloser's business and marketing plans and strategies, financial information, or customer information, and any and all information communicated or disclosed by the Discloser to Recipient describing or relating to the Discloser's research and development, Know-How, inventions, trade secrets, technical data, formulae, drawings, designs, software, models, samples, kits, processes, product development data and information, provided, however, that "Confidential Information" shall not be deemed to include information which the Recipient can demonstrate by written proof: (i) is now, or hereafter becomes, through no fault on the part of the Recipient, generally known or available; (ii) is known by the Recipient at the time of receiving such information; (iii) is furnished generally to others by Discloser without restriction on disclosure; (iv) is hereafter furnished to the Recipient by a third party unrelated to Discloser, as a matter of right and without any breach of any duty of non-disclosure; (v) is independently developed by the Recipient without use of or reference to any Confidential Information of Discloser; or (vi) is the subject of express written permission to disclose provided by Discloser. Without limiting the generality of the foregoing, Confidential Information may include information developed by the Discloser during the course of this Agreement.     "Connective Tissue Markers" means***** --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 1 --------------------------------------------------------------------------------     "Critical Reagents" means the set of reagents required by Metrika to be supplied by Ostex during Phase I, for use in the manufacture, quality control, and/or clinical trials of the NTx/DRx Device. As of the Effective Date of this Agreement, such Critical Reagents are limited to: ***** These Critical Reagents may be changed upon mutual agreement of the parties and reasonable notice to scale up to commercial quantities.     *****     "Development and Distribution Agreement" means that certain Development and Distribution Agreement dated June 8, 1998, by and between Ostex and Metrika, as amended by that certain Amendment No. 1 dated September 27, 1999.     "DRx Device" means that certain diagnostic platform developed by Metrika which uses MODM Technology in the DRx configuration (meaning a configuration which uses a 4-channel, dual beam, quantitative optical design) for simultaneous measurement of immunoassays and/or general chemistries in a single-use, fully disposable in vitro diagnostic device. Such device includes an integrated liquid crystal display for display of quantitative, semi-quantitative or qualitative results and a modified serial port interface for communication with an accessory docking station.     "Electronic Parts" are listed specifically in Exhibit D.     "Event of Bankruptcy" means, with respect to either of the parties, when (a) such party shall (i) admit in writing its inability to pay its debts generally as they become due, (ii) commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (iii) make a general assignment for the benefit of its creditors, (iv) consent to the appointment of a receiver of itself or of any substantial part of its property, (v) consent to the relief sought in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or (vi) take any action in furtherance of any of the aforesaid purposes or (b) a court of competent jurisdiction shall enter an order, decree or order for relief in respect of such party in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, appointing without the consent of such party a receiver of such party or any substantial part of its property, or approving commencement of an involuntary case filed against such party under any applicable law now or hereafter in effect seeking the winding up or liquidation of its affairs, and such order, decree or order for relief shall not be vacated or set aside or stayed within 60 days from the date of entry thereof.     "FDA" means the U.S. Food and Drug Administration or any successor agency thereof.     "Field of Use" means measurement of Connective Tissue Markers.     "Licensed DRx Device" means any DRx Device (other than the NTx/DRx Device) manufactured and sold for the Field of Use during the Term.     "Metrika Know-How" means any method, information, procedure, process, computer program, or other subject matter relating to the DRx Device and MODM Technology which: (a) has been developed or acquired by Metrika, prior to or during the Term (excluding improvements that Metrika is not allowed to share with Ostex due to contractual obligations), and (b) may be of value to Ostex to develop and/or manufacture the DRx Device within the Field of Use.     "Metrika Patent Rights" means all patents and patent applications in the Territory relating to the DRx Device and the MODM Technology that are owned or controlled by Metrika during the Term. --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 2 --------------------------------------------------------------------------------     "MODM Technology" means that certain proprietary technology developed by Metrika which integrates digital electronics, micro-optics and dry reagent chemistries and which allows quantitative or qualitative, reflectance-based measurements of immunoassays (such as the measurement of urinary NTx levels) and general chemistries (such as the measurement of urinary creatinine levels) to be measured simultaneously.     "MOU" means that certain Memorandum of Understanding dated March 10, 2000, by and between Metrika and Ostex     "Net Profits (Losses)" means, with respect to the Sale of the NTx/DRx Device purchased by Ostex under this Agreement, the excess (deficit) of the Net Sales over the NTx/DRx COGS.     "Net Sales" means, with respect to the sale of the NTx/DRx Device or other Licensed DRx Device (herein referred to as a "Product"), means (i) the gross revenues earned by Ostex upon the Sale of such Products, computed on an accrual basis of accounting, less (ii) the sum of (A) charges for transportation, handling, insurance, taxes, duties and other governmental and "pass-through" charges to the extent such charges are incurred by Ostex; (B) credits or refunds allowed by Ostex for returned, defective, expired or discounted Products; and (C) amounts written off by Ostex for bad debts related to the sale of such Products (or to the extent not yet written off, allowances for such bad debts, in such reasonable amounts as Ostex may reflect in its financial statements, given its historical experience of collection).     "NTx" means amino-terminal telopeptides of type I collagen detectable by immunoassay in body fluid samples.     "NTx/DRx COGS" means the sum of (A) direct material cost (including scrapped and failed lots) incurred by Metrika or Ostex in manufacturing the NTx/DRx Device, at the cost for purchasing the direct materials from suppliers (including applicable taxes and freight charges paid, without mark-up at Metrika's level) less the cost of the Critical Reagents as defined in Section 2.4; (B) direct labor costs from Metrika or Ostex (including labor for failed lots) incurred in manufacturing the NTx/DRx Device at Metrika's Manufacturing Facility; provided, however that when temporary employees assist in manufacturing the NTx/DRx Device, the direct labor cost for such employees shall be based upon the actual hourly labor rate paid for such employees multiplied by the total number of hours worked by such employees on the respective production lots; (C) an allocable share (in amounts to be agreed by Ostex and Metrika in advance) of indirect labor costs (including labor for failed lots) incurred by Metrika to support production of the NTx/DRx Device produced for the production lot. Metrika shall, in respect to indirect labor costs, not pass through all or any portion of such indirect labor costs unless and until it has obtained Ostex's prior written consent as to (i) the method to be used by Metrika in allocating such indirect labor costs between the production of the NTx/DRx Device lots and other unrelated business activities conducted concurrently by Metrika, and (ii) the specific indirect labor costs to be passed-through to Ostex. While it is presently contemplated that Ostex will not incur indirect labor costs attributable to NTx/DRx COGS, the parties agree to discuss a similar allocation of indirect labor costs of Ostex on a case by case basis, should that possibility arise during phase I.     "NTx/DRx Device" means any DRx Device for measuring NTx in urine.     "Ostex Know-How" means any method, information, procedure, process, composition of matter, biological material, or other subject matter relating to NTx or the Critical Reagents which: (i) has been developed or acquired by Ostex prior to or during the Term of this Agreement; (ii) may be required by Metrika to develop and manufacture the NTx/DRx Device pursuant to this Agreement; and (iii) Ostex has the right to license to Metrika hereunder.     "Ostex Patent Rights" means all U.S. patents and patent applications relating to NTx that are owned or controlled by Ostex during the Term. 3 --------------------------------------------------------------------------------     "Ostex Sale" means, with respect to Ostex, (a) any sale of all or substantially all of the assets of Ostex; (b) any consolidation, merger or other reorganization of Ostex with another party or parties, whether or not Ostex is the continuing or surviving entity; (c) any acquisition by any person, as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") of any shares of the Common Stock (or securities convertible into Common Stock), if after making such acquisition, such person is the beneficial owner, directly or indirectly, of 50% or more of the outstanding Common Stock (calculated as provided as in paragraph (d) of such Rule 13d-1 under the Exchange Act in the case of rights to acquire common stock).     "Phase I" means the period from March 10, 2000, the date of the MOU through the date the first NTx/ DRx Device lot is manufactured by Ostex as contemplated by Section 2.7 of this Agreement.     "Phase II" means the period commencing upon the expiration of Phase I and ending upon the termination of this Agreement pursuant to Section 10.     "Plastic Parts" are listed specifically in Exhibit E.     "QSR" shall mean Quality System Requirements as such term is defined under the laws and regulations promulgated by the FDA.     "Reagent COGS" means all costs of materials and components (including purchase costs and royalties payable to third parties) and personnel expended on manufacturing and quality control, relating to the Critical Reagents supplied by Ostex to Metrika hereunder, plus a portion of manufacturing overhead (including, but not limited to, inventory costs relating to spoilage, insurance, depreciation, administrative expenses, indirect employee expenses and quality assurance expenses) based on the portion of resources allocated to manufacturing, calculated in accordance with U.S. generally accepted accounting principles, less that portion of such costs attributable to capacity allocated to other products manufactured by Ostex.     "Sale" shall mean any and all transactions whereby Ostex sells or otherwise transfers or disposes of a NTx/DRx Device or Licensed DRx Device, as the case may be, to (i) any third-party distributor, (ii) any pharmaceutical company, or (iii) any end-user, including without limitation any physician's office or clinical laboratory purchaser, any right of ownership or any other right to possession.     "Shelf-Life" means, with respect to any product, the time interval from the date of product manufacture to product shelf life expiration.     "Specifications" means the product specifications to be used by Metrika in manufacturing the NTx/DRx Device, which Specifications are set forth in detail in Exhibit B to this Agreement.     "Term" means from the Effective Date until the earlier of (i) the expiration of all Metrika Patent Rights or (ii) the earlier termination of this Agreement pursuant to Section 10.2.     "Territory" means all of the countries of the world. 4 -------------------------------------------------------------------------------- EXHIBIT B Specifications for the NTx/DRx Device 1.0 *****   Time To Result   2.0 *****       Sample Types   3.0 *****       Sample Storage   4.0 *****       Sample Volume   5.0 *****       Device Orientation   6.0 *****       Calibration   7.0       Stability           7.1  Shelf life *****           7.2  Open package life *****   8.0       Operating Environment   8.1 *****       Temperature   8.2 *****       Humidity   8.3 *****       Ambient Light   8.4       Storage and Shipping Conditions   8.4.1       Storage Condition *****   8.4.2       Shipping Condition *****   9.0       Accuracy (maximum allowable bias from reference) See Exhibit C.   10.0       Precision (total clinical) See Exhibit C. --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 1 --------------------------------------------------------------------------------               11.0       Assay range   11.1 *****       NTx   11.2 *****       Creatinine   12.0       Interfering substances   12.1 *****       NTx   12.2 *****       Creatinine   13.0       Reliability   13.1       Error conditions *****   13.2       Misuse (Product Launch) *****   13.3       Functional Reliability *****             --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 2 -------------------------------------------------------------------------------- EXHIBIT C Final Release Specification and Testing Criteria 1 -------------------------------------------------------------------------------- PURCHASE SPECIFICATION Document Control History: Change Request Number --------------------------------------------------------------------------------   Revision --------------------------------------------------------------------------------   Date --------------------------------------------------------------------------------   Proofed By -------------------------------------------------------------------------------- ECO 0811   A   1/11/00   C. Smith   New             ECO 0850   B         Include bill of materials section,             Define ranges for panel members,             Revise QC acceptance criteria,             Add Part Number ot Device Pouch Label,             Delete Inventory Record             Document Approval           Quality Assurance   Manufacturing   Development Sandy Johnstone   Cory Smith   J. D. Clemens Date:  1/11/00   Date:  1/06/00   Date:  1/06/00 2 -------------------------------------------------------------------------------- 1.0BILL OF MATERIALS FOR A PLANNED BATCH SIZE OF      KITS. Lot# --------------------------------------------------------------------------------   Part # --------------------------------------------------------------------------------   Description --------------------------------------------------------------------------------        --------------------------------------------------------------------------------   Quantity/kit x --------------------------------------------------------------------------------   Batch Size -------------------------------------------------------------------------------- = Quantity Needed --------------------------------------------------------------------------------                          01001   Osteomark NTx POC Device, Labeled   2 ea                                   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------          3015   Box, NTx POC 2/pk   1 ea                                   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------          7014   Instructional Insert, NTx POC   1 ea                                   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------          5067   Label, Patient Result, NTx POC   0.2 ea (1 sheet   )                                 --------------------------------------------------------------------------------   --------------------------------------------------------------------------------          8086   Label, Lot/ Exp Date, NTx POC   1 ea                                   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Initials:       Checked by:       Date:       2.0   STORAGE CONDITIONS           2.1   This part is under lot control     2.2 Store at 2-8°C     2.3 Store in a controlled access inventory location   3.0       HEALTH AND SAFETY INFORMATION           N/A                       4.0       REFERENCE DOCUMENTS   4.1       P080 Sampling Plans   5.0       PURCHASE SPECIFICATIONS   5.1       Authorized vendor: Metrika, Inc.                       510 Oakmead Parkway Sunnyvale, CA 94086 (408) 524-2255 Fax: (408) 524-2252   5.2       Order Ostex Part Number 9015 Revision B   5.3       Certificate of Conformance must be received with each lot   6.0       RECEIVING INSPECTION   6.1       Date received:         6.2       Ostex receiving number:         6.3       Total number of 2/packs assembled:         6.4       Certificate of Analysis must contain the following information:           6.4.1   Lot Number of Device (Metrika PN01001).     6.4.2 Expiration Date for Device.       6.4.3   *****           6.4.3.2   *****                                   Pass [  ]    Fail [  ]                               3 --------------------------------------------------------------------------------                               Initials:                                      Date:          6.5       The number of boxes as described in P080 Sampling Plans will be inspected at Metrika for presence and conformance of the items listed below. Samples must be pulled randomly, but pull samples from each shipping container received, if possible. Pull randomly throughout the production lot if not sampling from shipping containers.                                   Accept if:           6.5.1 Units are packaged in Osteomark NTx POC box with reorder number 9015.   6.5.2 Boxes are free from obvious physical and moisture damage.   6.5.3 Each box contains a legible lot number and expiration date label.   6.5.4 Each box contains:     6.5.4.1   2 ea Osteomark NTx POC devices with pouch labeling as described in Attachment 1 and each pouch label is legible and has a legible lot number and expiration date imprint, and pouch label lot number and expiration date match those on outside of kit box.     6.5.4.2   Each device contains a dropper within the pouch.     6.5.4.3   Each pouch is free from tears or damage.     6.5.4.4   One package insert (PN 7014) is present in the top shelf of each kit box.     6.5.4.5   One sheet of patient result labels (Copy on Attachment 2) is present in the top shelf of each kit box.                       Number of 2 packs inspected:                                                    Pass [  ]    Fail [  ]                           Initials:                          Date:              6.6 *****             Lot number of devices received:                Same lot number of devices previously received?  YES [  ]  NO [  ]   If yes, previously received as PN:              RN:                 Number of devices delivered to QC:                         Initials:                                        Date:              6.6.1 *****           4 -------------------------------------------------------------------------------- Replicate Number --------------------------------------------------------------------------------   METR 2 (nM BCE/mM creatinine) --------------------------------------------------------------------------------   METR 3 (nM BCE/mM creatinine) -------------------------------------------------------------------------------- 1         2         3         4         5         6         7         8         9         10         11         12         13         14         15         16         17         18         19         20         Mean         %CV             ***** Accept if: Pass [  ]  Fail [  ]     Form completed by:                 Date:              6.7Ship ten boxes to Ostex for retention samples unless devices have been previously retained as PN 9013. If devices have been retained as PN 9013, retain two boxes. Label with part number, receiving number, initials and date. Record activity in retention log book. Initials:              Date:              6.8Comments: -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Reviewed by:              Date:              Packages are Approved:               Rejected:              NCR#              Total packages released to inventory:              Released to Finished Goods Inventory by:                                                                  Date:              Quality Assurance 5 -------------------------------------------------------------------------------- ATTACHMENT 1 Pouch Label for NTx Point of Care Device Osteomark® NTx Point-of-Care Device     For the measurement of cross-linked N-telopeptides of type I collagen (NTx) corrected for creatinine in human urine.     Caution:  For In Vitro diagnostic use only     Contents:  1 Test unit with disposable pipet     Storage:  Store at 2-8°C     PART NO: 01001       LOT NO:   EXP: Made for:   By: Ostex International, Inc.   Metrika, Inc.     2203 Airport Way S.       510 Oakmead Parkway     Seattle, WA 98134       Sunnyvale, CA 94086 (PN 90020 REV. D)     Circled items print Red.     Remaining text is 100% Black on white background.     Back of pouch is unprinted. 1 -------------------------------------------------------------------------------- ATTACHMENT 2     Copy for PN 5067 [Attatchment Graphic]      Circled items print PMS 485 Red, Remaining items print black. 1 -------------------------------------------------------------------------------- ATTACHMENT 3 ***** --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 1 -------------------------------------------------------------------------------- EXHIBIT D Electronic Parts     Metrika Part #     80037 *****     Or such other Metrika Part # or revision as mutually agreed by the parties --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 1 -------------------------------------------------------------------------------- EXHIBIT E Plastic Parts Metrika Part #     *****     Or such other Metrika Part #'s or revision's as mutually agreed by the parties. --------------------------------------------------------------------------------     ***** Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions. 1 -------------------------------------------------------------------------------- QUICKLINKS MANUFACTURING AND LICENSE AGREEMENT RECITALS AGREEMENT ARTICLE I—DEFINITIONS ARTICLE II—PHASE I ARTICLE III—PHASE II ARTICLE IV—TECHNOLOGY TRANSFERS AND LICENSES ARTICLE VI—PURCHASE OF CAPITAL EQUIPMENT ARTICLE VII—REPRESENTATIONS AND WARRANTIES OF OSTEX ARTICLE VIII—REPRESENTATIONS AND WARRANTIES OF METRIKA ARTICLE IX—DEFENSE OF THIRD-PARTY CLAIMS ARTICLE X—TERM AND TERMINATION ARTICLE XI—MISCELLANEOUS EXHIBIT A DEFINITIONS EXHIBIT B Specifications for the NTx/DRx Device EXHIBIT C Final Release Specification and Testing Criteria PURCHASE SPECIFICATION ATTACHMENT 1 Osteomark® NTx Point-of-Care Device Circled items print Red. ATTACHMENT 2 [Attatchment Graphic] ATTACHMENT 3 ***** EXHIBIT D Electronic Parts EXHIBIT E Plastic Parts

Exhibit 10.03 November 6, 2000 Manish Gupta 10200 Parkwood Drive, #2 Cupertino, CA 95014 Dear Manish,     On behalf of Zamba, I am both extremely pleased and excited to offer you an opportunity to join us as Chief Technology Officer, reporting to the President and Chief Executive Officer.     We would like to offer you an exempt, full time position, which includes: •Starting semi-monthly salary of $8,333.33 ($200,000 annualized). •You will be granted an option to purchase 450,000 shares of the company's common stock at a predetermined price. In accordance with the terms of our stock option plan, 25% of the initial grant will become vested at your one year anniversary date and 6.25% quarterly thereafter, and will be fully vested at the end of four years. •Participation in a bonus plan to be determined by the Compensation Committee of the Board of Directors. •The Board of Directors or the Compensation Committee will work with you to create a written employment agreement within thirty (30) days of your start date that will include provisions to (i) accelerate the vesting of all of your options upon a change of control and a second trigger, and (ii) six (6) months salary (or until you find a new job, if sooner) if you are terminated other than for cause. •Zamba will cover any liability and associated costs you may have with KPMG related to the creation and development of the team and concepts (company) that ended up integrating to Zamba. •Coverage under our existing Directors and Officers insurance policies.     This offer is contingent upon your executing the attached employment agreement before commencing your employment, the successful completion of your reference and background investigation, and compliance with the Immigration Reform Control Act of 1986 (IRCA). Also, if you are not a U.S. citizen, U.S. permanent resident, nor been granted asylee or refugee status, this offer is contingent upon your ability to meet Zamba's Immigration policy guidelines and INS approval of your right to reside and work in the United States (i.e., approval of appropriate work visa or status for Zamba, Minneapolis). Should you qualify, Zamba will pay the reasonable and usual costs to obtain the appropriate nonimmigrant classification.     This offer will remain valid for seven days from the date of this letter unless we notify you otherwise. You should understand that this offer does not constitute a contract of employment for any specified period of time but will create an "employment at will" relationship.     Please sign this letter, indicating acceptance of this offer and your anticipated start date. Return the signed copy in the enclosed envelope and keep a copy for your records. Please review and complete the enclosed forms. Bring these forms and the appropriate I-9 documentation with you on your first day of work. At orientation we will cover your benefits, review your forms and answer any questions you may have. --------------------------------------------------------------------------------     Manish, we believe that you will find Zamba a truly exciting and fulfilling place to work. We look forward to your joining us and contributing to our success. Sincerely, /s/ Paul Edelhertz Paul Edelhertz Chairman of the Board of Directors I accept this offer:       /s/ Manish Gupta   11/6/00 NAME   Date Anticipated Start Date: 11/15/00 ENCL: •Benefits Summary •Proprietary Information and Invention Agreement/Confidential Disclosure Agreement/Terms of Employment •I-9 and W-4 Forms •Export Control Document •MN Child Support (MN residents only) •Background Release Form Indemnification Agreement --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document FORM OF MICROVISION, INC. a Washington corporation COMMON STOCK PURCHASE WARRANT Certificate No.           THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS. THESE WARRANTS ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 UNDER THE ACT AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.     This is to certify that, for value received and subject to the terms and conditions set forth below, Microvision, Inc., a Washington corporation (the "Company"), promises and agrees to sell and issue to consultant, or registered assigns, up to a total of 100,000 fully paid and nonassessable shares of Common Stock, at any time up to and until 5:00 p.m., Seattle, Washington time, on August 10, 2010, upon surrender, at the principal office of the Company referred to below, of this Warrant Certificate, a duly completed and executed Notice of Exercise in the form attached hereto, and payment therefor in lawful money of the United States at the Exercise Price as set forth in Section 1.3 below.     This Warrant Certificate is issued subject to the following terms and conditions:     1.  Definitions of Certain Terms.  Except as may be otherwise clearly required by the context, the following terms have the following meanings:     1.1 "Common Stock" means the common stock, no par value, of the Company.     1.2 "Company" means Microvision, Inc., a Washington corporation.     1.3 "Exercise Price" means $34.00 per share or such other price at which a Warrantholder may purchase one share of Common Stock or other Securities upon exercise of Warrants, as determined from time to time pursuant to the provisions hereof.     1.4 "Securities" means the securities issued or issuable upon exercise of the Warrants or securities issued or issuable upon exercise, exchange, or conversion of such securities.     1.5 "Warrant Certificate" means a certificate evidencing Warrants.     1.6 "Warrantholder" means a record holder of Warrants or Securities.     1.7 "Warrants" means the warrants evidenced by this warrant certificate or any similar certificate issued in replacement of any such certificate.     2.  Exercise of Warrants.  All or any part of the Warrants evidenced by this Certificate may be exercised by surrendering this Warrant Certificate and the Notice of Exercise attached hereto, duly completed and executed by the Warrantholder or by his or her duly authorized attorney-in-fact, at the office of the Company, 19910 North Creek Parkway, Bothell, WA 98011-3008, or at such other office or agency as the Company may designate, accompanied by payment in U.S. funds in full, in cash or certified or cashier's check, of the Exercise Price payable with respect to the Warrants being exercised. Subject to the terms and conditions of this Warrant Certificate, the Company will, within five business days after said surrender and payment and completion of such Notice of Exercise by the Warrantholder, make arrangements with its stock transfer agent to send to the Warrantholder at the address specified in the Notice of Exercise a certificate or certificates evidencing the Securities 1 -------------------------------------------------------------------------------- subscribed for. If fewer than all the Warrants evidenced by this Warrant Certificate are exercised, the Company will, upon such exercise, execute and deliver to the Warrantholder a new Warrant Certificate (dated the date hereof), in form and tenor similar to this Warrant Certificate, evidencing the Warrants not exercised. The Securities to be issued on exercise of the Warrants will be deemed to have been issued, and any person exercising the Warrants will be deemed to have become a holder of record of those Securities, as of the close of business on the date of its surrender for exercise as provided above. The securities laws of the United States may require that a registration statement registering the Securities to be issued on exercise of the Warrants be effective, or that an exemption from registration be available, before the Company may issue the Securities to the Warrantholder. The Company will use its best efforts to take such actions under the Act and the laws of various states and other jurisdictions as may be required to cause the issuance of Securities upon exercise of Warrants to comply with applicable securities laws. However, the Company will not be required to honor the exercise of Warrants if, in the opinion of the Company's Board of Directors, upon advice of counsel, the issuance of Securities upon such exercise would be unlawful. In such event, the Company may elect to redeem Warrants submitted for exercise for a price equal to the difference between (i) the closing price of the Securities on the date of submission of the Notice of Exercise of Warrants, as reported by the principal exchange or market upon or through which the Securities are then principally traded or quoted (the "Exchange") and (ii) the Exercise Price of the Securities subscribed for in the Notice of Exercise of Warrants submitted to the Company. In the event of such redemption, the Company will pay to the Warrantholder the above-described redemption price within ten business days after the Warrantholder's submission of the Notice of Exercise of Warrants.     3.  Adjustments in Certain Events.  The number, class and price of Securities for which the Warrants may be exercised are subject to adjustment from time to time upon the happening of certain events as follows:     3.1 If the outstanding shares of Common Stock are divided into a greater number of shares or a dividend in stock is paid on the Common Stock, the number of shares of Common Stock for which the Warrants are then exercisable will be proportionately increased and the Exercise Price will be proportionately reduced. Conversely, if the outstanding shares of Common Stock are combined into a smaller number of shares of Common Stock, the number of shares of Common Stock for which the Warrants are then exercisable will be proportionately reduced and the Exercise Price will be proportionately increased. The increases and reductions provided for in this Section 3.1 will be made with the intent and, as nearly as practicable, the effect that neither the percentage of the total equity of the Company obtainable on exercise of the Warrants nor the price payable for such percentage upon such exercise will be affected by any event described in this Section 3.1.     3.2 In case of any change in the Common Stock through merger, consolidation, reclassification, reorganization, partial or complete liquidation, or other change in the capital structure of the Company, then, as a condition of the change in the capital structure of the Company, lawful and adequate provision will be made so that the holder of this Warrant Certificate will have the right thereafter to receive upon the exercise of the Warrants the kind and amount of shares of stock or other securities or property to which he would have been entitled if, immediately prior to such merger, consolidation, reclassification, reorganization, recapitalization, or other change in the capital structure, the Warrantholder had held the number of shares of Common Stock obtainable upon the exercise of the Warrants. In such event, the Exercise Price will be proportionately adjusted. In any such case, appropriate adjustment will be made in the application of the provisions set forth herein with respect to the rights and interest thereafter of the Warrantholder, to the end that the provisions set forth herein will thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the exercise of the Warrants. The Company will not permit any change in its 2 -------------------------------------------------------------------------------- capital structure to occur unless the issuer of the shares of stock or other securities to be received by the holder of this Warrant Certificate, if not the Company, agrees to be bound by and comply with the provisions of this Warrant Certificate.     3.3 When any adjustment is required to be made in the number of shares of Common Stock, other securities or the property purchasable upon exercise of the Warrants, the Company will promptly determine the new number of such shares or other securities or property purchasable upon exercise of the Warrants and (i) prepare and retain on file a statement describing in reasonable detail the method used in arriving at the new number of such shares or other securities or property purchasable upon exercise of the Warrants and (ii) cause a copy of such statement to be mailed to the Warrantholder within 30 days after the date when the event giving rise to the adjustment occurred.     3.4 No fractional shares of Common Stock or other Securities will be issued in connection with the adjustment of any Warrants, but the Company will pay, in lieu of fractional shares, a cash payment therefor on the basis of the closing price of the Securities as reported by the Exchange on the day immediately prior to the effective date of the adjustment.     4.  Reservation of Securities.  The Company agrees that the number of shares of Common Stock and other Securities sufficient to provide for the exercise of the Warrants upon the basis set forth above will at all times during the term of the Warrants be reserved for exercise.     5.  Validity of Securities; Transfer Taxes.  All Securities delivered upon the exercise of the Warrants in accordance with their terms will be duly and validly issued, fully-paid and non-assessable, and will be free and clear of any lien, pledge, security interest, claim, charges, encumbrance or other restriction or limitation (except with respect to restrictions on transfer under applicable securities laws) imposed on them by the Company. The Company will pay all documentary and transfer taxes, if any, in respect of the original issuance thereof upon exercise of the Warrants.     6.  Legending of Securities.  All certificates representing Securities delivered upon the exercise of the Warrants shall be impressed with a legend indicating that the Securities are not registered under the Act and reciting that the transfer thereof is restricted, such legend to be in a form acceptable to counsel for the Company.     7.  Transfer Prohibited.  The Warrants and all rights hereunder may not be transferred or assigned without the prior written approval of the Company; provided that, such approval shall not be unreasonably withheld or delayed with respect to a proposed transfer or assignment of Warrants exercisable for not less than 10,000 Securities that are not subject to a Lock-Up, as such term is defined in that certain Consulting Agreement, dated as of August 10, 2000, between       and the Company; and provided further that the Warrants may be transferred or assigned to the immediate family members (including grandchildren, nieces, and nephews) of the Warrantholder or to trusts or other entities for the sole benefit thereof without the Company's prior written approval, provided that the Warrantholder complies with applicable securities laws in effecting such a disposition. Except as provided for in the immediately preceding sentence, any transfer effected without the prior written approval of the Company shall be void.     8.  No Rights as a Shareholder.  Except as otherwise provided herein, the Warrantholder will not, by virtue of ownership of Warrants, be entitled to any rights as a shareholder of the Company.     9.  Ownership.  The Company, and its Transfer Agent, and any agent of the Company or its Transfer Agent may treat the bearer of this Warrant Certificate as the absolute owner of the Warrants evidenced hereby for the purpose of exercising the Warrants and for all other purposes whatsoever, and notwithstanding any notice of ownership or writing thereon, or any notice of previous loss or theft or other interest therein. 3 --------------------------------------------------------------------------------     10.  Replacement of Warrant Certificate.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant Certificate and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant Certificate, the Company at its expense shall execute and deliver, in lieu of this Warrant Certificate, a new Warrant Certificate of like tenor and amount.     11.  Notice.  Any notices required or permitted to be given hereunder may be given in writing personally or by mail or other comparable delivery service at the address determined below or at such other address as the party receiving notice has theretofore furnished to the notifying party: If to the Company: 19910 North Creek Parkway P.O. Box 3008 Bothell, WA 98011-3008 Attn: Secretary If to the Warrantholder: at the address furnished by the Warrantholder in such Warrantholder's Notice of Exercise.     Any notice given by mail will be deemed effectively given 48 hours after mailing when deposited in the United States mail, registered or certified mail, return receipt requested, postage prepaid and addressed as specified above. Any notice given by courier or other comparable form of delivery service will be deemed effectively given at the date and time recorded for such delivery in the records of the delivery service.     12.  Applicable Law.  This Certificate will be governed by and construed in accordance with the laws of the State of Washington, without giving effect to the conflict of laws thereof. Dated as of                               MICROVISION, INC.                 By:                  -------------------------------------------------------------------------------- Richard A. Raisig Chief Financial Officer                               4 -------------------------------------------------------------------------------- Microvision, Inc. Common Stock Purchase Warrant NOTICE OF EXERCISE To: Microvision, Inc.     (1) The undersigned hereby irrevocably exercises the right to purchase      shares of the common stock of Microvision, Inc., a Washington corporation, pursuant to Section 2 of the attached Warrant, and tenders herewith full payment of the exercise price for such shares.     (2) In exercising this Warrant, the undersigned hereby confirms and acknowledges that the shares of common stock to be issued upon exercise hereof are being acquired solely for the account of the undersigned and not as a nominee for any other party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such shares of common stock acquired upon exercise of the attached Warrant except under circumstances that will not result in a violation of the Securities Act of 1933, as amended, or any applicable state securities laws.     (3) Please issue a certificate or certificates representing said shares of common stock in the name of the undersigned or in such other name(s) as is(are) specified below:        -------------------------------------------------------------------------------- (Name)     (4) Please issue a new Warrant representing any unexercised portion of the attached Warrant in the name of the undersigned or in such other name(s) as is(are) specified below:              -------------------------------------------------------------------------------- (Name)        -------------------------------------------------------------------------------- (Date)              -------------------------------------------------------------------------------- (Signature of Holder)                    -------------------------------------------------------------------------------- (Address)                    -------------------------------------------------------------------------------- (Address)                   5 -------------------------------------------------------------------------------- QUICKLINKS COMMON STOCK PURCHASE WARRANT

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10(d) MANAGEMENT AGREEMENT     AGREEMENT made as of this 1st day of September, 1996 by and between Minntech Corporation, a Minnesota corporation, with its principal executive office at Plymouth, Minnesota ("Company") and Barbara A. Wrigley residing at 17101 Sandy Lane, Minnetonka, Minnesota 55345 (the "Executive").     WHEREAS, Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of Company and its shareholders; and     WHEREAS, the Executive is expected to continue to make a significant contribution to the profitability, growth and financial strength of Company; and     WHEREAS, Company, as a publicly held corporation, recognizes that the possibility of a Change in Control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of the Executive in the performance of the Executive's duties to the detriment of Company and its shareholders; and     WHEREAS, the Executive is willing to continue to be an employee of Company upon the understanding that Company will provide income security if the Executive's employment is terminated under certain terms and conditions; and     WHEREAS, it is in the best interests of Company and its shareholders to reinforce and encourage the continued attention and dedication of management personnel, including the Executive, to their assigned duties without distraction and to increase the likelihood of the continued availability to Company of the Executive in the event of a Change in Control.     THEREFORE, in consideration of the foregoing and other respective covenants and agreements of the parties herein contained, the parties hereto agree as follows:     1.  Term of Agreement.  This Agreement shall commence on the date hereof and shall continue in effect until such time as Company notifies the Executive or the Executive notifies Company of termination of this Agreement; provided, however, that in no event may this Agreement be terminated prior to two years from the date hereof, and notice of termination on the second or any subsequent anniversary date hereof must be given by Company in writing mailed to the Executive at his or her last known address within 60 days prior to such anniversary date or by the Executive by notice in writing mailed to Company at the principal executive office of Company within 60 days prior to such anniversary date. If no such notice is given, then the term of this Agreement shall be extended for additional periods of one year. Notwithstanding the preceding sentence, if a Change in Control occurs during the term of this Agreement (including any extension hereof), this Agreement shall continue in effect for a period of 36 months from the date of the occurrence of a Change in Control. Except as provided in Section 2(b) or Section 3(e) of this Agreement, nothing stated herein shall limit the right of the Executive or Company to terminate the employment of the Executive with Company at any time prior to the expiration of the term of this Agreement, with or without Cause (as defined in Section 3(b) of this Agreement) and for any reason whatsoever, subject to the right of the Executive to receive any payment and other benefits that may be due pursuant to the terms and conditions of Section 4 of this Agreement.     2.  Change in Control.  No amounts shall be payable hereunder unless a Change in Control, as set forth below, shall occur during the term of this Agreement.     (a) For purposes of this Agreement, a "Change in Control" of Company shall be deemed to occur if any of the following occur:      (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, or any successor statute thereto (the "Exchange Act")) acquires or becomes a "beneficial owner" (as defined in Rule 13d-3 or any successor rule under the Exchange Act), directly or indirectly, of securities of Company representing 30% or -------------------------------------------------------------------------------- more of the combined voting power of Company's then outstanding securities entitled to vote generally in the election of directors ("Voting Securities"), provided, however, that the following shall not constitute a Change in Control pursuant to this Section 2(a)(i):     (A) any acquisition or beneficial ownership by Company or a subsidiary of Company;     (B) any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by Company or one or more of its subsidiaries;     (C) any acquisition or beneficial ownership by any corporation with respect to which, immediately following such acquisition, more than 70% of both the combined voting power of Company's then outstanding Voting Securities and the common stock of Company is then beneficially owned, directly or indirectly, by all or substantially all of the persons who beneficially owned Voting Securities and common stock of Company immediately prior to such acquisition in substantially the same proportions as their ownership of such Voting Securities and common stock, as the case may be, immediately prior to such acquisition;     (ii) A majority of the members of the Board of Directors of Company shall not be Continuing Directors. For purposes of this subsection 2(a)(ii), "Continuing Directors" shall mean: (A) individuals who, on the date hereof, are directors of Company, (B) individuals elected as directors of Company subsequent to the date hereof for whose election proxies shall have been solicited by the Board of Directors of Company or (C) any individual elected or appointed by the Board of Directors of Company to fill vacancies on the Board of Directors of Company caused by death or resignation (but not by removal) or to fill newly-created directorships;     (iii) Approval by the shareholders of Company of a reorganization, merger or consolidation of Company (other than a merger or consolidation with a subsidiary of Company) or a statutory exchange of outstanding Voting Securities of Company, unless immediately following such reorganization, merger, consolidation or exchange, all or substantially all of the persons who were the beneficial owners, respectively, of Voting Securities and common stock of Company immediately prior to such reorganization, merger, consolidation or exchange beneficially own, directly or indirectly, more than 70% of, respectively, the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors and the then outstanding shares of common stock, as the case may be, of the corporation resulting from such reorganization, merger, consolidation or exchange in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, consolidation or exchange, of the Voting Securities and common stock of Company, as the case may be;     (iv) Approval by the shareholders of Company of (x) a complete liquidation or dissolution of Company or (y) the sale or other disposition of all or substantially all of the assets of Company (in one or a series of transactions), other than to a corporation with respect to which, immediately following such sale or other disposition, more than 70% of, respectively, the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and the then outstanding shares of common stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the persons who were the beneficial owners, respectively, of the Voting Securities and common stock of Company immediately prior to such sale or other disposition in substantially the same proportions as their ownership, immediately prior to such sale or other disposition, of the Voting Securities and common stock of Company, as the case may be; or 2 --------------------------------------------------------------------------------     (v) Company enters into a letter of intent, an agreement in principle or a definitive agreement relating to a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) above that ultimately results in such a Change in Control or a tender or exchange offer or proxy contest is commenced which ultimately results in a Change in Control described in Section 2(a)(i) or 2(a)(ii) hereof. Notwithstanding the above, a Change in Control shall not be deemed to occur with respect to the Executive if (x) the acquisition or beneficial ownership of the 30% or greater interest referred to in Section 2(a)(i) is by the Executive or by a group, acting in concert, that includes the Executive or (y) if a majority of the then combined voting power of the then outstanding voting securities (or voting equity interests) of the surviving corporation or of any corporation (or other entity) acquiring all or substantially all of the assets of Company shall, immediately after a reorganization, merger, consolidation, statutory share exchange or disposition of assets referred to in Section 2(a)(iii) or 2(a)(iv), be beneficially owned, directly or indirectly, by the Executive or by a group, acting in concert, that includes the Executive.     (b) The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Change in Control of Company described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv), occurring after the date hereof, the Executive, if employed by Company immediately prior to such a Change in Control, will not voluntarily terminate employment with Company except for Good Reason for a period of 90 days after the occurrence of such a Change in Control of Company.     (c) For purposes of this Agreement, a "subsidiary" of Company shall mean any entity of which securities or other ownership interests having general voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by Company.     3.  Termination Following Change in Control.  If a Change in Control shall occur during the term of this Agreement, the Executive shall be entitled to the payments and other benefits provided in subsection 4(d) in the event of the termination of the Executive's employment with Company unless the Executive's termination is (A) because of the Executive's death, (B) by Company for Cause or Disability, or (C) by the Executive other than for Good Reason.     (a)  Disability.  If, as a result of incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive's duties with Company for six consecutive months, and within 30 days after written Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive's duties, Company may terminate the Executive's employment for "Disability". Any question as to the existence of the Executive's Disability upon which the Executive and Company cannot agree shall be determined by a qualified independent physician selected by the Executive (or, if the Executive is unable to make such selection, it shall be made by any adult member of the Executive's immediate family), and approved by Company. The determination of such physician made in writing to Company and to the Executive shall be final and conclusive for all purposes of this Agreement.     (b)  Cause.  Termination of the Executive's employment for "Cause" shall mean termination upon the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct.     (c)  Good Reason.  Termination by the Executive for "Good Reason" shall mean termination by the Executive if, without the Executive's express written consent, any of the following shall occur:      (i) the assignment to the Executive of any duties inconsistent with the Executive's status or position with Company, or a substantial alteration in the nature or status of the Executive's responsibilities from those in effect immediately prior to the Change in Control; 3 --------------------------------------------------------------------------------     (ii) a reduction by Company in the Executive's annual base salary in effect immediately prior to a Change in Control;     (iii) the relocation of Company's principal executive offices to a location more than fifty miles from Plymouth, Minnesota or Company requiring the Executive to be based anywhere other than Company's principal executive office (or if the Executive is based at a location other than Company's principal executive office immediately prior to the first Change in Control, anywhere other than such location) except for required travel on Company's business to an extent substantially consistent with the Executive's prior business travel obligations;     (iv) the failure by Company to continue to provide the Executive with benefits at least as favorable to those enjoyed by the Executive under any of Company's pension, life insurance, medical, health and accident, disability, deferred compensation, incentive awards, employee stock options, or savings plans in which the Executive was participating at the time of the Change in Control, the taking of any action by Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed at the time of the Change in Control, or the failure by Company to provide the Executive with the number of paid vacation days to which the Executive is entitled at the time of the Change in Control, provided, however, that Company may amend any such plan or programs as long as such amendments do not reduce any benefits to which the Executive would be entitled upon termination;     (v) a termination pursuant to Section 3(d) of this Agreement;     (vi) the failure of Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 6; or    (vii) any purported termination of the Executive's employment which is not made pursuant to a Notice of Termination satisfying the requirements of subsection (e) below; for purposes of this Agreement, no such purported termination shall be effective.     (d)  Voluntary Termination Deemed Good Reason.  Notwithstanding anything herein to the contrary, during the period commencing on the 91st day following a Change in Control under Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) of this Agreement and ending on the 180th day following such a Change in Control, the Executive may voluntarily terminate his or her employment for any reason, and such termination shall be deemed "Good Reason" for all purposes of this Agreement. In the event of such voluntary termination pursuant to this subsection 3(d)), the multiple applied to the Severance Payment (as defined in Section 4(d)), if any, payable to the Executive pursuant to subsection 4(d)(ii) below shall be reduced by 50%.     (e)  Notice of Termination.  Any purported termination of the Executive's employment by Company or by the Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth the facts and circumstances claimed to provide a basis for termination of the Executive's employment.     (f)  Date of Termination.  For purposes of this Agreement, "Date of Termination" shall mean:      (i) if the Executive's employment is terminated for Disability, 30 days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive's duties during such 30 day period); and     (ii) if the Executive's employment is terminated pursuant to subsections (b), (c) or (d) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to subsection (b) above, shall not be 4 -------------------------------------------------------------------------------- less than 10 days, and, in the case of a termination pursuant to subsection (c) or (d) above, shall not be less than 10 nor more than 30 days, respectively, from the date such Notice of Termination is given).     (g)  Dispute of Termination.  If, within 10 days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or the time for appeal therefrom having expired and no appeal having been perfected); provided, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, Company shall continue to pay the Executive full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this subsection. Amounts paid under this subsection are in addition to all other amounts due under this Agreement and, except as provided in Section 4(d)(v), shall not be offset against or reduce any other amounts under this Agreement.     4.  Compensation Upon Termination or During Disability.  Upon termination of the Executive's employment (or, with respect to Section 4(a), during a period of Disability) following a Change in Control, as defined in Section 2(a), of Company or if there shall be a termination by Company of the Executive's employment prior to a Change in Control, or the Executive shall terminate employment with Company for Good Reason prior to a Change in Control (for which purpose the references in Section 3(c) to changes from circumstances existing immediately prior to or at the time of a Change in Control that constitute Good Reason for termination shall instead be deemed to be references to circumstances existing immediately prior to or at the time that the Change in Control is first anticipated), and the Executive reasonably demonstrates that such termination by Company or event constituting Good Reason for termination by the Executive (x) was requested by a third party that had previously taken other steps reasonably calculated to result in a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) and ultimately resulting in such a Change in Control following termination of the Executive's employment or (y) otherwise arose in connection with or in anticipation of a Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv) that ultimately occurs following termination of the Executive's employment, the Executive shall be entitled to the following benefits:     (a) Except as provided in Section 4(b), during any period that the Executive fails to perform full-time duties with Company as a result of Disability, Company shall pay the Executive the base salary of the Executive at the rate in effect at the commencement of any such period, until such time as the Executive is determined to be eligible for long term disability benefits in accordance with Company's insurance programs then in effect.     (b) If the Executive's employment shall be terminated by Company for Cause or Disability or by the Executive, following a Change in Control, other than for Good Reason, Company shall pay to the Executive his or her full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and Company shall have no further obligation to the Executive under this Agreement.     (c) If the Executive's employment shall be terminated by Company for Cause or Disability, or is terminated by reason of death, Company shall immediately cause to be commenced payment to the Executive (or the Executive's designated beneficiaries or estate, if no beneficiary is designated) 5 -------------------------------------------------------------------------------- of any and all benefits to which the Executive is entitled, if any, under Company's insurance programs then in effect.     (d) Except for termination of the Executive's employment with Company by reason of death, if the Executive's employment with Company shall be terminated (A) by Company other than for Cause or Disability or (B) by the Executive for Good Reason, then the Executive shall be entitled to the benefits provided below:      (i) Company shall pay the Executive the Executive's full base salary through the Date of Termination at the rate in effect at the time the Notice of Termination is given.     (ii) In lieu of any further salary payments for periods subsequent to the Date of Termination, Company shall pay as a severance payment (the "Severance Payment") an amount equal to (A) three (3) times (subject to reduction pursuant to Section 3(d) in the event of a termination of employment by the Executive pursuant to Section 3(d)) the average of the annual compensation which was paid to the Executive by Company (or any corporation affiliated with Company within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended (the "Code")) and includible in the Executive's gross income for federal income tax purposes for the shorter of the period consisting of (1) the five most recently completed taxable years of the Executive ending before the earlier of the first Change in Control (for which purpose the first Change in Control shall not be deemed to be a Change in Control pursuant to Section 2(a)(v) unless the Executive's termination of employment with Company occurs prior to the first Change in Control pursuant to Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv)) or (2) that portion of such five-year period during which the Executive was employed by Company, less (B) $1.00. Such average shall be determined in accordance with temporary or final regulations promulgated under Section 280G(d) of the Code or any successor provision thereto. The Severance Payment shall be made in full within 60 days after termination of employment. Such Severance Payment shall be reduced by any severance pay that the Executive receives from Company, any subsidiary of Company or any successor thereof under any other policy or agreement of Company in the event of involuntary termination of the Executive's employment.     (iii) For a 36 month period after the Date of Termination, Company shall arrange to provide the Executive with life, disability, accident and health insurance benefits substantially similar to those which the Executive is receiving or entitled to receive immediately prior to the Notice of Termination. Benefits otherwise receivable by the Executive pursuant to this paragraph (iii) shall be reduced to the extent comparable benefits are actually received by the Executive from another employer or other third party during such 36 month period, and any such benefits actually received by the Executive shall be reported to Company.     (iv) Company shall also pay to the Executive all legal fees and expenses incurred by the Executive as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).     (v) Notwithstanding any provision to the contrary contained herein except the last sentence of this Section 4(d)(v), if the lump sum cash payment due and the other benefits to which the Executive shall become entitled under this Section 4 hereof, either alone or together with other payments in the nature of compensation to the Executive which are contingent on a change in the ownership or effective control of Company or in the ownership of a substantial portion of the assets of Company or otherwise, would constitute a "parachute payment" as defined in Section 280G of the Code or any successor provision thereto, such lump sum payment and/or such other benefits and payments shall be reduced (but not below zero) to the largest aggregate amount as will result in no portion thereof being subject to the 6 -------------------------------------------------------------------------------- excise tax imposed under Section 4999 of the Code (or any successor provision thereto) or being non-deductible to Company for federal income tax purposes pursuant to Section 280G of the Code (or any successor provision thereto). The Executive in good faith shall determine the amount of any reduction to be made pursuant to this Section 4(d)(v) and shall select from among the foregoing benefits and payments those which shall be reduced. No modification of, or successor provision to, Section 280G or Section 4999 subsequent to the date of this Agreement shall, however, reduce the benefits to which the Executive would be entitled under this Agreement in the absence of this Section 4(d)(v) to a greater extent than they would have been reduced if Section 280G and Section 4999 had not been modified or superseded subsequent to the date of this Agreement, notwithstanding anything to the contrary provided in the first sentence of this Section 4(d)(v).     (e) The Executive shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by the Executive as the result of employment by another employer or by retirement benefits after the Date of Termination, or otherwise except as specifically provided in this Section 4.     (f)  In addition to all other amounts payable to the Executive under this Section 4, the Executive shall be entitled to receive all benefits payable to the Executive under any other plan or agreement relating to retirement benefits except as specifically provided in this Section 4.     (g) If Company fails to make any payment at the times and in the amounts specified herein, or with respect to any fringe benefits, fails to provide such benefit as specified herein, within 10 days from the date of written notice from the Executive to Company of such failure, Company shall be deemed to have waived any right to enforce any restriction on employment or non-competition provision contained in any agreement between Company and the Executive then in existence which limits the ability of the Executive to accept other employment and, thereafter, the Executive may work or consult for any person or business organization which is engaged in the design, development, assembly, manufacture, marketing or sale of any product which competes with any product of Company, or for any person or business organization which is in competition with Company, without liability to Company for such acts. A waiver of such restrictive covenant or non-competition provision shall not in any way restrict or limit the Executive's right to enforce the provisions of this Agreement, including any legal or equitable action to enforce any and all payments, rights or benefits under this Agreement, it being the intention of this subsection that such waiver shall be in addition to, not in substitution of, any other rights to which the Executive is entitled hereunder. Once waived, any such restrictive covenant or non-competition provision shall not thereafter be enforceable even though the Executive may later receive the payment, right or benefit which was the basis of the waiver of such restrictive covenant or non-competition provision.     5.  Funding of Payments.  In order to assure the performance of Company or its successor of its obligations under this Agreement, Company may deposit in trust an amount equal to the maximum payment that will be due the Executive under the terms hereof. Under a written trust instrument, the Trustee shall be instructed to pay to the Executive (or the Executive's legal representative, as the case may be) the amount to which the Executive shall be entitled under the terms hereof, and the balance, if any, of the trust not so paid or reserved for payment shall be repaid to Company. If Company deposits funds in trust, payment shall be made no later than the occurrence of the first Change in Control described in Section 2(a)(i), 2(a)(ii), 2(a)(iii) or 2(a)(iv). Company shall give notice of such a Change in Control to any such trustee upon any occurrence as defined herein. If and to the extent that the Executive becomes a beneficiary of any such funds deposited in trust, Company shall give prompt notice to the Executive, which shall include a copy of the trust instrument and amendments from time to time. The rights of the Executive under such trust instrument shall be enforceable against Company and any trustees named therein, as though the provisions of said trust were incorporated into this 7 -------------------------------------------------------------------------------- Agreement. If and to the extent there are not amounts in trust sufficient to pay the Executive under this Agreement, Company shall remain liable for any and all payments due to the Executive. In accordance with the terms of such trust, at all times during the term of this Agreement, the Executive shall have no rights, other than as an unsecured general creditor of Company, to any amounts held in trust and all trust assets shall be general assets of Company and subject to the claims of creditors of Company.     6.  Successors; Binding Agreement.       (a) Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place. Failure of Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from Company in the same amount and on the same terms as he would be entitled hereunder if he terminated his employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.     (b) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, successors, heirs, and designated beneficiaries. If the Executive should die while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's designated beneficiaries, or, if there is no such designated beneficiary, to the Executive's estate.     7.  Notice.  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage pre-paid, addressed to the last known residence address of the Executive or in the case of Company, to its principal executive office to the attention of each of the then directors of Company with a copy to its Secretary, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.     8.  Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties. No waiver by either party hereto at any time of any breach by the other party to this Agreement of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior to similar time. No legally binding or enforceable agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof that remain in effect have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Minnesota.     9.  Validity.  The invalidity or unenforceability or any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. MINNTECH CORPORATION   EXECUTIVE:   By       /s/ Louis C. Cosentino       /s/ Barbara A. Wrigley     --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     Its President   Barbara A. Wrigley 8 -------------------------------------------------------------------------------- QUICKLINKS MANAGEMENT AGREEMENT

Exhibit 10.02 October 18, 2000 Jeff McCall 2100 Welch #C120 Houston, Texas 77019 Dear Jeff,     On behalf of Zamba, I am both extremely pleased and excited to offer you an opportunity to join us as Executive Vice President of Internal Operations, reporting to the President and Chief Executive Officer.     We would like to offer you an exempt, full time position, which includes: •Starting semi-monthly salary of $9,375 ($225,000 annualized). •Signing bonus of $25,000. •You will be granted an option to purchase 450,000 shares of the company's common stock at a predetermined price. In accordance with the terms of our stock option plan, 25% of the initial grant will become vested at your one year anniversary date and 6.25% quarterly thereafter, and will be fully vested at the end of four years. •Participation in a bonus plan to be determined by the Compensation Committee of the Board of Directors. •The Board of Directors or the Compensation Committee will work with you to create a written employment agreement within thirty (30) days of your start date that will include provisions to (i) accelerate the vesting of all of your options upon a change of control and a second trigger, and (ii) six (6) months salary (or until you find a new job, if sooner) if you are terminated other than for cause. •Zamba will cover any liability and associated costs you may have with KPMG related to the creation and development of the team and concepts (company) that ended up integrating to Zamba. •Coverage under our existing Directors and Officers insurance policies.     This offer is contingent upon your executing the attached employment agreement before commencing your employment, the successful completion of your reference and background investigation, and compliance with the Immigration Reform Control Act of 1986 (IRCA). Also, if you are not a U.S. citizen, U.S. permanent resident, nor been granted asylee or refugee status, this offer is contingent upon your ability to meet Zamba's Immigration policy guidelines and INS approval of your right to reside and work in the United States (i.e., approval of appropriate work visa or status for Zamba, Minneapolis). Should you qualify, Zamba will pay the reasonable and usual costs to obtain the appropriate nonimmigrant classification.     This offer will remain valid for seven days from the date of this letter unless we notify you otherwise. You should understand that this offer does not constitute a contract of employment for any specified period of time but will create an "employment at will" relationship.     Please sign this letter, indicating acceptance of this offer and your anticipated start date. Return the signed copy in the enclosed envelope and keep a copy for your records. Please review and complete the enclosed forms. Bring these forms and the appropriate I-9 documentation with you on your first day of work. At orientation we will cover your benefits, review your forms and answer any questions you may have. --------------------------------------------------------------------------------     Jeff, we believe that you will find Zamba a truly exciting and fulfilling place to work. We look forward to your joining us and contributing to our success. Sincerely, /s/ Paul Edelhertz Paul Edelhertz Chairman of the Board of Directors I accept this offer:       /s/ Jeff McCall   10/18/00 NAME   Date Anticipated Start Date: 11/1/00 ENCL: •Benefits Summary •Proprietary Information and Invention Agreement/Confidential Disclosure Agreement/Terms of Employment •I-9 and W-4 Forms •Export Control Document •MN Child Support (MN residents only) •Background Release Form Indemnification Agreement --------------------------------------------------------------------------------

Exhibit 10.1 Amendment No. 1 to the CIGNA CORPORATION STOCK PLAN Section 3.3(f) of Article 3 is amended in its entirety to read as follows: (f)   Any outstanding option granted on or after July 26, 2000 and held by a Participant at Termination of Employment due to death, Disability, Early Retirement or Retirement shall become or remain exercisable in accordance with the terms and conditions established by the Committee at the time of grant.

PROMISSORY NOTE $2,000,000 October 19, 2000 FOR VALUE RECEIVED, the undersigned, Jerry Conrad ("Borrower"), hereby promises to pay to the order of Quentra Networks, Inc., a Delaware corporation with its principal offices at 1640 S. Sepulveda Blvd., Suite 222, Los Angeles, CA 90025 ("Payee"), the aggregate principal amount of Two Million Dollars ($2,000,000) (the "Principal Amount"), plus interest thereon to accrue commencing on the date hereof at an interest rate per annum equal to the prime rate as published in The Wall Street Journal as of the date hereof, which interest shall be payable at such time as the principal is due hereunder as set forth below, unless previously paid. This Promissory Note is made pursuant to and is the Promissory Note referenced in that certain Personal Services Agreement dated October __, 2000 between Borrower and Payee (the "Personal Services Agreement"), and is subject to the terms of the Personal Services Agreement. Concurrent with the execution and delivery of this Promissory Note, Marine Aircraft, a Nevada corporation, will be delivering a Pledge and Security Agreement (the "Pledge Agreement") under which Marine Aircraft will pledge shares of Common Stock (as defined in the Personal Services Agreement) as security for this Promissory Note. Principal and accrued interest shall be due and payable in three (3) equal annual installments on the second, third and fourth anniversaries of this Promissory Note. Notwithstanding the foregoing, under the terms of the Personal Services Agreement, if Borrower is terminated for "Cause" or if Borrower effects a "Voluntary Termination" of his employment with Payee (each, a "Termination Event"), the entire unpaid balance of principal and interest on this Promissory Note then outstanding shall be forthwith due and payable, and such Termination Event shall constitute a Default (as defined below) hereunder. Further notwithstanding the foregoing, as of each of the second, third and fourth anniversaries of this Promissory Note, and concurrent with the payments to become due hereunder as above set forth, Payee shall forgive the installment of principal and interest then due under this Promissory Note, provided there has been no Termination Event as of each such anniversary. In the event (a) Borrower is terminated under the Personal Services Agreement by the Company without "Cause," (b) Borrower terminates his employment under the Personal Services Agreement for "Good Cause," (c) Borrower dies prior to the fourth anniversary of the date of this Promissory Note, or (d) the closing sales price for the Common Stock on the primary market for such stock or the Nasdaq National Market, whichever is applicable, is equal to or less than $2 (two dollars) for twenty consecutive trading days, all of the outstanding principal and interest due on this Promissory Note shall be forgiven as of the date of such event. "Cause", "Good Cause", "Company", "Common Stock" and "Voluntary Termination" are used in this paragraph with the meanings as defined in the Personal Services Agreement. Borrower may prepay any amount due under this Promissory Note, in whole or in part, at any time without penalty. Payments received for application to this Promissory Note shall be applied first to the payment of accrued interest, if any, and the balance applied in reduction of the principal amount hereof. A default shall occur under this Promissory Note in the event that (i) Borrower shall fail to make any payment in respect of principal or interest on this Promissory Note as the same shall become due, whether by acceleration or otherwise, which failure shall continue for a period of 5 days; (ii) Borrower shall: (A) commence a voluntary case under Title 11 of the United States Code as from time to time in effect, or authorize the commencement of such a voluntary case; (B) have filed against him a petition commencing an involuntary case under said Title 11 which shall not have been dismissed within 30 days after the date on which such petition is filed; (C) seek relief as a debtor under any applicable law, other than said Title 11, of any jurisdiction relating to the liquidation or reorganization of debtors or to the modification or alteration of the rights of creditors, or consent to or acquiesce in such relief; (D) have entered against him an order by a court of competent jurisdiction (1) finding him to be bankrupt or insolvent, (2) ordering or approving his liquidation, reorganization or any modification or alteration of the rights of his creditors, or (3) assuming custody of, or appointing a receiver or other custodian for all or a substantial part of his property; or (E) make an assignment for the benefit of, or enter into a composition with, his creditors, or appoint or consent to the appointment of a receiver or other custodian for all or a substantial part of his property; (iii) a Termination Event shall have occurred, or (iv) a breach by Marine of the Pledge Agreement shall have occurred (collectively a "Default"). Upon Default, all of the unpaid balance of the principal and interest on this Promissory Note then outstanding shall be forthwith due and payable, and thereupon such unpaid balance or part thereof shall become so due and payable without presentation, protest or demand or notice of any kind, all of which are hereby expressly waived, and the Payee may proceed to enforce payment of such balance or part thereof in such manner as the Payee may elect. Further upon Default, the balance of principal and interest due under this Promissory Note shall bear interest at a rate equal to the lesser of (i) eighteen (18%) percent or (ii) the highest rate allowed by applicable law from the date of such Default until the date that Borrower makes full payment hereunder. Payee shall be entitled to collect all reasonable costs and expenses of collection of amounts due under this Promissory Note. In the event this Promissory Note is placed in the hands of any attorney for collection or is collected through any legal proceedings, Borrower promises to pay (in addition to costs and disbursements otherwise allowed), to the extent permitted by law, reasonable attorneys' fees and legal costs (whether or not suit is commenced and whether or not incurred in connection with appeal of a lower court judgment or order or in collecting any judgment entered therein). This obligation shall survive payment of this Promissory Note. Any notice or other communication required or permitted under this Promissory Note shall be in writing and shall be deemed to have been duly given if delivered by hand, overnight delivery, or mailed, postage prepaid, by certified or registered mail, return receipt requested, and addressed to Borrower at his address given below and to Payee at its address given above. Borrower and Payee shall be obligated to notify the other party of any change in address. Notice of change of address shall be effective only when made in accordance with this paragraph. BORROWER HEREBY CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF CALIFORNIA. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS PROMISSORY NOTE, OR THE TRANSACTIONS CONTEMPLATED THEREBY. The rights or remedies of Payee as provided in this Promissory Note, as well as any other remedy provided at law or in equity, shall be cumulative and concurrent and may be pursued singly, successively or together against Borrower. Borrower, for itself and its successors and assigns, hereby: (a) waives presentment, demand, protest, notice of protest, notice of dishonor and all other notices and demands whatever; and (b) consents to extensions of time for payment, and acceptance of late or partial payments before, at or after maturity. No failure on the part of the Payee to exercise any right or remedy under this Promissory Note shall constitute a waiver of such right or remedy, and no waiver of any past default shall constitute waiver of any future default or of any other default. No indulgence granted from time to time, shall be construed to be a waiver of the right to insist upon prompt payment thereafter retroactively or prospectively, or shall be deemed to be a novation of this Promissory Note or as a reinstatement of the debt evidenced hereby or as a waiver of any other right, or be construed so as to preclude the exercise of any right that the Payee may have, whether by the laws of the jurisdiction governing this Promissory Note, by agreement, or otherwise; and the Borrower expressly waives the benefit of any statute or rule of law or equity which would produce a result contrary to or in conflict with the foregoing. The acceptance by the Payee of any payment that is in an amount less than the amount that is due shall not constitute an accord and satisfaction. If any provision of this Promissory Note (or any part of any provision) is held by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Promissory Note; but this Promissory Note shall be construed as if such invalid, illegal or unenforceable provision (or part thereof) had not been contained in this Promissory Note, but only to the extent it is invalid, illegal or unenforceable. Time is of the essence of this Promissory Note and of each and every obligation of the Borrower hereunder. This Promissory Note may not be amended orally, but only by an amendment in writing signed by Borrower and Payee. THIS PROMISSORY NOTE MAY BE ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED BY PAYEE WITHOUT THE CONSENT OF BORROWER. Reference in this Promissory Note to "Payee" shall mean the original Payee hereunder so long as such Payee shall be holder of this Promissory Note and thereafter shall mean any assignee of Payee or subsequent holder of this Promissory Note. This Promissory Note shall be binding upon Borrower and its successors and assigns and shall inure to the benefit of Payee. This Promissory Note shall be governed in all respects in accordance with the laws of the State of California. BORROWER: /s/ Jerry Conrad -------------------------- Jerry Conrad, Individually Borrower's Address: ------------------------ ------------------------

EXHIBIT 10.2 EMPLOYMENT AGREEMENT   THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between CONTINENTAL AIRLINES, INC., a Delaware corporation ("Company"), and GREGORY D. BRENNEMAN ("Executive"), and is dated and effective as of July 25, 2000 (the "Effective Date"). W I T N E S S E T H: WHEREAS, Company and Executive were parties to that certain Amended and Restated Employment Agreement dated as of November 15, 1995, as amended by Amendment to Employment Agreement dated as of April 19, 1996 and Amendment to Employment Agreement dated as of September 30, 1996 (as so amended, the AOld Agreement@); and WHEREAS , Air Partners, L.P., its partners and certain affiliates entered into an Investment Agreement dated as of January 25, 1998, as amended, with Northwest Airlines Corporation and its affiliate (the AInvestment Agreement@), which investment agreement provided for the acquisition by an affiliate of Northwest Airlines Corporation of beneficial ownership of the Class A common stock and warrants held by Air Partners, L.P.; and WHEREAS , the acquisition by an affiliate of Northwest Airlines Corporation of beneficial ownership of the Class A common stock held by Air Partners, L.P. contemplated by the Investment Agreement (the AAcquisition@) on November 20, 1998 constituted a Change in Control for purposes of the Company=s 1994 Incentive Equity Plan, as amended, the Company=s 1997 Stock Incentive Plan, as amended, the Company=s then existing Executive Bonus Program and the Old Agreement; and WHEREAS, Company and Executive executed that certain Amended and Restated Employment Agreement dated as of November 20, 1998 to amend, restate and supersede the Original Agreement in its entirety, as provided for therein, and such Amended and Restated Employment Agreement dated as of November 20, 1998 was amended by Amendment to Employment Agreement dated as of May 19, 1999 and Amendment to Employment Agreement dated as of September 16, 1999 (as so amended, the "Existing Agreement"); and WHEREAS , the Human Resources Committee of the Board of Directors of Company ("HR Committee") has deemed it advisable and in the best interests of Company and its stockholders to assure management continuity for Company and, consistent therewith, has authorized the execution, delivery and performance by Company of this Agreement; WHEREAS, in connection therewith, the parties desire to enter into this Agreement to replace and supersede the Existing Agreement in its entirety, effective as of the Effective Date; NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company and Executive agree as follows:   ARTICLE 1: EMPLOYMENT AND DUTIES 1.1 Employment; Effective Date. Company agrees to employ Executive and Executive agrees to be employed by Company, beginning as of the Effective Date (as hereinafter defined) and continuing for the period of time set forth in Article 2 of this Agreement, subject to the terms and conditions of this Agreement. 1.2 Positions. From and after the Effective Date, Company shall employ Executive in the positions of President and Chief Operating Officer of Company, or in such other positions as the parties mutually may agree, and shall, for the full term of Executive's employment hereunder, cause Executive to be nominated for election as a director of Company and use its best efforts to secure such election. 1.3 Duties and Services. Executive agrees to serve in the positions referred to in paragraph 1.2 and, if elected, as a director of Company and to perform diligently and to the best of his abilities the duties and services appertaining to such offices as set forth in the Bylaws of Company in effect on the Effective Date, as well as such additional duties and services appropriate to such offices which the parties mutually may agree upon from time to time.   ARTICLE 2: TERM AND TERMINATION OF EMPLOYMENT 2.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for a five-year period beginning on the Effective Date. Said term of employment shall be extended automatically for an additional successive five-year period as of the fifth anniversary of the Effective Date and as of the last day of each successive five-year period of time thereafter that this Agreement is in effect; provided, however, that if, prior to the date which is six months before the last day of any such five-year term of employment, either party shall give written notice to the other that no such automatic extension shall occur, then Executive's employment shall terminate on the last day of the five-year term of employment during which such notice is given. 2.2 Company's Right to Terminate. Notwithstanding the provisions of paragraph 2.1, Company, acting pursuant to an express resolution of the Board of Directors of Company (the "Board of Directors"), shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons: (i) upon Executive's death; (ii) upon Executive's becoming incapacitated for a period of at least 180 days by accident, sickness or other circumstance which renders him mentally or physically incapable of performing the material duties and services required of him hereunder on a full-time basis during such period; (iii) if, in carrying out his duties hereunder, Executive engages in conduct that constitutes willful gross neglect or willful gross misconduct resulting in material economic harm to Company; (iv) upon the conviction of Executive for a felony or any crime involving moral turpitude; or (v) for any other reason whatsoever, in the sole discretion of the Board of Directors. 2.3 Executive's Right to Terminate. Notwithstanding the provisions of paragraph 2.1, Executive shall have the right to terminate his employment under this Agreement at any time for any of the following reasons: (i) the assignment to Executive by the Board of Directors or other officers or representatives of Company of duties materially inconsistent with the duties associated with the positions described in paragraph 1.2 as such duties are constituted as of the Effective Date, or the failure to elect or reelect Executive to any of the positions described in paragraph 1.2 or the removal of him from any such positions; (ii) a material diminution in the nature or scope of Executive's authority, responsibilities, or titles from those applicable to him as of the Effective Date, including a change in the reporting structure so that Executive reports to someone other than the Chief Executive Officer or Board of Directors; (iii) the occurrence of acts or conduct on the part of Company, its Board of Directors, or its officers, representatives or stockholders which prevent Executive from, or substantively hinder Executive in, performing his duties or responsibilities pursuant to this Agreement; (iv) Company requiring Executive to be permanently based anywhere outside a major urban center in Texas; (v) the taking of any action by Company that would materially adversely affect the corporate amenities enjoyed by Executive on the Effective Date; (vi) a material breach by Company of any provision of this Agreement which, if correctable, remains uncorrected for 30 days following written notice of such breach by Executive to Company, it being agreed that any reduction in Executive's then current annual base salary, or any reduction in Executive =s annual cash bonus opportunity as a percentage of such base salary from that percentage in effect on the Effective Date (i.e., 0% to 125% of base salary) or any material change in the frequency of payment thereof or the performance factors on which such bonus is based, shall constitute a material breach by Company of this Agreement; or (vii) for any other reason whatsoever, in the sole discretion of Executive. 2.4 Notice of Termination. If Company or Executive desires to terminate Executive's employment hereunder at any time prior to expiration of the term of employment as provided in paragraph 2.1, it or he shall do so by giving written notice to the other party that it or he has elected to terminate Executive's employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder.   ARTICLE 3: COMPENSATION AND BENEFITS 3.1 Base Salary. During the period of this Agreement, Executive shall receive a minimum annual base salary equal to the greater of (i) $757,500.00 or (ii) such amount as the parties mutually may agree upon from time to time. Executive's annual base salary shall be paid in equal installments in accordance with Company's standard policy regarding payment of compensation to executives but no less frequently than semimonthly. 3.2 Bonus Programs and Restricted Stock Grant. (a) Cash Bonus Programs. Executive shall participate in each cash bonus program maintained by Company on and after the Effective Date (including, without limitation, any such program maintained for the year during which the Effective Date occurs) at a level which is not less than the maximum participation level made available to any Company executive (determined without regard to period of service or other criteria that might otherwise be necessary to entitle Executive to such level of participation); provided that Company shall at all times maintain Executive =s annual cash bonus opportunity as a percentage of his base salary in an amount which is at least as great as that in effect on the Effective Date (i.e., 0% to 125% of base salary) and shall not change in any material respect the payment frequency thereof or the performance factors on which such bonus is based. (b) Restricted Stock Grant. On the Effective Date, Company shall make a restricted stock award to Executive of 30,000 shares of Class B common stock of Company under Company's Incentive Plan 2000, which restricted stock award shall vest as to 1/3 of the shares on the first anniversary of the Effective Date, 1/3 of the shares on the second anniversary of the Effective Date, and 1/3 of the shares on the third anniversary of the Effective Date, or otherwise in accordance with the terms of the Incentive Plan 2000 (including any grant document thereunder) and the terms of this Agreement. 3.3 Life Insurance. During the period of this Agreement, Company shall maintain one or more policies of life insurance on the life of Executive providing an aggregate death benefit in an amount not less than the Termination Payment (as such term is defined in paragraph 4.7). Executive shall have the right to designate the beneficiary or beneficiaries of the death benefit payable pursuant to such policy or policies up to an aggregate death benefit in an amount equal to the Termination Payment, and may transfer ownership of such policy or policies (and any rights of Executive under this paragraph 3.3) to any life insurance trust, family trust or other trust. To the extent that Company's purchase of, or payment of premiums with respect to, such policy or policies results in compensation income to Executive, Company shall pay to Executive an additional payment (the "Policy Payment") in an amount such that after payment by Executive of all taxes imposed on Executive with respect to the Policy Payment, Executive retains an amount of the Policy Payment equal to the taxes imposed upon Executive with respect to such purchase or the payment of such premiums. If for any reason Company fails to maintain the full amount of life insurance coverage required pursuant to the preceding provisions of this paragraph 3.3, Company shall, in the event of the death of Executive while employed by Company, pay Executive's designated beneficiary or beneficiaries an amount equal to the sum of (1) the difference between the Termination Payment and any death benefit payable to Executive's designated beneficiary or beneficiaries under the policy or policies maintained by Company and (2) such additional amount as shall be required to hold Executive's estate, heirs, and such beneficiary or beneficiaries harmless from any additional tax liability resulting from the failure by Company to maintain the full amount of such required coverage. 3.4 Vacation and Sick Leave. During each year of his employment, Executive shall be entitled to vacation and sick leave benefits equal to the maximum available to any Company executive, determined without regard to the period of service that might otherwise be necessary to entitle Executive to such vacation or sick leave under standard Company policy. 3.5 Supplemental Executive Retirement Plan. (i) Base Benefit. Company agrees to pay Executive the deferred compensation benefits set forth in this paragraph 3.5 as a supplemental retirement plan (the "Plan"). The base retirement benefit under the Plan (the "Base Benefit") shall be in the form of an annual straight life annuity in an amount equal to the product of (a) 2.5% times (b) the number of Executive's credited years of service (as defined below) under the Plan (but not in excess of 30 years) times (c) the Executive's final average compensation (as defined below). For purposes hereof, Executive's credited years of service under the Plan shall be equal to the sum of (1) the number of Executive's years of benefit service with Company, calculated as set forth in the Continental Retirement Plan (the "CARP") beginning at January 1, 1995 ("Actual Years of Service"), (2) an additional three years of service for each one year of service credited to Executive pursuant to clause (1) of this sentence for the period beginning on January 1, 2000 and ending on December 31, 2004, and (3) if the Termination Payment becomes payable to Executive under this Agreement or if Executive's employment is terminated for a reason encompassed by paragraphs 2.2(i) or 2.2(ii), that number of additional years of service as is equal to (X) 23 years minus (Y) four times the number of full calendar years which have occurred during the period beginning January 1, 2000 and ending on the earlier of (i) the date that the Termination Payment under this Agreement first becomes payable to Executive or (ii) December 31, 2004. For purposes hereof, Executive's final average compensation shall be equal to the greater of (A) $757,500.00 or (B) the average of the five highest annual cash compensation amounts (or, if Executive has been employed less than five years by Company, the average over the full years employed by Company) paid to Executive by Company during the consecutive ten calendar years immediately preceding Executive's termination of employment at retirement or otherwise. For purposes hereof, cash compensation shall include base salary plus cash bonuses (including any amounts deferred (other than Stay Bonus amounts described below) pursuant to any deferred compensation plan of the Company), but shall exclude (i) any cash bonus paid on or prior to March 31, 1995, (ii) any Stay Bonus paid to Executive pursuant to that certain Stay Bonus Agreement between Company and Executive dated as of April 14, 1998, (iii) any Termination Payment or Existing Severance paid to Executive under this Agreement, (iv) any payments received by Executive under Company's Officer Retention and Incentive Award Program, (v) any proceeds to Executive from any awards under any option, stock incentive or similar plan of Company, and (vi) any cash bonus paid under a long term incentive plan or program adopted by Company. Executive shall be vested immediately with respect to benefits due under the Plan. (ii) Offset for CARP Benefit. Any provisions of the Plan to the contrary notwithstanding, the Base Benefit shall be reduced by the actuarial equivalent (as defined below) of the pension benefit, if any, paid or payable to Executive from the CARP. In making such reduction, the Base Benefit and the benefit paid or payable under the CARP shall be determined under the provisions of each plan as if payable in the form of an annual straight life annuity beginning on the Retirement Date (as defined below). The net benefit payable under this Plan shall then be actuarially adjusted based on the actuarial assumptions set forth in paragraph 3.5(vii) for the actual time and form of payments. (iii) Normal and Early Retirement Benefits. Executive's benefit under the Plan shall be payable in equal monthly installments beginning on the first day of the month following the Retirement Date (the "Normal Retirement Benefit"). For purposes hereof, "Retirement Date" is defined as the later of (a) the date on which Executive attains (or in the event of Executive's earlier death, would have attained) age 60 or (b) the date of Executive's retirement from employment with Company. Notwithstanding the foregoing, if Executive's employment with Company is terminated, for a reason other than death, on or after the date Executive attains age 55 or is credited with 10 Actual Years of Service and prior to the Retirement Date, then Executive shall be entitled to elect to commence to receive Executive's benefit under the Plan as of the first day of any month coinciding with or next following Executive's termination of employment, or as the first day of any subsequent month preceding the Retirement Date (an "Early Retirement Benefit"); provided, however, that (1) written notice of such election must be received by Company not less than 15 days prior to the proposed date of commencement of the benefit, (2) each payment under an Early Retirement Benefit shall be reduced to the extent necessary to cause the value of such Early Retirement Benefit (determined without regard to clause (3) of this proviso) to be the actuarial equivalent of the value of the Normal Retirement Benefit (in each case based on the actuarial assumptions set forth in paragraph 3.5(vii) and adjusted for the actual time and form of payments), and (3) each payment under an Early Retirement Benefit that is made prior to the Retirement Date shall be reduced by an additional 10% of the amount of such payment as initially determined pursuant to clause (2) of this proviso. The HR Committee may, in its sole and absolute discretion, waive all or any part of the reductions contemplated in clauses (2) and/or (3) of the proviso of the preceding sentence. (iv) Form of Retirement Benefit. If Executive is not married on the date Executive's benefit under paragraph 3.5(iii) commences, then benefits under the Plan will be paid to Executive in the form of a single life annuity for the life of Executive. If Executive is married on the date Executive's benefit under paragraph 3.5(iii) commences, then benefits under the Plan will be paid to Executive, at the written election of Executive made at least 15 days prior to the first payment of benefits under the Plan, in either (1) the form of a single life annuity for the life of Executive, or (2) the form of a joint and survivor annuity that is actuarially equivalent to the benefit that would have been payable under the Plan to Executive if Executive was not married on such date, with Executive's spouse as of the date benefit payments commence being entitled during such spouse's lifetime after Executive's death to a benefit equal to 50% of the benefit payable to Executive during their joint lifetimes. If Executive fails to make such election, Executive will be deemed to have elected a joint and survivor annuity. (v) Death Benefit. Except as provided in this paragraph 3.5(v), no benefits shall be paid under the Plan if Executive dies prior to the date Executive's benefit commences pursuant to paragraph 3.5(iii). In the event of Executive's death prior to the commencement of Executive's benefit pursuant to paragraph 3.5(iii), Executive's surviving spouse, if Executive is married on the date of Executive's death, will receive a single life annuity consisting of monthly payments for the life of such surviving spouse determined as follows: (a) if Executive dies on or before reaching the Retirement Date, the death benefit such spouse would have received had Executive terminated employment on the earlier of Executive's actual date of termination of employment or Executive's date of death, survived until the Retirement Date, elected a joint and survivor annuity and began to receive Executive's Plan benefit beginning immediately at the Retirement Date, and died on the day after the Retirement Date; or (b) if Executive dies after reaching the Retirement Date, the death benefit such spouse would have received had Executive elected a joint and survivor annuity and begun to receive Executive's Plan benefit beginning on the day prior to Executive's death. Payment of such survivor annuity shall begin on the first day of the month following the later of (1) Executive's date of death or (2) the Retirement Date; provided, however, that if Executive was eligible to elect an Early Retirement Benefit as of the date of Executive's death, then Executive's surviving spouse shall be entitled to elect to commence to receive such survivor annuity as of the first day of the month next following the date of Executive's death, or as the first day of any subsequent month preceding the Retirement Date. Notice of such election must be received by Company not less than 15 days prior to the proposed date of commencement of the benefit, and each payment of such survivor annuity shall be reduced based on the principles used for the reductions described in clauses (2) and (3) of the proviso to the third sentence of paragraph 3.5(iii). (vi) Unfunded Benefit. The Plan is intended to constitute an unfunded, unsecured plan of deferred compensation. Further, it is the intention of Company that the Plan be unfunded for purposes of the Internal Revenue Code of 1986, as amended, and Title I of the Employee Retirement Income Security Act of 1974, as amended. The Plan constitutes a mere promise by Company to make benefit payments in the future. Plan benefits hereunder provided are to be paid out of Company's general assets, and Executive shall have the status of, and shall have no better status than, a general unsecured creditor of Company. Executive understands that he must rely upon the general credit of Company for payment of benefits under the Plan. Company shall establish a "rabbi" trust to assist Company in meeting its obligations under the Plan. The trustee of such trust shall be a nationally-recognized and solvent bank or trust company that is not affiliated with Company. Company shall transfer to the trustee money and/or other property determined in the sole discretion of the HR Committee based on the advice of the Actuary (as defined below) on an as-needed basis in order to assure that the benefit payable under the Plan is at all times fully funded. The trustee shall pay Plan benefits to Executive and/or Executive's spouse out of the trust assets if such benefits are not paid by Company. Company shall remain the owner of all assets in the trust, and the assets shall be subject to the claims of Company creditors in the event (and only in the event) Company ever becomes insolvent. Neither Executive nor any beneficiary of Executive shall have any preferred claim to, any security interest in, or any beneficial ownership interest in any assets of the trust. Company has not and will not in the future set aside assets for security or enter into any other arrangement which will cause the obligation created to be other than a general corporate obligation of Company or will cause Executive to be more than a general creditor of Company. (vii) Actuarial Equivalent. For purposes of the Plan, the terms "actuarial equivalent", or "actuarially equivalent" when used with respect to a specified benefit shall mean the amount of benefit of the referenced different type or payable at the referenced different age that can be provided at the same cost as such specified benefit, as computed by the Actuary and certified to Executive (or, in the case of Executive's death, to his spouse) by the Actuary. The actuarial assumptions used under the Plan to determine equivalencies between different forms and times of payment shall be the same as the actuarial assumptions then used in determining benefits payable under the CARP. The term "Actuary" shall mean the individual actuary or actuarial firm selected by Company to service its pension plans generally or if no such individual or firm has been selected, an individual actuary or actuarial firm appointed by Company and reasonably satisfactory to Executive and/or Executive's spouse. (viii) Medicare Payroll Taxes. Company shall indemnify Executive on a fully grossed-up, after-tax basis for any Medicare payroll taxes (plus any income taxes on such indemnity payments) incurred by Executive in connection with the accrual and/or payment of benefits under the Plan. 3.6 Additional Disability Benefit. If Executive shall begin to receive long-term disability insurance benefits pursuant to a plan maintained by Company and if such benefits cease prior to Executive's attainment of age 65 and while Executive remains disabled, then Company shall immediately pay Executive upon the cessation of such benefits a lump-sum, cash payment in an amount equal to the Termination Payment. If Executive receives payment of a Termination Payment pursuant to the provisions of Article 4, then the provisions of this paragraph 3.6 shall terminate. If Executive shall be disabled at the time his employment with Company terminates and if Executive shall not be entitled to the payment of a Termination Payment pursuant to the provisions of Article 4 upon such termination, then Executive's right to receive the payment upon the occurrence of the circumstances described in this paragraph 3.6 shall be deemed to have accrued as of the date of such termination and shall survive the termination of this Agreement. 3.7 Other Perquisites. During his employment hereunder, Executive shall be afforded the following benefits as incidences of his employment: (i) Automobile - Company will provide an automobile (including replacements therefor) of Executive's choice for Executive's use on the same terms as its current practices relating to the choice and use of automobiles by its Chief Executive Officer. If the automobile is leased, Company agrees to take such actions as may be necessary to permit Executive, at his option, to acquire title to any automobile subject to such a lease at the completion of the lease term by Executive paying the residual payment then owing under the lease. If Executive's employment terminates (other than as a result of the reasons encompassed by paragraphs 2.2 (iii) or (iv)), then Company (1) if the automobile is leased, will continue to make all payments under the lease and permit Executive (or Executive's estate, if applicable) to use the automobile during the remainder of such lease and will, at the conclusion of the lease, cause the title to the automobile to be transferred to Executive (or Executive's estate) without cost to Executive (or Executive's estate), or (2) if the automobile is owned by Company, transfer title to the automobile to Executive (or Executive's estate, as applicable), without cost to Executive (or Executive's estate). (ii) Business and Entertainment Expenses - Subject to Company's standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business related purposes, including dues and fees to industry and professional organizations, costs of entertainment and business development, and costs reasonably incurred as a result of Executive's spouse accompanying Executive on business travel. Company shall also pay on behalf of Executive the expenses of one athletic club selected by Executive. (iii) Parking - Company shall provide at no expense to Executive a reserved parking place convenient to Executive's headquarters office and a reserved parking place at George Bush Intercontinental Airport in Houston, Texas consistent with past practice. (iv) Other Company Benefits - Executive and, to the extent applicable, Executive's family, dependents and beneficiaries, shall be allowed to participate in all benefits, plans and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to similarly-situated Company employees. Such benefits, plans and programs may include, without limitation, profit sharing plan, thrift plan, annual physical examinations, health insurance or health care plan, life insurance, disability insurance, pension plan, pass privileges on Continental Airlines, Flight Benefits and the like. Company shall not, however, by reason of this paragraph be obligated to institute, maintain, or refrain from changing, amending or discontinuing, any such benefit plan or program, so long as such changes are similarly applicable to executive employees generally; provided, however, that Company shall not change, amend or discontinue Executive =s Flight Benefits without his consent. ARTICLE 4: EFFECT OF TERMINATION ON COMPENSATION 4.1 By Expiration. If Executive's employment hereunder shall terminate upon expiration of the term provided in paragraph 2.1 hereof, then all compensation and all benefits to Executive hereunder shall terminate contemporaneously with termination of his employment, except that (A) the Company shall pay Executive on or before the effective date of such termination a lump sum, cash payment in an amount equal to the Existing Severance, the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits (as such term is defined in paragraph 4.7) for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage (as such term is defined in paragraph 4.7) for the remainder of Executive's lifetime, and Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i) and (B) if such termination shall result from Company's delivery of the written notice described in paragraph 2.1, then Company shall (i) cause all options and shares of restricted stock awarded to Executive to vest immediately upon such termination and, with respect to options, be exercisable in full for 30 days after such termination, (ii) cause all Awards made to Executive under Company's Officer Retention and Incentive Award Program ("Retention Program") to vest immediately upon such termination, (iii) cause Company to pay to Executive, at the same time as other Payment Amounts with respect to Awards are paid to other participants under Company's Long Term Incentive Performance Award Program ("LTIP"), all Payment Amounts with respect to Awards made to Executive under the LTIP having a Performance Period that has not been completed as of the date of Executive's termination, as if Executive had remained employed by Company in his current position through the end of each such Performance Period (calculated using the Base Amount of Executive in effect on the day immediately preceding such termination), less any amounts paid to Executive under the LTIP upon the occurrence of a Qualifying Event with respect to Executive in connection with a Change in Control (such capitalized terms to have the meanings ascribed thereto in the LTIP), (iv) pay Executive on or before the effective date of such termination a lump-sum, cash payment in an amount equal to the Termination Payment, (v) provide Executive with Outplacement, Office and Related Services (as such term is defined in paragraph 4.7 and for the time periods described therein), and (vi) pay any amounts owed but unpaid to Executive under any plan, policy or program of Company as of the date of termination at the time provided by, and in accordance with the terms of, such plan, policy or program. 4.2 By Company. If Executive's employment hereunder shall be terminated by Company prior to expiration of the term provided in paragraph 2.1 hereof then, upon such termination, regardless of the reason therefor, all compensation and all benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment, except that the Company shall pay Executive on or before the effective date of such termination a lump sum, cash payment in an amount equal to the Existing Severance, the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage for the remainder of Executive's lifetime, and: (i) if such termination shall be for any reason other than those encompassed by paragraphs 2.2(i), (ii), (iii) or (iv), then Company shall provide Executive with the payments and benefits described in clauses (i) through (vi) of paragraph 4.1, and Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i); and (ii) if such termination shall be for a reason encompassed by paragraphs 2.2(i) or (ii), then Company shall (1) cause all options and shares of restricted stock awarded to Executive to vest immediately upon such termination and, with respect to options, be exercisable in full for 30 days (or such longer period as provided for under the circumstances in applicable option awards) after such termination, (2) cause all Awards made to Executive under the Retention Program to vest immediately upon such termination, (3) cause Company to pay to Executive (or Executive's estate), at the same time as Payment Amounts with respect to Awards are paid to other participants under the LTIP, all Payment Amounts with respect to Awards made to Executive under the LTIP having a Performance Period that has not been completed as of the date of Executive's termination, as if Executive had remained employed by Company in his current position through the end of each such Performance Period (calculated using the Base Amount of Executive in effect on the day immediately preceding such termination), less any amounts paid to Executive under the LTIP upon the occurrence of Executive's death or Disability after a Change in Control (such capitalized terms to have the meanings ascribed thereto in the LTIP), (4) provide Executive (or his designated beneficiary or beneficiaries) with the benefits contemplated under paragraph 3.3 or paragraph 3.6, as applicable, and (5) perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i). 4.3 By Executive. If Executive's employment hereunder shall be terminated by Executive prior to expiration of the term provided in paragraph 2.1 hereof then, upon such termination, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment, except that the Company shall pay Executive on or before the effective date of such termination a lump sum, cash payment in an amount equal to the Existing Severance, the benefits described in paragraph 3.5 shall continue to be payable, Executive shall be provided Flight Benefits for the remainder of Executive's lifetime, Executive and his eligible dependents shall be provided Continuation Coverage for the remainder of Executive's lifetime, Company shall perform its obligations with respect to the automobile then used by Executive as provided in subparagraph 3.7(i) and, if such termination shall be pursuant to paragraphs 2.3(i), (ii), (iii), (iv), (v), or (vi), then Company shall provide Executive with the payments and benefits described in clauses (i) through (vi) of paragraph 4.1. 4.4 Certain Additional Payments by Company. Notwithstanding anything to the contrary in this Agreement, if any payment, distribution or provision of a benefit by Company to or for the benefit of Executive, whether paid or payable, distributed or distributable or provided or to be provided pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to an excise or other special additional tax that would not have been imposed absent such Payment (including, without limitation, any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended), or any interest or penalties with respect to such excise or other additional tax (such excise or other additional tax, together with any such interest or penalties, are hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive an additional payment (a "Gross-up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any income taxes and Excise Taxes imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment (taking into account any similar gross-up payments to Executive under any stock incentive or other benefit plan or program of Company) equal to the Excise Tax imposed upon the Payments. Company and Executive shall make an initial determination as to whether a Gross-up Payment is required and the amount of any such Gross-up Payment. Executive shall notify Company in writing of any claim by the Internal Revenue Service which, if successful, would require Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by Company and Executive) within ten business days after the receipt of such claim. Company shall notify Executive in writing at least ten business days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If Company decides to contest such claim, Executive shall cooperate fully with Company in such action; provided, however, Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with such action and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of Company's action. If, as a result of Company's action with respect to a claim, Executive receives a refund of any amount paid by Company with respect to such claim, Executive shall promptly pay such refund to Company. If Company fails to timely notify Executive whether it will contest such claim or Company determines not to contest such claim, then Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. 4.5 Payment Obligations Absolute. Company's obligation to pay Executive the amounts and to make the arrangements provided in this Article 4 shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which Company (including its subsidiaries and affiliates) may have against him or anyone else. All amounts payable by Company shall be paid without notice or demand. Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Article 4, and, except as provided in paragraph 4.7 with respect to Continuation Coverage, the obtaining of any such other employment (or the engagement in any endeavor as an independent contractor, sole proprietor, partner, or joint venturer) shall in no event effect any reduction of Company's obligations to make (or cause to be made) the payments and arrangements required to be made under this Article 4. 4.6 Liquidated Damages. In light of the difficulties in estimating the damages upon termination of this Agreement, Company and Executive hereby agree that the payments and benefits, if any, to be received by Executive pursuant to this Article 4 shall be received by Executive as liquidated damages. Payment of the Termination Payment and the Existing Severance pursuant to paragraphs 4.1, 4.2 or 4.3 shall be in lieu of any severance benefit Executive may be entitled to under any severance plan or policy maintained by Company. 4.7 Certain Definitions and Additional Terms. As used herein, the following capitalized terms shall have the meanings assigned below: (i) "Continuation Coverage" shall mean the continued coverage of Executive and his eligible dependents under Company's welfare benefit plans available to executives of Company who have not terminated employment (or the provision of equivalent benefits), including, without limitation, medical, health, dental, life insurance, disability, vision care, accidental death and dismemberment, and prescription drug, at no greater cost to Executive than that applicable to a similarly situated Company executive who has not terminated employment; provided, however, that the coverage to Executive (or the receipt of equivalent benefits) shall be provided under one or more insurance policies so that reimbursement or payment of benefits to Executive thereunder shall not result in taxable income to Executive, and provided further that the coverage to Executive under a particular welfare benefit plan (or the receipt of equivalent benefits) shall be suspended during any period that Executive receives comparable benefits from a subsequent employer, and shall be reinstated upon Executive ceasing to so receive comparable benefits and notifying Company thereof; A Existing Severance@ shall mean the sum of three million eight hundred eighty-one thousand two hundred fifty dollars ($3,881,250), which sum represents the severance payable to Executive upon termination of employment by him after a Change in Control (as defined in the Old Agreement) caused by the Acquisition under the Old Agreement; (iii) "Flight Benefits" shall mean flight benefits on each airline operated by the Company or any of its affiliates or any successor or successors thereto (the "CO system"), consisting of the highest priority space available flight passes for Executive and Executive's eligible family members (as such eligibility is in effect on May 18, 1999), a Universal Air Travel Plan (UATP) card (or, in the event of discontinuance of the UATP program, a similar charge card permitting the purchase of air travel through direct billing to the Company or any successor or successors thereto (a "Similar Card")) in Executive's name for charging on an annual basis up to the applicable Annual Travel Limit (as hereinafter defined) with respect to such year in value (valued identically to the calculation of imputed income resulting from such flight benefits described below) of flights (in any fare class) on the CO system for Executive, Executive's spouse, Executive's family and significant others as determined by Executive, Platinum Elite OnePass Cards (or similar highest category successor frequent flyer cards) in Executive's and Executive's spouse's names for use on the CO system, a membership for Executive and Executive's spouse in the Company's President's Club (or any successor program maintained in the CO system) and payment by the Company to Executive of an annual amount (not to exceed in any year the Annual Gross Up Limit (as hereinafter defined) with respect to such year) sufficient to pay, on an after tax basis (i.e., after the payment by Executive of all taxes on such amount), the U.S. federal, state and local income taxes on imputed income resulting from such flights (such imputed income to be calculated during the term of such Flight Benefits at the lowest published or unpublished fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare, or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law) or resulting from any other flight benefits extended to Executive as a result of Executive's service as an executive of the Company; "Outplacement, Office and Related Services" shall mean (1) outplacement services, at Company's cost and for a period of twelve months beginning on the date of Executive's termination of employment, to be rendered by an agency selected by Executive and approved by the Board of Directors (with such approval not to be unreasonably withheld), (2) appropriate and suitable office space at the Company =s headquarters (although not on its executive office floor) or at a comparable location in downtown Houston for use by Executive, together with appropriate and suitable secretarial assistance, at Company=s cost and for a period of three years beginning on the date of Executive=s termination of employment, (3) a reserved parking place convenient to the office so provided and a reserved parking place at George Bush Intercontinental Airport in Houston, Texas consistent with past practice, at Company=s cost and for as long as Executive retains a residence in Houston, Texas, and (4) other incidental perquisites (such as free or discount air travel, car rental, phone or similar service cards) currently enjoyed by Executive as a result of his position, to the extent then available for use by Executive, for a period of three years beginning on the date of Executive=s termination of employment or a shorter period if such perquisites become unavailable to the Company for use by Executive; and "Termination Payment" shall mean an amount equal to three times the sum of (1) Executive's annual base salary pursuant to paragraph 3.1 in effect immediately prior to Executive's termination of employment hereunder and (2) an amount equal to 125% of the amount described in the foregoing clause (1). As used for purposes of Flight Benefits, with respect to any year, the term "Annual Travel Limit" shall mean an amount (initially $50,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Company's average fare per revenue passenger for its jet operations (excluding regional jets) with respect to the applicable year as reported in its Annual Report on Form 10-K (or, if not so reported, as determined by the Company's independent auditors) (the "Average Fare") for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company as of May 18, 1999), so as to preserve the benefit of $50,000 annually (adjusted in accordance with clauses (i) and (ii) above) of flights relative to the valuations resulting from the valuation methodology used by the Company as of May 18, 1999 (e.g., if a change in the valuation methodology results, on average, in such flights being valued 15% higher than the valuation that would result using the valuation methodology used by the Company as of May 18, 1999, then the Annual Travel Limit would be increased by 15% to $57,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to Executive upon request. The Company will promptly notify Executive in writing of any adjustments to the Annual Travel Limit described in this paragraph. As used for purposes of Flight Benefits, with respect to any year, the term "Annual Gross Up Limit" shall mean an amount (initially $10,000), which amount shall be adjusted (i) annually (beginning with the year 2000) by multiplying such amount by a fraction, the numerator of which shall be the Average Fare for such year, and the denominator of which shall be the Average Fare for the prior year, (ii) annually to add thereto any portion of such amount unused since the year 1999, and (iii) after adjustments described in clauses (i) and (ii) above, automatically upon any change in the valuation methodology for imputed income from flights (as compared with the valuation methodology for imputed income from flights used by the Company as of May 18, 1999), so as to preserve the benefit of $10,000 annually (adjusted in accordance with clauses (i) and (ii) above) of tax gross up relative to the valuations resulting from the valuation methodology used by the Company as of May 18, 1999 (e.g., if a change in the valuation methodology results, on average, in flights being valued 15% higher than the valuation that would result using the valuation methodology used by the Company as of May 18, 1999, then the Annual Gross Up Limit would be increased by 15% to $11,500, assuming no other adjustments pursuant to clauses (i) and (ii) above). In determining any adjustment pursuant to clause (iii) above, the Company shall be entitled to rely on a good faith calculation performed by its independent auditors based on a statistically significant random sampling of flight valuations compared with the applicable prior valuations of identical flights, which calculation (and the basis for any adjustments pursuant to clauses (i) or (ii) above) will be provided to Executive upon request. The Company will promptly notify Executive in writing of any adjustments to the Annual Gross Up Limit described in this paragraph. As used for purposes of Flight Benefits, a year may consist of twelve consecutive months other than a calendar year, it being the Company's practice as of May 18, 1999 for purposes of Flight Benefits for a year to commence on December 1 and end on the following November 30 (for example, the twelve-month period from December 1, 1998 to November 30, 1999 is considered the year 1999 for purposes of Flight Benefits); provided that all calculations for purposes of clause (i) in the prior two paragraphs shall be with respect to fiscal years of the Company. As used for purposes of Flight Benefits, the term "affiliates" of the Company means any entity controlled by, controlling, or under common control with the Company, it being understood that control of an entity shall require the direct or indirect ownership of a majority of the outstanding capital stock of such entity. No tickets issued on the CO system in connection with the Flight Benefits may be purchased other than directly from the Company or its successor or successors (i.e., no travel agent or other fee or commission based distributor may be used), nor may any such tickets be sold or transferred by Executive or any other person, nor may any such tickets be used by any person other than the person in whose name the ticket is issued. Executive agrees that, after receipt of an invoice or other accounting statement therefor, he will promptly (and in any event within 45 days after receipt of such invoice or other accounting statement) reimburse the Company for all charges on his UATP card (or Similar Card) which are not for flights on the CO system and which are not otherwise reimbursable to Executive under the provisions of paragraph 3.7(ii) hereof, or which are for tickets in excess of the applicable Annual Travel Limit. Executive agrees that the credit availability under Executive's UATP card (or Similar Card) may be suspended if Executive does not timely reimburse the Company as described in the foregoing sentence or if Executive exceeds the applicable Annual Travel Limit with respect to a year; provided, that, immediately upon the Company's receipt of Executive's reimbursement in full (or, in the case of exceeding the applicable Annual Travel Limit, beginning the next following year and after such reimbursement), the credit availability under Executive's UATP card (or Similar Card) will be restored. The sole cost to Executive of flights on the CO system pursuant to use of Executive's Flight Benefits will be the imputed income with respect to flights on the CO system charged on Executive's UATP card (or Similar Card), calculated throughout the term of Executive's Flight Benefits at the lowest published or unpublished fare (i.e., 21 day advance purchase coach fare, lowest negotiated consolidator net fare or other lowest available fare) for the applicable itinerary (or similar flights on or around the date of such flight), regardless of the actual fare class booked or flown, or as otherwise required by law, and reported to Executive as required by applicable law. With respect to any period for which the Company is obligated to provide the tax gross up described above, Executive will provide to the Company, upon request, a calculation or other evidence of Executive's marginal tax rate sufficient to permit the Company to calculate accurately the amount to be paid to Executive. Executive will be issued a UATP card (or Similar Card), Platinum Elite OnePass Cards (or similar highest category successor frequent flyer cards) in Executive's and Executive spouse's names, a membership card in the Company's Presidents Club (or any successor program maintained in the CO system) for Executive and Executive's spouse, and an appropriate flight pass identification card, each valid at all times during the term of Executive's Flight Benefits. ARTICLE 5: MISCELLANEOUS 5.1 Interest and Indemnification. If any payment to Executive provided for in this Agreement is not made by Company when due, Company shall pay to Executive interest on the amount payable from the date that such payment should have been made until such payment is made, which interest shall be calculated at 3% plus the prime or base rate of interest announced by Chase Bank of Texas N.A. (or any successor thereto) at its principal office in Houston, Texas (but not in excess of the highest lawful rate), and such interest rate shall change when and as any such change in such prime or base rate shall be announced by such bank. If Executive shall obtain any money judgment or otherwise prevail with respect to any litigation brought by Executive or Company to enforce or interpret any provision contained herein, Company, to the fullest extent permitted by applicable law, hereby indemnifies Executive for his reasonable attorneys' fees and disbursements incurred in such litigation and hereby agrees (i) to pay in full all such fees and disbursements and (ii) to pay prejudgment interest on any money judgment obtained by Executive from the earliest date that payment to him should have been made under this Agreement until such judgment shall have been paid in full, which interest shall be calculated at the rate set forth in the preceding sentence. 5.2 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to Company to : Continental Airlines, Inc. 1600 Smith, Dept. HQSEO Houston, Texas 77002 Attention: General Counsel If to Executive to : Mr. Gregory D. Brenneman 31 Hollymead Drive Houston, Texas 77387 or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices of changes of address shall be effective only upon receipt. 5.3 Applicable Law. This contract is entered into under, and shall be governed for all purposes by, the laws of the State of Texas. 5.4 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 5.5 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect. 5.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. 5.7 Withholding of Taxes and Other Employee Deductions. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company's employees generally. 5.8 Headings. The paragraph headings have been inserted for purposes of convenience and shall not be used for interpretive purposes. 5.9 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely. 5.10 Successors. This Agreement shall be binding upon and inure to the benefit of Company and any successor of the Company, including without limitation any person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business or assets of Company by any means whether direct or indirect, by purchase, merger, consolidation, or otherwise. Except as provided in the preceding sentence or in paragraph 3.3 (regarding assignment of life insurance benefits), this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. 5.11 Term. This Agreement has a term co-extensive with the term of employment as set forth in paragraph 2.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to or upon such termination. 5.12 Entire Agreement. Except as provided in (i) the benefits, plans, and programs referenced in paragraph 3.7(iv) and any awards under the Company's stock incentive plans or programs, LTIP, Retention Program, Executive Bonus Performance Award Program or similar plans or programs, and (ii) separate agreements governing Executive's flight benefits relating to other airlines, this Agreement, as of the Effective Date, will constitute the entire agreement of the parties with regard to the subject matter hereof, and will contain all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by Company. Effective as of the Effective Date, the Existing Agreement is hereby terminated and without any further force or effect. Any modification of this Agreement shall be effective only if it is in writing and signed by the party to be charged. 5.13 Deemed Resignations. Any termination of Executive's employment shall constitute an automatic resignation of Executive as an officer of Company and each affiliate of Company, and an automatic resignation of Executive from the Board of Directors and from the board of directors of any affiliate of Company, and from the board of directors or similar governing body of any corporation, limited liability company or other entity in which Company or any affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as Company's or such affiliate's designee or other representative. 5.14 Executive Bonus Program and certain Change in Control Matters. Executive agrees that the payment to Executive of the Existing Severance hereunder will not be deemed to be Ain connection with circumstances which would permit such Participant to receive severance benefits pursuant to any contract of employment between such Participant and the Company or any of its subsidiaries@ within the meaning of clause (d) of the last sentence of Section 7 of the Company=s Executive Bonus Performance Award Program, as in effect on the date hereof. Executive agrees that any recapitalization, conversion, reclassification or similar transaction involving Class A common stock of Company owned by Northwest Airlines Corporation or its affiliates, or any acquisition by Company of Class A common stock owned by Northwest Airlines Corporation or its affiliates (whether or not involving other outstanding shares of Class A common stock), which results in a person who is an Institutional Investor (as defined in that certain Rights Agreement dated November 20, 1998, as amended by First Amendment to Rights Agreement dated as of February 8, 2000, between Company and Harris Trust and Savings Bank, as in effect on the date hereof) as of the date hereof and as of the date of any such recapitalization, conversion, reclassification, acquisition or similar transaction being or becoming the beneficial owner of securities of Company sufficient to otherwise trigger a Change in Control pursuant to clause (aa) of Section 12 (c) of Company's Incentive Plan 2000, as in effect on the date hereof, shall not constitute a Change in Control for purposes of this Agreement, or for purposes of Company's stock incentive plans or programs, Long Term Incentive Performance Award Program, Officer Retention and Incentive Award Program, Executive Bonus Performance Award Program or similar plans or programs.   *******       IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.   CONTINENTAL AIRLINES, INC.     By: Name: Jeffery A. Smisek Title: Executive Vice President "EXECUTIVE"     GREGORY D. BRENNEMAN     APPROVED:   _______________________________ Thomas J. Barrack, Jr. Chair, Human Resources Committee

  Exhibit 10 ARTHUR C. MARTINEZ RETIREMENT AGREEMENT This Retirement Agreement (the "Agreement") is entered into between Sears, Roebuck and Co., a New York corporation (the "Company") and Arthur C. Martinez, a resident of the State of Illinois (the "Executive") as of April 11, 2000. This Agreement is hereby entered into in consideration of the following covenants and mutual promises. 1. Purpose. The Company and the Executive have determined that it would be appropriate to initiate a management transition process that includes the selection and hiring of a new chief executive officer. Upon the hiring of a new Chief Executive Officer, Executive will resign as President and Chief Executive Officer, and will resign from his position as Chairman and as a member of the Board of Directors at the discretion of the Board. Thereafter, the Executive will retire from the Company on a date designated by the Executive and acceptable to the Company, but in any event no later than ninety (90) days after the hiring of the new Chief Executive Officer. In consideration for Executive's dedicated service with the Company and his leadership during the management transition process and his subsequent retirement (the date of which is referred to as the "Retirement Date"), the Company and the Executive have agreed to enter into this Agreement. 2. Payments. Following the execution of this Agreement, the Company shall make the following payments to the Executive:   a) Continued annual base salary payments through Executive's Retirement Date, at the rate currently in effect; b) An amount (the "2000 Annual Bonus"), calculated according to the Sears, Roebuck and Co. Annual Incentive Compensation Plan (the "Annual Incentive Compensation Plan"), equal to the greater of (i) the amount of the 2000 target annual bonus under the Annual Incentive Compensation Plan to which Executive would have been entitled if he had remained employed by the Company through December 31, 2000 and the Company had met the target level performance requirements for 2000, and (ii)  the amount of the annual bonus under the Annual Incentive Compensation Plan to which Executive would have been entitled based on the actual percentage earned by the other senior executives, in each case, prorated for the year 2000 based on the number of days elapsed in such calendar year as of the earlier of the Retirement Date or December 31, 2000. The 2000 Annual Bonus shall be paid at such time as it would have been paid had Executive remained employed by the Company but in any event no later than March 1, 2001; c) A lump sum payment payable on January 5, 2001 (or the Retirement Date, if later), equal to three times the sum of (i) annual base salary at the rate currently in effect and (ii) the amount of the non-prorated 2000 target annual bonus referred to above; and d) The award under the Long Term Performance Plan ("LTPP") for the LTPP period January 1, 1999 through December 31, 2001 in an amount determined as if the Company had met the target level performance requirements for that LTPP period as provided in the LTPP and payable at the time such award would have been paid pursuant to the LTPP if Executive had continued employment with the Company through December 31, 2001, but in any event no later than March 1, 2002.     3. Supplemental Retirement Income Plan. Executive's accrued benefit under the Sears, Roebuck and Co. Supplemental Retirement Income Plan and the Executive's supplemental agreement related thereto (collectively, the "Supplemental Retirement Income Plan") shall be determined in accordance with the Supplemental Retirement Income Plan, by calculating the basic monthly benefit thereunder based on (a) Executive's actual credited service plus additional credited service for the period from the Retirement Date through and including December 31, 2003, (b) the assumption that, in addition to his actual annual salary and bonus, Executive received in 2000 a non-prorated 2000 target annual bonus, and earned annual salary (at the rate currently in effect) and bonus (at the 2000 target annual bonus level) for years 2001, 2002, and 2003, and (c)  the assumption that the amounts described in (b) above were received on or before the Executive's Retirement Date. The present value of such benefit payable as a life annuity commencing January 1, 2001, shall be paid in a single lump sum payment on January 5, 2001 (or the Retirement Date, if later), which lump sum shall be determined in accordance with the provisions of the Supplement Retirement Income Plan based on the Executive's actual age as of that date. Such a determination of the estimated amount of such lump sum payment has been provided to the Executive by the Company. The amount described in Paragraph 3 shall be in addition to the benefits to which Executive is entitled under the Sears Pension Plan. 4. Welfare Coverage. The Company shall provide Executive with coverage under the welfare plans in which Executive currently participates through the Retirement Date. Thereafter, Executive shall be treated as eligible to receive Retiree Medical coverage and for all purposes thereunder shall be treated as having been covered under a Sears medical option on the Retirement Date and as having been continuously covered for the ten (10) consecutive years immediately prior to the Retirement Date. 5. Chairman's Retirement Benefits. In recognition of the Executive's services as Chairman of the Company, the following additional benefits shall be provided, or the cost of such benefits reimbursed, consistent with traditional benefits provided upon retirement to the Chairman of the Company:   a) An office with furnishings, secretarial and other assistance consistent with past practice and suitable for Executive's needs until the earlier of (i)  December 31, 2009, and (ii) such time that comparable office space and support is provided by a new employer; and b) Fees for services consistent with current practice and suitable for Executive's needs, from a financial planner and tax advisor selected by the Executive, until December 31, 2005.     6. Equity. Effective on the Retirement Date, all stock options and restricted stock issued to the Executive under any Company-sponsored employee stock plan will become fully vested (except for the performance-based awards, which will be vested but will remain subject to the price targets for Company stock) and all of the Executive's vested stock options will remain exercisable until the earlier of (a) five (5) years after the Retirement Date for stock options granted in February, 1995 or later, and two (2) years after the Retirement Date for all other stock options, or (b) the date the options would otherwise have expired under the terms of the option grants (excluding provisions relating to termination of employment). 7. Mutual Release. In consideration of the service commitments and benefits provided under this Agreement, Executive and the Company have entered into the Mutual Release which is attached hereto as Exhibit A. This Mutual Release shall for purposes of this Agreement be treated as incorporated into this Section 7 in the form attached hereto. 8. Resignation of Officerships, Titles and Directorships. Effective on the Retirement Date, the Executive will resign all then remaining officerships, titles, and directorships with the Company, its subsidiaries and affiliates. 9. Prior Agreements, Non-Competition, Nonsolicitation, Confidentiality and Non-Disparagement. Except as provided for herein, this Agreement shall supersede all prior agreements between the Executive and the Company regarding Executive's employment; provided, however, the protective covenants provided for in Section 5 of the Non-Compete/Change-of-Control Agreement between the Company and Executive dated April 7, 1999 (the "Change-of-Control Agreement") shall continue in full force and effect as provided therein. Furthermore, the Executive agrees not to engage in any act after execution of this Agreement that is intended, or may reasonably be expected, to harm the reputation, business, prospects or operations of the Company, its officers, directors, stockholders, or employees. The Company further agrees that it will engage in no act which is intended, or may reasonably be expected, to harm the reputation, business, or prospects of the Executive. 10. Indemnification; D&O Insurance Coverage. To the fullest extent permitted by law, the Company will indemnify the Executive (including the advancement of expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including attorney's fees, incurred by the Executive in connection with the defense of any lawsuit or other claim to which he is made a party by reason of being or having been an officer, director or employee of the Company or any of its subsidiaries. In addition, the Company shall cause Executive to be covered (with respect to acts, errors or omissions which shall have occurred on or before the Retirement Date) under such director and officer liability insurance policies as the Company shall from time to time have in effect for its then-active officers and directors to the same extent as coverage is available thereunder to the then-active officers and directors for acts, errors or omissions during their periods of service to the Company. 11. Beneficiary. If the Executive should die prior to receiving all of the benefits payable under this Agreement, any remaining benefits will be paid to the beneficiary designated in writing by the Executive. If no such beneficiary is designated, any payments shall be paid to the Executive's estate at the time or times and in the manner as would otherwise be due to the Executive. 12. Involuntary Termination; Change-of-Control. Should Executive be involuntarily terminated by the Company for any reason, other than Cause (as defined in the Change-of-Control Agreement), death or total and permanent disability, the Executive's date of termination shall be his Retirement Date. Notwithstanding anything in this Agreement to the contrary, in the event of a Change-of-Control of the Company (as defined in the Change-of-Control Agreement) (a) the Executive's Retirement Date shall be any date on or after the date of the Change-of-Control as designated by the Executive in his sole discretion, but in any event no later than ninety (90) days after the Change-of-Control, and (b) the Executive shall receive all amounts due him under Sections 2 and 3 of this Agreement on the earlier of (i) the date(s) such amounts would otherwise be paid to him under this Agreement or (ii) a date that is no later than ten (10) business days after his Retirement Date. 13. Withholding. The Company's obligation to pay amounts under this Agreement are subject to its withholding obligations under applicable federal, state and local tax laws. 14. Severability. If all or any part of this Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any other portion of this Agreement. Any section or a part of a section declared to be unlawful or invalid shall, if possible, be construed in a manner, or shall be deemed modified in a manner, which will give effect to the terms of the section to the fullest extent possible while remaining lawful and valid. 15. Amendment. Except as provided in Section 14, this Agreement shall not be altered, amended, or modified except by written instrument executed by the Company and the Executive. A waiver of any portion of this Agreement shall not be deemed a waiver of any other portion of this Agreement. 16. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument. 17. Applicable Law. The provisions of this Agreement shall be interpreted and construed in accordance with the laws of the State of Illinois without regard to its choice of law principles. 18. Arbitration. Any controversy or claim relating to this Agreement (except for court action initiated by the Company to enforce the Executive's protective covenants) will be settled exclusively by arbitration in Chicago, Illinois in accordance with the rules of the American Arbitration Association then in effect. Any arbitration award will be binding on the parties and may be enforced in any court having jurisdiction.     ATTEST: SEARS, ROEBUCK AND CO.     /s/John T. Sloan By: Anastasia D. Kelly Its: General Counsel           EXECUTIVE:       /s/Arthur C. Martinez             EXHIBIT A Mutual Release In consideration of the benefits provided under that certain Retirement Agreement dated as of April 11, 2000 (the "Agreement") by and between Sears, Roebuck and Co. (the "Company") and the undersigned Executive, Executive and the Company, and any person acting by, through, or under the Executive or the Company, hereby release, waive, and forever discharge each other and their respective agents, subsidiaries, affiliates, employees, officers, shareholders, successors, and assigns (if any) from any and all liability, actions, charges, causes of action, demands, damages, or claims for relief or remuneration of any kind whatsoever, whether known or unknown at this time, arising out of, or connected with, Executive's employment with the Company (other than indemnification to which the Executive may be entitled under the Company's bylaws, policies or agreements (now or hereafter maintained) with regard to the indemnification of its executive officers or directors), Executive's decision to retire, and/or the termination of the Executive's employment, including, but not limited to, all matters in law, in equity, in contract, or in tort, or pursuant to statute, including any claim by Executive for age or other types of discrimination under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, or any other federal, state, or local law or ordinance (the foregoing being sometimes hereinafter referred to as the "Waiver"). The Waiver does not apply to any rights or claims that may arise under the Age Discrimination in Employment Act after the date that Executive signs this Waiver. Executive acknowledges that he has read the Waiver and is voluntarily executing the Waiver and the Agreement. Executive acknowledges that he has been advised to consult with an attorney prior to signing the Waiver, and was given at least twenty-one (21) days within which to consider the Agreement, including the Waiver, before signing the Waiver and the Agreement. Executive also acknowledges that he understands that if he signs the Waiver, he may revoke the Waiver and the Agreement within seven (7) days after signing the Waiver. The Agreement and the Waiver will, therefore, not be effective until seven (7) days after the Waiver is signed. Any other provision hereof notwithstanding, the Waiver does not apply to any benefits provided in the Agreement or any benefits to which the Executive may be entitled under a Company-sponsored benefit plan. Executed: April 11, 2000     ATTEST: SEARS, ROEBUCK AND CO.     /s/John T. Sloan By: Anastasia D. Kelly Its: General Counsel           EXECUTIVE:       /s/Arthur C. Martinez

QuickLinks -- Click here to rapidly navigate through this document AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT     THIS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as of October 31, 2000, by and among Avocent International, Ltd., an Irish Single Member Company ("Employer") and wholly-owned subsidiary of Cybex Computer Products Corporation ("Cybex"), Avocent Corporation, a Delaware corporation, and Kieran MacSweeney (the "Employee"). RECITALS     WHEREAS, Avocent Corporation and its affiliates including Apex Inc. ("Apex") and Cybex (Avocent Corporation and its affiliates are collectively referred to in this Agreement as "Avocent") are engaged in the business of designing, manufacturing, and selling stand-alone console/KVM switching systems, console/KVM remote access products, and integrated server cabinet solutions for the client/server computing market;     WHEREAS, Employee and Employer entered into that certain Employment and Noncompetition Agreement dated July 1, 1999 (the "Original Employment Agreement"); and     WHEREAS, on March 8, 2000, Apex, Cybex, and Avocent Corporation entered into an Agreement and Plan of Reorganization dated March 8, 2000 (the "Reorganization Agreement"). Pursuant to the Reorganization Agreement, (i) Apex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Apex on July 1, 2000 (the "Apex Merger"), and upon the Apex Merger, Apex became a wholly-owned subsidiary of Avocent, and (ii) Cybex Acquisition Corp., a wholly-owned subsidiary of Avocent, merged with and into Cybex (the "Cybex Merger") on July 1, 2000, and upon the Cybex Merger, Cybex also became a wholly-owned subsidiary of Avocent; and     WHEREAS, for and in consideration of an increase in base pay, certain incentive bonus eligibility and awards, and an award of stock options that would not otherwise be made to Employee, Employer, Employee, and Avocent now wish to amend and restate the Original Employment Agreement with this Amended and Restated Employment and Noncompetition Agreement. AGREEMENT     THE PARTIES HERETO AGREE AS FOLLOWS:     1.  DUTIES.  During the term of this Agreement, the Employee agrees to be employed by Employer and to serve Avocent as President and Managing Director of Avocent International, Ltd, and Employee agrees to serve Avocent in such capacities. The Employee shall devote such of his business time, energy, and skill to the affairs of Avocent and Employer as shall be necessary to perform the duties of President and Managing Director of Avocent International, Ltd. The Employee shall report to the President of Cybex and Avocent Corporation and to the Boards of Directors of Cybex and Avocent Corporation, and at all times during the term of this Agreement, the Employee shall have powers and duties at least commensurate with his position as President and Managing Director of Avocent International, Ltd.     2.  TERM OF EMPLOYMENT.       2.1  DEFINITIONS.  For purposes of this Agreement the following terms shall have the following meanings:     (a) "TERMINATION FOR CAUSE" shall mean termination by the Employer of the Employee's employment by the Employer by reason of the Employee's willful dishonesty towards, fraud upon, or deliberate injury or attempted injury to, the Employer or Avocent or by reason of the Employee's willful material breach of this Agreement which has resulted in material injury to the Employer or Avocent. --------------------------------------------------------------------------------     (b) "TERMINATIONS OTHER THAN FOR CAUSE" shall mean termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than in a Termination for Cause) and shall include any constructive termination of the Employee's employment by reason of material breach of this Agreement by the Employer or Avocent, such constructive termination to be effective upon thirty (30) days written notice from the Employee to the Employer of such constructive termination.     (c) "VOLUNTARY TERMINATION" shall mean termination by the Employee of the Employee's employment by the Employer other than (i) constructive termination as described in subsection 2.1(b), (ii) "Termination Upon a Change in Control" as described in Section 2.1(e), and (iii) termination by reason of the Employee's disability or death as described in Sections 2.5 and 2.6.     (d) "TERMINATION UPON A CHANGE IN CONTROL" shall mean (i) a termination by the Employee of the Employee's employment with the Employer or services to Avocent within six (6) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement), or (ii) any termination by the Employer or Avocent Corporation of the Employee's employment by the Employer (other than a Termination for Cause) within eighteen (18) months following any "Change in Control" other than any "Change in Control" contemplated by or described in the Reorganization Agreement and/or resulting from the closing of the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger (as such terms are defined in the Reorganization Agreement).     (e) "CHANGE IN CONTROL" shall mean any one of the following events:      (i) Any person (other than Avocent) acquires beneficial ownership of Employer's, Cybex's, or Avocent Corporation's securities and is or thereby becomes a beneficial owner of securities entitling such person to exercise twenty-five percent (25%) or more of the combined voting power of Employer's, Cybex's, or Avocent Corporation's then outstanding stock. For purposes of this Agreement, "beneficial ownership" shall be determined in accordance with Regulation 13D under the Securities Exchange Act of 1934, or any similar successor regulation or rule; and the term "person" shall include any natural person, corporation, partnership, trust or association, or any group or combination thereof, whose ownership of Employer's, Cybex's, or Avocent Corporation's securities would be required to be reported under such Regulation 13D, or any similar successor regulation or rule.     (ii) Within any twenty-four (24) month period, the individuals who were Directors of Avocent Corporation at the beginning of any such period, together with any other Directors first elected as directors of Avocent Corporation pursuant to nominations approved or ratified by at least two-thirds (2/3) of the Directors in office immediately prior to any such election, cease to constitute a majority of the Board of Directors of Avocent Corporation.     (iii) Avocent Corporation's stockholders approve:     (1) any consolidation or merger of Avocent Corporation in which Avocent Corporation is not the continuing or surviving corporation or pursuant to which shares of Avocent Corporation common stock would be converted into cash, securities or other property, other than a merger or consolidation of Avocent 2 -------------------------------------------------------------------------------- Corporation in which the holders of Avocent Corporation's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Avocent Corporation. Notwithstanding subparagraphs (e)(iii)(1) and (e)(iii)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Avocent Corporation is owned, directly or indirectly, by a holding company, and the holders of Avocent Corporation's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     (iv) Cybex's stockholders approve:     (1) any consolidation or merger of Cybex in which Cybex is not the continuing or surviving corporation or pursuant to which shares of Cybex common stock would be converted into cash, securities or other property, other than a merger or consolidation of Cybex (including a merger of Cybex into Avocent Corporation) in which the holders of Cybex's common stock immediately prior to the merger or consolidation have substantially the same proportionate ownership and voting control of the surviving corporation immediately after the merger or consolidation; or     (2) any sale, lease, exchange, liquidation or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Cybex. Notwithstanding subparagraphs (e)(iv)(1) and (e)(iv)(2) above, the term "Change in Control" shall not include a consolidation, merger, or other reorganization if upon consummation of such transaction all of the outstanding voting stock of Cybex is owned, directly or indirectly, by a holding company, and the holders of Cybex's common stock immediately prior to the transaction have substantially the same proportionate ownership and voting control of such holding company after such transaction.     2.2  BASIC TERM.  The term of employment of the Employee by the Employer shall be for the period beginning immediately prior to the closing of the Cybex Merger (as described in the Reorganization Agreement) on July 1, 2000, and ending on December 31, 2004, unless terminated earlier pursuant to this Section 2. At any time before December 31, 2004, the Employer and the Employee may by mutual written agreement extend the Employee's employment under the terms of this Agreement for such additional periods as they may agree.     2.3  TERMINATION FOR CAUSE.  Termination For Cause may be effected by the Employer at any time during the term of this Agreement and shall be effected by thirty (30) days written notification to the Employee from the Boards of Directors of Employer and Avocent Corporation stating the reason for termination. Upon Termination For Cause, the Employee immediately shall be paid all accrued salary, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation. 3 --------------------------------------------------------------------------------     2.4  TERMINATION OTHER THAN FOR CAUSE.  Notwithstanding anything else in this Agreement, the Employer may effect a Termination Other Than For Cause at any time upon giving thirty (30) days written notice to the Employee of such termination. Upon any Termination Other Than For Cause, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.2, but no other compensation or reimbursement of any kind.     2.5  TERMINATION BY REASON OF DISABILITY.  If, during the term of this Agreement, the Employee, in the reasonable judgment of the Board of Directors of Avocent, has failed to perform his duties under this Agreement on account of illness or physical or mental incapacity, and such illness or incapacity continues for a period of more than six (6) consecutive months, the Employer shall have the right to terminate the Employee's employment hereunder by delivery of written notice to the Employee at any time after such six month period and payment to the Employee of all accrued salary, bonus compensation in an amount equal to the average annual bonus earned by the Employee as an employee of Avocent and its affiliates and predecessors in the two (2) years immediately preceding the date of termination, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, with the exception of medical and dental benefits which shall continue through the expiration of this Agreement, but the Employee shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.6  TERMINATION BY REASON OF DEATH.  In the event of the Employee's death during the term of this Agreement, the Employee's employment shall be deemed to have terminated as of the last day of the month during which his death occurs and the Employer shall pay to his estate or such beneficiaries as the Employee may from time to time designate all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but the Employee's estate shall not be paid any other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.7  VOLUNTARY TERMINATION.  Notwithstanding anything else in this Agreement, the Employee may effect a Voluntary Termination at any time upon giving thirty (30) days written notice to the Employer of such termination. In the event of a Voluntary Termination, the Employer shall immediately pay all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under 4 -------------------------------------------------------------------------------- such plans, accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, but no other compensation or reimbursement of any kind, including without limitation, severance compensation.     2.8  TERMINATION UPON A CHANGE IN CONTROL.  In the event of a Termination Upon a Change in Control, the Employee shall immediately be paid all accrued salary, bonus compensation to the extent earned, vested deferred compensation, if any (other than pension plan or profit sharing plan benefits which will be paid in accordance with the applicable plan), any benefits under any plans of Employer or Avocent in which the Employee is a participant to the full extent of the Employee's rights under such plans (including having the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated), accrued vacation pay and any appropriate business expenses incurred by the Employee in connection with his duties hereunder, all to the date of termination, and all severance compensation provided in Section 4.1, but no other compensation or reimbursement of any kind. Employee acknowledges and agrees that the transactions described in the Reorganization Agreement including, without limitation, the Cybex Merger, the Apex Merger, and the Merger do not constitute, and shall not be construed retroactively or otherwise as constituting, a "Change in Control" as defined in Section 2.1(e) and that any future termination of Employee's employment with Employer will not constitute a "Termination Upon A Change in Control" under Section 2.1(d) or this Section 2.8 unless there is a Change in Control as defined in Section 2.1(e) of this Agreement after the date of this Agreement.     3.  SALARY, BENEFITS AND BONUS COMPENSATION.       3.1  BASE SALARY.  Effective July 1, 2000, as payment for the services to be rendered by the Employee as provided in Section 1 and subject to the terms and conditions of Section 2, the Employer agrees to pay to the Employee a "Base Salary" at the rate of US$180,000 per annum, payable in equal bi-weekly installments. The Base Salary for each year will be converted, on January 1 of each year, to Irish Pounds based on the US$/IEP exchange rate existing on that date. The exchange rate on July 1, 2000 is 0.8518 IEP to the Dollar. Therefore, the annualized base salary for the period July 1, 2000 through December 31, 2000, shall be IEP 153,324. It is intended that the base salary will not be adversely affected from year to year due to the exchange rates. The Base Salary for each calendar year (or proration thereof) beginning January 1, 2001 shall be determined by the Board of Directors of Avocent Corporation upon a recommendation of the Compensation Committee of Avocent Corporation (the "Compensation Committee"), which shall authorize an increase in the Employee's Base Salary in an amount which, at a minimum, shall be equal to the cumulative cost-of-living increment on the Base Salary as reported in the "Consumer Price Index, Huntsville, Alabama, All Items," published by the U.S. Department of Labor (using July 1, 2000, as the base date for computation prorated for any partial year). The Employee's Base Salary shall be reviewed annually by the Board of Directors and the Compensation Committee of Avocent Corporation.     3.2  BONUSES.  The Employee shall be eligible to receive a bonus for each calendar year (or portion thereof) during the term of this Agreement and any extensions thereof, with the actual amount of any such bonus to be determined in the sole discretion of the Board of Directors of Avocent Corporation based upon its evaluation of the Employee's performance during such year. All such bonuses shall be payable during the last month of the fiscal year or within forty-five (45) days after the end of the fiscal year to which such bonus relates. All such bonuses shall be reviewed annually by the Compensation Committee of Avocent Corporation. 5 --------------------------------------------------------------------------------     3.3  ADDITIONAL BENEFITS.  During the term of this Agreement, the Employee shall be entitled to the following fringe benefits:     (a)  THE EMPLOYEE BENEFITS.  The Employee shall be eligible to participate in such of Avocent's benefits and deferred compensation plans as are now generally available or later made generally available to executive officers of or Avocent, including, without limitation, stock option plans, Section 401(k) plan (or Employer's approved equivalent pension plan), profit sharing plans, annual physical examinations, dental and medical plans, personal catastrophe and disability insurance, retirement plans and supplementary executive retirement plans, if any. For purposes of establishing the length of service under any benefit plans or programs of Cybex or Avocent, the Employee's employment with the Employer (or any successor) will be deemed to have commenced on the date that Employee first commenced employment with Cybex, which was October 29, 1996.     (b)  VACATION.  The Employee shall be entitled to vacation in accordance with the Avocent Corporation's vacation policy but in no event less than three weeks during each year of this Agreement.     (c)  LIFE INSURANCE.  For the term of this Agreement and any extensions thereof, the Employer shall at its expense procure and keep in effect term life insurance on the life of the Employee, payable to such beneficiaries as the Employee may from time to time designate, in an aggregate amount equal to the lesser of (i) three times the Employee's Base Salary or (ii) $500,000. Such policy shall be owned by the Employee or by any person or entity with an insurable interest in the life of the Employee.     (d)  REIMBURSEMENT FOR EXPENSES.  During the term of this Agreement, the Employer or Avocent Corporation shall reimburse the Employee for reasonable and properly documented out-of-pocket business and/or entertainment expenses incurred by the Employee in connection with his duties under this Agreement.     4.  SEVERANCE COMPENSATION.       4.1  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION UPON A CHANGE IN CONTROL.  In the event the Employee's employment is terminated in a Termination Upon a Change in Control, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of termination of this Agreement, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.1 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Upon a Change in Control, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.1. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate of 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated. The Employee shall be provided with medical plan benefits under any health plans of Avocent or Employer in which the Employee is a participant to the full extent of the Employee's rights under such plans for a period of 12 months 6 -------------------------------------------------------------------------------- from the date of termination of this Agreement; provided, however, that the benefits under any such plans of Employer or Avocent in which the Employee is a participant, including any such perquisites, shall cease upon employment by a new employer.     4.2  SEVERANCE COMPENSATION IN THE EVENT OF A TERMINATION OTHER THAN FOR CAUSE.  In the event the Employee's employment is terminated in a Termination Other Than for Cause, the Employee shall be paid as severance compensation his Base Salary (at the rate payable at the time of such termination) for a period of twelve (12) months from the date of such termination, on the dates specified in Section 3.1, and an amount equal to the average annual bonus earned by the Employee as an employee of Avocent Corporation and its affiliates and predecessors in the two (2) years immediately preceding the date of termination. Notwithstanding anything in this Section 4.2 to the contrary, the Employee may in the Employee's sole discretion, by delivery of a notice to the Employer within thirty (30) days following a Termination Other Than for Cause, elect to receive from the Employer a lump sum severance payment by bank cashier's check equal to the present value of the flow of cash payments that would otherwise be paid to the Employee pursuant to this Section 4.2. Such present value shall be determined as of the date of delivery of the notice of election by the Employee and shall be based on a discount rate equal to the interest rate on 90-day U.S. Treasury bills, as reported in The Wall Street Journal (or similar publication), on the date of delivery of the election notice. If the Employee elects to receive a lump sum severance payment, Avocent Corporation shall cause the Employer to make such payment to the Employee within ten (10) days following the date on which the Employee notifies the Employer of the Employee's election. The Employee shall also be entitled to have the vesting of any awards granted to the Employee under any Cybex or Avocent stock option plans fully accelerated.     4.3  NO SEVERANCE COMPENSATION UNDER OTHER TERMINATION.  In the event of a Voluntary Termination, Termination For Cause, termination by reason of the Employee's disability pursuant to Section 2.5, or termination by reason of the Employee's death pursuant to Section 2.6, the Employee or his estate shall not be paid any severance compensation.     5.  NON-COMPETITION OBLIGATIONS.  Unless waived or reduced by the Employer or Avocent, during the term of this Agreement and for a period of 12 months thereafter, the Employee will not, without the Employer's prior written consent, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any company or business, engage in any business activity in the United States, Canada, or Europe which is substantially similar to or in direct competition with any of the business activities of or services provided by the Employer at such time. Notwithstanding the foregoing, the ownership by the Employee of not more than five percent (5%) of the shares of stock of any corporation having a class of equity securities actively traded on a national securities exchange or on The Nasdaq Stock Market shall not be deemed, in and of itself, to violate the prohibitions of this Section 5.     6.  MISCELLANEOUS.       6.1  PAYMENT OBLIGATIONS.  If litigation after a Change in Control shall be brought to enforce or interpret any provision contained herein, the Employer and Avocent Corporation, to the extent permitted by applicable law and the Employer's and Avocent Corporation's Articles of Incorporation and Bylaws, each hereby indemnifies the Employee for the Employee's reasonable attorneys' fees and disbursements incurred in such litigation.     6.2  GUARANTEE.  Avocent Corporation hereby unconditional and irrevocable guarantees the payment obligations of the Employer under this Agreement, including, without limitation, the Employer's obligations under Section 6.1 hereof. 7 --------------------------------------------------------------------------------     6.3  WITHHOLDINGS.  All compensation and benefits to the Employee hereunder shall be reduced by all federal, state, local, and other withholdings and similar taxes and payments required by applicable law.     6.4  WAIVER.  The waiver of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or other provision hereof.     6.5  ENTIRE AGREEMENT; MODIFICATIONS.  Except as otherwise provided herein, this Agreement represents the entire understanding among the parties with respect to the subject matter hereof, and this Agreement supersedes any and all prior understandings, agreements, plans and negotiations, whether written or oral with respect to the subject matter hereof including without limitation, the Original Employment Agreement, and any understandings, agreements or obligations respecting any past or future compensation, bonuses, reimbursements or other payments to the Employee from the Employer or Avocent Corporation. In particular, Employee acknowledges and agrees that the terms and conditions of this Agreement (and not the Original Employment Agreement) shall apply to all stock option awards granted to Employee under any Cybex or Avocent stock option plan (including, without limitation, Employee's September 18, 2000 stock option award from Avocent Corporation). All modifications to the Agreement must be in writing and signed by the party against whom enforcement of such modification is sought.     6.6  NOTICES.  All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery or first class mail, certified or registered with return receipt requested, and shall be deemed to have been duly given upon hand delivery to an officer of the Employer or the Employee, as the case may be, or upon three (3) days after mailing to the respective persons named below: If to the Employer/Avocent: Avocent Corporation 4991 Corporate Drive Huntsville, AL 35805 Attn: Executive Vice President Copy to General Counsel   If to the Employee:   Mr. Kieran MacSweeney [                   ] [                   ] [                   ] [                   ]     Any party may change such party's address for notices by notice duly given pursuant to this Section 6.6.     6.7  HEADINGS.  The Section headings herein are intended for reference and shall not by themselves determine the construction or interpretation of this Agreement.     6.8  GOVERNING LAW; VENUE.  This Agreement shall be governed by and construed in accordance with the laws of the State of Alabama.     6.9  ARBITRATION.  Any controversy or claim arising out of or relating to this Agreement, or breach thereof, shall be settled by arbitration in Huntsville, Alabama, in accordance with the Rules of the American Arbitration Association, and judgment upon any proper award rendered by the arbitrators may be entered in any court having jurisdiction thereof. There shall be three (3) arbitrators, one (1) to be chosen directly by each party at will, and the third arbitrator to be selected by the two (2) arbitrators so chosen. To the extent permitted by the Rules of the 8 -------------------------------------------------------------------------------- American Arbitration Association, the selected arbitrators may grant equitable relief. Each party shall pay the fees of the arbitrator selected by him and of his own attorneys, and the expenses of his witnesses and all other expenses connected with the presentation of his case. The cost of the arbitration including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees and costs shall be borne equally by the parties.     6.10  SEVERABILITY.  If a court or other body of competent jurisdiction determines that any provision of this Agreement is excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, and all other provisions of this Agreement shall be deemed valid and enforceable to the extent possible.     6.11  SURVIVAL OF EMPLOYER'S OBLIGATIONS.  The Employer's and Avocent Corporation's obligations hereunder shall not be terminated by reason of any liquidation, dissolution, bankruptcy, cessation of business, or similar event relating to the Employer or Avocent Corporation. This Agreement shall not be terminated by any merger or consolidation or other reorganization of the Employer or Avocent Corporation. In the event any such merger, consolidation or reorganization shall be accomplished by transfer of stock or by transfer of assets or otherwise, the provisions of this Agreement shall be binding upon and inure to the benefit of the surviving or resulting corporation or person. This Agreement shall be binding upon and inure to the benefit of the executors, administrators, heirs, successors and assigns of the parties; provided, however, that except as herein expressly provided, this Agreement shall not be assignable either by the Employer (except to an affiliate of the Employer (including Avocent Corporation) in which event the Employer shall remain liable if the affiliate fails to meet any obligations to make payments or provide benefits or otherwise) or by the Employee.     6.12  COUNTERPARTS.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same Agreement.     6.13  INDEMNIFICATION.  In addition to any rights to indemnification to which the Employee is entitled to under the Employer's Articles of Incorporation and Bylaws, the Employer and Avocent Corporation shall indemnify the Employee at all times during and after the term of this Agreement to the maximum extent permitted under the corporation laws of the State of Delaware and any other applicable state law, and shall pay the Employee's expenses in defending any civil or criminal action, suit, or proceeding in advance of the final disposition of such action, suit, or proceeding, to the maximum extent permitted under such applicable state laws.     6.14  INDEMNIFICATION FOR SECTION 4999 EXCISE TAXES.  In the event that it shall be determined that any payment or other benefit paid by the Employer or Avocent Corporation to or for the benefit of the Employee under this Agreement or otherwise, but determined without regard to any additional payments required under this Amendment (the "Payments") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the "Excise Tax"), then the Employer and Avocent Corporation shall indemnify the Employee for such Excise Tax in accordance with the following:     (a) The Employee shall be entitled to receive an additional payment from the Employer and/or Avocent Corporation equal to (i) one hundred percent (100%) of any Excise Tax actually paid or finally or payable by the Employee in connection with the Payments, plus (ii) an additional payment in such amount that after all taxes, interest and penalties incurred in connection with all payments under this Section 2(a), the Employee retains an amount equal to one hundred percent (100%) of the Excise Tax.     (b) All determinations required to be made under this Section shall be made by the Avocent Corporation's primary independent public accounting firm, or any other nationally recognized accounting firm reasonably acceptable to the Avocent Corporation and the 9 -------------------------------------------------------------------------------- Employee (the "Accounting Firm"). Avocent Corporation shall cause the Accounting Firm to provide detailed supporting calculations of its determinations to the Employer and the Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Employer. For purposes of making the calculations required by this Section, the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Internal Revenue Code, provided the Accounting Firm's determinations must be made with substantial authority (within the meaning of Section 6662 of the Internal Revenue Code). The payments to which the Employee is entitled pursuant to this Section shall be paid by the Employer and/or Avocent Corporation to the Employee in cash and in full not later than thirty (30) calendar days following the date the Employee becomes subject to the Excise Tax.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     AVOCENT INTERNATIONAL, LTD.:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Director --------------------------------------------------------------------------------           AVOCENT CORPORATION:           By:   /s/ DOYLE C. WEEKS    --------------------------------------------------------------------------------     Its: Executive Vice President --------------------------------------------------------------------------------           EMPLOYEE:           /s/ KIERAN MACSWEENEY    -------------------------------------------------------------------------------- Kieran MacSweeney 10 -------------------------------------------------------------------------------- QUICKLINKS AMENDED AND RESTATED EMPLOYMENT AND NONCOMPETITION AGREEMENT RECITALS AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.40 Execution copy AMENDMENT NO. 1     AMENDMENT NO. 1 dated as of October 30, 2000 to the Credit Agreement referred to below, between BIRCH TELECOM, INC., a corporation duly organized and validly existing under the laws of the State of Delaware (the "Company"); BIRCH TELECOM fINANCE, INC., a Delaware corporation duly organized and validly existing under the laws of the State of Delaware (the "Borrower"); each of the lenders that is a signatory hereto (individually, a "Lender" and, collectively, the "Lenders"); and LEHMAN COMMERCIAL PAPER INC., as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative Agent").     The Company, the Borrower, the Lenders and the Administrative Agent are parties to an Amended and Restated Credit Agreement dated as of February 2, 2000 (as heretofore modified and supplemented and in effect on the date hereof, the "Credit Agreement"), providing, subject to the terms and conditions thereof, for extensions of credit to be made by said Lenders to the Borrower in an original aggregate principal or face amount not exceeding $125,000,000. The Borrower, the Company, the Subsidiary Guarantors, the Lenders and the Administrative Agent wish to increase the aggregate amount of the Commitments under the Existing Credit Agreement from $125,000,000 to $195,000,000, and to amend the Existing Credit Agreement in certain other respects, and accordingly, the parties hereto hereby agree as follows:     Section 1.  Definitions.  Except as otherwise defined in this Amendment No. 1, terms defined in the Credit Agreement are used herein as defined therein.     Section 2.  Amendments.  Subject to the satisfaction of the conditions precedent specified in Section 4 of this Amendment No. 1, but effective as of the date hereof, the Credit Agreement shall be amended as follows:     2.1. References in the Credit Agreement (including references to the Credit Agreement as amended hereby) to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Credit Agreement as amended hereby.     2.2.  Definitions.  Section 1.01 of the Credit Agreement shall be amended by adding the following new definitions (to the extent not already included in said Section 1.01) and inserting the same in the appropriate alphabetical locations and amending in their entirety the following definitions (to the extent already included in said Section 1.01), as follows:     "Aggregate Exposure": with respect to any Lender at any time, an amount equal to the sum of (i) the amount of such Lender's Term Loan Commitment then in effect or, if the Term Loan Commitments have been terminated, the aggregate then unpaid principal amount of such Lender's Term Loans, (ii) the amount of such Lender's Revolving Credit Commitment then in effect or, if the Revolving Credit Commitments have been terminated, the amount of such Lender's Revolving Extensions of Credit then outstanding and (iii) the amount of such Lender's Incremental Term Loan Commitment, if any, then in effect or, if such Incremental Term Loan Commitment has been terminated, the amount of such Lender's Incremental Loans then outstanding.     "Amendment No. 1": Amendment No. 1 dated as of October 30, 2000 to this Agreement.     "Amendment No. 1 Effective Date": the effective date of Amendment No. 1.     "Amendment No. 1 Lender Addendum": with respect to any Lender which is increasing its Revolving Credit Commitment and/or agreeing to a Tranche A-1 Term Loan Commitment as of the Amendment No. 1 Effective Date, a Lender Addendum, substantially in the form of -------------------------------------------------------------------------------- Exhibit H (with such changes thereto as the Administrative Agent shall require), to be executed and delivered by such Lender pursuant to Section 4.1 of Amendment No. 1.     "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit.     "Class": when used in reference to any Loans, refers to whether such Loan is a Tranche A Term Loan, a Tranche A-1 Term Loan, a Revolving Credit Loan, a Swing Line Loan or an Incremental Term Loan and, when used in reference to any Commitment, refers to whether such Commitment is a Term Loan Commitment, a Revolving Credit Commitment or an Incremental Term Loan Facility.     "Facility": each of (a) the Term Loan Commitments and the Term Loans made thereunder (the "Term Loan Facility"), (b) the Revolving Credit Commitments and the extensions of credit made thereunder (the "Revolving Credit Facility") and (c) the Incremental Term Loan Commitments and the Incremental Term Loans made thereunder (if any) (the "Incremental Term Loan Facility").     "Incremental Term Loan": as defined in Section 2.25(b).     "Incremental Term Loan Activation Date": the date designated as such in the Incremental Term Loan Activation Notice.     "Incremental Term Loan Activation Notice": a notice substantially in the form of Exhibit J.     "Incremental Term Loan Commitment": as to any Lender, the obligation of such Lender, if any, to make one or more Incremental Term Loans on and after the relevant Incremental Term Loan Activation Date in an aggregate principal amount not to exceed the amount specified in the related Incremental Term Loan Activation Notice under the heading "Incremental Term Loan Commitment" or in the Assignment and Acceptance pursuant to which such Lender became a party hereto. The aggregate principal amount of the Incremental Term Loan Commitments and the Incremental Term Loans as of the Amendment No. 1 Effective Date is zero. The maximum principal amount of Incremental Term Loans that may be made hereunder is $100,000,000.     "Incremental Term Loan Commitment Period": as defined in Section 2.25(a).     "Incremental Term Loan Commitment Termination Date": December 31, 2001.     "Incremental Term Loan Facility": as defined in the definition of "Facility" in this Section.     "Incremental Term Loan Lender": each Lender which has an Incremental Term Loan Commitment or is the holder of an Incremental Term Loan.     "Incremental Term Note": any Note evidencing a Lender's Term Loan Commitment and Term Loans of any Class, substantially in the form of Exhibit F-4.     "Issuing Lender": any Lender who consents to be designated as such by the Administrative Agent and the Borrower, in its capacity as issuer of any Letter of Credit.     "L/C Commitment": $10,000,000.     "L/C Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Credit Commitment Period.     "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 2A.5. 2 --------------------------------------------------------------------------------     "L/C Participants": the collective reference to all the Revolving Credit Lenders other than the Issuing Lender.     "Letters of Credit": as defined in Section 2A.1.     "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Lender pursuant to Section 2A.5 for amounts drawn under Letters of Credit.     "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by the Company or any of its Subsidiaries in connection therewith which are not applied to prepay the Term Loans or the Incremental Term Loans or reduce the Commitments pursuant to Section 2.12(b) as a result of the delivery of a Reinvestment Notice.     "Required Lenders": at any time, the holders of more than 50% of the sum of (i) the Term Loan Commitments then in effect or, if the Term Loan Commitments have been terminated, the aggregate unpaid principal amount of the Term Loans then outstanding, (ii) the Total Revolving Credit Commitments then in effect or, if the Revolving Credit Commitments have been terminated, the Total Revolving Extensions of Credit then outstanding and (iii) the Incremental Term Loan Commitments (if any) then in effect, or if such Incremental Term Loan Commitments have been terminated, the aggregate unpaid amount of the Incremental Term Loans then outstanding (if any).     "Revolving Credit Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving Credit Loans and participate in Swing Line Loans and Letters of Credit, in an aggregate principal amount not to exceed the amount set forth under the heading "Revolving Credit Commitment" opposite such Lender's name on Schedule I to the Lender Addendum (or the Amendment No. 1 Lender Addendum, as the case may be) delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The aggregate amount of the Total Revolving Credit Commitments is $50,000,000 as of the Amendment No. 1 Effective Date.     "Revolving Credit Termination Date": the earlier of (a) the Scheduled Revolving Credit Termination Date and (b) the date on which the Term Loans and the Incremental Term Loans shall be paid in full.     "Revolving Extensions of Credit": as to any Revolving Credit Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, (b) such Lender's Revolving Credit Percentage of the L/C Obligations then outstanding and (c) such Lender's Revolving Credit Percentage of the aggregate principal amount of Swing Line Loans then outstanding.     "Stage 1": the period prior to September 30, 2002.     "Stage 2": the period from and after September 30, 2002.     "Term Loan Commitments": the collective reference to (a) the Term Loan Commitments under (and as defined in) this Agreement (as in effect immediately prior to the Amendment No. 1 Effective Date) in an original aggregate principal amount of $100,000,000 and (b) the Tranche A-1 Term Loan Commitments.     "Term Loans": the collective reference to (a) the term loans made pursuant to Section 2.1(a) hereof (as in effect immediately prior to the Amendment No. 1 Effective Date) and outstanding on the Amendment No. 1 Effective Date and (b) the Tranche A-1 Term Loans.     "Tranche A Term Loans": as defined in Section 2.1(a). 3 --------------------------------------------------------------------------------     "Tranche A-1 Term Loan Commitment": as to any Lender, the obligation of such Lender, if any, to make or continue one or more Tranche A-1 Term Loans to the Borrower hereunder in an aggregate principal amount not to exceed the amount set forth under the heading "Tranche A-1 Term Loan Commitment" opposite such Lender's name on Schedule I to the Amendment No. 1 Lender Addendum delivered by such Lender, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The aggregate principal amount of the Tranche A-1 Term Loan Commitments is $45,000,000 as of the Amendment No. 1 Effective Date.     "Tranche A-1 Term Loan Commitment Period": the period from and including the Amendment No. 1 Effective Date to the Tranche A-1 Term Loan Commitment Termination Date.     "Tranche A-1 Term Loan Commitment Termination Date": October 5, 2001.     "Tranche A-1 Term Loans": as defined in Section 2.1(a).     2.3. The definition of "Consolidated EBITDA" in Section 1.01 of the Credit Agreement is hereby amended by deleting the word "and" immediately preceding clause (h) thereof and inserting, immediately after the words "acquisitions permitted under Section 6.7(j)" appearing therein, the word "and" and a new clause (i) to read as follows:     "(i) any charges reflecting costs or expenses in an aggregate amount of up to but not exceeding $1,500,000 incurred in the year 2000 in connection with the proposed initial public offering of equity securities in the Company"     2.4. The definition of "Excess Cash Flow" in Section 1.01 of the Credit Agreement is hereby amended by inserting, immediately following each reference to the "Term Loans" in clauses (b)(iii) and (b)(iv) thereof, the words "and the Incremental Term Loans".     2.5. The definition of "Facility Usage" in Section 1.01 of the Credit Agreement is hereby amended by inserting, immediately before each reference to the "Term Loan Commitment Termination Date" thereof, the words "Tranche A-1".     2.6. The definition of "Obligations" in Section 1.01 of the Credit Agreement is hereby amended by (i) inserting the words "Reimbursement Obligations and" immediately before the words "interest accruing" appearing therein and (ii) inserting the words "the Letters of Credit," immediately before the words "any Hedge Agreement" appearing therein.     2.7. Term Loan Commitments.  Section 2.1 of the Credit Agreement is hereby amended as follows:     A.  Section 2.1(a) is hereby amended in its entirety to read as follows:     "(a) Subject to the terms and conditions hereof, each Term Loan Lender which has a Tranche A-1 Term Loan Commitment severally agrees to make term loans to the Borrower during the Tranche A-1 Term Loan Commitment Period in an aggregate principal amount not exceeding such Tranche A-1 Term Loan Commitment (the "Tranche A-1 Term Loans"). The Term Loans (including the Tranche A-1 Term Loans) may from time to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.13."     B.  Section 2.1(b) is hereby amended by inserting the words "Tranche A-1" immediately before the words "Term Loan Commitment Termination Date" appearing therein. 4 --------------------------------------------------------------------------------     2.8.  Repayment of Term Loans.  Section 2.3 of the Credit Agreement is hereby amended by inserting the words "Tranche A-1" immediately before the words "Term Loan Commitment Termination Date" appearing therein.     2.9. Section 2.4(a) of the Credit Agreement is hereby amended by inserting, immediately before the words "the aggregate principal amount" appearing in the first sentence thereof, the words "the sum of (i) the L/C Obligations then outstanding and (ii)"     2.10.  Revolving Credit Commitments.  Section 2.4(c) of the Credit Agreement is hereby amended in its entirety to read as follows:     "(c) The Total Revolving Credit Commitments shall be automatically reduced on each Commitment Reduction Date specified below in an aggregate amount equal to the percentage set forth below opposite such day: Commitment Reduction Date Falling on or Nearest to: --------------------------------------------------------------------------------   Commitment Reduction Percentage --------------------------------------------------------------------------------   March 31, 2003   2.5 % June 30, 2003   2.5 % September 30, 2003   2.5 % December 31, 2003   2.5 %   March 31, 2004       2.5   % June 30, 2004   2.5 % September 30, 2004   2.5 % December 31, 2004   2.5 %   March 31, 2005       2.5   % June 30, 2005   2.5 % September 30, 2005   2.5 % December 31, 2005   2.5 %   March 31, 2006       17.5   % June 30, 2006   17.5 % September 30, 2006   17.5 % December 31, 2006   17.5 % ; provided that if upon any date after giving effect to such reduction the Total Revolving Extensions of Credit shall exceed the amount of the Total Revolving Credit Commitments as so reduced, the Borrowers shall prepay Revolving Credit Loans and/or Swing Line Loans, if any, to the extent of such excess (such prepayment to be applied, first, to Base Rate Loans and, second, on Eurodollar Loans).     2.11.  Commitment Fees, etc.  Section 2.9(a) of the Credit Agreement is hereby amended by replacing the words "(in the case of the Term Lenders) the Term Loan Commitment Termination Date" with the following: "(in the case of the Term Lenders holding Tranche A-1 Term Loan Commitments) the Tranche A-1 Term Loan Commitment Termination Date".     2.12.  Optional Prepayments.  The penultimate sentence of Section 2.11 of the Credit Agreement is hereby amended in its entirety to read as follows:     "Partial prepayments of Revolving Credit Loans, Term Loans and the Incremental Term Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof." 5 --------------------------------------------------------------------------------     2.13.  Mandatory Prepayments.  Section 2.12 of the Credit Agreement is hereby amended as follows:     A.  Section 2.12(a) is hereby amended by inserting the words "and the Incremental Term Loans" immediately after the words "Term Loans" appearing therein.     B.  Section 2.12(b) is hereby amended by inserting the words "and the Incremental Term Loans" immediately after the words "Term Loans" appearing therein.     C.  Section 2.12(c) is hereby amended in its entirety to read as follows:     "(c) Amounts to be applied in connection with prepayments and Commitment reductions made pursuant to this Section shall be applied, first, to reduce permanently the unused portion (if any) of Term Loan Commitments, second, to the prepayment of the Term Loans and the Incremental Term Loans and, third, to reduce permanently the Revolving Credit Commitments. Any such reduction of the Revolving Credit Commitments shall be accompanied by prepayment of the Revolving Credit Loans and/or Swing Line Loans to the extent, if any, that the Total Revolving Extensions of Credit exceed the amount of the Total Revolving Credit Commitments as so reduced; provided that if the aggregate principal amount of Revolving Credit Loans and Swing Line Loans then outstanding is less than the amount of such excess (because L/C Obligations constitute a portion thereof), the Borrower shall, to the extent of the balance of such excess, replace outstanding Letters of Credit and/or deposit an amount in cash in a cash collateral account established with the Administrative Agent for the benefit of the Lenders on terms and conditions satisfactory to the Administrative Agent. The application of any prepayment pursuant to this Section shall be made, first, to Base Rate Loans and, second, to Eurodollar Loans. Each prepayment of the Loans under this Section (except in the case of Revolving Credit Loans that are Base Rate Loans and Swing Line Loans) shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid."     2.14. Section 2.15(c) of the Credit Agreement is hereby amended in its entirety to read as follows:     "(a) (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to Base Rate Loans under the Revolving Credit Facility plus 2%, and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to Base Rate Loans under the relevant Facility plus 2%, in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (after as well as before judgment)." 6 --------------------------------------------------------------------------------     2.15.  Pro Rata Treatment and Payments.  Section 2.18 of the Credit Agreement is hereby amended as follows:     A.  Section 2.18(a) is hereby amended by (i) inserting the terms ", and each payment in respect of Reimbursement Obligations," immediately after the words "fees payable hereunder" appearing therein and (ii) by adding the following language at the end thereof:     "Notwithstanding anything herein to the contrary, any borrowing in respect of an Incremental Term Loan Commitment of any Incremental Term Loan Lender shall be made only from such Incremental Term Loan Lender and any payment in respect of principal of any Incremental Term Loan held by any Incremental Term Loan Lender (including principal, interest, commitment fee or other amounts) shall be applied only to the obligations of such Incremental Term Loan Lender in respect of such Incremental Term Loan."     B.  Section 2.18(b) is hereby amended in its entirety to read as follows:     "(b) Each optional prepayment pursuant to Section 2.11 to be applied to the Term Loans and the Incremental Term Loans shall be allocated between the Term Loan Facility and the Incremental Term Loan Facility pro rata according to the respective outstanding principal amounts of Loans under such Facilities, and shall be applied to the installments of such Loans pro rata based on the remaining outstanding principal amount of such installments."     C.  Section 2.18(c) is hereby amended in its entirety to read as follows:     "(c) Each mandatory prepayment to be applied to the Term Loans and the Incremental Term Loans pursuant to Section 2.12 shall be allocated between the Term Loan Facility and the Incremental Term Loan Facility pro rata according to the respective outstanding principal amounts of Loans under such Facilities and shall be applied to the installments of such Loans pro rata based on the remaining outstanding principal amount of such installments. Amounts prepaid on account of the Term Loans and the Incremental Term Loan Facility may not be reborrowed.     2.16.Section 2.19 of the Credit Agreement is hereby amended as follows:     A.  Section 2.19(a)(i) is hereby amended by inserting the terms ", any Letter of Credit, any Application" immediately after the words "with respect to this Agreement" appearing therein.     B.  The penultimate sentence of Section 2.19(a) is hereby amended by inserting the words "or issuing or participating in Letters of Credit" immediately after the words "maintaining Eurodollar Loans" appearing therein.     C.  Section 2.19(b) is hereby amended by inserting the words "or under or in respect of any Letter of Credit" immediately after the words "its obligations hereunder" appearing therein.     2.17.  Incremental Loans.  A new Section 2.25 is hereby added to the Credit Agreement to read as follows:     "2.25  Incremental Loans.  (a) The Borrower and any Lender (including any Person that was not theretofore a Lender selected by the Borrower and reasonably satisfactory to the Administrative Agent (each a "New Lender")) may, at any time during the period from and including the Amendment No. 1 Effective Date to the Incremental Term Loan Commitment Termination Date, agree that such Lender shall become an Incremental Term Lender by executing and delivering to the Administrative Agent an Incremental Term Loan Activation 7 -------------------------------------------------------------------------------- Notice specifying (i) the respective Incremental Term Loan Commitment of such Lender, (ii) the Incremental Term Loan Activation Date, (iii) the rate of commitment fee, if any, payable by the Borrower in respect of such Incremental Term Loan Commitment, (iv) the Applicable Margin that will apply to the Incremental Term Loans made under such Incremental Term Loan Commitment, (v) the period of availability of such Incremental Term Loan Commitment (which shall in no event end later than the Incremental Term Loan Commitment Termination Date) (the "Incremental Term Loan Commitment Period") and (vi) the principal installments (if any) payable in respect of any Incremental Term Loans made thereunder and the final maturity date of such Incremental Loans, which shall be scheduled to be paid only on dates that are also Principal Payment Dates; provided that, with respect to each Incremental Term Loan Commitment and Incremental Term Loan, the terms referred to in (iii) through (vi) above shall be subject to the consent of the Administrative Agent (which consent shall not be unreasonably withheld). Upon execution and delivery of such Incremental Term Loan Activation Notice (and the consent of the Administrative Agent thereto, to the extent required by the proviso to the immediately preceding sentence) such Lender shall have an Incremental Term Loan Commitment in the amount specified therein and, in the case of any New Lender, shall be a "Lender" party to this Agreement and, to the extent provided in such Incremental Term Loan Activation Notice, have the rights and obligations of a Lender hereunder.     (b) Subject to the terms and conditions hereof, each Incremental Term Loan Lender severally agrees to make term loans (the "Incremental Term Loans") to the Borrower during the relevant Incremental Term Loan Commitment Period in an aggregate amount not exceeding the amount of the Incremental Term Loan Commitment of such Lender. In addition, the Incremental Term Loans may from time to time be Eurodollar Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.25(d) and 2.13.     (c) Any unused portion of any Incremental Term loan Commitment shall automatically terminate at 5:00 p.m. (New York City time) on the Incremental Term Loan Commitment Termination Date.     (d) The Borrower may borrow under any Incremental Term Loan Commitment from the relevant Incremental Term Loan Lender during the relevant Incremental Term Loan Commitment Period on any Business Day; provided that the Borrower shall give the Administrative Agent irrevocable notice (by delivering to the Administrative Agent a Notice of Borrowing, which Notice of Borrowing must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans), specifying (i) the identity of the Incremental Term Lender, (ii) the amount and Type of Incremental Term Loans to be borrowed, (iii) the requested Borrowing Date and (iv) in the case of Eurodollar Loans, the length of the initial Interest Period therefor. Each borrowing under the Incremental Term Loan Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then unused amount of such Incremental Term Loan Commitment is less than $1,000,000, such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $1,000,000 in excess thereof. Upon receipt of such notice the Administrative Agent shall promptly notify the relevant Incremental Term Loan Lender thereof. Such Incremental Term Lender will make the amount of each borrowing available to the Administrative Agent for the account of the Borrower at the Funding Officer prior to 12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. 8 -------------------------------------------------------------------------------- Such borrowing will then be made available to the Borrower, upon its instructions, by the Administrative Agent in like funds as received by the Administrative Agent.     (e) The Incremental Term Loan(s) of each Incremental Term Loan Lender shall be repaid in such number of quarterly installments and/or on such final maturity date, as shall be specified in the relevant Incremental Term Loan Activation Notice; provided that in no event shall the percentage of the original principal amount of such Incremental Term Loan payable on any Principal Payment Date exceed the percentage set forth below opposite such date: Principal Payment Date Falling on or Nearest to --------------------------------------------------------------------------------   Percentage --------------------------------------------------------------------------------   March 31, 2003   2.5 % June 30, 2003   2.5 % September 30, 2003   2.5 % December 31, 2003   2.5 % March 31, 2004   5.0 % June 30, 2004   5.0 % September 30, 2004   5.0 % December 31, 2004   5.0 % March 31, 2005   7.5 % June 30, 2005   7.5 % September 30, 2005   7.5 % December 31, 2005   7.5 % March 31, 2006   10.0 % June 30, 2006   10.0 % September 30, 2006   10.0 % December 31, 2006   10.0 %     Notwithstanding anything herein to the contrary, no scheduled principal payments in respect of any Incremental Term Loan may be made prior to March 31, 2003.     (f)  Nothing in this Agreement shall be construed to obligate any Lender to provide any Incremental Term Loan Commitment."     2.18. A new SECTION 2A entitled "LETTERS OF CREDIT" is hereby added to the Credit Agreement to read as follows:     "2A.1  L/C Commitment.  Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Revolving Credit Lenders set forth in Section 2A.4(a), agrees to issue standby letters of credit ("Letters of Credit") for the account of the Borrower or any Subsidiary Guarantor on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Available Commitments as to the Revolving Credit Lenders would be less than zero. Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date which is five Business Days prior to the Revolving Credit Termination Date; provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above)." 9 --------------------------------------------------------------------------------     2A.2  Procedure for Issuance of Letter of Credit.  The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. The Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit (including the amount thereof).     2A.3  Fees and Other Charges.  (a) The Borrower will pay a fee in respect of all outstanding Letters of Credit on the aggregate drawable amount of all such outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurodollar Loans under the Revolving Credit Facility, in each case shared ratably among the Revolving Credit Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. In addition, the Borrower shall pay to the Issuing Lender for its own account a fronting fee on the aggregate drawable amount of all outstanding Letters of Credit of 0.25% per annum, payable quarterly in arrears on each L/C Fee Payment Date after the issuance date.     (b) In addition to the foregoing fees, the Borrower shall pay or reimburse the Issuing Lender, on demand, for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit.     2A.4  L/C Participations.  (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/ C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Percentage in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's Revolving Credit Percentage of the amount of such draft, or any part thereof, which is not so reimbursed.     (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 2A.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date 10 -------------------------------------------------------------------------------- such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 2A.4(a) is not made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans under the Revolving Credit Facility. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.     (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 2A.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it.     2A.5  Reimbursement Obligation of the Borrower.  The Borrower agrees to reimburse the Issuing Lender on each date on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment. Each such payment shall be made to the Issuing Lender at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Section from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate set forth in (i) until the second Business Day following the date of the applicable drawing, Section 2.15(b) and (ii) thereafter, Section 2.15(c). Each drawing under any Letter of Credit shall (unless an event of the type described in clause (i) or (ii) of Section 7(f) shall have occurred and be continuing with respect to the Borrower, in which case the procedures specified in Section 2A.4 for funding by L/C Participants shall apply) constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to Section 2.5 of Base Rate Loans (or, at the option of the Administrative Agent and the Swing Line Lender in their sole discretion, a borrowing pursuant to Section 2.7 of Swing Line Loans) in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing.     2A.6  Obligations Absolute.  The Borrower's obligations under this Section 2A shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 2A.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing 11 -------------------------------------------------------------------------------- Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Issuing Lender. The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender to the Borrower.     2A.7  Letter of Credit Payments.  If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit.     2A.8  Applications.  To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 2A, the provisions of this Section 2A shall apply.     2A.9  Amendments and Waivers.  The consent of the Issuing Lender shall be required to (i) forgive any principal amount or extend the final scheduled date of maturity of any Reimbursement Obligation, extend the expiration of any Letter of Credit beyond the Revolving Credit Termination Date, reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or (ii) amend, modify or waive any provision of this Section 2A."     2.19.  The introductory sentence to Section 3 of the Credit Agreement is hereby amended by inserting the words "and issue or participate in the Letters of Credit" immediately after the word "Loans" appearing therein.     2.20.  Section 3.5 of the Credit Agreement is hereby amended by inserting the terms ", the issuance of Letters of Credit," immediately after the words "the other Credit Documents" appearing therein.     2.21.  Purpose of Loans.  Section 3.15 of the Credit Agreement is hereby amended in its entirety to read as follows:     "3.15  Purpose of Loans.  The proceeds of the Term Loans, the Revolving Extensions of Credit and the Incremental Loans shall be used to finance or reimburse the cost (including the cost of design, development, acquisition, construction, installation, improvement, transportation or integration) of telecommunications equipment, inventory and/or network assets and back office systems for the business of the Subsidiaries of the Company and for purposes reasonably related thereto. The proceeds of the Revolving Extensions of Credit shall also be used to finance the general corporate purposes of the Subsidiaries of the Company."     2.22.  The last sentence of Section 4.2 of the Credit Agreement is hereby amended by inserting the words "and issuance of a Letter of Credit on behalf of" after the words "Each borrowing by" appearing therein. 12 --------------------------------------------------------------------------------     2.23.  Conditions to Each Term Loan and Each Incremental Loan.  Section 4.3 of the Credit Agreement is hereby amended in its entirety as follows:     "4.3  Conditions to Each Incremental Term Loan.  The obligations of each Incremental Term Loan Lender to make an Incremental Term Loan requested to be made by it pursuant to its Incremental Term Loan Commitment on any date, are subject to the satisfaction of the conditions precedent that on or prior to the date of such Incremental Term Loan:     (a) The Company shall have received at least $105,000,000 in cash from the issuance of equity of the Company after the Amendment No. 1 Effective Date.     (b) The Tranche A-1 Term Loans in an aggregate principal amount of $45,000,000 shall have been made."     2.24.  The introductory sentence to Section 5 of the Credit Agreement is hereby amended by inserting the terms ", any Letter of Credit remains outstanding" immediately after the words "Commitments remain in effect" appearing therein.     2.25.  The introductory sentence to Section 6 of the Credit Agreement is hereby amended by inserting the terms ", any Letter of Credit remains outstanding" immediately after the words "Commitments remain in effect" appearing therein.     2.26.  Financial Condition Covenants.  Section 6.1 of the Credit Agreement is hereby amended in its entirety to read as follows:     "6.1  Financial Condition Covenants.       I.  Stage 1 Financial Covenants.  During Stage 1:     (a)  Revenues.  Permit the Revenues for any fiscal quarter set forth below to be less than the amount set forth below opposite such fiscal quarter: Fiscal Quarter Ending --------------------------------------------------------------------------------   Minimum Revenues -------------------------------------------------------------------------------- September 30, 2000   $ 27,200,000 December 31, 2000   $ 33,300,000   March 31, 2001       $   38,000,000 June 30, 2001   $ 43,400,000 September 30, 2001   $ 47,700,000 December 31, 2001   $ 55,800,000   March 31, 2002       $   63,000,000 June 30, 2002   $ 71,900,000 13 --------------------------------------------------------------------------------     (b)  Consolidated EBITDA.  Permit Consolidated EBITDA for any fiscal quarter set forth below to be less than the amount (or, if the amount specified below is a negative number, to be greater than such amount) set forth below opposite such fiscal quarter: Fiscal Quarter Ending --------------------------------------------------------------------------------   EBITDA --------------------------------------------------------------------------------   September 30, 2000   $ (31,500,000 ) December 31, 2000   $ (34,500,000 )   March 31, 2001       $   (33,500,000   ) June, 30, 2001   $ (16,000,000 ) September 30, 2001   $ (12,000,000 ) December 31, 2001   $ (8,000,000 )   March 31, 2002       $   (3,500,000   ) June, 30, 2002   $ 1,000,000       (c)  Lines.  Permit the aggregate number of Lines as at the last day of any fiscal quarter set forth below to be less than the amount set forth below opposite such fiscal quarter: Fiscal Quarter Ending --------------------------------------------------------------------------------   Minimum Number of Lines -------------------------------------------------------------------------------- September 30, 2000   180,600 December 31, 2000   222,000   March 31, 2001       264,000 June, 30, 2001   310,000 September 30, 2001   340,000 December 31, 2001   390,000   March 31, 2002       440,000 June, 30, 2002   490,000     (d)  Senior Secured Debt to Total Capitalization Ratio.  Permit, as at the last day of any fiscal quarter ending during Stage 1, the ratio of (a) Senior Secured Debt on such day to (b) Total Capitalization on such day to exceed 0.50 to 1. 14 --------------------------------------------------------------------------------     II.  Stage 2 Financial Covenants.  During Stage 2:     (a)  Senior Leverage Ratio.  Permit the Senior Leverage Ratio as at the last day of any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter: Fiscal Quarter Ending --------------------------------------------------------------------------------   Senior Leverage Ratio -------------------------------------------------------------------------------- September 30, 2002   6.0 to 1 December 31, 2002   5.0 to 1   March 31, 2003       4.0 to 1 June 30, 2003   4.0 to 1 September 30, 2003   3.5 to 1 December 31, 2003   3.0 to 1   March 31, 2004       2.5 to 1 June 30, 2004   2.0 to 1 September 30, 2004   2.0 to 1 December 31, 2004   2.0 to 1   March 31, 2005       2.0 to 1 June 30, 2005   2.0 to 1 September 30, 2005   2.0 to 1 December 31, 2005   2.0 to 1   March 31, 2006       2.0 to 1 June 30, 2006   2.0 to 1 September 30, 2006   2.0 to 1 December 31, 2006   2.0 to 1 15 --------------------------------------------------------------------------------     (b)  Total Leverage Ratio.  Permit the Total Leverage Ratio as at the last day of any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter: Fiscal Quarter Ending --------------------------------------------------------------------------------   Total Leverage Ratio -------------------------------------------------------------------------------- September 30, 2002   9.0 to 1 December 31, 2002   9.0 to 1   March 31, 2003       8.0 to 1 June 30, 2003   8.0 to 1 September 30, 2003   8.0 to 1 December 31, 2003   8.0 to 1   March 31, 2004       7.0 to 1 June 30, 2004   7.0 to 1 September 30, 2004   7.0 to 1 December 31, 2004   7.0 to 1   March 31, 2005       6.0 to 1 June 30, 2005   6.0 to 1 September 30, 2005   6.0 to 1 December 31, 2005   6.0 to 1   March 31, 2006       6.0 to 1 June 30, 2006   6.0 to 1 September 30, 2006   6.0 to 1 December 31, 2006   6.0 to 1 16 --------------------------------------------------------------------------------     (c)  Interest Coverage Ratio.  Permit the Interest Coverage Ratio as at the last day of any fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter: Fiscal Quarter Ending --------------------------------------------------------------------------------   Interest Coverage Ratio -------------------------------------------------------------------------------- September 30, 2002   1.00 to 1 December 31, 2002   1.25 to 1   March 31, 2003       1.50 to 1 June 30, 2003   1.75 to 1 September 30, 2003   2.00 to 1 December 31, 2003   2.25 to 1   March 31, 2004       2.50 to 1 June 30, 2004   2.75 to 1 September 30, 2004   2.75 to 1 December 31, 2004   2.75 to 1   March 31, 2005       2.75 to 1 June 30, 2005   2.75 to 1 September 30, 2005   2.75 to 1 December 31, 2005   2.75 to 1   March 31, 2006       2.75 to 1 June 30, 2006   2.75 to 1 September 30, 2006   2.75 to 1 December 31, 2006   2.75 to 1 17 --------------------------------------------------------------------------------     (d)  Pro Forma Debt Service Coverage.  Permit the Pro Forma Debt Service Coverage Ratio as at the last day of any fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter: Fiscal Quarter Ending --------------------------------------------------------------------------------   Pro Forma Debt Service Coverage Ratio --------------------------------------------------------------------------------   December 31, 2002   1.00 to 1     March 31, 2003       1.00 to 1     June 30, 2003   1.25 to 1   September 30, 2003   1.50 to 1   December 31, 2003   1.50 to 1     March 31, 2004       1.75 to 1     June 30, 2004   2.00 to 1   September 30, 2004   2.00 to 1   December 31, 2004   2.00 to 1     March 31, 2005       2.00 to 1     June 30, 2005   2.00 to 1   September 30, 2005   2.00 to 1   December 31, 2005   2.00 to 1     March 31, 2006       2.00 to 1     June 30, 2006   2.00 to 1   September 30, 2006   2.00 to 1   December 31, 2006   2.00 to 1 "     2.27.  Indebtedness.  Section 6.2(f) of the Credit Agreement is hereby amended by replacing the amount "$5,000,000" with "$10,000,000".     2.28.  Limitation on Capital Expenditures.  Section 6.15 of the Credit Agreement is amended in its entirety to read as follows:     "6.15  Limitation on Capital Expenditures.  Make or commit to make any Capital Expenditure, except Capital Expenditures of the Company and its Subsidiaries in the ordinary course of business in an aggregate amount not exceeding (a) $120,000,000 in fiscal year 2000, (b) $60,000,000 in fiscal year 2001 and (c) for each fiscal year thereafter, the amount set forth below opposite such fiscal year: Fiscal Year --------------------------------------------------------------------------------   Capital Expenditures -------------------------------------------------------------------------------- 2002   $ 50,000,000 2003   $ 50,000,000 2004   $ 75,000,000 2005   $ 75,000,000 2006   $ 75,000,000 ; provided that (i) up to 25% of any such amount referred to above, if not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next succeeding fiscal year, (ii) up to 25% of the amount referred to above for any fiscal year may be expended in the immediately prior fiscal year (but any amount so expended in any such prior fiscal year may not be expended in such fiscal year) and (iii) Capital Expenditures made pursuant to this Section during any fiscal year shall be deemed made, first, in respect of 18 -------------------------------------------------------------------------------- amounts permitted for such fiscal year as provided above and, second, in respect of amounts carried over from the prior fiscal year pursuant to subclause (i) above; and provided, further, that no more than 20% of Capital Expenditures in any fiscal year may be incurred for expenditures not related to the Company's and its Subsidiaries' core CLEC switched access business as conducted as of the Closing Date and similar or related businesses. Notwithstanding the foregoing limitations, the Company and its Subsidiaries may make Capital Expenditures with (i) the proceeds of any Reinvestment Deferred Amount received in connection with a Recovery Event and (ii) the Available Amount at the time any such Capital Expenditure is made."     2.29.  Section 7 of the Credit Agreement is hereby amended as follows:     A.  by inserting in the portion of the sentences immediately after paragraph (k) thereof, immediately following each reference to "other Credit Documents" thereof, the parenthetical "(including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder)" and     B.  by inserting the following new sentences at the end thereof:     "With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Credit Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other Obligations of the Borrower hereunder and under the other Credit Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto)."     2.30.  Events of Default.  Section 7(k) of the Credit Agreement is hereby amended by inserting the word "or" immediately after the semicolon appearing at the end thereof and a new Section 7(l) is hereby added to the Credit Agreement to read as follows:     "(l) the Company shall fail to receive aggregate cash proceeds from the issuance of additional equity of the Company after the Amendment Effective Date in an amount of at least $105,000,000 on or before July 31, 2001, of which not less than $75,000,000 of such amount shall have been received on or before March 31, 2001;"     2.31.    The last sentence of Section 8.8 of the Credit Agreement is hereby amended by inserting the terms "and with respect to any Letter of Credit issued or participated in by it," immediately following the words "Loans made or renewed by it" appearing therein.     2.32.  Successors and Assigns; Participations and Assignments.  Section 9.6(e) of the Credit Agreement is amended in its entirety to read as follows:     "(e) Upon its receipt of an Assignment and Acceptance executed by an Assignor and an Assignee (and, in any case where the consent of any other Person is required by Section 9.6(c), by each such other Person) together with payment to the Administrative Agent of a registration and processing fee of $3,500 (except that no such registration and processing fee shall be payable (y) in connection with an assignment by or to LCPI or any of its Affiliates 19 -------------------------------------------------------------------------------- or (z) in the case of an Assignee which is already a Lender or is an Affiliate of a Lender (including, without limitation in the case of any Lender that is an investment fund which is regularly engaged in making, purchasing or investing in loans or securities, any other such fund which is under common (or affiliated) management with such Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and deliver to the Administrative Agent (in exchange for the Revolving Credit Note and/or Term Notes and/or Incremental Term Loan Notes, as the case may be, of the assigning Lender) a new Revolving Credit Note and/or Term Notes and/or Incremental Term Loan Notes, as the case may be, to the order of such Assignee in an amount equal to the Revolving Credit Commitment and/or Term Commitment or Term Loans, as the case may be, assumed or acquired by it pursuant to such Assignment and Acceptance and, if the Assignor has retained a Revolving Credit Commitment and/or Term Commitment or Term Loans, and/or the Incremental Term Loan Commitments or Incremental Term Loans, as the case may be, upon request, a new Revolving Credit Note and/or Term Notes and/or Incremental Term Loan Notes, as the case may be, to the order of the Assignor in an amount equal to the Revolving Credit Commitment and/or applicable Term Commitment or Term Loans and/or the Incremental Term Loan Commitments or Incremental Term Loans, as the case may be, retained by it hereunder. Such new Note or Notes shall be dated the Closing Date and shall otherwise be in the form of the Note or Notes replaced thereby."     2.33.  Pricing Grid.  Schedule I to the Credit Agreement is hereby amended in its entirety and replaced with Schedule I attached to this Amendment No. 1, and each reference in the Credit Agreement to "Schedule I" or the "Pricing Grid" (or words of like import) shall be deemed to refer to Schedule I attached to this Amendment No. 1.     2.34.  Form of Incremental Term Note.  A new Exhibit F-4 attached to this Amendment No. 1 is hereby added to the Credit Agreement.     2.35.  Form of Incremental Term Loan Activation Notice.  A new Exhibit J attached to this Amendment No. 1 is hereby added to the Credit Agreement.     Section 3.  Representations and Warranties.  Each of the Company and the Borrower represents and warrants to the Lenders that (a) after giving effect to the amendments set forth in Section 2 of this Amendment No. 1, no Default or Event of Default shall have occurred and be continuing and (b) the representations and warranties set forth in Section 3 of the Credit Agreement are true and complete on the date hereof as if made on and as of the date hereof (or, if any such representations and warranties expressly relate to any earlier date, as of such earlier date), after giving effect to such amendments and as if each reference in said Section 3 to "this Agreement" included reference to this Amendment No. 1.     Section 4.  Conditions Precedent.  As provided in Section 2 of this Amendment No. 1, the amendments to the Credit Agreement set forth in said Section 2 shall become effective as of the date hereof upon satisfaction of the following conditions precedent (the "Amendment Closing Date"):     4.1.  Amendment No. 1.  The Administrative Agent shall have received (a) one or more counterparts of this Amendment No. 1, duly executed and delivered by the Company, the Borrower and the Required Lenders (or the Administrative Agent, with the written consent of the Required Lenders) and (b) an Amendment No. 1 Lender Addendum executed by each Lender which is increasing its Revolving Credit Commitment and/or agreeing to a Tranche A-1 Term Loan Commitment as of the Amendment No. 1 Effective Date, the Borrower and the Administrative Agent. 20 --------------------------------------------------------------------------------     4.2.  Documents.  The Administrative Agent shall have received the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance:     (1)  Authorizations.  All authorizations and approvals referred to in Section 3.4 of the Credit Agreement (as amended hereby) shall have been obtained and be in full force and effect.     (2)  Opinions of Counsel.  The Administrative Agent shall have received an executed legal opinion dated the Amendment No. 1 Effective Date from (a) Latham & Watkins, counsel to the Company and its Subsidiaries and (b) the General Counsel of the Company, which opinions shall cover such matters incident to the transactions contemplated by this Amendment No. 1 as the Administrative Agent may reasonably require and shall be in form and substance satisfactory to the Administrative Agent.     (3)  Fees and Expenses.  The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Amendment No. 1 Effective Date, including, to the extent invoiced, reimbursement or payment of all out of pocket expenses required to be reimbursed or paid by the Company or the Borrower under the Credit Agreement.     (4)  Other Documents.  Receipt by the Administrative Agent of such other documents as the Administrative Agent or any Lender or Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to the Administrative Agent may reasonably request.     Section 5.  Miscellaneous.  Except as herein provided, the Credit Agreement shall remain unchanged and in full force and effect. This Amendment No. 1 may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Amendment No. 1 by signing any such counterpart. This Amendment No. 1 shall be governed by, and construed in accordance with, the law of the State of New York. 21 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed and delivered as of the day and year first above written.           BIRCH TELECOM, INC.           By:   -------------------------------------------------------------------------------- Name: Title:           BIRCH TELECOM FINANCE, INC.           By:   -------------------------------------------------------------------------------- Name: Title:           LENDERS           LEHMAN COMMERCIAL PAPER INC, individually, as Swingline Lender and as Administrative Agent           By:   -------------------------------------------------------------------------------- Name: Title: 22 -------------------------------------------------------------------------------- SHEDULE I PRICING GRID (for Revolving Credit Facility and Term Loan Facility) Total Leverage Ratio --------------------------------------------------------------------------------   Applicable Margin for Eurodollar Loans --------------------------------------------------------------------------------   Applicable Margin for Base Rate Loans --------------------------------------------------------------------------------   > 8.0 to 1 (or negative EBITDA)   4.00 % 2.75 % > 7.0 to 1   3.75 % 2.50 % > 6.0 to 1   3.50 % 2.25 % > 5.0 to 1   3.25 % 2.00 % less than or equal to 5.0 to 1   3.00 % 1.75 % -------------------------------------------------------------------------------- EXHIBIT F-4 [FORM OF INCREMENTAL TERM NOTE]     THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.   $       New York, New York      FOR VALUE RECEIVED, the undersigned, BIRCH TELECOM FINANCE, INC., a corporation duly organized and validly existing under the law of the State of Delaware (the "Borrower"), hereby unconditionally promises to pay to            (the "Lender") or its registered assigns at the Payment Office specified in the Credit Agreement (as hereinafter defined) in lawful money of the United States and in immediately available funds, the principal amount of (a)             ($      ) or, if less, (b) the unpaid principal amount of all Incremental Term Loans made by the Lender pursuant to Section 2.25 of the Credit Agreement. The principal amount shall be paid in the amounts and on the dates specified in Section 2.25 of the Credit Agreement. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 2.25 of the Credit Agreement.     The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each Incremental Term Loan and the date and amount of each payment or prepayment of principal with respect thereto, each conversion of all or a portion thereof to another Type, each continuation of all or a portion thereof as the same Type and, in the case of Eurodollar Loans, the length of each Interest Period with respect thereto. Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in any such endorsement shall not affect the obligations of the Borrower in respect of any Incremental Term Loan.     This Note (a) is one of the Incremental Term Notes referred to in the Credit Agreement dated as of February 2, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among BIRCH TELECOM, INC., the Borrower, the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), LEHMAN BROTHERS INC., as advisor, lead arranger and book manager (in such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such capacity, the "Syndication Agent"), and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"), (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This Note is secured and guaranteed as provided in the Credit Documents. Reference is hereby made to the Credit Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof.     Upon the occurrence of any one or more of the Events of Default, all principal and all accrued interest then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement. --------------------------------------------------------------------------------     All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.     Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement     NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE REGISTRATION AND OTHER PROVISIONS OF SECTION 9.6 OF THE CREDIT AGREEMENT.     THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.           BIRCH TELECOM FINANCE, INC.           By:   -------------------------------------------------------------------------------- Name: Title: 2 -------------------------------------------------------------------------------- Schedule A to Incremental Term Note LOANS, CONVERSIONS AND REPAYMENT OF BASE RATE LOANS -------------------------------------------------------------------------------- Date   Amount of Base Rate Loans   Amount Converted to Base Rate Loans   Amount of Principal of Base Rate Loans Repaid   Amount of Base Rate Loans Converted to Eurodollar Loans   Unpaid Principal Balance of Base Rate Loans   Notation Made By -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Schedule B to Incremental Term Note LOANS, CONVERSIONS AND REPAYMENT OF EURODOLLAR LOANS -------------------------------------------------------------------------------- Date   Amount of Eurodollar Loans   Amount Converted to Eurodollar Loans   Interest Period and Eurodollar Rate with Respect Thereto   Amount of Principal of Eurodollar Loans Repaid   Amount of Eurodollar Loans Converted to Base Rate Loans   Unpaid Principal Balance of Eurodollar Loans   Notation Made By -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT J [FORM OF INCREMENTAL TERM LOAN ACTIVATION NOTICE] To:  Lehman Commercial Paper Inc., as Administrative Agent under the Credit Agreement referred to below     Reference is hereby made to the Credit Agreement, dated as of February 2, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among BIRCH TELECOM, INC., a corporation duly organized and validly existing under the law of the State of Delaware (the "Company"), BIRCH TELECOM FINANCE, INC., a corporation duly organized and validly existing under the law of the State of Delaware (the "Borrower"), the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), LEHMAN BROTHERS INC., as advisor, lead arranger and book manager (in such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication agent (in such capacity, the "Syndication Agent"), and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the "Administrative Agent"). Terms defined in the Credit Agreement and not defined herein are used herein as defined therein.     This notice is an Incremental Term Loan Activation Notice referred to in the Credit Agreement, and the Borrower and the Lender signatory hereto (the "Incremental Term Loan Lender") hereby notify you that: 1.The Incremental Term Loan Activation Date is            . 2.The Incremental Term Loan Commitment of the Incremental Term Loan Lender is set forth opposite the Incremental Term Loan Lender's name on the signature pages hereof under the caption "Incremental Term Loan Commitment".     The Incremental Term Loan Lender and the Borrower hereby agree that (a) the rate of commitment fee payable by the Borrower to the Incremental Term Loan Lender under Section 2.25 of the Credit Agreement on the average daily unused amount of the Incremental Term Loan Lender's Incremental Term Loan Commitment shall be              , (b) the Applicable Margin for Incremental Term Loans shall be             , (c) the Incremental Term Loan Commitment of the Incremental Term Loan Lender shall terminate on [specify date (not to be later than the Incremental Term Loan Commitment Termination Date)], (d) principal installments of the Incremental Term Loans shall be payable as follows: [            ] and (e) the final maturity date of the Incremental Term Loan is             . --------------------------------------------------------------------------------     BIRCH TELECOM FINANCE, INC.           By -------------------------------------------------------------------------------- Name: Title:   Incremental Term Loan Commitment       [NAME OF INCREMENTAL TERM LOAN LENDER]   $                                     By -------------------------------------------------------------------------------- Name: Title:   CONSENTED TO:           LEHMAN COMMERCIAL PAPER INC., as Administrative Agent           By --------------------------------------------------------------------------------           Name:       Title:     2 -------------------------------------------------------------------------------- QUICKLINKS EXHIBIT 10.40 Execution copy AMENDMENT NO. 1 PRICING GRID (for Revolving Credit Facility and Term Loan Facility) EXHIBIT F-4 [FORM OF INCREMENTAL TERM NOTE]

Exhibit 10(l) EXCHANGE AGREEMENT   This Exchange Agreement ("Agreement") made and entered into as of this 28th day of June, 2000, by and between CoEnergy Trading Company, a Michigan corporation ("CTC"), and The Peoples Gas Light and Coke Company, an Illinois corporation ("Customer"). INTRODUCTION Customer desires to deliver volumes of natural gas to CTC during the term of the Agreement and cause equal volumes of natural gas to be redelivered by CTC on a firm basis to Customer's city gate. Subject to the terms and conditions hereinafter set forth, CTC is willing to engage in this exchange of natural gas with Customer and to provide the services herein described. Therefore, in consideration of the mutual benefits to be derived from this arrangement, the parties agree as follows: ARTICLE I DEFINITIONS 1.1 "Business Day" shall mean any day except Saturdays, Sundays and federal bank holidays, and each such Business Day shall commence at 8:00 a.m. Central Time and end at 5:00 p.m. Central Time. 1.2 "Central Time" shall mean the prevailing time in the Central Time Zone. 1.3 "Contract Quantity" shall mean the maximum quantity of natural gas that may be accounted for in the Exchange Account on any Day, and such quantity shall be one million (1,000,000) MMBtu. 1.4 "Delivery MDQ" shall mean the maximum quantity of gas that Customer may deliver to CTC at the Point of Delivery on any Day. The Delivery MDQ shall be ten thousand (10,000) MMBtu. 1.5 "Delivery Period" shall mean the period commencing July 1, 2000 and ending October 31, 2000 inclusive of the commencement and ending dates, during the term of this Agreement. 1.6 "Exchange Account" shall mean, for administrative purposes, the account in which the balance of Customer's deliveries to CTC, net of redeliveries by CTC to Customer, shall be maintained. 1.7 "Gas Day" or "Day" shall mean a period of twenty-four (24) consecutive hours beginning and ending at 9:00 a.m. Central Time, or as redefined by the Transporter in Transporter's Tariff. 1.8 "Point of Delivery" shall mean the point or points at which Customer delivers or causes to be delivered gas to CTC. 1.9 "Point of Redelivery" shall mean the point or points at which CTC delivers natural gas or causes natural gas to be redelivered to Customer at Customer's distribution system, or a mutually agreed upon redelivery point. 1.10 "Redelivery MDQ" shall mean the maximum quantity of natural gas that CTC may redeliver to Customer at the Point of Redelivery on any Day. The Redelivery MDQ shall be twenty thousand (20,000) MMBtu. 1.11 "Redelivery Period" shall mean the period commencing November 1, 2000 and ending March 31, 2000 inclusive of the commencement and ending dates, during the term of this Agreement. 1.12 "Transporter" shall mean the interstate pipeline or the local distribution company through which natural gas is delivered to or away from the Point of Delivery, and to or away from the Redelivery Point. 1.13 "Transporter's Tariff" shall mean the Transporter's FERC Gas Tariff, as revised from time to time, on file with the Federal Energy Regulatory Commission, or the local distribution company's tariff, as revised from time to time, on file with the state public utility commission. ARTICLE II DELIVERIES AND REDELIVERIES 2.1 During the Delivery Period, Customer shall deliver to CTC, and CTC shall cause to be received from Customer for credit to the Exchange Account any quantity of natural gas, equal to the quantity Customer nominates up to and including the Delivery MDQ. 2.2 Customer will inform CTC of its delivery of natural gas for any Gas Day by notice via telephone call and confirming telecopy to CTC no later than one and a half (11/2) hours prior to the applicable Transporter's earliest regular nomination deadline for such Gas Day to permit CTC to receive such deliveries, and CTC will confirm such nomination by return notice via telecopy to Customer. 2.3 During the Redelivery Period, CTC shall cause to be redelivered to Customer, and Customer shall receive, a quantity of natural gas equal to the quantity nominated by Customer for redelivery in accordance with Section 2.4 below, up to and including the Redelivery MDQ, provided that the requested redeliveries do not cause Customer to have a negative balance in its Exchange Account. 2.4 Customer shall nominate the daily redelivery quantity of natural gas for any Gas Day by telephone call with confirming telecopy to CTC no later than one and a half (11/2) hours prior to the applicable Transporter's earliest regular nomination deadline for such Gas Day to permit CTC to redeliver such gas, and CTC will confirm such nomination by return notice via telecopy to Customer. 2.5 The Points of Delivery under this Agreement shall be supply delivered: on the Michigan Consolidated Gas Company ("MichCon") system; at the interconnection of MichCon's system and the Shell Western E&P, Inc. processing plant at Kalkaska, Michigan; or at an interconnection between the MichCon system and one or more of the following pipelines: ANR Pipeline Company ("ANR") at the Willow Run Interconnect, or Panhandle Eastern Pipe Line Company ("Panhandle") at the River Rouge Interconnect. 2.6 The Points of Redelivery under this Agreement shall be Customer's natural gas distribution system at a point(s) mutually agreed upon by CTC and Customer. 2.7 Customer shall be responsible for making all arrangements and paying for the transportation of the gas to the Point of Delivery and from the Point of Redelivery. CTC shall be responsible for making all arrangements and paying for the transportation of gas from the Point of Delivery and to the Point of Redelivery. 2.8 The parties will cooperate to the extent operationally feasible to avoid imbalances resulting in imbalance or penalty charges, and/or cash-out obligations, under the provisions of the applicable Transporter's Tariff. This cooperation will include maintaining operational balancing arrangements or similar arrangements with Transporter to reduce the likelihood of imbalance or penalty charges being incurred. Each party will promptly notify the other whenever it has knowledge of an imbalance condition that must be corrected to avoid such imbalance or penalty charges, or cash-out obligations. Should either party incur an imbalance or penalty charge, or cash-out obligation from a Transporter, both parties shall use their reasonable efforts to determine the validity as well as the cause of such imbalance or penalty charge, or cash-out obligation. If the parties determine that the imbalance or penalty charge, or cash-out obligation was imposed solely as a result of Customer's actions or omissions, then Customer shall pay such imbalance, penalty charge, or cash-out obligation. If the parties determine that the imbalance or penalty charge, or cash-out obligation was imposed solely as a result of CTC's actions or omissions, then CTC shall pay such imbalance or penalty charge, or cash-out obligation. If the parties determine that the imbalance or penalty charge, or cash-out obligation was imposed as a result of the actions or omissions of both parties, then each party shall pay that portion of the imbalance or penalty charge, or cash-out obligation caused by its actions or omissions. 2.9 Upon expiration or termination of this Agreement, Customer shall be obligated to schedule redelivery of any positive balance reflected in Customer's Exchange Account by the end of the month in which expiration or termination is deemed to be effective. Customer may solicit an offer from CTC to purchase remaining Exchange Account volumes, but CTC shall be under no obligation to purchase the same. For volumes remaining in Customer's Exchange Account after the end of the month in which expiration or termination is deemed effective, such volumes shall be redelivered to Customer, or purchased by CTC, or a third-party within one (1) month of such expiration or termination; if such redelivery or purchase does not occur within the one-month period, then Customer shall continue to pay applicable charges pursuant to Section 3.1(a) below, until such volumes are redelivered to Customer, or purchased by CTC, or a third-party. Unless CTC and Customer agree otherwise in a separate written instrument CTC is under no obligation to redeliver volumes sold by Customer to a third party. ARTICLE III PRICE 3.1 Customer shall pay CTC for each month during the term of this Agreement the following Fees: (a) A fixed monthly fee of $123,333.00; 3.2 The Exchange Fee set forth in Section 3.1 does not include taxes, if any, arising out of the transaction. Customer shall pay all taxes imposed on, or with respect to, the natural gas prior to its delivery at the Points of Delivery and at and after its redelivery at the Point of Redelivery. CTC shall pay all taxes imposed on, or with respect to, the gas at and after its delivery at the Points of Delivery and prior to its redelivery at the Point of Redelivery. Each party shall furnish the other with any applicable exemption or resale certificates prior to initial deliveries. ARTICLE IV BILLING AND PAYMENT 4.1 Beginning in August 2000 and on or before the tenth (10th) day of each month thereafter during the term of this Agreement and the month immediately following the termination date, CTC shall render a statement to Customer for the applicable Exchange Fee provided for in Article III, above. Customer shall pay to CTC on or before the twenty-fifth (25th) day of the month the amount billed in that statement; provided that, if the twenty-fifth (25th) day of the month is not a Business Day, Customer shall pay the stated amount on the next succeeding Business Day. If CTC is late in rendering its statement, the due date for payment shall be extended on a day-for-day basis to the next Business Day. Unless notified otherwise, all payments shall be made by electronic transfer to a bank account specified by CTC on the monthly statement. 4.2 In the event that Customer disputes any portion of a statement rendered pursuant to Article III, above the total undisputed amount shall nevertheless be paid when due. If the parties cannot resolve the dispute within thirty (30) days after such payment, the matter shall be submitted to a mutually agreed upon firm of nationally known public accountants or other third party with appropriate expertise (the "Expert") who shall examine the records and billings and make a written report thereon, which shall be delivered to each party. The decision rendered by the Expert in this report shall be binding upon both parties. The party against whom the Expert's decision is rendered shall pay the fees and expenses of the Expert incurred in connection with such decision. If both parties prevail with respect to some part of the Expert's decision, the fees and expenses of the Expert shall be allocated between the parties in a manner appropriate to the Expert's decision. Each party shall pay for its own expenses, including attorneys' fees, with respect to any such dispute. 4.3 Should Customer fail to pay the undisputed amount of any statement rendered by CTC when such amount is due, or any disputed amount ultimately determined to be due, Customer shall pay CTC interest thereon from the date due until the date of payment at an annual rate equal to the lesser of (1) the then-effective prime rate of interest as published under the heading "Money Rates" in The Wall Street Journal, plus one percent (1%), or (2) the maximum rate allowed by law. In addition, CTC may, upon two (2) Business Days prior written notice sent to Customer by facsimile transmission, suspend further service under this Agreement until amounts are paid in full and/or may terminate this Agreement. 4.4 Each party shall have the right, at its expense and during normal business hours, and upon two (2) Business Days prior notice, to audit the books and records of the other party to the extent necessary to verify the accuracy of any statement rendered under this Agreement. 4.5 Should CTC find at any time within twenty-four (24) months after the date of any statement rendered by it that there has been an undercharge in the amount billed in the statement rendered to Customer for services provided under this Agreement, CTC may submit a statement for such undercharge, and Customer, upon verifying the same, shall pay such amount within thirty (30) days after receipt of the statement, with interest as provided for in Section 4.3. 4.6 Should Customer find at any time within twenty-four (24) months after the date of any statement rendered by CTC that there has been an overcharge in the amount billed in the statement by CTC to Customer for services rendered under this Agreement, and if Customer has paid said overcharge, the overcharge, if verified by CTC, shall be refunded within thirty (30) days of notification by Customer, with interest as provided for in Section 4.3. ARTICLE V CREDITWORTHINESS 5.1 Upon execution of this Agreement, or at any time during the term hereof, should CTC have a reasonable good faith belief that Customer lacks the ability to meet its payment obligation, either because of Customer's failure to meet the criteria for creditworthiness under CTC's credit policy, or otherwise, CTC may require that Customer do any one of the following: (a) provide CTC with a corporate guarantee of Customer's payment obligation under this Agreement within fourteen (14) days after receiving a request to do so; or (b) provide CTC with an irrevocable stand-by letter of credit in a form, and with a bank, reasonably acceptable to CTC within fourteen (14) days after receiving a request to do so.   Should Customer fail to comply with any one of the requirements set forth above, CTC may, at its option, refuse to commence, suspend, and/or terminate service under this Agreement, with no liability on either party's part except for payment of amounts due and owing under the Agreement and disposition of any gas in the Exchange Account in accordance with Section 6.1. ARTICLE VI TERM 6.1 This Agreement shall be effective as of July 1, 2000, and shall continue through March 31, 2001. The Parties agree that any natural gas remaining in Customer's Exchange Account upon the expiration or termination of this agreement, shall be subject to the disposition procedure identified in Section 2.10. ARTICLE VII MEASUREMENT AND QUALITY 7.1 All gas delivered hereunder shall be measured at the Point of Delivery by the Transporter operating the measurement equipment at the Point of Delivery, and shall conform to the measurement and quality specifications contained in that Transporter's Tariff. 7.2 All gas redelivered hereunder shall be measured at the Point of Redelivery by the Transporter operating the measurement equipment at the Point of Redelivery, and shall conform to the measurement and quality specifications contained in that Transporter's Tariff. ARTICLE VIII FORCE MAJEURE 8.1 Neither CTC nor Customer shall be liable in damages to the other for any act, omission or circumstances occasioned by or in consequence of any acts of God, explosions, breakage or accident to machinery or lines of pipe, line freezeups, curtailments instituted by any Transporter(s), the binding order of any court or governmental authority, or any other cause, whether of the kind herein enumerated, or otherwise, not within the control of the party claiming force majeure and which by the exercise of due diligence such party is unable to prevent or overcome. The term "force majeure" as used in this Agreement shall not include (a) the curtailment or interruption of interruptible transportation by Transporter; (b) the loss of Customer's markets nor Customer's inability economically to use or resell gas purchased hereunder; or (c) the loss or failure of CTC's gas supply, including, without limitation, depletion of reserves or other failure of production, nor CTC's ability to sell gas to a market at a more advantageous price. 8.2 Such causes or contingencies affecting the performance of this Agreement by either party, however, shall not relieve it of liability in the event of its concurring negligence or in the event of its failure to use due diligence to remedy the situation and remove the cause in an adequate manner and with all reasonable dispatch; nor shall such causes or contingencies affecting the performance of this Agreement relieve either party from its obligation to make payment of amounts then due hereunder, nor shall such causes or contingencies relieve either party of liability unless such party shall give notice and full particulars of the same in writing or by facsimile transmission to the other party as soon as possible after the occurrence relied on. ARTICLE IX REGULATION 9.1 This Agreement is subject to all valid laws, orders, rules and regulations of duly constituted governmental authorities having jurisdiction. Notwithstanding any other provision in this Agreement, if any regulatory body, governmental entity or agency having jurisdiction prohibits any transaction entered into pursuant to this Agreement or otherwise conditions such transaction in a form that is unacceptable in the sole judgment of the party affected thereby, then the party so affected may terminate this Agreement by thirty (30) days prior written notice stating the date of such termination, with no liability on either party's part except for payment of amounts due and owing under the Agreement and disposition of any remaining gas in Customer's Exchange Account in accordance with Section 2.10. ARTICLE X WARRANTY 10.1 Each party warrants that all gas delivered and redelivered hereunder shall be free and clear of all liens, encumbrances and claims whatsoever, and that it will indemnify the other party and save it harmless from suits, actions, debts, accounts, damages, costs, losses and expenses, including attorneys' fees, arising from or out of adverse claims of any and all persons to said gas or arising from royalties, taxes, license fees or charges thereon, to the extent that they arise or attach to the gas when it is subject to the indemnifying party's control and possession as defined in Article Xl, below. ARTICLE Xl POSSESSION AND LIABILITY 11.1 With respect to gas delivered by Customer to CTC, Customer shall be deemed in exclusive control and possession of the gas, and responsible for any damages or injuries caused thereby, until it is delivered to CTC at the Points of Delivery at which point title shall pass to CTC. CTC shall be deemed in exclusive control and possession of said gas and responsible for any damages or injuries caused thereby, at and after it is delivered by Customer to CTC at the Points of Delivery. 11.2 With respect to gas redelivered by CTC to Customer, CTC shall be deemed in exclusive control and possession of the gas, and responsible for any damages or injuries caused thereby, until it is delivered to Customer at the Point of Redelivery at which point title shall pass to Customer. Customer shall be deemed in exclusive control and possession of said gas, and responsible for any damages or injuries caused thereby, at and after it is redelivered by CTC to Customer at the Point of Redelivery. ARTICLE XII NOTICES 12.1 Unless otherwise provided herein, all communications from one party to the other shall be sent by registered mail, overnight courier or facsimile transmission, and shall be effective upon receipt thereof. However, routine communications shall be deemed duly delivered when mailed by either registered or ordinary mail, or sent by overnight courier or facsimile transmission (telecopy). Communications sent by ordinary mail shall be considered received three (3) Business Days after deposit in the mail. Monthly statements shall be sent by overnight courier or facsimile transmission. All communications should be addressed to: CUSTOMER:   CTC: All Correspondence     The Peoples Gas Light and Coke Company   CoEnergy Trading Company 130 E. Randolph Drive   150 West Jefferson Gas Supply Administration   Suite 1800 22nd Floor   Detroit, Michigan 48226 Chicago, Illinois 60601   Attn: Mr. Kevin McCracken Attn: Mr. Dave Wear, Manager   Telephone: (313) 256-5925 Telephone: (312) 240-4554   Facsimile: (313) 256-5739 Facsimile: (312) 240-4211   Duns #: 806 708 806 Duns#: 006 932 115           Operating Communications   Attn: Ms. Margo Pardi Attn: Gas Control   Telephone: (313) 256-6299 Telephone: (312) 240-4754   Facsimile: (313) 963-3636 Facsimile: (312) 240-4762   After Hours Telephone: (800) 506-9857       For Payments :   CoEnergy Trading Company Not Applicable   150 West Jefferson     Suite 1800     Detroit, Michigan 48226     Attn: Accounts Payable   ARTICLE XIII GOVERNING LAW AND JURISDICTION 13.1 This Agreement shall be governed by the law of the state of Michigan without regard to principles of conflicts of law. ARTICLE XIV NON-WAIVER OF FUTURE DEFAULTS 14.1 No waiver by either party of any one or more defaults by the other in the performance of any provision of this Agreement shall operate or be construed as a waiver of any future default or defaults, whether of a like or of a different character. ARTICLE XV TRANSFER AND ASSIGNMENT 15.1 Any company that shall succeed by purchase, merger or consolidation to either party hereto shall be entitled to the rights and shall be subject to the obligations of its predecessor in title under this Agreement. Either party may, without relieving itself of its obligations under this Agreement, assign any of its rights and obligations hereunder to a corporation with which it is affiliated at the time of such assignment. Otherwise, no assignment of this Agreement or of any rights or obligations hereunder shall be made by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld. The provisions of this Article XV shall not prevent either party from pledging or mortgaging its rights hereunder as security for its indebtedness. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties hereto. ARTICLE XVI LIMITATION ON DAMAGES 16.1 Neither party shall be liable to the other for any incidental, consequential (including lost profits), indirect, special, exemplary, or punitive damages. ARTICLE XVII ENTIRE AGREEMENT 17.1 This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof. Any prior understandings, representations, promises, undertakings, agreements or inducements, whether written or oral, concerning the subject matter hereof not contained herein shall have no force and effect. This Agreement may be modified or amended only by writing that is duly executed by both parties. ARTICLE XVIII CONFIDENTIALITY 18.1 Each party will keep the terms of this Agreement confidential during the term hereof, using the same degree of care it customarily uses with respect to confidential business information, provided that disclosure may be made to a regulatory authority having jurisdiction if requested or required by that authority, or if the party is obligated by law, rule or order to make such disclosure. If disclosure to a regulatory authority is made, the disclosing party will request confidential treatment of the disclosed information. ARTICLE XIX THIRD PARTY BENEFICIARY 19.1 Customer and CTC agree that there are no third party beneficiaries of this Agreement and that the provisions of this Agreement do not impart enforceable rights to anyone who is not a signatory to this Agreement.   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their duly authorized officers, as of the day and year first above written.   THE PEOPLES GAS LIGHT AND   COENERGY TRADING COMPANY COKE COMPANY                 By: /s/ William E. Morrow   By: /s/ Steven E. Kurmas William E. Morrow   Name: Steven E. Kurmas Executive Vice President   Title: President & CEO           Reviewed O.G.C.     BY 6/21/00

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.1 AMENDMENT 1 TO ALLIANT TECHSYSTEMS INC. MANAGEMENT COMPENSATION PLAN     The Alliant Techsystems Inc. Management Compensation Plan (effective October 1, 1990) (the "Plan") is hereby amended as follows, effective May 16, 2000:     (1) Section 5.12 is amended to delete references to Section 16(b) Participants so that Section 5.12, as so amended, reads in its entirety as follows:     "Except as provided below and in Section 6.1, payment of each Incentive Award shall be made in a lump sum either in cash or, if the Committee so specifies, in cash and/or Stock (as defined in Section 6.2(a)) valued at Fair Market Value (as defined in Section 5.13) as of the day before the date the amount of the Incentive Award is approved by the Committee, in the proportion specified by the Committee as to any Participant or group of Participants.     The Committee may, in its discretion, with respect to all or any part of the cash portion of any Incentive Award ("Cash Award"), permit such Participants or group of Participants as it may designate ("Electing Participants") to elect, in lieu of receiving payment of the Cash Award in cash, to use the Cash Award to acquire Stock on the date such Cash Award would otherwise be payable, at a price specified by the Committee, which price shall be no less than 85 percent of Fair Market Value as of the day before the date the amount of the Incentive Award is approved by the Committee ("Stock Election"). The Committee shall designate an election period ("Election Period") during which Electing Participants may make and file with the Committee irrevocable, written Stock Elections.     An aggregate of 250,000 shares of Stock is hereby made available and is reserved for delivery under the Plan pursuant to this Section 5.12. Subject to the foregoing limit, shares of Stock held in treasury shares by the Company may be used for or in connection with the Plan."     Capitalized terms used herein and not defined herein shall have the respective meanings assigned to them in the Plan.     Except as expressly amended herein, the Plan shall remain in full force and effect in accordance with its terms and provisions as in effect on the effective date of this Amendment No. 1. -------------------------------------------------------------------------------- QUICKLINKS AMENDMENT 1 TO ALLIANT TECHSYSTEMS INC. MANAGEMENT COMPENSATION PLAN

EXHIBIT 10.1 INVESTMENT AGREEMENT         Agreement entered into as of November 9, 2000, by and between Galen Partners III, L.P., a Delaware limited partnership (“Galen Partners”), Galen Partners International III, L.P., a Delaware limited partnership (“Galen International”), Galen Employee Fund III, L.P., a Delaware limited partnership (“Employee Fund”), and DAOU Systems, Inc., a Delaware corporation (the “Company”). Galen Partners, Galen International, Employee Fund, and the Company are referred to collectively herein as the “Parties.”         WHEREAS, each of Galen Partners, Galen International, and the Employee Fund (collectively, the “Investors”) owns all of the issued and outstanding shares of Series A Preferred Stock, par value $0.001 per share, of the Company (the “Series A Preferred Stock”) set forth opposite its name on Schedule 1;         WHEREAS, the Series A Preferred Stock is redeemable at the option of the holders upon the occurrence of certain events; and         WHEREAS, the Investors have agreed to waive such redemption rights now and hereafter in return for the grant of certain warrants to purchase common stock, par value $0.001 per share, of the Company (the “Common Stock”) and the payment of $2,000,000 in cash as an advisory fee to Galen Associates, a Delaware general partnership.         NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows: 1.  Issuance of Warrants.         (a)  Basic Transaction. Subject to the terms and conditions of this Agreement, at the Closing (as defined below) the Company will issue to the Investors warrants exercisable for an aggregate of 3,540,000 shares of the Company’s Common Stock allocated among the Investors as set forth on Schedule 1, which warrants will be substantially in the form set forth on Exhibit A hereto.         (b)  The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of DAOU Systems, Inc. at 5120 Shoreham Place, San Diego, CA 92122, or such other place as the Parties may mutually determine on November 9, 2000 (the “Closing Date”). 2.  Representations And Warranties Concerning The Transaction.         (a)  Representations and Warranties of the Company. The Company represents and warrants to each Investor that the statements contained in this §2(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this §2(a)) with respect to itself.               (i)  Organization of the Company. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its formation.               (ii)  Authorization of Transaction. The Company has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms. The Company need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement.               (iii)  Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Company is subject or any provision of its charter or bylaws. --------------------------------------------------------------------------------         (b)  Representations and Warranties of the Investors. Each Investor represents and warrants to the Company that the statements contained in this §2(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date with respect to such Investor (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this §2(b)).               (i)  Organization of the Investor; Ownership of Series A Preferred Stock. The Investor is a limited partnership duly formed and validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Investor owns all of the Series A Preferred Stock set forth opposite its name on Schedule 1 and has not assigned, pledged, hypothecated, or otherwise transferred any of the shares of Series A Preferred Stock acquired from the Company regardless of whether or not set forth on Schedule 1 hereto.               (ii)  Authorization of Transaction. The Investor has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Investor, enforceable against the Investor in accordance with its terms. The Investor need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order to consummate the transactions contemplated by this Agreement.               (iii)  Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Investor is subject or any provision of its charter documents.               (iv)  Acquired Entirely for Own Account. This Agreement is made with each Investor in reliance upon such Investor’s representation to the Company, which by such Investor’s execution of this Agreement such Investor hereby confirms, that the Warrant to be received by such Investor and the Common Stock issuable upon exercise thereof (collectively, the “ Securities”) will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, each Investor further represents that such Investor does not have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participations to such person or to any third person, with respect to any of the Securities.               (v)  Due Diligence; Disclosure of Information. Each Investor has performed a due diligence investigation of the Company and its industry. Each Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities. Each Investor believes it has received all of the information it considers necessary in order to enter into this Agreement and consummate the transactions contemplated hereby.               (vi)  Investment Experience. Each Investor is a professional investor with substantial knowledge about the industry in which the Company functions. Accordingly, each Investor has such knowledge and experience regarding the industry of the Company and in financial or business matters that it is capable of evaluating fully the merits and risks of the investment in the Securities. Each Investor acknowledges that it is able to fend for itself and can bear the economic risk of its investment, and each Investor also represents that it has not been organized for the purpose of acquiring the Securities. Each Investor represents and warrants that it maintains its principal place of business at the address indicated for such Investor on Schedule 1 of this Agreement and that it is organized under the laws of the state of Delaware.               (vii)  Accredited Investor; Investor Status. Each Investor is an “accredited investor” within the meaning of SEC Rule 501 of Regulation D, as presently in effect. Each of Galen Partners, Galen International and the Employee Fund is an institutional buyer as referenced in the General Business Law of the State of New York.               (viii)  Restricted Securities. Each Investor understands that the Securities are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the “Act”), only in certain limited circumstances. In this connection, each Investor represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act. In addition, each Investor agrees that it will not transfer any Securities in violation of any state or federal securities law. --------------------------------------------------------------------------------               (ix)  Legends. It is understood that the certificates evidencing the Warrant (and the Common Stock issuable upon exercise thereof) may bear one or all of the following legends as appropriate in substantially the form set forth below:                      (A)  THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES LAWS. NEITHER THIS WARRANT NOR ANY OF SUCH SECURITIES MAY BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SAID ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR EXEMPTIONS THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT UPON THE CONDITIONS SPECIFIED IN THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED WITH.                      (B)  THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED FOR THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED UNTIL A REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR TRANSFER.                      (C)  THE SHARES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN VOTING RIGHTS AND RESTRICTIONS WITH RESPECT TO THE ELECTIONS OF DIRECTORS AS MORE FULLY SET FORTH IN THE INVESTMENT AGREEMENT, DATED NOVEMBER 9, 2000, BY AND BETWEEN THE CORPORATION AND THE SHAREHOLDERS PARTY THERETO.                      (D)  Any legend required by the laws of the State of California, including any legend required by the California Department of Corporations and Sections 417 and 418 of the Code.                      (E)  Any other legend required to comply with applicable state securities laws.               (x)  Securities Law Compliance. Each Investor acknowledges and understands that the Company is relying on the representations and warranties set forth above in this §2 for compliance with applicable federal and state securities laws. 3.  Waiver of Redemptive Rights.         (a)  Each Investor unequivocally and irrevocably waives any and all rights that such Investor now has, or hereafter may have, pursuant to Section 3 of the Certificate of Designations, Preferences and Relative Rights of Preferred Stock and Qualifications, Limitations, and Restrictions thereof of Series A Preferred Stock, dated July 22, 1997 (the “Series A Certificate of Designations”) concerning rights of redemption with respect to the Series A Preferred Stock and agrees not to exercise such rights now or in the future. Each Investor agrees that it shall not transfer any interest in the Series A Preferred Stock unless such transferee agrees to be bound by this Section 3 and shall cause each transferee to comply with this Section 3. In addition, each Investor agrees (i) to vote its Voting Securities (as defined below) in favor of any amendment to the Company’s Certificate of Incorporat ion the purpose of which is to remove such provisions from the Series A Certificate of Designations and (ii) to exchange, if so requested by the Board, its Series A Preferred Stock for preferred stock of the Company that is identical to the Series A Preferred Stock except that such preferred stock does not contain a right of redemption.         (b)  Each Investor agrees to have the following legend placed on each and every Certificate, either now held by the Investor or hereinafter issued to the Investor, representing Series A Preferred Stock:               THESE SHARES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS, INCLUDING RESTRICTIONS ON THEIR RIGHT OF REDEMPTION, AS SET FORTH IN THAT CERTAIN INVESTMENT AGREEMENT, DATED NOVEMBER 9, 2000 BY AND BETWEEN THE CORPORATION AND THE SHAREHOLDERS PARTY THERETO. 3 -------------------------------------------------------------------------------- 4.  Additional Agreements.         (a)  Voting. Except as otherwise provided herein, each Investor shall take such action as may be required so that all shares of Common Stock, Series A Preferred Stock or any other securities generally entitled to vote in matters brought before the stockholders of the Company (collectively, the “Voting Securities”) owned directly or indirectly by it or any Affiliate shall be present for quorum purposes, in person or represented by proxy (or consent) at every meeting of holders of Common Stock (or, if applicable, in any matter to be voted upon by consent of stockholders without a meeting). Nothing set forth in this Section 4(a) shall limit or otherwise restrict how any Investor votes its Voting Securities at a meeting of stockholders or by consent of stockholders without a meeting.         (b)  Directorship. Galen Partners shall not nominate more than one person for election to the Board of Directors of the Company if the election of all such nominees would result in such nominees, if elected, comprising over 25% of the membership of the Board. If at any time, more than one such nominee sits on the Board and such nominees comprise over 25% of the membership of the Board, a sufficient number of nominees shall promptly resign so that any remaining nominees comprise 25% or less of the membership of the Board. If an Investor nominee resigns or is removed, except if the replacement of such nominee will result in Galen Partners having more than one nominee on the Board and such nominees will represent over 25% of the membership of the Board, Galen Partners shall be entitled to select a replacement. The Board of Directors shall approve such replacement. Without the consent of Galen Partners, which such consent shall not be unreasonably withheld, the number of Directors constituting the Board of Directors shall not exceed five. 5.  Pre-Closing Covenants. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing.         (a)  General. Each of the Parties will use its commercially reasonable efforts to take all action and to do all things necessary in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in §6 below).         (b)  Notices and Consents. Each of the Parties will give any notices to, make any filings with, and use its commercially reasonable efforts to obtain any authorizations, consents, and approvals of, governments and governmental agencies in connection with the matters referred to in §2(a)(ii) and (iii) and §2(b)(ii) and (iii), above. 6.  Conditions to Obligation to Close.         (a)  Conditions to Obligation of the Investors. The obligation of the Investors to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions:               (i)  the representations and warranties set forth in §2(a) above shall be true and correct in all material respects at and as of the Closing Date;               (ii)  the Company shall have performed and complied with all of its covenants hereunder in all material respects through the Closing; and               (iii)  there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement. Each Investor may waive any condition specified in this §6(a) if it executes a writing so stating at or prior to the Closing.         (b)  Conditions to Obligation of the Company. The obligation of the Company to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:               (i)  the representations and warranties set forth in §2(b) above shall be true and correct in all material respects at and as of the Closing Date;               (ii)  the Investors shall have performed and complied with all of their covenants hereunder in all material respects through the Closing; and 4 --------------------------------------------------------------------------------               (iii)  there shall not be any injunction, judgment, order, decree, ruling, or charge in effect preventing consummation of any of the transactions contemplated by this Agreement. The Company may waive any condition specified in this §6(b) if it executes a writing so stating at or prior to the Closing. 7.  Termination.         (a)  The Company and the Investors may terminate this Agreement by mutual written consent at any time prior to the Closing.         (b)  The Agreement will automatically terminate when the Investor Group beneficially owns less than 10% of the Voting Securities; provided that Sections 2 and 3 hereof will survive such termination. 8.  Miscellaneous.         (a)  Press Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the other Parties; provided, however, that any Party may make any public disclosure it believes in good faith is required by applicable law.         (b)  Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties, and their respective successors and permitted assigns.         (c)  Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they have related in any way to the subject matter hereof.         (d)  Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties.         (e)  Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.         (f)  Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.         (g)  Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then five business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:  If to the Company:   Daou Systems, Inc. 5120 Shoreham Place San Diego, California 92122 Attn.: Chief Financial Officer Facsimile: 858-452-2789  with a copy to: Baker & McKenzie 1301 McKinney Street, Suite 3300 Houston, Texas 77010-3019 Attn: Alan Harvey Facsimile: 713-427-5099  If to the Investors:   To the address listed on Schedule 1 5 --------------------------------------------------------------------------------  with a copy to: Thelen Reid & Priest LLP 40 West 57th Street New York, New York 10019 Attn: Peter K. Anglum Facsimile: 212-603-2001 Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.         (h)  Aggregation of Stock. All shares of the Series A Preferred Stock held or acquired by affiliated entities or persons will be aggregated together for the purpose of determining the availability of any rights under this Agreement.         (i)  Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.         (j)  Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by each of the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.         (k)  Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.         (l)  Expenses. Each of the Parties will bear its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby; provided that the Company will reimburse the Investors up to $30,000 for their costs and expenses.         (m)  Specific Performance. Each of the Parties acknowledges and agrees that the other parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each Party agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity.         (n)  Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.         (o)  Further Assurances. The Parties agree (i) to furnish upon request to each other such further information, (ii) to execute and deliver to each other such other documents, and (iii) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.         (p)  Incorporation of Exhibits, Annexes, and Schedules. The Exhibits, Annexes, and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof. 6 --------------------------------------------------------------------------------         IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.      THE COMPANY: DAOU SYSTEMS, INC.   By:   /s/  Neil R. Cassidy      --------------------------------------------------------------------------------        Name:   Neil R. Cassidy Title:   Executive Vice President and    Chief Financial Officer      THE INVESTORS: GALEN PARTNERS III, L.P., a Delaware Limited Partnership   By:    Claudius, L.L.C., a Delaware Limited Liability Company                    By:   /s/  Bruce F. Wesson      --------------------------------------------------------------------------------        Name:   Bruce F. Wesson Title:   Senior Managing Member      GALEN PARTNERS INTERNATIONAL III, L.P., a Delaware Limited Partnership   By:   Claudius, L.L.C., a Delaware Limited Liability Company                    By:   /s/  Bruce F. Wesson      --------------------------------------------------------------------------------        Name:   Bruce F. Wesson Title:   Senior Managing Member      GALEN EMPLOYEE FUND III, L.P., a Delaware Limited Partnership   By:    Wesson Enterprises, Inc.                    By:   /s/  Bruce F. Wesson      --------------------------------------------------------------------------------        Name:   Bruce F. Wesson Title:   President 7 -------------------------------------------------------------------------------- SCHEDULE 1 Shares Owned Warrants -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- GALEN PARTNERS III, L.P.    610 Fifth Avenue, 5th Floor    New York, New York 10020    Attn.: Bruce F. Wesson     Facsimile:    2,114,623    3,234,022               GALEN PARTNERS INTERNATIONAL III, L.P.    610 Fifth Avenue, 5th Floor    New York, New York 10020    Attn.: Bruce F. Wesson     Facsimile:    191,410    292,735               GALEN EMPLOYEE FUND III, L.P.    610 Fifth Avenue, 5th Floor    New York, New York 10020    Attn.: Bruce F. Wesson     Facsimile:    8,659    13,243  

AMENDMENT TO THE TELLABS, INC. 1981 INCENTIVE STOCK OPTION PLAN   WHEREAS, Tellabs, Inc. (the "Corporation") has heretofore established the Tellabs, Inc. 1981 Incentive Stock Option Plan (the "Plan") for the benefit of participating officers and other key employees of the Corporation and its subsidiaries; WHEREAS, the Corporation deems it desirable to make certain amendments to the Plan relating to the vesting of options and/or the post-employment exercise period in the event of the death, disability, or retirement of an option holder, or a change in control of the Corporation; WHEREAS, the Compensation Committee of the Corporation has considered the recommendations and recommended that the Board of Directors of the Corporation approve this Amendment to the Plan; and WHEREAS, the Board of Directors of the Corporation has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows : I. Under Article 2 of the Plan, the following definition of "Change in Control" shall be added: (o) "Change in Control" means the first to occur of: (i) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, the Corporation or any subsidiary of the Corporation, or any employee benefit plan of the Corporation or any subsidiary of the Corporation, or any person or entity organized, appointed or established by the Corporation for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Corporation; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (ii) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of the Corporation and any new director (except for a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Corporation immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of the Corporation; (B) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation. II. Under Article 2 of the Plan, the following definition of "Disability" shall be added: (r) "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. III. Article 14 shall be amended in its entirety to read as follows: 14. Termination of Employment. Except as set forth in Article 14A with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Option Agreement, the following rules shall apply upon termination of the Grantee's employment with the Corporation and all subsidiaries: (a) Except as set forth in subsections (b), (c) and (d) below, in the event a Grantee ceases to be an employee of the Corporation and its subsidiaries for any reason, any Option or unexercised portion thereof granted under this Plan may be exercised, to the extent such Option would have exercisable by the Grantee hereunder on the date on which the Grantee ceased to be an employee, within three months of such date (seven months in the event such termination occurs after the occurrence of a Change in Control), but in no event later than the date of expiration of the term of the Option. (b) In the event of termination of employment due to the death the Grantee, each Option held by the Grantee shall become exercisable in full and may be exercised at any time prior to the expiration date of the Option or within one year after the date of the Grantee's death, whichever period is shorter. (c) In the event of termination of employment due to the Disability of the Grantee, each Option held by the Grantee may, to the extent exercisable at the time of such termination, be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's termination of employment, whichever period is shorter. (d) In the event of termination of employment due to the retirement of the Grantee on or after attaining age 55, all or a portion of each Option held by the Grantee, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Grantee's attained age and one point for each year of continuous service with the Corporation or its subsidiaries as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Corporation or an affiliate of the Corporation, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points          50% of each unvested option shall vest At least 80 but less than 90 points          75% of each unvested option shall vest At least 90 points                                  100% of each unvested option shall vest and all Options held by the Grantee to the extent then exercisable may be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's retirement, whichever period is shorter. (e) Notwithstanding anything in this Plan to the contrary, any Incentive Stock Option which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death, shall be treated as a non-qualified stock option. IV. The Plan shall hereby be amended by adding a new Article 14A to read: 14A. Change in Control. (a) Upon the occurrence of a Change in Control, any and all Options granted hereunder shall become immediately exercisable and remain exercisable until such Options expire or terminate under the provisions of this Plan. (b) Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to such Change in Control. V. Article 15 of the Plan shall be amended in its entirety to read as follows: 15. Effect of Change in Stock Subject to Plan. Except as provided below, the Board shall make equitable adjustments in the number and class of shares of stock subject to the Plan, and to the Option rights granted hereunder and the exercise prices of such Option rights, in the event of a stock dividend, stock split, reverse stock split, recapitalization, reorganization, merger, consolidation, acquisition, separation or other change in the capital structure of the Corporation. IN WITNESS WHEREOF, the foregoing amendments to the Tellabs, Inc. 1981 Incentive Stock Option Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000.   TELLABS, INC.   By: /s Michael J. Birck Name: Michael J. Birck Its: President and Chief Executive Officer

Exhibit 10.2 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT This FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the "First Amendment"), dated as of March 8, 2000 (the "Effective Date"), is by and between Mark Diamond ("Employee") and SED International, Inc., a Georgia corporation (the "Company"); WITNESSETH : WHEREAS , Employee and the Company desire to continue the employment relationship established by the Employment Agreement dated as of November 9, 1999 between Employee and the Company (the "Agreement"), with certain modifications to the terms of that relationship; and WHEREAS , Employee and the Company desire to memorialize those modifications in this First Amendment; NOW THEREFORE , in consideration of the mutual promises and covenants contained herein, the Agreement is hereby modified and amended as follows:   Employee's annual base salary during the term of this Agreement shall be $250,000.00, payable in accordance with the normal payroll practices of the Company. Employee will be eligible for an annual bonus based on operating profit for each fiscal year. (See Attachment A.) The Bonus Plan may be amended, each July 1st, at the sole discretion of the Compensation Committee of the Board of Directors of the Company and the CEO. Except as amended, the Agreement is ratified, approved and confirmed in all respects.   IN WITNESS WHEREOF, the parties hereto have signed this FIRST AMENDMENT TO EMPLOYMENT AGREEMENT as of the date first above written.   Employee: /s/ Mark Diamond   Company: SED INTERNATIONAL, INC. By: /s/ Larry G. Ayers, Vice President (CORPORATE SEAL)   Attachment "A"   SED International, Inc. Annual Bonus Plan for Mark Diamond:   OPERATING PROFITS FISCAL YEAR 2000 BONUS $ 0 to $ 2,000,000 $ 0 $ 2,0000,001 and Over 5% of profit over $2,000,001, up to 50% of base salary. Operating Profits are defined as the net income before taxes as determined and reported by the CFO of the Company to the Securities and Exchange Commission. The Bonus is payable upon the filing of Form 10-K with the Securities and Exchange Commission.    

EXECUTION VERSION AIRCRAFT LEASE EXTENSION AND AMENDMENT AGREEMENT No. 2 Dated as of September 29, 2000 Between GENERAL ELECTRIC CAPITAL CORPORATION as Lessor and FRONTIER AIRLINES, INC. as Lessee in respect of Aircraft Lease Agreement dated as of October 20, 1995 relating to one Boeing 737-301 aircraft manufacturer's serial number 23257 THIS AGREEMENT is dated as of September 29, 2000 BETWEEN: GENERAL ELECTRIC CAPITAL CORPORATION, a company incorporated under the laws of New York whose headquarters are at 260 Long Ridge Road, Stamford, CT 06927 ("Lessor"); and FRONTIER AIRLINES, INC., a company incorporated under the laws of Colorado whose headquarters are at 12015 East 46th Avenue, Denver, Colorado 80239 ("Lessee"). WHEREAS: (A) By an Aircraft Lease Agreement dated as of October 20, 1995 as amended and supplemented by Letter Agreement No. 1 dated as of October 20, 1995, and as further amended and supplemented by an Aircraft Lease Extension and Amendment Agreement dated as of October 1, 1999 and an Amendment to Letter Agreement No. 1 dated as of October 1, 1999 (as further amended, modified and supplemented from time to time, the "Lease"), Lessor leased to Lessee and Lessee took on lease one Boeing 737-301 aircraft with manufacturer's serial number 23257, together with the engines (each having 750 or more rated takeoff horsepower) installed thereon, all more fully identified in Schedule 1 hereto, together with the related parts and equipment (collectively, the "Aircraft") on the terms and subject to the conditions contained therein. (B) Interests in the Aircraft and such engines are affected by the Lease and the other instruments identified (together with information respecting their recordation by the FAA under the Federal Aviation Act) in Schedule 2 hereto. (C) Lessor and Lessee wish to enter into this Agreement for the purpose of extending the term of the Lease and making certain further amendments to the Lease. IT IS AGREED as follows: 1. INTERPRETATION 1.1 Definitions: Capitalised terms used herein but not defined shall have the respective meanings ascribed to such terms in the Lease. In this Agreement "Extended Lease" means the Lease as amended by this Agreement. 1.2 Construction: The provisions of Clause 1.2 (Construction) of the Lease shall apply to this Agreement as if the same were set out in full herein. 2. REPRESENTATIONS AND WARRANTIES Lessee hereby repeats the representations and warranties in Clause 2.1 of the Lease as if made with reference to the facts and circumstances existing as at the date hereof and as if the references in such representations and warranties to "this Agreement" referred to the Lease as amended by this Agreement. 3. LEASE EXTENSION Lessor and Lessee hereby agree (subject to satisfaction of the conditions specified in Clause 5) to extend the period for which the Aircraft is leased to Lessee pursuant to the Lease from the current Expiry Date of February 23, 2003 to September 30, 2003. Accordingly, the Lease is hereby amended (subject to satisfaction of the conditions specified in Clause 5) by deleting it in its entirety and replacing it with the following: Expiry Date September 30, 2003 or if earlier the date on which: (a) Lessor, acting in accordance with the terms of this Agreement terminates the leasing of the Aircraft to Lessee under this Agreement; or (b) Lessor receives the Agreed Value together with any other amounts then due and unpaid by Lessee following an Event of Loss. 4. OTHER AMENDMENTS TO LEASE 4.1 Other Amendments: The Lease shall be further amended (subject to satisfaction of the conditions specified in Clause 5) as follows: 4.1.1 The following definitions shall be added in the appropriate alphabetical order in Clause 1.1: "Pre-Approved Bank Wells Fargo Bank, N.A." "Letter of Credit as defined in Clause 5.1 hereof." "Required LC Expiry Date" the date which is 91 days after the Expiry Date." 4.1.2 Clause 5.1 is hereby amended and restated its entirety as follows: "5.1 Deposit: (a) Lessee shall pay to Lessor a Deposit in the amount set forth in the definition of that term in Letter Agreement Number 1. (b) In lieu of a cash Deposit, Lessee shall have the option to provide Lessor with a letter of credit issued and payable by a Pre-Approved Bank or another bank reasonably acceptable to Lessor in its reasonable discretion and in form and substance reasonably acceptable to Lessor, and, if not issued by a Pre-Approved Bank or by the New York branch of a major bank reasonably acceptable to Lessor in its reasonable discretion from time to time, will be confirmed by and payable at the New York branch of a major bank reasonably acceptable to Lessor in its reasonable discretion from time to time (the "Letter of Credit"). The Letter of Credit will be issued in lieu of a cash Deposit as security for all payment obligations of Lessee under the Lease and Other Agreements (including any and all obligations to indemnify Lessor for Losses suffered or incurred by it), which shall remain in full force and effect and may be drawn down by Lessor upon demand at any time or times following the occurrence of an Event of Default until the Required LC Expiry Date. (c) With the prior written consent of Lessor, the Letter of Credit may have a validity period or periods ending prior to the Required LC Expiry Date, provided that (i) the Letter of Credit shall, in each case, be renewed and delivered to Lessor not later than 45 days prior to its expiry; and (ii) a Letter of Credit shall remain in force at all times up to the Required LC Expiry Date. (d) If at any time during the Term, Lessor reasonably determines in its reasonable discretion that the current issuing or confirming bank for the Letter of Credit is no longer an acceptable issuing or confirming bank (whether by virtue of a material adverse change in its financial condition, a decrease in any credit rating of its long-term unsecured debt obligations, or for any other reason) Lessee shall promptly procure that the Letter of Credit is replaced by a Letter of Credit issued by another bank reasonably acceptable to Lessor in its reasonable discretion and (if reasonably requested by Lessor in its reasonable discretion) that such replacement Letter of Credit is confirmed by another bank reasonably acceptable to Lessor in its reasonable discretion. (e) If Lessor makes a drawing under the Letter of Credit, Lessee shall, following a demand in writing by Lessor, procure that the maximum amount available for drawing under the Letter of Credit is promptly restored to the level at which it stood immediately prior to such drawing. (f) If Lessee elects to provide Lessor with a Letter of Credit in lieu of the cash Deposit pursuant to the provisions of this Clause 5.1, then promptly upon receipt by Lessor of such Letter of Credit, Lessor shall return such cash Deposit to Lessee. If at any time thereafter a Letter of Credit shall not be in force and effect, then Lessee shall promptly provide Lessor with a cash Deposit. (g) So long as no Default or Event of Default then exists, Lessor shall refund to Lessee all Deposits (if any) then held by Lessor or, as the case may be, return the Letter of Credit upon return and final acceptance of the Aircraft by Lessor on the Expiry Date or promptly after receipt of the Agreed Value after an Event of Loss. 4.1.3 Clause 7.3(b)(i) shall be amended by inserting the words "(if any) or, as the case may be, return the Letter of Credit" immediately after the word "Deposit". 4.1.4 Clause 16.7 (a) shall be amended be deleting the Phrase beginning with the words "The U.N. Convention" through the words ", and" at the end thereof and replacing them with the word "or". 4.1.5 The following sentence shall be added at the end of Clause 16.12(a): "The U.N. Convention on Contracts for the International Sales of Goods is not applicable to this Agreement and all of its terms must be construed in accordance with the Governing Law applicable to domestic transactions in the jurisdiction to which the Governing Law pertains." 5. CONDITIONS PRECEDENT 5.1 Conditions: This Agreement and Lessor's obligation to extend the Term shall be subject to the satisfaction of each of the following conditions and receipt of the following documents: (a) Insurances: certificates of insurance, an undertaking from Lessee's insurance broker and other evidence satisfactory to Lessor of Lessee's due compliance with the provisions of the Lease (as extended hereby) regarding Insurances; (b) Legal Opinion: a legal opinion from Lessee's counsel in form and substance reasonably acceptable to Lessor; (c) Filings and FAA Opinion: evidence of the recordation of this Amendment with the FAA and, promptly after such recordation, provision by Lessee to Lessor of an opinion of FAA counsel acceptable to Lessor who are recognized specialists with regard to FAA registration matters in a form acceptable to Lessor acting reasonably as to the due filing for recordation of this Amendment; (d) Certificate of Lease Termination: a replacement certificate of lease termination executed by a duly authorized officer of Lessee, substantially in the form of Schedule 3 hereto, acknowledging that the Extended Lease is no longer in effect with respect to the Aircraft, which certificate Lessor will hold in escrow to be filed at the FAA upon the expiration of the Term or other termination of the leasing of the Aircraft to Lessee pursuant to the Extended Lease. (e) Other: such other documents as Lessor may reasonably request. 5.2 Further Conditions: The obligation of Lessor to extend the Term under this Agreement is subject to the further condition that, as of February 23, 2003 (the Expiry Date prior to the amendment contained herein), no Default or Event of Default shall have occurred and be continuing under the Lease or any other Operative Document. 5.3 Waiver: The conditions specified in Clauses 5.1 and 5.2 are for the sole benefit of Lessor and may be waived or deferred (in whole or in part and with or without conditions) by Lessor. 6. MISCELLANEOUS 6.1 Further Assurances: Lessee agrees from time to time to do and perform such other and further acts and execute and deliver any and all such other instruments as may be required by law or reasonably requested by Lessor to establish, maintain and protect the rights and remedies of Lessor and to carry out and effect the intent and purpose of this Agreement. 6.2 Counterparts: This Agreement may be executed in any number of separate counterparts, and each counterpart shall when executed and delivered be an original document, but all counterparts shall together constitute one and the same instrument. 6.3 Governing Law: The provisions of Clause 16.12 (Governing Law and Jurisdiction) of the Lease shall apply to this Agreement as if the same were set out in full herein. 6.4 Variation: The provisions of this Agreement shall not be varied otherwise than by an instrument in writing executed by or on behalf of Lessor and Lessee. 6.5 Invalidity of any Provision: If any provision of this Agreement becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. 6.6 Costs and Expenses: In accordance with Clause 16.9 of the Lease, Lessee shall bear the costs and expenses associated with this extension and amendment of the Lease, including without limitation the costs and expenses of legal counsel providing the legal opinions referenced in Clause 5.1 7. CONTINUATION OF LEASE Save as expressly amended by this Agreement, the Lease shall continue in full and unvaried force and effect as the legal, valid and binding rights and obligations of each of Lessor and Lessee enforceable in accordance with their respective terms. IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written. Signed for and on behalf of GENERAL ELECTRIC CAPITAL CORPORATION By: __________________ Title: __________________ Signed for and on behalf of FRONTIER AIRLINES, INC. By: __________________ Title: __________________ SCHEDULE 1 DESCRIPTION OF AIRCRAFT ----------------------- AIRCRAFT: N578US Manufacturer: Boeing Model: 737-301 Serial Number 23257 ENGINES: Type: CFM International Inc. CFM-56-3B2 Serial Nos.: 721160 and 725729 SCHEDULE 2 INSTRUMENTS ----------- Aircraft Lease Agreement dated as of October 20, 1995, between General Electric Capital Corporation as lessor and Frontier Airlines, Inc. as lessee, as supplemented by Lease Supplement No. 1 dated October 24, 1995, recorded by the Federal Aviation Administration on December 20, 1995, as Conveyance no. SS004071 (the "Lease") SCHEDULE 3 [FORM OF] CERTIFICATE OF LEASE TERMINATION The undersigned hereby certify that the Aircraft Lease Agreement dated as of October 20, 1995, as amended and supplemented from time to time, including, without limitation, by the Aircraft Lease Extension and Amendment Agreement dated as of October 1, 1999 and by the Aircraft Lease Extension and Amendment Agreement No. 2 dated as of September __, 2000, and as further described in the Appendix attached hereto, has terminated and the aircraft and the aircraft engines covered thereby are no longer subject to the terms thereof. This certificate may be executed in one or more counterparts each of which when taken together shall constitute one and the same instrument. DATED this _________________ day of____________________________ Lessor: Lessee: GENERAL ELECTRIC CAPITAL FRONTIER AIRLINES, INC. CORPORATION By: _______________________ By: ________________________ Title: Title:

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.24 SEVENTH AMENDMENT TO LOAN AGREEMENT     This amendment to Loan Agreement ("Amendment") is made as of October 5, 2000 by and among the following parties:     Bank of America, N.A., formerly known as Bank of America National Trust and Savings Association ("Bank of America" and a "Lender")     U.S. Bank National Association ("U.S. Bank" and a "Lender")     Bank of America, N.A., formerly known as Bank of America National Trust and Savings Association, in its capacity as Agent ("Agent")     Each of the several financial institutions which subsequently becomes party to the Loan Agreement pursuant to Section 11.7 (each individually a "Lender")     Northwest Pipe Company, an Oregon corporation ("Borrower") R E C I T A L S     A.  The Borrower, the Lenders and the Agent are parties to that certain Amended and Restated Loan Agreement dated as of June 30, 1998, as amended as of December 23, 1998, June 16, 1999, November 30, 1999, December 30, 1999, May 11, 2000 and August 31, 2000, and as the same may be further amended, modified or extended from time to time (the "Loan Agreement") and the related Loan Documents described therein.     B.  The Temporary Supplemental Revolving Loans which were the subject of the Fifth Amendment to Loan Agreement dated as of May 11, 2000 and the Sixth Amendment to Loan Agreement dated August 31, 2000, are no longer available to Borrower because the maturity date for such loans is September 30, 2000. Therefore, the Borrower desires the Lenders to increase the Total Commitment by $10,000,000.     NOW, THEREFORE, the parties agree as follows: A G R E E M E N T     1.  Definitions.  Capitalized terms used herein and not otherwise defined shall have the meaning given in the Loan Agreement.     2.  Amendment to Section 1.1.  Section 1.1 of the Loan Agreement is amended by revising the following definition of "Total Commitment" by revising the definition of "Total Commitment" in its entirety to read as follows: "Total Commitment" means Sixty-Five Million Dollars ($65,000,000.00)."     3.  Amendment to Section 5.13.  Section 5.13 is amended in its entirety to read as follows: "Section 5.13 Maximum Funded Debt to EBITDA. Borrower and its Subsidiaries, on a consolidated basis, shall maintain for each period of four consecutive fiscal quarters a ratio of Funded Debt to EBITDA of no greater than: Period --------------------------------------------------------------------------------   Ratio -------------------------------------------------------------------------------- For the four consecutive fiscal quarters ending September 30, 2000   3.65:1 For the four consecutive fiscal quarters ending December 31, 2000   3.65:1 For the four consecutive fiscal quarters ending March 31, 2001   3.50:1 For any four consecutive fiscal quarters ending on or after June 30, 2001   3.25:1 -------------------------------------------------------------------------------- For purposes of calculating this covenant, the EBITDA for the prior fiscal year for the "Acquisitions," as defined in Section 6.6, shall be included in the calculation. The Acquisitions' EBITDA shall be incorporated on a decreasing pro-rata basis, with 100% of the Acquisitions' EBITDA included in the calculation for the first calendar quarter-end following closing of the Acquisitions, 75% included in the second quarter-end, 50% included in the third quarter-end, and 25% included in the fourth quarter-end. Beginning with the fifth quarter following the closing of the Acquisitions, the EBITDA for the Acquisitions' prior fiscal year shall no longer be incorporated in this calculation."     4.  Addition of Section 5.15.  The following Section 5.15 is added to the Loan Agreement: "Section 5.15 Maximum Funded Debt to Selected Balance Sheet Items. Borrower and its subsidiaries, on a consolidated basis, shall maintain a ratio of funded debt to selected balance sheet items of no more than 1.00:1. For purposes of calculating this covenant "selected balance sheet items" shall mean the total of the following as shown on Borrower's most recent 10-Q or 10-K report: 80% of trade accounts receivable after deducting the allowance for doubtful accounts. 50% of raw materials inventory and finished goods inventory. 75% of property, plant and equipment after deducting, in each case, accumulated depreciation. This covenant will be measured upon receipt of the applicable 10-Q or 10-K report for each quarter beginning with the quarter ended September 30, 2000."     5.  Amendment of Section 6.2.  Section 6.2 of the Loan Agreement is amended in its entirety to read as follows: "Section 6.2 Liquidation, Merger, Sale of Assets. Borrowers shall not, and shall not permit any Subsidiary to liquidate, dissolve or enter into any merger, consolidation, partnership or other combination, except that Borrowers may make acquisitions by merger, as provided in Section 6.6 when Northwest Pipe Company is the survivor. Borrowers shall not sell, lease, or dispose of assets other than in the ordinary course of business, except that Borrowers in any one fiscal year may sell assets not in the ordinary course of business so long as the total of such sales does not exceed 5% of Tangible Net Worth as of the end of the prior fiscal year".     6.  Fees.  Upon execution of this Amendment, Borrower agrees to pay Agent for the benefit of Lenders, a fee of Thirty Thousand Dollars ($30,000.00) to be divided in proportion to their Revolving Loan Pro Rata shares.     7.  No Further Amendment.  Except as expressly modified by this Amendment, the Loan Agreement and the other Loan Documents shall remain unmodified and in full force and effect and the parties hereby ratify their respective obligations thereunder. Without limiting the foregoing, the Borrower expressly reaffirms and ratifies its obligation to pay or reimburse the Agent and the Lender on request for all reasonable expenses, including legal fees, actually incurred by the Agent or such Lender in connection with the preparation of this Amendment, any other amendment documents, and the closing of the transactions contemplated hereby and thereby.     8.  Miscellaneous.       (a) Entire Agreement.  This Amendment comprises the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior oral or written agreements, representations or commitments. 2 --------------------------------------------------------------------------------     (b) Counterparts.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same Amendment.     (c) Governing Law.  This Amendment and the other agreements provided for herein and the rights and obligations of the parties hereto and thereto shall be construed and interpreted in accordance with the laws of the State of Oregon.     (d) Certain Agreements Not Enforceable. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS MADE BY THE LENDERS AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION, AND BE SIGNED BY THE LENDERS TO BE ENFORCEABLE. 3 --------------------------------------------------------------------------------     EXECUTED AND DELIVERED by the duly authorized officers of the parties as of the date first above written. BORROWER:   NORTHWEST PIPE COMPANY           By: BRIAN DUNHAM Its: President and Chief Operating Officer     Address:   200 S.W. Market St., Suite 1800 Portland OR 97201 Fax No. (503) 240-6615   LENDER:       BANK OF AMERICA, N.A.           By: ED KLUSS Its: Vice President     Address:   Commercial Banking 121 SW Morrison Street, Suite 1700 Portland OR 97204 Fax No. (503) 275-1391 Attn: Edward R. Kluss           U.S. BANK NATIONAL ASSOCIATION           By: J. STEPHEN MITCHELL Its: Vice President     Address:   Oregon Corporate Banking, T-4 111 SW Fifth Avenue, Suite 400 Portland OR 97208 Fax No. (503) 275-7290 Attn: Stephen Mitchell   AGENT:       BANK OF AMERICA, N.A.           By: DORA A. BROWN Its: Vice President             Address:   Commercial Agency Management WA1-501-37-20 800 Fifth Avenue, Floor 37 Seattle WA 98104-3185 Fax No. (206) 358-0971 Attn: Dora A. Brown 4 -------------------------------------------------------------------------------- QUICKLINKS SEVENTH AMENDMENT TO LOAN AGREEMENT

EXECUTION VERSION AIRCRAFT LEASE EXTENSION AND AMENDMENT AGREEMENT Dated as of September 29, 2000 between POLARIS HOLDING COMPANY as Lessor and FRONTIER AIRLINES, INC. as Lessee in respect of Aircraft Lease Agreement dated as of May 1, 1996 relating to one Boeing 737-2L9 aircraft manufacturer's serial number 22733 THIS AGREEMENT is dated as of September 29, 2000 BETWEEN: POLARIS HOLDING COMPANY, a company incorporated under the laws of Delaware whose principal office is c/o GE Capital Aviation Services, Inc., 201 High Ridge Road, Stamford, CT 06927 ("Lessor"); and FRONTIER AIRLINES, INC., a company incorporated under the laws of Colorado whose headquarters are at 12015 East 46th Avenue, Denver, Colorado 80239 ("Lessee"). WHEREAS: (A) By an Aircraft Lease Agreement dated as of May 1, 1996 as amended and supplemented by Letter Agreement No. 1 dated as of May 1, 1996 (as further amended, modified and supplemented from time to time, the "Lease"), Lessor leased to Lessee and Lessee took on lease one Boeing 737-2L9 aircraft with manufacturer's serial number 22733, together with the engines (each having 750 or more rated takeoff horsepower) installed thereon, all more fully identified in Schedule 1 hereto, together with the related parts and equipment (collectively, the "Aircraft") on the terms and subject to the conditions contained therein. (B) Interests in the Aircraft and such engines are affected by the Lease and the other instruments identified (together with information respecting their recordation by the FAA under the Federal Aviation Act) in Schedule 2 hereto. (C) Lessor and Lessee wish to enter into this Agreement for the purpose of extending the term of the Lease and making certain further amendments to the Lease. IT IS AGREED as follows: 1. INTERPRETATION 1.1 Definitions: Capitalised terms used herein but not defined shall have the respective meanings ascribed to such terms in the Lease. In this Agreement "Extended Lease" means the Lease as amended by this Agreement. 1.2 Construction: The provisions of Clause 1.2 (Construction) of the Lease shall apply to this Agreement as if the same were set out in full herein. 2. REPRESENTATIONS AND WARRANTIES Lessee hereby repeats the representations and warranties in Clause 2.1 of the Lease as if made with reference to the facts and circumstances existing as at the date hereof and as if the references in such representations and warranties to "this Agreement" referred to the Lease as amended by this Agreement. 3. LEASE EXTENSION Lessor and Lessee hereby agree (subject to satisfaction of the conditions specified in Clause 5) to extend the period for which the Aircraft is leased to Lessee pursuant to the Lease from the current Expiry Date of May 30, 2001 to September 30, 2002. Accordingly, the Lease is hereby amended (subject to satisfaction of the conditions specified in Clause 5), by deleting the words "the day preceding the day which is the 60th monthly anniversary of the Delivery Date" in the definition of "Expiry Date" in Clause 1.1 and replacing them with the words "September 30, 2002". 4. OTHER AMENDMENTS TO LEASE 4.1 Other Amendments: The Lease shall be further amended (subject to satisfaction of the conditions specified in Clause 5) as follows: 4.1.1 The definition of "Other Agreements" in Clause 1.1 shall be amended by deleting the words "GPA Group plc" and replacing them with the words "Airplanes Holdings Limited". 4.1.2 The following definitions shall be added in the appropriate alphabetical order in Clause 1.1: "Pre-Approved Bank Wells Fargo Bank, N.A." "Letter of Credit as defined in Clause 5.1 hereof." "Required LC Expiry Date" the date which is 91 days after the Expiry Date." 4.1.3 Clause 5.1 is hereby amended and restated its entirety as follows: "5.1 Deposit: (a) Lessee shall pay to Lessor a Deposit in the amount set forth in the definition of that term in Letter Agreement Number 1. (b) In lieu of a cash Deposit, Lessee shall have the option to provide Lessor with a letter of credit issued and payable by a Pre-Approved Bank or another bank reasonably acceptable to Lessor in its reasonable discretion and in form and substance reasonably acceptable to Lessor, and, if not issued by a Pre-Approved Bank or by the New York branch of a major bank reasonably acceptable to Lessor in its reasonable discretion from time to time, will be confirmed by and payable at the New York branch of a major bank reasonably acceptable to Lessor in its reasonable discretion from time to time (the "Letter of Credit"). The Letter of Credit will be issued in lieu of a cash Deposit as security for all payment obligations of Lessee under the Lease and Other Agreements (including any and all obligations to indemnify Lessor for Losses suffered or incurred by it), which shall remain in full force and effect and may be drawn down by Lessor upon demand at any time or times following the occurrence of an Event of Default until the Required LC Expiry Date. (c) With the prior written consent of Lessor, the Letter of Credit may have a validity period or periods ending prior to the Required LC Expiry Date, provided that (i) the Letter of Credit shall, in each case, be renewed and delivered to Lessor not later than 45 days prior to its expiry; and (ii) a Letter of Credit shall remain in force at all times up to the Required LC Expiry Date. (d) If at any time during the Term, Lessor reasonably determines in its reasonable discretion that the current issuing or confirming bank for the Letter of Credit is no longer an acceptable issuing or confirming bank (whether by virtue of a material adverse change in its financial condition, a decrease in any credit rating of its long-term unsecured debt obligations, or for any other reason) Lessee shall promptly procure that the Letter of Credit is replaced by a Letter of Credit issued by another bank reasonably acceptable to Lessor in its reasonable discretion and (if reasonably requested by Lessor in its reasonable discretion) that such replacement Letter of Credit is confirmed by another bank reasonably acceptable to Lessor in its reasonable discretion. (e) If Lessor makes a drawing under the Letter of Credit, Lessee shall, following a demand in writing by Lessor, procure that the maximum amount available for drawing under the Letter of Credit is promptly restored to the level at which it stood immediately prior to such drawing. (f) If Lessee elects to provide Lessor with a Letter of Credit in lieu of the cash Deposit pursuant to the provisions of this Clause 5.1, then promptly upon receipt by Lessor of such Letter of Credit, Lessor shall return such cash Deposit to Lessee. If at any time thereafter a Letter of Credit shall not be in force and effect, then Lessee shall promptly provide Lessor with a cash Deposit. (g) So long as no Default or Event of Default then exists, Lessor shall refund to Lessee all Deposits (if any) then held by Lessor or, as the case may be, return the Letter of Credit upon return and final acceptance of the Aircraft by Lessor on the Expiry Date or promptly after receipt of the Agreed Value after an Event of Loss. 4.1.4 Clause 7.3(b)(i) shall be amended by inserting the words "(if any) or, as the case may be, return the Letter of Credit" immediately after the word "Deposit". 4.1.5 Clause 16.11 shall be amended by (a) deleting the Lessor contact information and replacing it with the following: "Lessor: Address: c/o GE Capital Aviation Services, Inc., 201 High Ridge Road, Stamford, CT 06927; Attn: Contracts Leader; Facsimile: (203) 357-3201; Telephone: (203) 357-4482"; and (b) by deleting the "With a copy to" contact information. 4.1.6 The following sentence shall be added at the end of Clause 16.12(a): "The U.N. Convention on Contracts for the International Sales of Goods is not applicable to this Agreement and all of its terms must be construed in accordance with the Governing Law applicable to domestic transactions in the jurisdiction to which the Governing Law pertains." 5. CONDITIONS PRECEDENT 5.1 Conditions: This Agreement and Lessor's obligation to extend the Term shall be subject to the satisfaction of each of the following conditions and receipt of the following documents: (a) Insurances: certificates of insurance, an undertaking from Lessee's insurance broker and other evidence satisfactory to Lessor of Lessee's due compliance with the provisions of the Lease (as extended hereby) regarding Insurances; (b) Legal Opinion: a legal opinion from Lessee's counsel in form and substance reasonably acceptable to Lessor; (c) Filings and FAA Opinion: evidence of the recordation of this Amendment with the FAA and, promptly after such recordation, provision by Lessee to Lessor of an opinion of FAA counsel acceptable to Lessor who are recognized specialists with regard to FAA registration matters in a form acceptable to Lessor acting reasonably as to the due filing for recordation of this Amendment; (d) Certificate of Lease Termination: a replacement certificate of lease termination executed by a duly authorized officer of Lessee, substantially in the form of Schedule 3 hereto, acknowledging that the Extended Lease is no longer in effect with respect to the Aircraft, which certificate Lessor will hold in escrow to be filed at the FAA upon the expiration of the Term or other termination of the leasing of the Aircraft to Lessee pursuant to the Extended Lease. (e) Other: such other documents as Lessor may reasonably request. 5.2 Further Conditions: The obligation of Lessor to extend the Term under this Agreement is subject to the further condition that, as of May 30, 2001 (the Expiry Date prior to the amendment contained herein), no Default or Event of Default shall have occurred and be continuing under the Lease or any other Operative Document. 5.3 Waiver: The conditions specified in Clauses 5.1 and 5.2 are for the sole benefit of Lessor and may be waived or deferred (in whole or in part and with or without conditions) by Lessor. 6. MISCELLANEOUS 6.1 Further Assurances: Lessee agrees from time to time to do and perform such other and further acts and execute and deliver any and all such other instruments as may be required by law or reasonably requested by Lessor to establish, maintain and protect the rights and remedies of Lessor and to carry out and effect the intent and purpose of this Agreement. 6.2 Counterparts: This Agreement may be executed in any number of separate counterparts, and each counterpart shall when executed and delivered be an original document, but all counterparts shall together constitute one and the same instrument. 6.3 Governing Law: The provisions of Clause 16.12 (Governing Law and Jurisdiction) of the Lease shall apply to this Agreement as if the same were set out in full herein. 6.4 Variation: The provisions of this Agreement shall not be varied otherwise than by an instrument in writing executed by or on behalf of Lessor and Lessee. 6.5 Invalidity of any Provision: If any provision of this Agreement becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. 6.6 Costs and Expenses: In accordance with Clause 16.9 of the Lease, Leasee shall bear the costs and expenses associated with this extension and amendment of the Lease, including without limitation the costs and expenses of legal counsel providing the legal opinions referenced in Clause 5.1 7. CONTINUATION OF LEASE Save as expressly amended by this Agreement, the Lease shall continue in full and unvaried force and effect as the legal, valid and binding rights and obligations of each of Lessor and Lessee enforceable in accordance with their respective terms. IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written. Signed for and on behalf of POLARIS HOLDING COMPANY By: __________________ Title: __________________ Signed for and on behalf of FRONTIER AIRLINES, INC. By: __________________ Title: __________________ SCHEDULE 1 DESCRIPTION OF AIRCRAFT ----------------------- AIRCRAFT: N270FL Manufacturer: Boeing Model: 737-2L9 Serial Number 22733 ENGINES: Type: Pratt & Whitney JT8D-17 Serial Nos.: 688456 and 702762 SCHEDULE 2 INSTRUMENTS ----------- Aircraft Lease Agreement dated as of May 1, 1996, between Polaris Holding Company as lessor and Frontier Airlines, Inc. as lessee, as supplemented by Lease Supplement No. 1 dated May 1, 1996, recorded by the FAA on August 5, 1996, as Conveyance No. XX006402, as amended by Amendment No. 1 dated as of October 11, 1996, recorded November 13, 1996, as Conveyance No. NN012761 (collectively, the "Lease") SCHEDULE 3 [FORM OF] CERTIFICATE OF LEASE TERMINATION The undersigned hereby certify that the Aircraft Lease Agreement dated as of May 1, 1996, as amended and supplemented by the Aircraft Lease Extension and Amendment Agreement dated as of September ___, 2000, and as further described in the Appendix attached hereto, has terminated and the aircraft and the aircraft engines covered thereby are no longer subject to the terms thereof. This certificate may be executed in one or more counterparts each of which when taken together shall constitute one and the same instrument. DATED this _________________ day of____________________________ Lessor: Lessee: POLARIS HOLDING COMPANY FRONTIER AIRLINES, INC. By: _______________________ By: ________________________ Title: Title:

Exhibit 10.38 E*TRADE GROUP, INC. NOTE SECURED BY DEED OF TRUST $1,600,000.00 February 28, 2000 Menlo Park, California                 FOR VALUE RECEIVED, DENNIS LUNDIEN (“Maker”) promises to pay to the order of E*TRADE Group, Inc, (“Corporation”), at its corporate offices at 4500 Bohannon Drive, Menlo Park, CA 94025, the principal sum of One Million Six Hundred Thousand Dollars ($1,600,000.00), together with all accrued interest thereon (the “Loan”), upon the terms and conditions specified below.               1. Interest. Interest shall accrue on the unpaid balance outstanding from time to time under this Note at six and two tenths percent (6.2%), compounded annually. All computations of interest shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Anything herein to the contrary notwithstanding, if during any period for which interest is computed hereunder the amount of interest computed on the basis provided for in this Note, together with all fees, charges and other payments which are treated as interest under applicable law, as provided for herein or in any other document executed in connection herewith, would exceed the amount of such interest computed on the basis of the Highest Lawful Rate (as defined below), Maker shall not be obligated to pay, and Corporat ion shall not be entitled to charge, collect, receive, reserve or take, interest in excess of the Highest Lawful Rate, and during any such period the interest payable hereunder shall be computed on the basis of the Highest Lawful Rate. As used herein, “Highest Lawful Rate” means the maximum non-usurious rate of interest, as in effect from time to time, which may be charged, contracted for, reserved, received or collected by Corporation in connection with this Note under applicable law.               2. Principal. The entire principal balance of this Note, together with all accrued and unpaid interest, shall become due and payable in one lump sum on March 1, 2002.               3. Payment. All payments of principal and interest on the Loan shall be made without offset or deduction and shall be made in immediately available lawful tender of the United States and shall be applied first to the payment of all accrued and unpaid interest and then to the payment of principal. Prepayment of the principal balance of this Note, together with all accrued and unpaid interest, may be made in whole or in part at any time without penalty. Whenever any payment hereunder shall be stated to be due, or whenever any interest payment date or any other date specified hereunder would otherwise occur, on a day other than a Business Day (as defined below), then such payment shall be made, and such interest payment date or other date shall occur, on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest hereunder. As used herein, “Business Day” means a day (i) other than Saturday or Sunday, and (ii) on which commercial banks are open for business in San Francisco, California.               4. Representations and Warranties. Maker represents and warrants to Corporation that this Note does not contravene any contractual or judicial restriction binding on or affecting Maker and that this Note is the legal, valid and binding obligation of Maker enforceable against Maker in accordance with its terms.               5. Notice. Maker agrees to notify Corporation of the incurrence of any other indebtedness secured by the Collateral (as defined below) prior to the incurrence thereof.               6. Events of Acceleration. The entire unpaid principal balance of this Note, together with all accrued and unpaid interest, shall become immediately due and payable prior to the specified due date of this Note upon the occurrence of one or more of the following events:                      a. the failure to make any payment of principal, interest or any other amount payable hereunder when due under this Note or the breach of any other condition, obligation or covenant under this Note;   --------------------------------------------------------------------------------                        b. the breach of any representation or covenant under the Deed of Trust (as defined below);                      c. the filing of a petition by or against Maker under any provision of the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or under any similar law relating to bankruptcy, insolvency or other relief for debtors and the continuation of such petition without dismissal for a period of thirty (30) days or more, or appointment of a receiver, trustee, custodian or liquidator of or for all or any part of the assets or property of Maker; or the insolvency of Maker; or the making of a general assignment for the benefit of creditors by Maker;                      d. Maker’s death or incapacity;                      e. any of the documents relating to the Collateral after delivery thereof shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or Maker or any other person shall contest in any manner the validity or enforceability thereof, or Maker or any other person shall deny that it has any further liability or obligation thereunder; or any of the documents relating to the Collateral for any reason, except to the extent permitted by the terms thereof, shall cease to create a valid and perfected first priority lien in any of the Collateral purported to be covered thereby;                      f. the expiration of the thirty (30)-day period following the date Maker ceases for any reason to remain in Corporation’s employ;                      g. the incurrence by Maker of any other indebtedness secured by the Collateral which has not been consented to by the Corporation;                      h. an acquisition of Corporation (whether by merger or acquisition of all or substantially all of Corporation’s assets or outstanding voting stock) for consideration payable in cash or freely-tradable securities; provided, however, that if the Pooling of Interest Method, as described in Accounting Principles Board Opinion No. 16, is used to account for the acquisition for financial reporting purposes, acceleration shall not occur prior to the end of the sixty (60)-day period immediately following the end of the applicable restriction period required under Accounting Series Release Numbers 130 and 135; or                      i. the occurrence of any event of default under the Deed of Trust securing this Note or any obligation secured thereby.               7.  Special Acceleration Event. From the date of this Note until the day on which this Note is secured by the Collateral, if Maker sells any shares of the common stock of Corporation acquired through the exercise of one or more employee stock options, the unpaid principal balance of this Note shall become immediately due and payable to the extent of one hundred percent (100%) of the after-tax proceeds realized upon such sale, and Maker shall promptly deliver those after-tax proceeds to the Company to the extent necessary to satisfy the accelerated balance of this Note.               8.  Late Fee; Default.               a.  If any payment hereunder is not paid on or before the fifth (5th) business day of the month during which any such payment first became due and payable, Maker shall pay to Corporation a reasonable late or administrative charge in the amount of five percent (5%) of the amount so unpaid.               b.  Upon and after the occurrence of a default hereunder or any other agreement or instrument evidencing, governing or securing this Loan (an “Event of Default”), the Loan shall bear interest, payable upon demand, at the lessor of twelve percent (12%) or the maximum rate allowed by law (the “Default Rate”).               c.  If any interest payment hereunder is not paid on of before the fifth (5th) business day of the month during which such payment first became due and payable, any interest so unpaid shall bear interest from the first day of the month during which such payment first became due and payable until paid at the Default Rate. Interest on the amount of interest so unpaid shall be compounded monthly and shall be payable upon demand.               d.  Maker and Corporation agree that the actual damages and costs sustained by Corporation due to the failure to make timely payments would be extremely difficult to measure and that the charges specified herein represent a reasonable estimate by Maker and Corporation of a fair average compensation for such damages and costs. Such charges shall be paid by Maker without prejudice to the right of Corporation to collect any other 2 -------------------------------------------------------------------------------- amounts provided to be paid under this Note or any other agreement or, with respect to late payments, to declare an Event of Default.               9.  Employment. For purposes of applying the provisions of this Note, Maker shall be considered to remain in Corporation’s employ for so long as Maker renders services as a full-time employee of Corporation, any successor entity or one or more of Corporation’s fifty percent (50%)-or-more owned (directly or indirectly) subsidiaries.               10.  Security. The obligations of Maker under this Note shall be secured by a deed of trust recorded against real property (the “Collateral”) owned by Maker and                          . The Collateral shall have a fair market value, as reasonably determined by Corporation, of not less than            Dollars ($           ) and otherwise be acceptable to Corporation in its sole and absolute discretion. Within sixty (60) days after the date of this Note, Maker shall provide to Corporation (i) a written description (including address) of the property on which Maker proposes to grant to Corporation a deed of trust (hereinafte r referred to as the “Designated Property”), (ii) a copy of a recent preliminary title report (the “Preliminary Report”) for the Designated Property and all documents listed as exceptions to title in the Preliminary Report and (iii) such other documentation or information regarding the Designated Property as Corporation shall reasonably require. Corporation shall notify Maker in writing as to whether the Designated Property is acceptable to Corporation within twenty (20) days after Corporation receives Maker’s written notice identifying the Designated Property and all of the documentation required in the preceding sentence. Corporation may accept or reject the Designated Property as security for Maker’s obligations under this Loan for any or no reason whatsoever in its sole and absolute discretion. If Corporation notifies Maker that it will accept a lien on the Designated Property as security for Maker’s obligations under this Note, Maker shall execute and deliver to Corpor ation a deed of trust encumbering the Designated Property in the form attached hereto as Exhibit A, If Corporation notifies Maker that it will not accept a lien on the Designated Property as security for Maker’s obligations under this Note, Maker shall provide Corporation with a lien of a deed of trust on other real property acceptable to Corporation in its sole and absolute discretion. If Corporation fails to notify Maker in writing of its acceptance of the Designated Property as security for Maker’s obligations under this Note within the twenty (20) day period referenced above, Corporation shall be deemed to have rejected the Designated Property as security for Maker’s obligations under this Note. In addition, the failure of Maker to execute and deliver to Corporation a deed of trust in the form of Exhibit A, attached hereto, on real property acceptable to Corporation within ninety (90) days after the date of this Note shall constitute a default by Maker hereunder. Maker shall remain personally liable for payment of this Note, and any other assets of Maker, in addition to the Collateral, may be applied to the satisfaction of Maker’s obligations hereunder.               11.  Collection. Maker agrees to pay on demand all the losses, costs, and expenses (including, without limitation, attorneys’ fees and disbursements) which Corporation incurs in connection with enforcement or attempted enforcement of this Note, or the protection or preservation of Corporation’s rights under this Note, whether by judicial proceedings or otherwise. Such costs and expenses include, without limitation, those incurred in connection with any workout or refinancing, or any bankruptcy, insolvency, liquidation or similar proceedings.               12.  Waiver. A waiver of any term of this Note, the Deed of Trust or of any of the obligations secured thereby must be made in writing and signed by a duly-authorized officer of Corporation and any such waiver shall be limited to its express terms. No delay by Corporation in acting with respect to the terms of this Note or the Deed of Trust shall constitute a waiver of any breach, default, or failure of a condition under this Note, the Deed of Trust or the obligations secured thereby. No single or partial exercise of any power under this Note shall preclude any other or further exercise of such power or exercise of any other power. Maker waives presentment, demand, notice of dishonor, notice of default or delinquency, notice of acceleration, notice of protest and nonpayment, notice of costs, expenses or losses and interest thereon, notice of interest on interest and diligence in taking any action to collect any sums owing under this Note or in proceeding against any of the rights or interests in or to properties securing payment of this Note. Maker agrees to make all payments under this Note without set-off or deduction and regardless of any counterclaim or defense.               13.  Conflicting Agreements. In the event of any inconsistencies between the terms of this Note and the terms of any other document related to the loan evidenced by the Note, the terms of this Note shall prevail. 3 --------------------------------------------------------------------------------               14.  Governing Law. This Note shall be construed in accordance with the laws of the State of California. This Note shall be binding on Maker and his successors, assigns, personal representatives, heirs, and legatees, and shall be binding upon and inure to the benefit of Corporation, any future holder of this Note and their respective successors and assigns. Maker may not assign or transfer this Note or any of his obligations hereunder without Corporation’s prior written consent.               15.  Time of Essence. Time is of the essence with respect to every provision hereof.           /s/ Dennis Lundien --------------------------------------------------------------------------------      DENNIS LUNDIEN 4 -------------------------------------------------------------------------------- EXHIBIT A DEED OF TRUST -------------------------------------------------------------------------------- EXHIBIT A RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: E*Trade Group, Inc. c/o Brobeck, Phleger & Harrison LLP One Market Spear Street Tower San Francisco, CA 94105 Attn: -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SPACE ABOVE THIS LINE FOR RECORDER’S USE DEED OF TRUST WITH ASSIGNMENT OF RENTS               THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS (this "Deed of Trust") is made as of this       day of February, 2000, by Dennis Lundien and                     , husband and wife (collectively, “Trustor”), whose address is                                                                  , to CHICAGO TITLE COMPANY, a California corporation ("Trustee"), for the benefit of E*TRADE GROUP, INC., a Delaware corporation ("Beneficiary").               Trustor irrevocably grants, transfers and assigns to Trustee in trust, with power of sale that certain property located in                                  , California, more particularly described in Exhibit 1 attached hereto, together with all improvements thereon, rights appurtenant thereto and the rents, issues and profits thereof (collectively, the “Property”), subject, however, to the right, power and authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents, issues and profits, for the purpose of securing: (i) payment of the sum of One Million Six Hundred Thousand and No/100 Dollars ($1,600,000.00) together with all interest thereon according to the terms of that certain Note Secured by D eed of Trust dated as of February   , 2000 (“Note”) made by Dennis Lundien and payable to the order of Beneficiary, and extensions or renewals thereof; (ii) the performance of each agreement of Trustor incorporated by reference or contained herein or reciting it is so secured; and (iii) payment of additional sums and interest thereon which may hereafter be loaned to Trustor, or their successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Deed of Trust. The Property and any and all other collateral pledged as security to Beneficiary are collectively referred to herein as the “Collateral.”         A.  To protect the security of this Deed of Trust, and with respect to the Property, Trustor agrees:               (1)  To keep the Property in good condition and repair; not to remove or demolish any building thereon; to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged or destroyed thereon and to pay when due all claims for labor performed and materials furnished therefor; to comply with all laws affecting the Property or requiring any alterations or improvements to be made thereon; not to commit or permit waste thereof; not to commit, suffer or permit any act upon the Property in violation of law; to cultivate, irrigate, fertilize, fumigate, prune and do all other acts which from the character or use of the Property may be reasonably necessary, the specific enumerations herein not excluding the general.               (2)  To provide, maintain and deliver to Beneficiary insurance policies satisfactory to and with loss payable to Beneficiary. The amount collected under any earthquake, fire or other insurance policy may be applied by Beneficiary to any indebtedness secured hereby and in such order as Beneficiary may determine, or at option of Beneficiary the entire amount so collected or any part thereof may be released to Trustor. Such application or release shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to the Note or otherwise.               (3)  To appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; and to pay all costs and expenses, including cost of evidence of title and attorney’s fees in a reasonable sum, in any action or proceeding in which Beneficiary or Trustee may appear, and in any suit brought by Beneficiary or Trustee to foreclose this Deed of Trust.               (4)  To pay, at least ten days before delinquency, all taxes and assessments affecting the Property, including assessments on appurtenant water stock; and to pay, when due, all encumbrances, charges and 1 --------------------------------------------------------------------------------  liens, with interest, on the Property or any part thereof, which appear to be prior or superior hereto and all costs, fees and expenses incurred by Beneficiary or Trustee in connection with this Deed of Trust.               Should Trustor fail to make any payment or to do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon the Property for such purposes; appear in and defend any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; pay, purchase, contest or compromise any encumbrance, charge, or lien which in the judgment of either appears to be prior or superior hereto and, in exercising any such powers, pay necessary expenses, employ counsel and pay his or her reasonable fees.               (5)  To pay immediately and without demand all sums so expended by Beneficiary or Trustee, with interest from date of expenditure at the amount then applicable under the Note, and to pay for any statement provided for by law in effect at the date hereof regarding the obligation secured hereby, any amount demanded by Beneficiary or Trustee not to exceed the maximum allowed by law at the time when said statement is demanded. B.  It is further agreed:               (1)  That any award of damages in connection with any condemnation for public use of or injury to the Property or any part thereof is hereby assigned and shall be paid to Beneficiary who may apply or release such moneys received in the same manner and with the same effect as above provided for disposition of proceeds of insurance.               (2)  That by accepting payment of any sum secured hereby after its due date, Beneficiary does not waive its right either to require prompt payment when due of all other sums so secured or to declare default for failure so to pay.               (3)  That at any time or from time to time, without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the Note for endorsement, and without affecting the personal liability of any person for payment of the indebtedness secured hereby, Beneficiary or Trustee may reconvey any part of the Property, consent to the making of any map or plat thereof, join in granting any easement thereon, or join in any extension agreement or any agreement subordinating the lien or charge hereof.               (4)  That upon written request of Beneficiary stating that all sums secured hereby have been paid, and upon surrender of this Deed of Trust and the Note to Trustee for cancellation and retention or other disposition as Trustee in its sole discretion may choose and upon payment of its fees, Trustee shall reconvey, without warranty, the Property then held hereunder. The Grantee in such reconveyance may be described as “the person or persons legally entitled thereto.”               (5)  That as additional security, Trustor hereby gives to and confers upon Beneficiary the right, power and authority, during the continuance of these trusts to collect the rents, issues and profits of the Property, reserving unto Trustor the right, prior to any default by Trustor in payment of any indebtedness secured hereby or in performance of any agreement hereunder or under the Note, to collect and retain such rents, issues and profits as they become due and payable. Upon any such default, Beneficiary may at any time without notice, either in person, by agent, or by a receiver to be appointed by a court, and without regard to the adequacy of any security for the indebtedness hereby secured, enter upon and take possession of the Property or any part thereof, in its own name sue for or otherwise collect such rents, issues, and profits, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorneys’ fees, upon any indebtedness secured hereby, and in such order as Beneficiary may determine. The entering upon and taking possession of the Property, the collection of such rents, issues and profits and the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice.               (6)  That upon default by Trustor in the payment of any indebtedness secured hereby or in performance of any agreement hereunder, or upon the occurrence of any Event of Acceleration or any other default by Trustor in the payment or performance of any obligation reader the Note, Beneficiary may declare all sums secured hereby immediately due and payable by delivery to Trustee of written declaration of default and demand for sale and of written notice of default and of election to cause the Property to be sold, which notice Trustee shall cause 2 -------------------------------------------------------------------------------- to be filed for record. Beneficiary also shall deposit with Trustee this Deed of Trust, the Note and all documents evidencing expenditures secured hereby.               After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Property at the time and place fixed by it in said notice for sale, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States, payable at the time of sale. Trustee may postpone the sale of all or any portion of the Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement at the time fixed by the preceding postponement. Trustee shall deliver to such purchaser its deed conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of many matters of facts shall be conclusive proof of the truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary as hereinafter defined, may purchase at such sale.               After deducting all costs, fees and expenses of Trustee and of this trust, including cost of evidence of title in connection with sale, Trustee shall apply the proceeds of sale to payment of (in the following order of priority): all sums owing under the terms hereof or under the Note, not then repaid, with accrued interest at the amount allowed by law in effect at the date hereof; all other sums then secured hereby; and the remainder, if any, to the person or persons legally entitled thereto.               (7)  Beneficiary or any successor in ownership of any indebtedness secured hereby may, from time to time, by instrument in writing, substitute a successor or successors to any Trustee named herein or acting hereunder, which instrument, executed by Beneficiary and duly acknowledged and recorded in the office of the recorder of the county or counties where the Property is situated, shall be conclusive proof of proper substitution of such successor Trustee or Trustees, who shall, without conveyance from Trustee’s predecessor, succeed to all its title, estate, rights, powers and duties. Said instrument must contain the name of the original Trustor, Trustee and Beneficiary hereunder, the book and page where this Deed of Trust is recorded and the name and address of the new Trustee.               (8)  This Deed of Trust applies to, inures to the benefit of, and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors, and assigns. The term “Beneficiary” shall mean the owner and holder, including pledgees, of the Note secured hereby, whether or not named as Beneficiary herein. In this Deed of Trust, whenever the context so requires, the masculine gender includes the feminine and/or the neuter, and the singular number includes the plural.               (9)  Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other Deed of Trust or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party unless brought by Trustee.               (10)  Beneficiary may charge for a statement regarding the obligation secured hereby, provided the charge thereof does not exceed the maximum allowed by law.               (11)  The undersigned Trustor, requests that a copy of any notice of default and any notice of sale hereunder be mailed to him or her at his or her address hereinbefore set forth.               (12)  This Deed of Trust is further subject to the terms and conditions set forth in Addendum to this Deed of Trust attached hereto and incorporated herein by this reference.               (13)  This Deed of Trust shall be governed by the laws of the state of California and all applicable federal laws.               (14)  Any married person who executes this Deed of Trust as a Trustor and who is obligated under the Note or any other instrument relating thereto or hereto agrees that any money judgment which Beneficiary or Trustee obtains pursuant to the terms of this Deed of Trust or any other obligation of fleet married person secured by this Deed of Trust may be collected by execution upon that person’s separate property and any community property of which that person is a manager. 3 --------------------------------------------------------------------------------               IN WITNESS WHEREOF, Trustor has executed this Deed of Trust effective as of the date first set forth above.      [name]      --------------------------------------------------------------------------------      [spouse]   4 -------------------------------------------------------------------------------- STATE OF CALIFORNIA                          )  COUNTY OF                                                 )         On                                      , 2000 before me,                                              , Notary Public, personally appeared                             , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and th at by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. (SEAL)      --------------------------------------------------------------------------------      Signature of Notary      STATE OF CALIFORNIA                         )  COUNTY OF                                                 )         On                                      , 2000 before me,                                              , Notary Public, personally appeared                             , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and tha t by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. (SEAL)      --------------------------------------------------------------------------------      Signature of Notary      5 -------------------------------------------------------------------------------- EXHIBIT 1 Property -------------------------------------------------------------------------------- ADDENDUM               THIS ADDENDUM is attached to, and made a part of, that certain Deed of Trust With Assignment of Rents (the “Deed of Trust”) dated February    , 2000 executed by                                   and                               , as Trustor, to CHICAGO TITLE COMPANY, a California corporation, as Trustee, for the benefit and security of E*TRADE GROUP, INC., a Delaware corporation, as Beneficiary. Capitalized terms used herein and not otherwise defined herein shall have the same meaning as in the Deed of Trust.               In addition to the terms and conditions set forth in the Deed of Trust, the following provisions are hereby incorporated as if fully set forth therein.               1.  Due on Sale or Encumbrance. If Trustor shall convey or alienate the Property or any part thereof or interest therein, or shall be divested of its title to the Property in any manner, whether voluntary or involuntary, any indebtedness or obligation secured by the Deed of Trust, irrespective of the maturity date expressed in the Note, shall become immediately due and payable at the option of Beneficiary, without demand or notice.               2.  Hazardous Materials. Trustor represents and warrants that, to the best of its knowledge, no hazardous materials (which shall mean any material or substance that, whether by its nature or use, is now or hereafter defined as a hazardous waste, hazardous substance, pollutant or contaminant under any environmental laws or regulations or which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous) are located at, on, in, under or about the Property and that the Property is in full compliance with all such environmental laws and regulations. Trustor shall comply in all respects with all environmental laws and regulations and will not generate, release, store, handle, process, dispose of or otherwise use any hazardous materials on or about the Property, Trustor shall defend, indemnify and hold harmless Beneficiary and its officers, dire ctors and shareholders from and against any and all claims, demands, penalties, causes of actions, fines, liabilities, settlements, damages, costs or expenses of whatever kind or nature, known or unknown, foreseen or unforeseen, contingent or otherwise arising out of, or in any way related to (i) any breach by Trustor of the provisions of this paragraph, (ii) the release, disposal, spillage, discharge, emission, leakage, generation, release or threatened release of any hazardous materials in, on, under or about the Property, (iii) any personal injury arising out of or related thereto or (iv) any violation of any such environmental laws or regulations. To the extent applicable, Beneficiary shall have all the rights and remedies under California Code of Civil Procedure Sections 564(c) and 726.5 and California Civil Code Section 2929.5.               3.  Events of Default. In addition to the defaults set forth in the Deed of Trust (which shall be deemed “Events of A cceleration” for purposes of the Note), each of the following events shall also constitute an Event of Default:                      a.  Trustor shall become insolvent or generally shall not be paying its debts as they become due, as defined in the Bankruptcy Reform Act, Title 11 of the United States Code, as amended from time to time (the “Bankruptcy Code”) or shall file a voluntary petition in bankruptcy seeking to effect a plan or other arrangement with creditors or seek any other relief under the Bankruptcy Code or under any other state or federal law relating to bankruptcy or other relief for debtors;                      b.  Any court or similar tribunal shall enter a decree or order appointing a receiver, trustee, assignee in bankruptcy or insolvency of Trustor or of the Property or shall enter a decree or order for relief in any involuntary case under the Bankruptcy Code; or                      c.  The occurrence of any breach, default or failure under any other deed of trust, mortgage or other security agreement or interest encumbering the Property.                      d.  The failure of Trustor to pay any principal or interest evidenced by that certain Note Secured by Deed of Trust (the “Note”) of even date herewith from Trustor to Beneficiary, within five (5) days of the date so provided for therein;                      e.   The failure by Trustor to perform or comply with any other material obligation, covenant or condition contained in this Deed of Trust within ten (10) days following written notice from Beneficiary of such failure; or  1 --------------------------------------------------------------------------------                    f.   If any hazardous materials are found in, on, under or about the Property, or if Trustor becomes subject to any proceeding or investigation pertaining to the release by Trustor or any other person of any hazardous materials into the environment or to any violation of any environmental laws and Trustor fails to cure the same within such time as may be provided by applicable law.      “Trustor”      --------------------------------------------------------------------------------      Dennis Lundien           --------------------------------------------------------------------------------      -------------------------------------------------------------------------------- 2 -------------------------------------------------------------------------------- STATE OF CALIFORNIA                         )  COUNTY OF                                                 )         On                                      , 2000 before me,                                              , Notary Public, personally appeared                             , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that she executed the same in her authorized capacity, and th at by her signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. (SEAL)      --------------------------------------------------------------------------------      Signature of Notary      STATE OF CALIFORNIA                         )  COUNTY OF                                                 )         On                                      , 2000 before me,                                              , Notary Public, personally appeared                             , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his authorized capacity, and tha t by his signature on the instrument the person, or the entity upon behalf of which the person acted, executed the instrument. WITNESS my hand and official seal. (SEAL)      --------------------------------------------------------------------------------      Signature of Notary      3

Third Amendment to the Connecticut Natural Gas Corporation Officers' Retirement Plan The Connecticut Natural Gas Corporation Officers' Retirement Plan, as amended and restated effective as of March 1, 1999, as heretofore amended (the "Plan"), is hereby amended as follows effective immediately prior to the effective date of the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation and Oak Merger Co.: 1. Section 1.2 of the Plan is hereby amended by adding the following language at the end thereof: "Following the consummation of the merger of CTG Resources, Inc. with and into Oak Merger Co. pursuant to the Agreement and Plan of Merger, dated as of June 29, 1999, by and among CTG Resources, Inc., Energy East Corporation ("EEC") and Oak Merger Co., EEC will be the common parent of an "affiliated group" (the "EEC Group") within the meaning of Section 1504 of the Internal Revenue Code of which the Corporation is a member and EEC will be an Affiliated Company of the Corporation. Anything to the contrary notwithstanding, the Plan shall be interpreted and administered at all times in accordance with the terms of the Internal Revenue Code and the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), as applicable to the EEC Group and those members thereof which are Affiliated Companies."   IN WITNESS WHEREOF, the undersigned hereby executes this Amendment as of the 25th day of April, 2000. WITNESS: CONNECTICUT NATURAL GAS CORPORATION S/ Jeffrey A. Hall                   By: S/ Jean S. McCarthy                                  Title: Vice President, Human Resources

Exhibit 10(d) Contract No. 113419   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AMENDMENT NO. 2 DATED March 27, 2000 TO AGREEMENT DATED January 15, 1998 (Agreement)   1. [ ] Exhibit A dated March 27, 2000. Changes Primary Receipt Point(s)/Secondary Receipt Point(s) and Point MDQ's. This Exhibit A replaces any previously dated Exhibit A. 2. [ ] Exhibit B dated March 27, 2000. Changes Primary Delivery Point(s)/Secondary Delivery Point(s) and Point MDQ's. This Exhibit B replaces any previously dated Exhibit B. 3. [X] Exhibits A and B dated March 27, 2000. Changes Primary Receipt and Delivery Points/Secondary Receipt and Delivery Points. These Exhibits A and B replace any previously dated Exhibits A and B. 4. [X] Exhibit C dated March 27, 2000. Changes the Agreement's Path. This Exhibit C replaces any previously dated Exhibit C. 5. [X] Revise Agreement MDQ: [ ] Increase [X] Decrease In Section 2. of Agreement substitute 9,000 MMBTU for 90,000 MMBTU. [ ] Revise Agreement MAC: [ ] Increase [X] Decrease In Section 2. of Agreement substitute MMBtu for MMBtu. 6. [ ] Revise Service Options Service option selected (check any or all): [ ] LN [ ] SW [ ] NB 7. [ ] The term of this Agreement is extended through _______________________. 8. [ ] Other:____________________________ This Amendment No. 2 becomes effective April 16, 2000. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. Agreed to by: AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Vice President     EXHIBIT A DATED: March 27, 2000 EFFECTIVE DATE: April 16, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. SULPHUR/NGPL MAUD MILLER MILLER AR 3844 08 9,000 INTERCONNECT WITH NGC           ENERGY ON TRANSPORTER'S           MAUD LATERAL IN SEC. 33-T17S-           R28W, MILLER COUNTY, ARKANSAS               SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT B DATED: March 27, 2000 EFFECTIVE DATE: April 16, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   DELIVERY POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY DELIVERY POINT/S                       1. NO SHORE/NGPL GRAYSLAKE LAKE LAKE IL 900001 09 4,500 INTERCONNECT WITH NORTH           SHORE GAS COMPANY LOCATED IN           SEC. 12-T44N-R10E, LAKE COUNTY,           ILLINOIS                                   2. PGLC/NGPL OAKTON STREET COOK COOK IL 904174 09 4,500 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY'S ON TRANSPORTER'S           HOWARD STREET LINE IN SEC. 26-           T41N-R13E, COOK COUNTY, ILLINOIS             SECONDARY DELIVERY POINT/S All secondary delivery points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. DELIVERY PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered by Natural to Shipper, or for Shipper's account, at the Delivery Point/s shall be at the pressure available in Natural's pipeline facilities from time to time. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Delivery Point/s.     EXHIBIT C DATED March 27, 2000 EFFECTIVE DATE: April 16, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED March 27, 2000 EFFECTIVE DATE: April 16, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 113419   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 27   0   F   0 28   27   F   9,000 30   28   F   4,500 39   40   F   4,500 40   28   F   4,500

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

$750,000,000 THIRD AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT dated as of June 13, 2000, by and among JONES APPAREL GROUP USA, INC., the Additional Obligors referred to herein, the Lenders referred to herein, CHASE SECURITIES INC. and SALOMON SMITH BARNEY INC. as Joint Lead Arrangers FIRST UNION NATIONAL BANK, as Administrative Agent, and THE CHASE MANHATTAN BANK and CITIBANK, N.A., as Syndication Agents <PAGE> i TABLE OF CONTENTS Page ARTICLE I DEFINITIONS......................................................1 SECTION 1.1 Definitions..................................................1 SECTION 1.2 General.....................................................12 SECTION 1.3 Other Definitions and Provisions............................12 ARTICLE II REVOLVING CREDIT FACILITY......................................13 SECTION 2.1 Revolving Credit Loans......................................13 SECTION 2.2 Procedure for Advances of Revolving Credit Loans............13 SECTION 2.3 Repayment of Revolving Credit Loans.........................13 SECTION 2.4 Evidence of Debt............................................14 SECTION 2.5 Permanent Reduction of the Revolving Credit Commitment......14 SECTION 2.6 Termination of Revolving Credit Facility....................15 ARTICLE III LETTER OF CREDIT FACILITY.....................................16 SECTION 3.1 L/C Commitment..............................................16 SECTION 3.2 Procedure for Issuance of Letters of Credit.................16 SECTION 3.3 Fees and Other Charges......................................17 SECTION 3.4 L/C Participations..........................................17 SECTION 3.5 Reimbursement...............................................18 SECTION 3.6 Provisions Regarding National Currency Units and the Euro...18 SECTION 3.7 Obligations Absolute........................................20 SECTION 3.8 Effect of Application.......................................20 ARTICLE IV [RESERVED].....................................................20 ARTICLE V GENERAL LOAN PROVISIONS.........................................20 SECTION 5.1 Interest....................................................20 SECTION 5.2 Notice and Manner of Conversion or Continuation of Revolving Credit Loans......................................22 SECTION 5.3 Fees........................................................22 SECTION 5.4 Manner of Payment...........................................22 SECTION 5.5 Crediting of Payments and Proceeds..........................23 SECTION 5.6 Adjustments.................................................23 SECTION 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent...........23 SECTION 5.8 Joint and Several Liability of the Credit Parties ..........24 SECTION 5.9 Changed Circumstances.......................................25 SECTION 5.10 Indemnity..................................................27 SECTION 5.11 Capital Requirements.......................................27 SECTION 5.12 Taxes......................................................28 ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING...................29 SECTION 6.1 Closing.....................................................29 SECTION 6.2 Conditions to Closing and Initial Revolving Credit Loans and Letters of Credit. ...............................29 SECTION 6.3 Conditions to All Extensions of Credit......................32 ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES..........32 SECTION 7.1 Representations and Warranties..............................32 SECTION 7.2 Survival of Representations and Warranties, Etc. ...........36 ARTICLE VIII FINANCIAL INFORMATION AND NOTICES ...........................36 SECTION 8.1 Financial Statements and Projections........................36 SECTION 8.2 Officer's Compliance Certificate............................37 SECTION 8.3 Accountants' Certificate....................................37 SECTION 8.4 Other Reports...............................................37 SECTION 8.5 Notice of Litigation and Other Matters......................37 SECTION 8.6 Accuracy of Information.....................................38 ARTICLE IX AFFIRMATIVE COVENANTS..........................................38 i <PAGE> ii SECTION 9.1 Preservation of Corporate Existence and Related Matters.....38 SECTION 9.2 Maintenance of Property.....................................38 SECTION 9.3 Insurance. .................................................38 SECTION 9.4 Accounting Methods and Financial Records ...................38 SECTION 9.5 Payment and Performance of Obligations......................38 SECTION 9.6 Compliance With Laws and Approvals .........................39 SECTION 9.7 Environmental Laws..........................................39 SECTION 9.8 Compliance with ERISA.......................................39 SECTION 9.9 Conduct of Business.........................................39 SECTION 9.10 Visits and Inspections ....................................39 SECTION 9.11 Use of Proceeds ...........................................40 ARTICLE X FINANCIAL COVENANTS.............................................40 SECTION 10.1 Interest Coverage Ratio....................................40 SECTION 10.2 Minimum Net Worth. As of the end of any fiscal quarter, permit Consolidated Net Worth to be less than $905,772,400.40 ARTICLE XI NEGATIVE COVENANTS.............................................40 SECTION 11.1 Limitations on Debt and Guaranty Obligations...............40 SECTION 11.2 [Reserved].................................................41 SECTION 11.3 Limitations on Liens ......................................41 SECTION 11.4 Limitations on Loans, Advances, Investments and Acquisitions...............................................43 SECTION 11.5 Limitations on Mergers and Liquidation. Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except so long as no Default or Event of Default has occurred and is continuing, or would result therefrom:.....................44 SECTION 11.6 Limitations on Sale or Transfer of Assets..................44 SECTION 11.7 Limitations on Dividends and Distributions.................44 SECTION 11.8 Transactions with Affiliates...............................45 SECTION 11.9 Changes in Fiscal Year End.................................45 SECTION 11.10 Amendments; Payments and Prepayments of Material Debt and Subordinated Debt ....................................45 ARTICLE XII DEFAULT AND REMEDIES..........................................45 SECTION 12.1 Events of Default .........................................45 SECTION 12.2 Remedies ..................................................47 SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; Etc. ..........47 ARTICLE XIII THE ADMINISTRATIVE AGENT.....................................48 SECTION 13.1 Appointment ...............................................48 SECTION 13.2 Delegation of Duties.......................................48 SECTION 13.3 Exculpatory Provisions.....................................48 SECTION 13.4 Reliance by the Administrative Agent.......................48 SECTION 13.5 Notice of Default..........................................49 SECTION 13.6 Non-Reliance on the Administrative Agent and Other Lenders.49 SECTION 13.7 Indemnification............................................49 SECTION 13.8 The Administrative Agent in Its Individual Capacity........50 SECTION 13.9 Resignation of the Administrative Agent; Successor Administrative Agent.......................................50 SECTION 13.10 Syndication Agents........................................50 ARTICLE XIV MISCELLANEOUS.................................................50 SECTION 14.1 Notices ...................................................50 SECTION 14.2 Expenses; Indemnity........................................51 SECTION 14.3 Set-off....................................................52 SECTION 14.4 Governing Law..............................................52 SECTION 14.5 Consent to Jurisdiction....................................52 SECTION 14.6 Waiver of Jury Trial. .....................................52 SECTION 14.7 Reversal of Payments.......................................52 SECTION 14.8 Injunctive Relief; Punitive Damages........................52 SECTION 14.9 Accounting Matters.........................................53 SECTION 14.10 Successors and Assigns; Participations....................53 SECTION 14.11 Amendments, Waivers and Consents..........................56 ii <PAGE> iii SECTION 14.12 Performance of Duties ....................................57 SECTION 14.13 All Powers Coupled with Interest..........................57 SECTION 14.14 Survival of Indemnities...................................57 SECTION 14.15 Titles and Captions.......................................57 SECTION 14.16 Severability of Provisions................................57 SECTION 14.17 Counterparts..............................................57 SECTION 14.18 Term of Agreement.........................................57 SECTION 14.19 Inconsistencies with Other Documents; Independent Effect of Covenants ......................................57 Exhibits Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Notice of Revolving Credit Borrowing Exhibit C - Form of Notice of Account Designation Exhibit D - Form of Notice of Prepayment Exhibit E - Form of Notice of Conversion/Continuation Exhibit F - Form of Officer's Compliance Certificate Exhibit G - Form of Assignment and Acceptance The Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of the omitted schedules to the Commission upon request. Schedules Schedule 1.1(a) - Lenders and Revolving Credit Commitments Schedule 1.1(b) - Outstanding Letters of Credit Schedule 7.1(b) - Subsidiaries and Capitalization Schedule 7.1(p) - Debt and Guaranty Obligations Schedule 7.1(q) - Litigation Schedule 11.3 - Existing Liens Schedule 11.4 - Existing Loans, Advances and Investments iii <PAGE> 1 THIRD AMENDED AND RESTATED 364-DAY CREDIT AGREEMENT, dated as of the 13th day of June, 2000, by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation, the Additional Obligors (as defined below), the Lenders who are or may become a party to this Agreement, CHASE SECURITIES INC. and SALOMON SMITH BARNEY INC., as Joint Lead Arrangers, FIRST UNION NATIONAL BANK, as Administrative Agent for the Lenders, and THE CHASE MANHATTAN BANK and CITIBANK, N.A., as Syndication Agents. STATEMENT OF PURPOSE The Borrower (as defined below) has requested and the Lenders have agreed to amend and restate the Prior Credit Agreement (as defined below) as set forth herein to amend and restate, and as of the Closing Date replace, on substantially the same terms, the Obligations provided for in the Prior Credit Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definitions. The following terms when used in this Agreement shall have the meanings assigned to them below: "Additional Debt Securities" shall have the meaning set forth in Section 11.1(f). "Additional Obligors" means, the collective reference to Jones Apparel Group, Jones Apparel Group Holdings and Nine West Group in their capacities as co-obligors under this Agreement. "Administrative Agent" means First Union in its capacity as Administrative Agent hereunder, and any successor thereto appointed pursuant to Section 13.9. "Administrative Agent's Office" means the office of the Administrative Agent specified in or determined in accordance with the provisions of Section 14.1(c). "Affiliate" means, with respect to any Person, any other Person (other than a Subsidiary) which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person or any of its Subsidiaries. The term "control" means the possession, directly or indirectly, of any power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Agreement" means this Third Amended and Restated 364-Day Credit Agreement, as amended, restated, supplemented or otherwise modified. "Alternative Currency" means (i) Pounds Sterling, (ii) any national currency of Italy, Spain, the Federal Republic of Germany or the Republic of France (in each case, so long as such national currency unit continues to be available as legal tender for obligations of the same type and character as the obligations set forth in this Agreement, is freely convertible and is not subject to exchange controls), (iii) the euro or (iv) any other lawful currency (other than Dollars) acceptable to the Issuing Lenders which, in the case of this clause (iv), is freely transferable and convertible into Dollars in the United States currency market and is freely available to all Issuing Lenders in the London interbank deposit market. "Alternative Currency L/C Commitment" means the lesser of (a) One Hundred Million Dollars ($100,000,000) and (b) the L/C Commitment. <PAGE> 2 "Applicable Law" means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators. "Applicable Margin" means, for purposes of calculating (a) the Base Rate and LIBOR Rate for purposes of Section 5.1(a), (b) the L/C Fee for purposes of Section 3.3(a) or (c) the Facility Fee for purposes of Section 5.3(a), the corresponding rate set forth below for the applicable rating of the senior, unsecured, long-term debt of the Credit Parties, on a collective basis (the "Debt Rating") publicly announced by Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies ("S&P") and Moody's Investors Service, Inc. ("Moodys") as follows: Applicable Margin Per Annum -------------------------------------------- Level S&P Moodys LIBOR Base Trade Standby Facility Rating Rating Rate Rate L/C Fee L/C Fee Fee I >=A- >=A3 0.350% 0.000% 0.150% 0.350% 0.100% II >=BBB+ >=Baa1 0.500% 0.000% 0.200% 0.500% 0.125% III >=BBB >=Baa2 0.600% 0.000% 0.225% 0.600% 0.150% IV >=BBB- >=Baa3 0.800% 0.000% 0.300% 0.800% 0.200% V <=BB+ <=Ba1 1.125% 0.000% 0.350% 1.125% 0.250% provided, that if both Moodys and S&P shall not have in effect a Debt Rating (other than by reason of the circumstances referred to in the last sentence of this definition), then such Debt Rating shall be deemed to be Level V. In the event that the corresponding Debt Ratings publicly announced by S&P and Moodys listed above differ by (a) one pricing level, the Applicable Margin shall be based on the higher of the two ratings, and (b) two or more pricing levels, the Applicable Margin shall be based on the rating one rating below the higher of the two ratings. Any change in the Applicable Margin shall be effective as of the Business Day on which the applicable rating is announced or is publicly available. If the rating system of S&P and Moodys shall change, or if both of such rating agencies shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agencies and, pending the effectiveness of any such amendment, the Applicable Margin shall be determined by reference to the rating most recently in effect prior to such change or cessation. "Application" means an application, in the form specified by any Issuing Lender from time to time, requesting such Issuing Lender to issue a Letter of Credit. "Assignment and Acceptance" shall have the meaning assigned thereto in Section 14.10. "Base Rate" means, at any time, the higher of (a) the Prime Rate and (b) the sum of (i) the Federal Funds Rate plus (ii) 1/2 of 1%; each change in the Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate or the Federal Funds Rate. "Base Rate Loan" means any Revolving Credit Loan bearing interest at a rate based upon the Base Rate as provided in Section 5.1(a). "beginning of the Third State of EMU" means January 1, 1999. "Borrower" means Jones Apparel Group USA, Inc. 2 <PAGE> 3 "Business Day" means (a) any day other than a Saturday, Sunday or legal holiday on which banks in Charlotte, North Carolina, Philadelphia, Pennsylvania and New York, New York, are not authorized or required by law to remain closed for the conduct of their commercial banking business, (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, the term "Business Day" shall also exclude any day on which banks are not open for trading in Dollar deposits in the London interbank market, and (c) with respect to all notices and determinations in connection with, and payment of principal and interest on, any L/C Obligation denominated in an Alternative Currency; the term "Business Day" shall also exclude any day on which banks in London do not provide quotations for deposits denominated in such Alternative Currency. "Capital Lease" means, with respect to the Credit Parties and their Subsidiaries, any lease of any property that should, in accordance with GAAP, be classified and accounted for as a capital lease on a Consolidated balance sheet of the Credit Parties and their Subsidiaries. "Change in Control" shall have the meaning assigned thereto in Section 12.1(h). "Closing Date" means the date of this Agreement or such later Business Day upon which each condition described in Section 6.2 shall be satisfied or waived in all respects. "Code" means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended, supplemented or otherwise modified from time to time. "Consolidated" means, when used with reference to financial statements or financial statement items of the Credit Parties and their Subsidiaries, such statements or items on a consolidated basis in accordance with applicable principles of consolidation under GAAP. "Correspondent" means any financial institution designated by an Issuing Lender to act as such Issuing Lender's correspondent hereunder with respect to the distribution and payment of Letters of Credit denominated in an Alternative Currency. "Credit Facility" means the collective reference to the Revolving Credit Facility and the L/C Facility. "Credit Parties" means each of the Additional Obligors and the Borrower. "Debt" means, with respect to the Credit Parties and their Subsidiaries at any date and without duplication, the sum of the following calculated in accordance with GAAP: (a) all liabilities, obligations and indebtedness, in each case for borrowed money including but not limited to obligations evidenced by bonds, debentures, notes or other similar instruments of any such Person, (b) all obligations to pay the deferred purchase price of property or services of any such Person, except trade payables arising in the ordinary course of business, (c) all obligations of any such Person as lessee under Capital Leases, (d) all Debt of any other Person secured by a Lien on any asset of any such Person, (e) all Guaranty Obligations of any such Person, (f) all obligations, contingent or otherwise, of any such Person relative to the amount of drawn letters of credit not reimbursed as required by the terms thereof, including without limitation any Reimbursement Obligation not reimbursed as required by the terms hereof, and banker's acceptances issued for the account of any such Person, and (g) all obligations incurred by any such Person pursuant to Hedging Agreements. "Default" means any of the events specified in Section 12.1 which with the passage of time, the giving of notice or any other condition, would constitute an Event of Default. "Dollar Amount" shall mean (a) with regard to any Obligation denominated in Dollars, the amount thereof and (b) with regard to any Obligation denominated in an Alternative Currency, the amount of Dollars which is equivalent to the sum of (i) the amount so expressed in an Alternative Currency at the applicable-quoted spot rate on the appropriate page of the Reuter's 3 <PAGE> 4 Screen as determined by the Administrative Agent at the relevant time; plus (ii) any amounts owed by the Borrower pursuant to Section 3.5(b). "Dollars" or "$" means, unless otherwise qualified, dollars in lawful currency of the United States. "EBITDAR" means, with respect to the Credit Parties and their Subsidiaries on a Consolidated basis for any period, the sum of (a) Net Income for such period, plus (b) the sum of the following to the extent deducted in the determination of Net Income: (i) income and franchise taxes, (ii) Interest Expense, (iii) amortization, depreciation, extraordinary non-cash losses and any other non-cash charges (including amortization of goodwill, transaction expenses, covenants not to compete and other intangible assets, and non-cash charges resulting from purchase accounting related to the Nine West Acquisition) and (iv) Rental Expense less (c) any items of extraordinary gain which were included in determining Net Income. "Eligible Assignee" means, with respect to any assignment of the rights, interest and obligations of a Lender hereunder, a Person that is at the time of such assignment (a) a commercial bank organized under the laws of the United States or any state thereof, having combined capital and surplus in excess of $500,000,000, (b) a commercial bank organized under the laws of any other country that is a member of the Organization of Economic Cooperation and Development, or a political subdivision of any such country, having combined capital and surplus in excess of $500,000,000, (c) a finance company, insurance company or other financial institution which in the ordinary course of business extends credit of the type extended hereunder and that has total assets in excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original party to this Agreement or as the assignee of another Lender) or an Affiliate of a Lender hereunder, (e) the successor (whether by transfer of assets, merger or otherwise) to all or substantially all of the commercial lending business of the assigning Lender, (f) any SPC solely to the extent permitted by Section 14.10(h), or (g) any other Person that has been approved in writing as an Eligible Assignee by the Borrower and the Administrative Agent. "Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower or any ERISA Affiliate or (b) has at any time within the preceding six (6) years been maintained for the employees of the Borrower or any current or former ERISA Affiliate. "EMU" mean economic and monetary union as contemplated in the Treaty on European Union. "EMU Legislation" means legislative measures of the European Council (or any duly authorized successor thereto) for the introduction of the change over to or operation of a single or unified European currency (whether known as the euro or otherwise), being in part the beginning of the Third Stage of EMU. "Environmental Laws" means any and all federal, state and local laws, statutes, ordinances, rules, regulations, permits, licenses, approvals, binding interpretations and orders of courts or Governmental Authorities, relating to the protection of human health or the environment, including, but not limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or remediation of Hazardous Materials. "ERISA" means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended, supplemented or otherwise modified from time to time. "ERISA Affiliate" means any Person who together with the Borrower is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA. 4 <PAGE> 5 "euro" means the single currency to which Participating Member States of the European Union have converted. "euro unit" means the currency unit of the euro. "Eurodollar Reserve Percentage" means, for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for such day as prescribed by the Federal Reserve Board (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve System in New York City. "Event of Default" means any of the events specified in Section 12.1, provided that any requirement for passage of time, giving of notice, or any other condition, has been satisfied. "Existing Debt Securities" means the 6.25% Senior Notes due 2001, the 7.50% Senior Notes due 2004 and the 7.875% Senior Notes due 2006 of Jones Apparel Group. "Existing Loans" shall have the meaning assigned thereto in Section 6.2(f). "Extensions of Credit" means, as to any Lender at any time, (a) an amount equal to the sum of (i) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding, and (ii) such Lender's Revolving Credit Commitment Percentage of the L/C Obligations then outstanding, or (b) the making of any loan or participation in any Letter of Credit by such Lender, as the context requires. "Facility Fee" shall have the meaning assigned thereto in Section 5.3(a). "FDIC" means the Federal Deposit Insurance Corporation, or any successor thereto. "Federal Funds Rate" means, the rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) representing the daily effective federal funds rate as quoted by the Administrative Agent and confirmed in Federal Reserve Board Statistical Release H.15 (519) or any successor or substitute publication selected by the Administrative Agent. If, for any reason, such rate is not available, then "Federal Funds Rate" shall mean a daily rate which is determined, in the opinion of the Administrative Agent, to be the rate at which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be the same as the rate for the most immediate preceding Business Day. "First Union" means First Union National Bank, a national banking association, and its successors. "Fiscal Year" means the fiscal year of the Credit Parties and their Subsidiaries ending on December 31. "Five-Year Credit Agreement" means the Five-Year Credit Agreement as of June 15, 1999 by and among the Borrower, the Additional Obligors, the Administrative Agent and the financial institutions party thereto, as amended, restated, supplemented or otherwise modified from time to time. "Five-Year Credit Agreement Obligations" means the obligations of the Borrower and the Additional Obligors under the Five-Year Credit Agreement. "Fixed Exchange Rate" means the exchange rate for a national currency unit into a euro unit set in accordance with EMU Legislation in effect from time to time. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States 5 <PAGE> 6 of America, each state thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for the Credit Parties and their Subsidiaries throughout the period indicated. "Governmental Approvals" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities. "Governmental Authority" means any nation, province, state or political subdivision thereof, and any government or any Person exercising executive, legislative, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Granting Lender" shall have the meaning assigned thereto in Section 14.10(h). "Guaranty Obligation" means, with respect to the Credit Parties and their Subsidiaries, without duplication, any obligation, contingent or otherwise, of any such Person pursuant to which such Person has directly or indirectly guaranteed any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, that the term Guaranty Obligation shall not include (i) endorsements for collection or deposit in the ordinary course of business or (ii) a contractual commitment by one Person to invest in another Person for so long as such investment is expected to constitute a permitted investment under Section 11.4. "Hazardous Materials" means any substances or materials (a) which are or become defined as hazardous wastes, hazardous substances, pollutants, contaminants, chemical substances or mixtures or toxic substances under any Environmental Law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become regulated by any Governmental Authority, (c) the presence of which require investigation or remediation under any Environmental Law, (d) the discharge or emission or release of which requires a permit or license under any Applicable Law or other Governmental Approval, or (e) which contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas. "Hedging Agreement" means any agreement with respect to an interest rate swap, collar, cap, floor or forward rate agreement or other agreement regarding the hedging of interest rate risk exposure executed in connection with hedging the interest rate exposure of any Credit Party, and any confirming letter executed pursuant to such hedging agreement, all as amended, restated or otherwise modified from time to time. "Interest Coverage Ratio" shall have the meaning assigned thereto in Section 10.1. "Interest Expense" means, for any period, total interest expense (including, without limitation, interest expense attributable to Capital Leases) determined on a consolidated basis, without duplication, for the Credit Parties and their Subsidiaries in accordance with GAAP. "Interest Period" shall have the meaning assigned thereto in Section 5.1(b). 6 <PAGE> 7 "ISP 98" means the International Standby Practices (1998 Revision, effective January 1, 1999), International Chamber of Commerce Publication No. 590. "Issuing Lender" means (a) First Union and The Chase Manhattan Bank, each in its capacity as issuer of any Letter of Credit, and any other Lender mutually acceptable and on terms satisfactory to the Borrower and the Administrative Agent and (b) with regard to any Letter of Credit denominated in an Alternative Currency the Correspondent of any entity identified in clause (a); and Issuing Lenders means all such Lenders. "Jones Apparel Group" means Jones Apparel Group, Inc., a Pennsylvania corporation. "Jones Apparel Group Holdings" means Jones Apparel Group Holdings, Inc., a Delaware corporation. "L/C Commitment" means Seven Hundred Fifty Million Dollars ($750,000,000). "L/C Facility" means the letter of credit facility established pursuant to Article III hereof. "L/C Fee" shall have the meaning assigned thereto in Section 3.3(a). "L/C Obligations" means at any time, an amount equal to the sum of (a) the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.5; provided that the amount of L/C Obligations shall be deemed to be reduced on any day by the amount on deposit in a cash collateral account on such day after giving effect to cash collateral funded by the Borrower or by the proceeds of Base Rate Loans in accordance with Section 2.6. "L/C Participants" means the collective reference to all the Lenders having a Revolving Credit Commitment other than the applicable Issuing Lender. "Lender" means each Person executing this Agreement as a Lender set forth on the signature pages hereto and each Person that hereafter becomes a party to this Agreement as a Lender pursuant to Section 14.10 other than any party hereto that ceases to be a party hereto pursuant to any Assignment and Acceptance. "Lending Group Members" means the collective reference to (a) the Lenders party to this Agreement and (b) the lenders party to the Five Year Credit Agreement. "Lending Office" means, with respect to any Lender, the office of such Lender maintaining such Lender's Revolving Credit Commitment Percentage of the Revolving Credit Loans. "Letters of Credit" shall have the meaning assigned thereto in Section 3.1. "LIBOR" means the rate of interest per annum determined on the basis of the rate for deposits in Dollars in minimum amounts of at least $5,000,000 for a period equal to the applicable Interest Period which appears on the Dow Jones Market Screen 3750 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period (rounded upward, if necessary, to the nearest one hundredth of one percent (1/100%)). If, for any reason, such rate does not appear on Dow Jones Market Screen 3750, then "LIBOR" shall be determined by the Administrative Agent to be the arithmetic average (rounded upward, if necessary, to the nearest one-hundredth of one percent (1/100%)) of the rate per annum at which deposits in Dollars would be offered by the Reference Group in the London interbank market to 7 <PAGE> 8 the Administrative Agent as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of the applicable Revolving Credit Loan. "LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by the Administrative Agent pursuant to the following formula: LIBOR RATE = LIBOR ------------------------------------ 1.00 - Eurodollar Reserve Percentage "LIBOR Rate Loan" means any Revolving Credit Loan bearing interest at a rate based upon the LIBOR Rate as provided in Section 5.1(a). "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. "Loan Documents" means, collectively, this Agreement, the Revolving Credit Notes, the Applications and each other document, instrument and agreement executed and delivered by any Credit Party, its Subsidiaries or their counsel in connection with this Agreement or otherwise referred to herein or contemplated hereby, all as may be amended, restated or otherwise modified. "Material Adverse Effect" means, with respect to the Credit Parties or any of their Subsidiaries, a material adverse effect on the business, assets, operations or financial condition of the Credit Parties and their Subsidiaries taken as a whole or the ability of any such Person to perform its obligations under the Loan Documents, in each case to which it is a party. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making (or has made), or is accruing (or has accrued) an obligation to make, contributions either presently or within the preceding six years. "national currency unit" means the unit of currency (other than a euro unit) of a Participating Member State. "Net Income" means, with respect to the Credit Parties and their Subsidiaries for any period, the Consolidated net income (or loss) of the Credit Parties and their Subsidiaries for such period determined in accordance with GAAP; provided, that there shall be excluded from net income (or loss), the income (or loss) of any Person (other than a Subsidiary of such Person) in which such Person has an ownership interest unless received by such Person in a cash distribution. "Net Worth" means, with respect to the Credit Parties and their Subsidiaries, as of any date, the total shareholders' equity that would appear on a Consolidated balance sheet of the Credit Parties and their Subsidiaries prepared as of such date in accordance with GAAP. "Nine West Acquisition" means the acquisition of all of the outstanding stock of the predecessor company to Nine West Group one of the Credit Parties. "Nine West Group" means Nine West Group Inc., a Delaware corporation. "Non-Consenting Lenders" shall have the meaning assigned thereto in Section 2.6. "Notice of Account Designation" shall have the meaning assigned thereto in Section 2.2(b). 8 <PAGE> 9 "Notice of Conversion/Continuation" shall have the meaning assigned thereto in Section 5.2. "Notice of Prepayment" shall have the meaning assigned thereto in Section 2.3(c). "Notice of Revolving Credit Borrowing" shall have the meaning assigned thereto in Section 2.2(a). "Obligations" means, in each case, whether now in existence or hereafter arising: (a) the principal of and interest on (including interest accruing after the filing of any bankruptcy or similar petition) the Revolving Credit Loans, (b) the L/C Obligations, (c) all payment and other obligations owing by the Credit Parties to any Lender or Affiliate of a Lender or the Administrative Agent under any Hedging Agreement with any Lender or Affiliate of a Lender (which such Hedging Agreement is permitted hereunder), and (d) all other fees and commissions (including attorney's fees), charges, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Credit Parties to the Lenders or the Administrative Agent, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note, in each case under or in respect of this Agreement, any Revolving Credit Note, any Letter of Credit or any of the other Loan Documents. "Officer's Compliance Certificate" shall have the meaning assigned thereto in Section 8.2. "Operating Lease" shall mean, as to any Person, as determined in accordance with GAAP, any lease of property (whether real, personal or mixed) by such Person as lessee which is not a Capital Lease. "Other Taxes" shall have the meaning assigned thereto in Section 5.12(b). "Outstanding Letters of Credit" means each letter of credit described on Schedule 1.1(b) and outstanding as of the Closing Date. "Outstanding Nine West Debt Obligations" means the collective reference to (a) the existing 8-3/8% Series B Senior Notes due 2005 of Nine West Group (the "Nine West Senior Notes"), (b) the existing 9% Series B Senior Subordinated Notes due 2007 of Nine West Group (the "Nine West Senior Subordinated Notes") and (c) the existing 5-1/2% Convertible Subordinated Notes due 2003 of Nine West Group (the "Nine West Convertible Subordinated Notes"). "Participating Member State" means each state so described in any EMU Legislation. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor agency. "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code. "Permitted Lines of Business" shall have the meaning assigned thereto in Section 9.9. "Person" means an individual, corporation, limited liability company, partnership, association, trust, business trust, joint venture, joint stock company, pool, syndicate, sole proprietorship, unincorporated organization, Governmental Authority or any other form of entity or group thereof. "Pounds Sterling" means, unless otherwise qualified, pounds sterling in lawful currency of the United Kingdom. 9 <PAGE> 10 "Prime Rate" means, at any time, the rate of interest per annum publicly announced from time to time by First Union as its prime rate in effect at its principal office in Charlotte, North Carolina. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in the Prime Rate occurs. The parties hereto acknowledge that the rate announced publicly by First Union as its Prime Rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks. "Prior Credit Agreement" means the Second Amended and Restated 364-Day Credit Agreement dated as of June 15, 1999, by and among the Borrower, the Prior Lenders and First Union, as administrative agent. "Prior Lenders" means, collectively, the lenders party to the Prior Credit Agreement. "Reference Group" shall mean the Lenders party to this Agreement on the Closing Date. "Register" shall have the meaning assigned thereto in Section 2.4(a). "Reimbursement Obligation" means the obligation of the Borrower to reimburse each Issuing Lender pursuant to Section 3.5 for amounts drawn under Letters of Credit. "Rental Expense" means, all obligations of the Credit Parties or any of their Subsidiaries for payments under Operating Leases. "Required Agreement Lenders" means, at any date, any combination of Lenders whose Revolving Credit Commitment Percentage equals at least fifty-one percent (51%) of the Revolving Credit Commitment or if the Revolving Credit Commitment has been terminated, any combination of Lenders who collectively hold at least fifty-one percent (51%) of the aggregate unpaid principal amount of the Extensions of Credit. "Required Lenders" means, at any date, any combination of Lending Group Members whose Total Committed Percentage equals at least fifty-one percent (51%) of the Total Committed Amount. "Responsible Officer" means any of the following: the chairman, president, chief executive officer, chief financial officer or vice president and corporate controller of the Borrower or Jones Apparel Group or any other officer of the Borrower or Jones Apparel Group reasonably acceptable to the Administrative Agent. "Revolving Credit Commitment" means (a) as to any Lender, the obligation of such Lender to make Revolving Credit Loans to the Borrower hereunder in an aggregate principal amount at any time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1.1(a) hereto as such amount may be reduced or modified at any time or from time to time pursuant to the terms hereof and (b) as to all Lenders, the aggregate Revolving Credit Commitment of all Lenders to make Revolving Credit Loans, as such amount may be reduced at any time or from time to time pursuant to the terms hereof. The Revolving Credit Commitment of all Lenders on the Closing Date shall be Seven Hundred Fifty Million Dollars ($750,000,000). "Revolving Credit Commitment Percentage" means, as to any Lender at any time, the ratio of (a) the amount of the Revolving Credit Commitment of such Lender to (b) the Revolving Credit Commitment of all of the Lenders. "Revolving Credit Facility" means the revolving credit facility established pursuant to Article II hereof. "Revolving Credit Loans" means any revolving loan made to the Borrower pursuant to Section 2.1, and all such revolving loans collectively as the context requires. 10 <PAGE> 11 "Revolving Credit Notes" means the collective reference to the Revolving Credit Notes made by the Borrower under this Agreement payable to the order of any such Lender requesting such note, substantially in the form of Exhibit A hereto, evidencing the obligation owed to such Lender under the Revolving Credit Facility, and any amendments and modifications thereto, any substitutes therefor, and any replacements, restatements, renewals or extension thereof, in whole or in part; "Revolving Credit Note" means any of such Revolving Credit Notes. "Revolving Credit Termination Date" means the earliest of the dates referred to in Section 2.6. "SPC" shall have the meaning assigned thereto in Section 14.10(h). "Subordinated Debt" means the collective reference to Debt on Schedule 7.1(p) hereof designated as Subordinated Debt and any other Debt of the Credit Parties or any Subsidiary thereof subordinated in right and time of payment to the Obligations and otherwise permitted hereunder. "Subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be Consolidated with those of the parent in the parent's Consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than fifty percent (50%) of the equity or more than fifty percent (50%) of the ordinary voting power or, in the case of a partnership, more than fifty percent (50%) of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless otherwise qualified references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the Borrower. "Sun Acquisition Agreement" means the Agreement and Plan of Merger dated September 10, 1998 by and among the Borrower, SAI Acquisition Corp., Sun Apparel, Inc. and the Shareholders of Sun Apparel, Inc., as amended and modified from time to time. "Syndication Agents" means The Chase Manhattan Bank and Citibank, N.A., each in their capacity as syndication agent hereunder, and any successor thereto. "Taxes" shall have the meaning assigned thereto in Section 5.12(a). "Termination Event" means: (a) a "Reportable Event" described in Section 4043 of ERISA, or (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC, or (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, or (f) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan, or (g) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA, or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA, or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. "Third Stage Cutoff Date" shall have the meaning assigned to such term in Section 3.6(c) hereof. 11 <PAGE> 12 "Total Committed Amount" means (a) as to any Lending Group Member, the sum of (i) the Revolving Credit Commitment of such Lending Group Member (or, if such Revolving Credit Commitment has been terminated, the aggregate unpaid principal amount of all outstanding Extensions of Credit of such Lending Group Member) plus (ii) the Revolving Credit Commitment (as defined in the Five Year Credit Agreement) of such Lending Group Member (or, if such Revolving Credit Commitment has been terminated, the aggregate unpaid principal amount of all outstanding Extensions of Credit (as defined in the Five Year Credit Agreement) of such Lending Group Member) and (b) as to all Lenders, the aggregate Total Committed Amount of all Lending Group Members. "Total Committed Percentage" means, as to any Lending Group Member at any time, the ratio of (a) the amount of the Total Committed Amount of such Lending Group Member to (b) the aggregate Total Committed Amount of all Lending Group Members. "Treaty on European Union" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (signed February 7, 1992), as amended from time to time. "UCC" means the Uniform Commercial Code as in effect in the State of New York, as amended, restated or otherwise modified from time to time. "Uniform Customs " the Uniform Customs and Practice for Documentary Credits (1994 Revision), International Chamber of Commerce Publication No. 500. "United States" means the United States of America. "Utilization Fee" shall have the meaning assigned thereto in Section 5.3(b). "Wholly-Owned" means, with respect to a Subsidiary, that all of the shares of capital stock or other ownership interests of such Subsidiary are, directly or indirectly, owned or controlled by any Credit Party and/or one or more of its Wholly-Owned Subsidiaries. SECTION 1.2 General. Unless otherwise specified, a reference in this Agreement to a particular section, subsection, Schedule or Exhibit is a reference to that section, subsection, Schedule or Exhibit of this Agreement. Terms defined in this Agreement and the Five-Year Credit Agreement shall be construed consistently and no term defined herein shall be limited or restricted by any similar definition in the Five-Year Credit Agreement nor shall any such term herein limit or restrict any similar definition in the Five-Year Credit Agreement. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, feminine and neuter. Any reference herein to "Charlotte time" shall refer to the applicable time of day in Charlotte, North Carolina. SECTION 1.3 Other Definitions and Provisions. (a) Use of Capitalized Terms. Unless otherwise defined therein, all capitalized terms defined in this Agreement shall have the defined meanings when used in this Agreement and the other Loan Documents or any certificate, report or other document made or delivered pursuant to this Agreement. (b) Miscellaneous. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (c) Any reference or usage of the word "amount" herein as it pertains to any Obligation denominated in an Alternative Currency shall be deemed to be a reference or usage of the term "Dollar Amount." 12 <PAGE> 13 ARTICLE II REVOLVING CREDIT FACILITY SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Revolving Credit Loans to the Borrower from time to time from the Closing Date through the Revolving Credit Termination Date as requested by the Borrower in accordance with the terms of Section 2.2; provided, that (a) the aggregate principal amount of all outstanding Revolving Credit Loans (after giving effect to any amount requested) shall not exceed the Revolving Credit Commitment less the sum of all outstanding L/C Obligations (after giving effect to the deposit of any amount requested into a cash collateral account in accordance with Section 2.6) and (b) the principal amount of outstanding Revolving Credit Loans from any Lender to the Borrower shall not at any time exceed such Lender's Revolving Credit Commitment. Each Revolving Credit Loan by a Lender shall be in a principal amount equal to such Lender's Revolving Credit Commitment Percentage of the aggregate principal amount of Revolving Credit Loans requested on such occasion. Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder until the Revolving Credit Termination Date. SECTION 2.2 Procedure for Advances of Revolving Credit Loans. (a) Requests for Borrowing. The Borrower shall give the Administrative Agent irrevocable prior written notice in the form attached hereto as Exhibit B (a "Notice of Revolving Credit Borrowing") not later than 11:00 a.m. (Charlotte time) (i) on the same Business Day as each Base Rate Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the date of such borrowing, which shall be a Business Day, (B) the amount of such borrowing, which shall be in an amount equal to the unused amount of the Revolving Credit Commitment, or if less, (x) with respect to Base Rate Loans in an aggregate principal amount of $1,000,000 or a whole multiple of $250,000 in excess thereof and (y) with respect to LIBOR Rate Loans in an aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof, (C) whether such Revolving Credit Loan is to be a LIBOR Rate Loan or Base Rate Loan, and (D) in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto. Notices received after 11:00 a.m. (Charlotte time) shall be deemed received on the next Business Day. The Administrative Agent shall promptly notify the Lenders of each Notice of Revolving Credit Borrowing. (b) Disbursement of Revolving Credit Loans. Not later than 2:00 p.m. (Charlotte time) on the proposed borrowing date, each Lender will make available to the Administrative Agent, for the account of the Borrower, at the office of the Administrative Agent in funds immediately available to the Administrative Agent, such Lender's Revolving Credit Commitment Percentage of the Revolving Credit Loans to be made on such borrowing date. The Borrower hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of each borrowing requested pursuant to this Section 2.2 in immediately available funds by crediting or wiring such proceeds to the deposit account of the Borrower identified in the most recent notice of account designation, substantially in the form of Exhibit C hereto (a "Notice of Account Designation"), delivered by the Borrower to the Administrative Agent or as may be otherwise agreed upon by the Borrower and the Administrative Agent from time to time. Subject to Section 5.7 hereof, the Administrative Agent shall not be obligated to disburse the portion of the proceeds of any Revolving Credit Loan requested pursuant to this Section 2.2 for which any Lender is responsible to the extent that such Lender has not made available to the Administrative Agent its Revolving Credit Commitment Percentage of such Revolving Credit Loan. SECTION 2.3 Repayment of Revolving Credit Loans. (a) Repayment on Termination Date. The Borrower shall repay the outstanding principal amount of all Revolving Credit Loans in full on the Revolving Credit Termination Date, with all accrued but unpaid interest thereon. (b) Mandatory Repayment of Excess Extensions of Credit. (i) If at any time the outstanding principal amount of all Revolving Credit Loans plus the sum of all outstanding L/C Obligations exceeds the Revolving Credit Commitment, the Borrower shall repay immediately upon notice from the Administrative Agent, by payment to the Administrative Agent for the account of the Lenders, Revolving Credit Loans and/or furnish cash collateral reasonably satisfactory to the Administrative Agent or repay the 13 <PAGE> 14 L/C Obligations in an amount equal to such excess. Such cash collateral shall be applied in accordance with Section 12.2(b). (ii) Excess Alternative Currency Letters of Credit. If the Administrative Agent shall determine that the outstanding principal Dollar Amount of all outstanding Letters of Credit denominated in an Alternative Currency exceeds one hundred and five percent (105%) of the lesser of (A) the L/C Commitment less the sum of the outstanding principal Dollar Amount of all L/C Obligations and (B) the Alternative Currency L/C Commitment, in each case as of the last Business Day of any calendar month during the term hereof, then not later than three (3) Business Days after notice of the amount of such excess from the Administrative Agent to the Borrower, the Borrower shall deposit an amount in Dollars equal to such excess with the Administrative Agent to be held as cash collateral in accordance with Section 12.2(b). (c) Optional Repayments. The Borrower may at any time and from time to time repay the Revolving Credit Loans, in whole or in part, upon at least three (3) Business Days' irrevocable notice to the Administrative Agent with respect to LIBOR Rate Loans and one (1) Business Day irrevocable notice with respect to Base Rate Loans, in the form attached hereto as Exhibit D (a "Notice of Prepayment") specifying the date and amount of repayment and whether the repayment is of LIBOR Rate Loans, Base Rate Loans, or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of such notice, the Administrative Agent shall promptly notify each Lender. If any such notice is given, the amount specified in such notice shall be due and payable on the date set forth in such notice. Partial repayments shall be in an aggregate amount of $1,000,000 or a whole multiple of $250,000 in excess thereof with respect to Base Rate Loans and $5,000,000 or a whole multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans. (d) Limitation on Repayment of LIBOR Rate Loans. The Borrower may not repay any LIBOR Rate Loan on any day other than on the last day of the Interest Period applicable thereto unless such repayment is accompanied by any amount required to be paid pursuant to Section 5.10 hereof. SECTION 2.4 Evidence of Debt. (a) The Administrative Agent shall maintain a register and a subaccount therein for each Lender (the "Register"), in which shall be recorded (i) the amount of each Revolving Credit Loan made hereunder, including each Revolving Credit Loan evidenced by a Revolving Credit Note, and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof. (b) The entries made in the Register and the accounts of each Lender maintained pursuant to Section 2.4(a) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrowers therein recorded, absent manifest error; provided, however, that the failure of the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Revolving Credit Loans made to the Borrower in accordance with the terms of this Agreement. (c) The Borrower hereby agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a Revolving Credit Note of such Borrower evidencing the Revolving Credit Loans of such Lender, substantially in the form of Exhibit A. SECTION 2.5 Permanent Reduction of the Revolving Credit Commitment (a) Voluntary Reduction. The Borrower shall have the right at any time and from time to time, upon at least five (5) Business Days prior written notice to the Administrative Agent, to permanently reduce, without premium or penalty, (i) the entire Revolving Credit Commitment at any time or (ii) portions of the Revolving Credit Commitment, from time to time, in an aggregate principal amount not less than $5,000,000 or any whole multiple of $1,000,000 in excess thereof. (b) Each permanent reduction of the Revolving Credit Commitment made pursuant to this Section 2.5 shall be accompanied, if necessary, by a payment of principal sufficient to reduce the 14 <PAGE> 15 aggregate outstanding Revolving Credit Loans and L/C Obligations, as applicable, after such reduction to the Revolving Credit Commitment as so reduced and if the Revolving Credit Commitment as so reduced is less than the aggregate amount of all outstanding Letters of Credit, the Borrower shall be required to deposit in a cash collateral account opened by the Administrative Agent an amount equal to the amount by which the aggregate then undrawn and unexpired amount of such Letters of Credit exceeds the Revolving Credit Commitment as so reduced. Any reduction of the Revolving Credit Commitment to zero (including upon termination of the Revolving Credit Facility on the Revolving Credit Termination Date) shall be accompanied by payment of all outstanding Revolving Credit Loans (and furnishing of cash collateral satisfactory to the Administrative Agent for all L/C Obligations) and shall result in the termination of the Revolving Credit Commitment and the Revolving Credit Facility. Such cash collateral shall be applied in accordance with Section 12.2(b). If the reduction of the Revolving Credit Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any amount required to be paid pursuant to Section 5.10 hereof. SECTION 2.6 Termination of Revolving Credit Facility. The Revolving Credit Facility shall terminate on the earliest of (a) June 12, 2001, (b) the date of termination of the entire Revolving Credit Commitment by the Borrower pursuant to Section 2.5(a), and (c) the date of termination by the Administrative Agent on behalf of the Lenders pursuant to Section 12.2(a); provided, that the Borrower may request on an annual basis a 364-day extension of the date set forth in clause (a) above by providing the Administrative Agent and each of the Lenders with a written request for such extension not more than sixty (60) days and not fewer than fifty (50) days prior to the then existing Revolving Credit Termination Date; provided further that each such extension shall be subject to the satisfaction by the Borrower of each of the conditions set forth in Section 6.3 on the then existing Revolving Credit Termination Date. Each of the Lenders shall provide written notice to the Administrative Agent on or prior to the thirtieth (30th) day (the "Consent Date") before the then existing Revolving Credit Termination Date of its desire to extend (any such Lender, a "Consenting Lender") or not to so extend (any such Lender, a "Non-Consenting Lender") such date; provided further, that the Termination Date shall not in any event extend beyond June 13, 2004. No Lender shall be under any obligation or commitment to extend such date and no such obligation or commitment on the part of any Lender shall be inferred from the provisions of this Section 2.6. Failure on the part of any Lender to respond to such request by the required date set forth above shall be deemed to be a denial by such Lender of such request and all Revolving Credit Loans of such Non-Consenting Lender shall be subject to the then existing Revolving Credit Termination Date. If Lenders holding Revolving Credit Commitment Percentages aggregating less than one hundred percent (100%) of the Revolving Credit Commitment consent to such extension, the Borrower may elect by written notice to the Administrative Agent and Lenders to (i) continue the Revolving Credit Facility for such additional period with a Revolving Credit Commitment equal to the then effective Revolving Credit Commitment less the total Revolving Credit Commitment of the Non-Consenting Lenders or (ii) require any such Non-Consenting Lender to transfer and assign without recourse (in accordance with the provisions of Section 14.10) its Revolving Credit Commitment and other interests, rights and obligations under this Agreement to an Eligible Assignee (who consents thereto), which shall assume such obligations upon its consent to assume such obligations; provided that (A) no such assignment shall conflict with any Applicable Law, (B) such assignment shall be at the cost and expense of the Borrower and (C) the purchase price to be paid to such Non-Consenting Lender shall be an amount equal to the outstanding principal amount of the Revolving Credit Loans of such Non-Consenting Lender plus all interest accrued and unpaid thereon and all other amounts owing to such Non-Consenting Lender thereon. To the extent the Administrative Agent is a Consenting Lender, the Administrative Agent agrees to use reasonable efforts to assist the Borrower in the syndication of the total Revolving Credit Commitment of the Non-Consenting Lenders after such extension; provided that any such syndication is made on customary terms and the Administrative Agent is compensated for such services in an amount reasonably acceptable to it. The Administrative Agent shall provide a written list of the Consenting Lenders and Non-Consenting Lenders to the Borrower and the Lenders promptly following the Consent Date (but in no event less than twenty-five (25) days prior to the existing Revolving Credit Termination Date). If (x) the sum of the outstanding principal amount of all Revolving Credit Loans plus the sum of all outstanding L/C Obligations on the third (3 rd ) Business Day prior to the existing Revolving Credit Termination Date exceeds (y) the aggregate amount of the Revolving Credit Commitments of the Consenting Lenders, each Issuing Bank may require, and the Borrower hereby agrees to so provide, cash collateral satisfactory to the Administrative Agent in an amount equal to such 15 <PAGE> 16 excess not later than three (3) Business Days prior to the existing Revolving Credit Termination Date to be deposited in a cash collateral account and applied in accordance with Section 12.2(b). To the extent that the Borrower fails to timely provide such cash collateral, the Administrative Agent shall so notify each L/C Participant whereupon each L/C Participant shall pay an amount in Dollars equal to such L/C Participant's Revolving Credit Commitment Percentage of the amount of the payment required to be paid by the Borrower, such payment by the L/C Participants to be made by the making of a Base Rate Loan in Dollars pursuant to Section 3.5(c) below on or prior to the existing Revolving Credit Termination Date and the proceeds of such Base Rate Loans shall be deposited in a cash collateral account and applied in accordance with Section 12.2(b). If the extension is granted, upon the then existing date set forth in clause (a) of this Section 2.6, such date shall be extended to the date which is 364 days from the then current date set forth therein. ARTICLE III LETTER OF CREDIT FACILITY SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, each Issuing Lender, in reliance on the agreements of the other Lenders set forth in Section 3.4(a), agrees to issue trade and standby letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day from the Closing Date through but not including the Revolving Credit Termination Date in such form as may be approved from time to time by such Issuing Lender; provided, that no Issuing Lender shall have any obligation to issue any Letter of Credit if, after giving effect to such issuance, (a) the L/C Obligations would exceed the L/C Commitment or (b) the L/C Obligations on account of Letters of Credit denominated in an Alternative Currency would exceed the Alternative Currency L/C Commitment or (c) the aggregate principal amount of outstanding Revolving Credit Loans, plus the aggregate principal amount of L/C Obligations would exceed the Revolving Credit Commitment after giving pro forma effect to any reduction of the Revolving Credit Commitment resulting from the failure to fully syndicate the total Revolving Credit Commitment of any Non-Consenting Lenders under Section 2.6. Each Letter of Credit shall (i) be denominated in (A) Dollars, if such Letter of Credit is a standby Letter of Credit, or (B) Dollars or an Alternative Currency, if such Letter of Credit is a trade Letter of Credit, (ii) be a trade or standby letter of credit issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, incurred in the ordinary course of business, (iii) expire on a date no later than (A) two hundred twenty-five (225) days from the date of issuance thereof for trade Letters of Credit and (B) one (1) year from the date of issuance thereof for standby Letters of Credit, and (iv) be subject to the Uniform Customs and/or ISP 98, as set forth in the Application or as determined by the Issuing Lender and, to the extent not inconsistent therewith, the laws of the State of New York. No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits imposed by, any Applicable Law. References herein to "issue" and derivations thereof with respect to Letters of Credit shall also include extensions or modifications of any existing Letters of Credit, unless the context otherwise requires. SECTION 3.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that any Issuing Lender issue a Letter of Credit (or amend, extend or renew an outstanding Letter of Credit) by delivering to such Issuing Lender at any Issuing Lender's office at any address mutually acceptable to the Borrower and such Issuing Lender an Application therefor, including, if applicable, the office of such Issuing Lender's Correspondent, completed to the satisfaction of such Issuing Lender, and such other certificates, documents and other papers and information as such Issuing Lender may reasonably request. Upon receipt of any Application, such Issuing Lender shall process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall, subject to Section 3.1 and Article VI hereof, promptly issue the Letter of Credit (or amend, extend or renew the outstanding Letter of Credit) requested thereby (but in no event shall any Issuing Lender be required to issue any Letter of Credit (or amend, extend or renew an outstanding Letter of Credit) earlier than three (3) Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by such Issuing Lender and the Borrower. Within fifteen (15) Business Days after the end of each 16 <PAGE> 17 month, the Administrative Agent shall report to each Lender the average daily outstandings for each day in such month for all Letters of Credit during the previous month. SECTION 3.3 Fees and Other Charges. (a) The Borrower shall pay to the Administrative Agent, for the account of each Issuing Lender and the L/C Participants, a letter of credit fee (the "L/C Fee") (i) with respect to each trade Letter of Credit, in an amount equal to the Applicable Margin for trade Letters of Credit times the average daily undrawn amount of such issued Letter of Credit as reported by the Administrative Agent pursuant to Section 3.2 and (ii) with respect to each standby Letter of Credit, in an amount equal to the Applicable Margin for standby Letters of Credit times the face amount of such Letter of Credit. Such fee shall be payable quarterly in arrears (x) for trade Letters of Credit, within fifteen (15) Business Days after the end of each calendar quarter and on the Revolving Credit Termination Date and (y) for standby Letters of Credit, on the last Business Day of each calendar quarter and on the Revolving Credit Termination Date. (b) In addition to the foregoing commission, the Borrower shall pay the Issuing Lenders an issuance fee of one eighth percent (1/8%) per annum on the face amount of each standby Letter of Credit, payable quarterly in arrears on the last Business Day of each calendar quarter and on the Revolving Credit Termination Date. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to each Issuing Lender and the L/C Participants all fees received by the Administrative Agent in accordance with their respective Revolving Credit Commitment Percentages. SECTION 3.4 L/C Participations. (a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce such Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from such Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage in such Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit for which such Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to such Issuing Lender upon demand at such Issuing Lender's address for notices specified herein an amount in Dollars equal to such L/C Participant's Revolving Credit Commitment Percentage of the Dollar Amount of such draft, or any part thereof, which is not so reimbursed, such payment to be made by the making of a Base Rate Loan in Dollars pursuant to Section 3.5(c) below. (b) Upon becoming aware of any amount required to be paid by any L/C Participant to any Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender under any Letter of Credit, the Administrative Agent shall notify each L/C Participant of the amount and due date of such required payment and such L/C Participant shall pay to such Issuing Lender the amount specified on the applicable due date. If any such amount is paid to such Issuing Lender after the date such payment is due, such L/C Participant shall pay to such Issuing Lender on demand, in addition to such amount, the product of (i) such amount, times (ii) the daily average Federal Funds Rate as determined by the Administrative Agent during the period from and including the date such payment is due to the date on which such payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A certificate of any Issuing Lender with respect to any amounts owing under this Section 3.4(b) shall be conclusive in the absence of manifest error. With respect to payment to any Issuing Lender of the unreimbursed amounts described in this Section 3.4(b), if the L/C Participants receive notice that any such payment is due (A) prior to 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due that Business Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such payment shall be due on the following Business Day. (c) Whenever, at any time after any Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its Revolving Credit Commitment Percentage of 17 <PAGE> 18 such payment in accordance with this Section 3.4, such Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, or any payment of interest on account thereof), such Issuing Lender will distribute to such L/C Participant its pro rata share thereof in accordance with such L/C Participant's Revolving Credit Commitment Percentage; provided, that in the event that any such payment received by such Issuing Lender shall be required to be returned by such Issuing Lender, such L/C Participant shall return to such Issuing Lender the portion thereof previously distributed by such Issuing Lender to it. SECTION 3.5 Reimbursement. (a) Reimbursement by the Borrower. The Borrower agrees to reimburse each Issuing Lender on each date the Administrative Agent notifies the Borrower of the date and amount of a draft paid under any Letter of Credit for the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by any Issuing Lender in connection with such payment (other than those payable pursuant to Section 3.5(b) below). Each such payment shall be made to any Issuing Lender at its address for notices specified herein (i) in Dollars if such Letter of Credit was denominated in Dollars or (ii) in Dollars or the applicable Alternative Currency, at the option of the Borrower, if such Letter of Credit was denominated in an Alternative Currency, and in each case, in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Article III from the day immediately following the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full at the rate which would be payable on any outstanding Base Rate Loans which were then overdue. (b) Exchange Indemnification and Increased Costs. The Borrower shall, upon demand from any Issuing Lender or L/C Participant, pay to such Issuing Lender or L/C Participant, the amount of (i) any loss or cost or increased cost incurred by such Issuing Lender or L/C Participant, (ii) any reduction in any amount payable to or in the effective return on the capital to such Issuing Lender or L/C Participant, (iii) any currency exchange loss, in each case with respect to clauses (i), (ii) and (iii), that such Issuing Lender or L/C Participant sustains as a result of the Borrower's repayment in Dollars of any Letter of Credit denominated in an Alternative Currency or (iv) any interest or any other return, including principal, foregone by such Issuing Lender as a result of the introduction of, change over to or operation of the euro in any member state participating in the euro. A certificate of such Issuing Lender setting forth in reasonable detail the basis for determining such additional amount or amounts necessary to compensate such Issuing Lender shall be conclusively presumed to be correct save for manifest error. (c) Reimbursement by the Lenders. If the Borrower fails to timely reimburse such Issuing Lender on the date the Borrower receives the notice referred to in this Section 3.5, the Borrower shall be deemed to have timely given a Notice of Revolving Credit Borrowing pursuant to Section 2.2 hereunder to the Administrative Agent requesting the Lenders to make a Base Rate Loan on such date in an amount in Dollars equal to the Dollar Amount (as of the date of funding of such Base Rate Loan by each Lender) of such draft paid, together with any taxes, fees, charges or other costs or expenses incurred by any Issuing Lender and to be reimbursed pursuant to this Section 3.5 and, regardless of whether or not the conditions precedent specified in Article VI have been satisfied, the Lenders shall make Base Rate Loans in such amount, the proceeds of which shall be applied to reimburse such Issuing Lender for the amount of the related drawing and costs and expenses. Notwithstanding the foregoing, nothing in this Section 3.5 shall obligate the Lenders to make such Base Rate Loans if the making of such Base Rate Loans would violate the automatic stay under federal bankruptcy laws. SECTION 3.6 Provisions Regarding National Currency Units and the Euro. (a) Effectiveness of Provisions. To the extent that any provision of this Section 3.6 relates to any state (or the national currency unit of such state) that is not a Participating Member State at the beginning on the Third Stage of EMU, such provision shall become effective in relation to such state (and the national currency unit of such state) at and from the date on which such state becomes a Participating Member State. (b) Continuity of Contract. The Administrative Agent, the Lenders and the Borrower agree that the occurrence or non-occurrence of EMU, any event or events associated with EMU and/or the introduction of the euro in all or any part of the European Union will not result in the discharge, cancellation, rescission or termination in whole or in part of any agreement between the Administrative Agent, any Lender and the Borrower or give the Administrative Agent, any Lender or the Borrower the 18 <PAGE> 19 right to cancel, rescind, terminate or vary any agreement, other than as specifically provided in this Agreement. (c) Redenomination and Alternative Currencies. Each obligation of any party under this Agreement which has been denominated in the national currency unit of a Participating Member State shall be automatically redenominated into the euro unit at the Fixed Exchange Rate on January 1, 2002 (the "Third Stage Cutoff Date") and shall thereafter be payable solely in euro; provided, that if and to the extent that any EMU Legislation provides that following the beginning of the Third Stage of EMU, and prior to the Third Stage Cutoff Date, an amount denominated either in the euro unit or in the national currency unit of a Participating Member State and payable within the Participating Member State by crediting an account of a creditor can be paid by a debtor either in the euro unit or in that national currency unit, each party to this Agreement shall be entitled to pay or repay any such amount either in the euro unit or in such national currency unit; provided, however, any amount paid in a national currency unit shall equal, at the Fixed Exchange Rate for that national currency unit, the required amount stated to be due in euro units. (d) Payments. Those Sections of this Agreement providing for payment or repayment by the Borrower in a national currency unit shall be construed so that, in relation to the payment of any amount of euro units or national currency units, such amount shall be made available to the Administrative Agent, any Issuing Lender or any Lender, as applicable, in immediately available, freely transferable, cleared funds to such account with each bank (in such principal financial center) as the Administrative Agent, any Issuing Lender or any Lender, as applicable, may from time to time nominate for this purpose. (e) Payments by the Administrative Agent and Issuing Lenders Generally. With respect to the payment of any amount denominated in the euro unit or in a national currency unit, the Administrative Agent and the Issuing Lenders shall not be liable to the Borrower or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent or any Issuing Lender, as applicable, if the Administrative Agent or any Issuing Lender, as applicable, has made reasonable effort to effect all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the euro unit or, as the case may be, in a national currency unit) to the account with the bank in the principal financial center in the Participating Member State which the Borrower or, as the case may be, any Lender shall have specified for such purpose. In this paragraph, "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent or any Issuing Lender, as applicable, may from time to time reasonably believe to be in effect for the purpose of clearing or settling payment of the euro. (f) Rounding and Other Consequential Changes. Without prejudice and in addition to any method of conversion or rounding prescribed by any EMU Legislation and without prejudice to the respective liabilities for indebtedness of the Borrower to the Administrative Agent, any Issuing Lender or any Lender, as applicable, and the Administrative Agent, any Issuing Lender or any Lender, as applicable, to the Borrower under or pursuant to this Agreement: (i) each reference in this Agreement to a minimum amount (or an integral multiple thereof) in a national currency unit to be paid to or by the Administrative Agent, any Issuing Lender or any Lender, as applicable, shall be replaced by a reference to such reasonably comparable amount (or an integral multiple thereof) in the euro unit as the Administrative Agent may from time to time specify; and (ii) except as expressly provided in this Agreement, each provision of this Agreement, including, without limitation, the right to combine currencies to affect a set off, shall be subject to such reasonable changes of interpretation as the Administrative Agent may from time to time specify to be necessary or appropriate to reflect the introduction of or change over to the euro in Participating Member States necessary or appropriate to reflect the implementation of 19 <PAGE> 20 EMU to place the parties hereto in substantially the position they would have occupied had EMU not been implemented. (g) Further Assurance. The Borrower agrees, at the request of the Administrative Agent or any Issuing Lender, at the time of or at any time following the implementation of EMU, to enter into an agreement amending this Agreement in such manner as the Administrative Agent or such Issuing Lender reasonably shall request in order to reflect the implementation of EMU to place the parties hereto in the position they would have been in had EMU not been implemented. SECTION 3.7 Obligations Absolute. The Borrower's obligations under this Article III (including without limitation the Reimbursement Obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against any Issuing Lender or any beneficiary of a Letter of Credit. The Borrower also agrees with each Issuing Lender that no Issuing Lender shall be responsible for, and the Borrower's Reimbursement Obligation under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by such Issuing Lender's gross negligence or willful misconduct. The Borrower agrees that any action taken or omitted by any Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Customs and/or ISP 98, as set forth in the Application or as determined by the Issuing Lender and, to the extent not inconsistent therewith, the laws of the State of New York, shall be binding on the Borrower and shall not result in any liability of any Issuing Lender to the Borrower. The responsibility of each Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. SECTION 3.8 Effect of Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Article III, the provisions of this Article III shall apply. ARTICLE IV [RESERVED] ARTICLE V GENERAL LOAN PROVISIONS SECTION 5.1 Interest. (a) Interest Rate Options. Subject to the provisions of this Section 5.1, at the election of the Borrower, the aggregate principal balance of any Revolving Credit Loans shall bear interest at (i) the Base Rate plus the Applicable Margin or (ii) the LIBOR Rate plus the Applicable Margin; provided that LIBOR Rate Loans shall not be available until three (3) Business Days after the Closing Date unless the Borrower executes and delivers an indemnity in favor of the Administrative Agent and the Lenders in form and substance satisfactory to them. The Borrower shall select the rate of interest and Interest Period, if any, applicable to any Revolving Credit Loan at the time a Notice of Revolving Credit Borrowing is given pursuant to Section 2.2 or at the time a Notice of Conversion/Continuation is given pursuant to Section 5.2. Each Revolving Credit Loan or portion thereof bearing interest based on the Base Rate shall be a "Base Rate Loan", and each Revolving Credit Loan or portion thereof bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan." Any Revolving Credit Loan or any portion thereof as to 20 <PAGE> 21 which the Borrower has not duly specified an interest rate as provided herein shall be deemed a Base Rate Loan. (b) Interest Periods. In connection with each LIBOR Rate Loan, the Borrower, by giving notice at the times described in Section 5.1(a), shall elect an interest period (each, an "Interest Period") to be applicable to such Revolving Credit Loan, which Interest Period shall, unless otherwise agreed by the Administrative Agent and the Lenders, be a period of one (1), two (2), three (3), or six (6) months with respect to each LIBOR Rate; provided that: (i) the Interest Period shall commence on the date of advance of or conversion to any LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each successive Interest Period shall commence on the date on which the next preceding Interest Period expires; (ii) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, that if any Interest Period with respect to a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iii) any Interest Period with respect to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such Interest Period; (iv) no Interest Period shall extend beyond the Revolving Credit Termination Date; and (v) there shall be no more than six (6) Interest Periods in effect at any time. (c) Default Rate. Subject to Section 12.3, at the discretion of the Administrative Agent and Required Lenders, upon the occurrence and during the continuance of an Event of Default, (i) the Borrower shall no longer have the option to request LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a rate per annum two percent (2%) in excess of the rate then applicable to LIBOR Rate Loans, as applicable, until the end of the applicable Interest Period and thereafter at a rate equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans, and (iii) all outstanding Base Rate Loans shall bear interest at a rate per annum equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans. Interest shall continue to accrue on the amount of Revolving Credit Loans outstanding after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or debtor relief, whether state, federal or foreign. (d) Interest Payment and Computation. Interest on each Base Rate Loan shall be payable in arrears on the last Business Day of each calendar quarter commencing June 30, 2000; and interest on each LIBOR Rate Loan shall be payable on the last day of each Interest Period applicable thereto, and if such Interest Period exceeds three (3) months, at the end of each three (3) month interval during such Interest Period. Interest on LIBOR Rate Loans and all fees payable hereunder shall be computed on the basis of a 360-day year and assessed for the actual number of days elapsed and interest on Base Rate Loans shall be computed on the basis of a 365/66-day year and assessed for the actual number of days elapsed. (e) Maximum Rate. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder or under any of the Loan Documents charged or collected pursuant to the terms of this Agreement or pursuant to any other Loan Document exceed the highest rate permissible under any Applicable Law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Lenders have charged or received interest hereunder in excess of the highest applicable rate, the rate in effect hereunder shall automatically be reduced to the maximum rate permitted by Applicable Law and the Lenders shall at the Administrative Agent's option (i) promptly refund to the Borrower any interest received by Lenders in excess of the 21 <PAGE> 22 maximum lawful rate or (ii) shall apply such excess to the principal balance of the Obligations. It is the intent hereof that the Borrower not pay or contract to pay, and that neither the Administrative Agent nor any Lender receive or contract to receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be paid by the Borrower under Applicable Law. SECTION 5.2 Notice and Manner of Conversion or Continuation of Revolving Credit Loans. Provided that no Event of Default has occurred and is then continuing, the Borrower shall have the option (a) to convert all or any portion of its outstanding Base Rate Loans in a principal amount equal to $5,000,000 or any whole multiple of $1,000,000 in excess thereof into one or more LIBOR Rate Loans and (b), (i) to convert all or any part of its outstanding LIBOR Rate Loans in a principal amount equal to $1,000,000 or a whole multiple of $250,000 in excess thereof into Base Rate Loans or (ii) to continue such LIBOR Rate Loans as LIBOR Rate Loans for an additional Interest Period; provided that if any conversion or continuation is made prior to the expiration of any Interest Period, the Borrower shall pay any amount required to be paid pursuant to Section 5.10 hereof. Whenever the Borrower desires to convert or continue Revolving Credit Loans as provided above, the Borrower shall give the Administrative Agent irrevocable prior written notice in the form attached as Exhibit E (a "Notice of Conversion/Continuation") not later than 11:00 a.m. (Charlotte time) three (3) Business Days before the day on which a proposed conversion or continuation of such Revolving Credit Loan is to be effective (except in the case of a conversion of a LIBOR Rate Loan to a Base Rate Loan in which case same day notice by the Borrower shall be sufficient) specifying (A) the Revolving Credit Loans to be converted or continued, and, in the case of any LIBOR Rate Loan to be converted or continued, the last day of the Interest Period therefor, (B) the effective date of such conversion or continuation (which shall be a Business Day), (C) the principal amount of such Revolving Credit Loans to be converted or continued, and (D) the Interest Period to be applicable to such converted or continued LIBOR Rate Loan. The Administrative Agent shall promptly notify the Lenders of such Notice of Conversion/Continuation. SECTION 5.3 Fees. (a) Facility Fees. The Borrower shall pay to the Administrative Agent, for the account of the Lenders, a non-refundable facility fee (the "Facility Fee") at a rate per annum equal to the Applicable Margin on the full amount of the Revolving Credit Commitment, regardless of usage. The Facility Fee shall be payable in arrears on the last Business Day of each calendar quarter for the period commencing on the Closing Date and ending on the Revolving Credit Termination Date. The Facility Fee shall be distributed by the Administrative Agent to the Lenders pro rata in accordance with the Lenders' respective Revolving Credit Commitment Percentages. (b) Utilization Fee. The Borrower shall pay a utilization fee (the "Utilization Fee") at a rate per annum equal to 0.125% on the average amount of outstanding Revolving Credit Loans during each fiscal quarter that such average exceeds 50% of the Revolving Credit Commitments (exclusive of any issued and outstanding Letters of Credit). The average amount of Revolving Credit Loans for any fiscal quarter shall be calculated by the Administrative Agent (which such calculation shall be conclusively presumed correct save manifest error) as follows: (i) the sum of the principal amount of outstanding Revolving Credit Loans at the close of business for each day during such fiscal quarter, divided by (ii) the total number of days of such fiscal quarter. The Utilization Fee shall be payable in arrears on the fifteenth (15th) day following written notification by the Administrative Agent to the Borrower of the average for the preceding quarter and the resulting Utilization Fee. The Utilization Fee shall be distributed by the Administrative Agent to the Lenders pro rata in accordance with the Lenders' respective Revolving Credit Commitment Percentage. (c) Administrative Agent's and Other Fees. In order to compensate the Administrative Agent for its obligations hereunder, the Borrower agrees to pay to the Administrative Agent, for its account, the fees set forth in the separate fee letter agreement executed by the Borrower and the Administrative Agent dated April 26, 2000. SECTION 5.4 Manner of Payment. Each payment by the Borrower on account of the principal of or interest on the Revolving Credit Loans or of any fee, commission or other amounts (including the Reimbursement Obligation) payable to the Lenders under this Agreement or any other Loan Document shall be made not later than 1:00 p.m. (Charlotte time) on the date specified for payment under this Agreement to the Administrative Agent at the Administrative Agent's Office for the account of the Lenders 22 <PAGE> 23 (other than as set forth below) pro rata in accordance with their respective Revolving Credit Commitment Percentages (except as specified below), in Dollars, in immediately available funds and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte time) on such day shall be deemed a payment on such date for the purposes of Section 12.1, but for all other purposes shall be deemed to have been made on the next succeeding Business Day. Any payment received after 2:00 p.m. (Charlotte time) shall be deemed to have been made on the next succeeding Business Day for all purposes. Upon receipt by the Administrative Agent of each such payment, the Administrative Agent shall distribute to each Lender at its address for notices set forth herein its pro rata share of such payment in accordance with such Lender's Revolving Credit Commitment Percentage (except as specified below), and shall wire advice of the amount of such credit to each Lender. Each payment to the Administrative Agent of the L/C Participants' commissions shall be made in like manner, but for the account of the L/C Participants. Each payment to the Administrative Agent of Administrative Agent's fees or expenses shall be made for the account of the Administrative Agent and any amount payable to any Lender under Section 5.9, 5.10, 5.11, 5.12 or 14.2 shall be paid to the Administrative Agent for the account of the applicable Lender. Subject to Section 5.1(b)(ii), if any payment under this Agreement or any other Loan Document shall be specified to be made upon a day which is not a Business Day, it shall be made on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest if payable along with such payment. SECTION 5.5 Crediting of Payments and Proceeds. In the event that the Borrower shall fail to pay any of the Obligations when due and the Obligations have been accelerated pursuant to Section 12.2, all payments received by the Lenders upon the Obligations and all net proceeds from the enforcement of the Obligations shall be applied first to all expenses then due and payable by the Borrower hereunder, then to all indemnity obligations then due and payable by the Borrower hereunder, then to all Administrative Agent's fees then due and payable, then to all commitment and other fees and commissions then due and payable, then to accrued and unpaid interest hereunder or under any other Loan Document, and Reimbursement Obligation (pro rata in accordance with all such amounts due), then to the principal amount hereunder or under any other Loan Document, Reimbursement Obligation and any termination payments due in respect of a Hedging Agreement with any Lender or Affiliate of a Lender (which Hedging Agreement is permitted hereunder) (pro rata in accordance with all such amounts due) and then to the cash collateral account described in Section 12.2(b) hereof to the extent of any L/C Obligations then outstanding, in that order. SECTION 5.6 Adjustments. If any Lender (a "Benefited Lender") shall at any time receive any payment of all or part of the Obligations owing to it, or interest thereon, or if any Lender shall at any time receive any collateral in respect to the Obligations owing to it (whether voluntarily or involuntarily, by set-off or otherwise) in a greater proportion than any such payment to and collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, or interest thereon, such Benefited Lender shall purchase for cash from the other Lenders such portion of each such other Lender's Extensions of Credit, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Extensions of Credit may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. SECTION 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent. The obligations of the Lenders under this Agreement to make the Revolving Credit Loans and issue or participate in Letters of Credit are several and are not joint or joint and several. Unless the Administrative Agent shall have received notice from a Lender prior to a proposed borrowing date that such Lender will not make available to the Administrative Agent such Lender's ratable portion of the amount to be borrowed on such date (which notice shall not release such Lender of its obligations hereunder), the Administrative Agent may assume that such Lender has made such portion available to the 23 <PAGE> 24 Administrative Agent on the proposed borrowing date in accordance with Sections 2.2(b) and 4.2, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If such amount is made available to the Administrative Agent on a date after such borrowing date, such Lender shall pay to the Administrative Agent on demand an amount, until paid, equal to the product of (a) the amount not made available by such Lender in accordance with the terms hereof, times (b) the daily average Federal Funds Rate during such period as determined by the Administrative Agent, times (c) a fraction the numerator of which is the number of days that elapse from and including such borrowing date to the date on which such amount not made available by such Lender in accordance with the terms hereof shall have become immediately available to the Administrative Agent and the denominator of which is 360. A certificate of the Administrative Agent with respect to any amounts owing under this Section 5.7 shall be conclusive, absent manifest error. If such Lender's Revolving Credit Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three (3) Business Days of such borrowing date, the Administrative Agent shall be entitled to recover such amount made available by the Administrative Agent with interest thereon at the rate per annum applicable to such borrowing, on demand, from the Borrower. The failure of any Lender to make available its Revolving Credit Commitment Percentage of any Revolving Credit Loan requested by the Borrower shall not relieve it or any other Lender of its obligation hereunder to make its Revolving Credit Commitment Percentage of such Revolving Credit Loan available on the borrowing date, but no Lender shall be responsible for the failure of any other Lender to make its Revolving Credit Commitment Percentage of such Revolving Credit Loan available on the borrowing date. SECTION 5.8 Joint and Several Liability of the Credit Parties. (a) Each of the Credit Parties is jointly and severally liable not merely as a surety but as a co-debtor for each and every Obligation. Each of the Credit Parties is accepting joint and several liability hereunder in consideration of the financial accommodations to be provided by the Lenders under this Agreement, for the mutual benefit, directly or indirectly, of each of the Credit Parties and in consideration of the undertakings of each of the Credit Parties to accept joint and several liability for the Obligations. (b) Except as otherwise expressly provided herein, each Credit Party hereby waives promptness, diligence, presentment, demand, protest, notice of acceptance of its joint and several liability, notice of any and all advances of the Revolving Credit Loans and Letters of Credit made under this Agreement and the other Loan Documents, notice of occurrence of any Default or Event of Default, or of any demand for any payment under this Agreement and notice of any action at any time taken or omitted by the Administrative Agent or any Lender under or in respect of any of the Obligations hereunder. Each Credit Party hereby waives all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshaling of assets of any of the Credit Parties and any other entity or person primarily or secondarily liable with respect to any of the Obligations, and all suretyship defenses generally. Each Credit Party hereby assents to, and waives notice of, any extension or postponement of the time for the payment, or place or manner for payment, compromise, refinancing, consolidation or renewals of any of the Obligations hereunder, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by the Administrative Agent or any Lender at any time or times in respect of any default by any Credit Party in the performance or satisfaction of any term, covenant, condition or provision of this Agreement and the other Loan Documents, any and all other indulgences whatsoever by the Administrative Agent or any Lender in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of such Obligations or the addition, substitution or release, in whole or in part, of any Credit Party or any other entity or person primarily or secondarily liable for any Obligation. If for any reason any of the Credit Parties has no legal existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from any of the Credit Parties by reason of such Credit Party's insolvency, bankruptcy or reorganization or by other operation of law or for any reason, this Agreement and the other Loan Documents shall nevertheless be binding on each of the other Credit Parties to the same extent as if such Credit Party at all times had been the sole obligor on such Obligations. The Obligations of each Credit Party under this Section 5.8 shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any reconstruction or similar proceeding with respect to any Credit Party, the Administrative Agent or any Lender. 24 <PAGE> 25 (c) If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy or reorganization of any of the Credit Parties, or otherwise, the provisions of this Section 5.8 will forthwith be reinstated in effect as though such payment had not been made. (d) Until the payment and performance in full of all the Obligations, none of the Credit Parties shall exercise and each hereby waives any rights against the other Credit Parties as a result of payment by such Credit Party hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise, and none of the Credit Parties will prove any claim in competition with the Administrative Agent or any Lender in respect of any payment hereunder in bankruptcy, insolvency, or reorganization proceedings of any nature; none of the Credit Parties will claim any set-off, recoupment or counterclaim against any of the other Credit Parties in respect of any liability of one Credit Party to another Credit Party. Each of the Credit Parties hereby agrees that the payment of any amounts due with respect to any indebtedness owing by any of the Credit Party to any other Credit Party is hereby subordinated to the prior payment in full in cash of the Obligations. Each Credit Party agrees that, after the occurrence and during the continuance of any Default or Event of Default hereunder, none of the Credit Parties will demand, sue for or otherwise attempt to collect any indebtedness of any other Credit Party to such Credit Party until all of the Obligations of the Credit Parties hereunder shall have been paid in full in cash. If, notwithstanding the foregoing sentence, any Credit Party shall collect, enforce or receive any amounts in respect of such indebtedness in violation of the foregoing sentence while any Obligations of the Credit Parties are still outstanding, such amounts shall be collected, enforced and received by such Credit Party as trustee for the Administrative Agent and the Lenders and be paid over to the Administrative Agent on account of the Obligations without affecting in any manner the liability of such Credit Party under the other provisions hereof. SECTION 5.9 Changed Circumstances. (a) Circumstances Affecting LIBOR Rate Availability. If with respect to any Interest Period: (i) the Administrative Agent or any Lender (after consultation with Administrative Agent) shall determine that, by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars, in the applicable amounts are not being quoted via Dow Jones Market Screen 3750 (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) or offered to the Administrative Agent or such Lender for such Interest Period; or (ii) the Required Lenders reasonably determine (which determination shall be conclusive) and notify the Administrative Agent that the LIBOR Rate will not adequately and fairly reflect the cost to the Required Lenders of funding LIBOR Rate Loans for such Interest Period; then the Administrative Agent shall forthwith give notice thereof to the Borrower. Thereafter, until the Administrative Agent notifies the Borrower that such circumstances no longer exist, the obligation of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Revolving Credit Loan to or continue any Revolving Credit Loan as a LIBOR Rate Loan shall be suspended, and the Borrower shall repay in full (or cause to be repaid in full) the then outstanding principal amount of each such LIBOR Rate Loan together with accrued interest thereon, on the last day of the then current Interest Period applicable to such LIBOR Rate Loan or convert the then outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period. (b) Laws Affecting LIBOR Rate Availability. If, after the date hereof, the introduction of, or any change in, any Applicable Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) issued after the date hereof of any such Authority, central bank or comparable agency, shall make it unlawful or impossible for any of the Lenders (or any of their respective Lending Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice to the Borrower and the other Lenders. Thereafter, until 25 <PAGE> 26 the Administrative Agent notifies the Borrower that such circumstances no longer exist, (i) the obligations of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Revolving Credit Loan or continue any Revolving Credit Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if any of the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to the end of the then current Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base Rate Loan for the remainder of such Interest Period. (c) Increased Costs. If, after the date hereof, the introduction of, or any change in, any Applicable Law, or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any of the Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) issued after the date hereof of such Authority, central bank or comparable agency: (i) shall subject any of the Lenders (or any of their respective Lending Offices) to any tax, duty or other charge with respect to any Revolving Credit Loan, Letter of Credit or Application or shall change the basis of taxation of payments to any of the Lenders (or any of their respective Lending Offices) of the principal of or interest on any Revolving Credit Loan, Letter of Credit or thereof (except for changes in the rate of tax on the overall net income of any of the Lenders or any of their respective Lending Offices imposed by the jurisdiction in which such Lender is organized or is or should be qualified to do business or such Lending Office is located); or (ii) shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit, insurance or capital or similar requirement against assets of, deposits with or for the account of, or credit extended by any of the Lenders (or any of their respective Lending Offices) or shall impose on any of the Lenders (or any of their respective Lending Offices) or the foreign exchange and interbank markets any other condition affecting any Revolving Credit Loan; and the result of any of the foregoing is to increase the costs to any of the Lenders of maintaining any LIBOR Rate Loan or issuing or participating in Letters of Credit or to reduce the yield or amount of any sum received or receivable by any of the Lenders under this Agreement or under any other Loan Document in respect of a LIBOR Rate Loan or Letter of Credit or Application, then such Lender may promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify the Borrower of such fact and demand compensation therefor and, within fifteen (15) days after such notice by the Administrative Agent, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or Lenders for such increased cost or reduction. The Administrative Agent and the applicable Lender will promptly notify the Borrower of any event of which it has knowledge which will entitle such Lender to compensation pursuant to this Section 5.9(c); provided, that the Administrative Agent shall incur no liability whatsoever to the Lenders or the Borrower in the event it fails to do so. The amount of such compensation shall be determined, in the applicable Lender's reasonable discretion, based upon the assumption that such Lender funded its Revolving Credit Commitment Percentage of the LIBOR Rate Loans in the London interbank market and using any reasonable attribution or averaging methods which such Lender deems appropriate and practical; provided that no compensation shall be payable pursuant to the above if the applicable Lender fails to demand compensation for such increased costs within one-hundred eighty (180) days following the date on which such Lender has actual knowledge of the event resulting in such increase. A certificate of such Lender setting forth in reasonable detail the basis for determining such amount or amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error. (d) Mitigation Obligations; Replacement of Lenders. (i) If any Lender requests compensation under this Section 5.9, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of 26 <PAGE> 27 any Lender pursuant to Section 5.12, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Revolving Credit Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (A) would eliminate or reduce amounts payable pursuant to this Section 5.9 or Section 5.12, as the case may be, in the future and (B) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (ii) If any Lender requests compensation under this Section 5.9, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.12, or if any Lender defaults in its obligation to fund Revolving Credit Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 14.10), all its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (A) the Borrower shall have received the prior written consent of the Administrative Agent (and, if an L/C Commitment is being assigned, the Issuing Bank), which consent shall not unreasonably be withheld, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Credit Loans and participations in Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (C) in the case of any such assignment resulting from a claim for compensation under this Section 5.9, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 5.10 Indemnity. The Borrower hereby indemnifies each of the Lenders against any loss or expense which may arise or be attributable to each Lender's obtaining, liquidating or employing deposits or other funds acquired to effect, fund or maintain any Revolving Credit Loan (a) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the Borrower to borrow on a date specified therefor in a Notice of Revolving Credit Borrowing or Notice of Continuation/Conversion or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date other than the last day of the Interest Period therefor. The amount of such loss, cost or expense to any Lender shall be deemed to equal an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the LIBOR Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid, were it to bid, at the commencement of such period, for Dollar deposits of a comparable amount and period from other banks in the London interbank market; provided that no compensation shall be payable pursuant to the above if the applicable Lender fails to demand compensation for such increased costs within one-hundred eighty (180) days following the date on which such Lender has actual knowledge of the event resulting in such increase. A certificate of such Lender setting forth in reasonable detail the basis for determining such amount or amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error. SECTION 5.11 Capital Requirements. If either (a) the introduction of, or any change in, or in the interpretation of, any Applicable Law or (b) compliance with any guideline or request issued after the date hereof from any central bank or comparable agency or other Governmental Authority (whether or not having the force of law), has or would have the effect of reducing the rate of return on the capital of, or has affected or would affect the amount of capital required to be maintained by, any Lender or any corporation 27 <PAGE> 28 controlling such Lender as a consequence of, or with reference to any Lender's Revolving Credit Commitment and other commitments of this type, below the rate which the Lender or such other corporation could have achieved but for such introduction, change or compliance, then within five (5) Business Days after written demand by any such Lender, the Borrower shall pay to such Lender from time to time as specified by such Lender additional amounts sufficient to compensate such Lender or other corporation for such reduction; provided that no compensation shall be payable pursuant to the above if the applicable Lender fails to demand compensation for such increased costs within one-hundred eighty (180) days following the date on which such lender has actual knowledge of the event resulting in such increase. A certificate of such Lender setting forth in reasonable detail the basis for determining such amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error. SECTION 5.12 Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder or under the Revolving Credit Notes or the Letters of Credit shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholding, and all liabilities with respect thereto excluding, (i) in the case of each Lender and the Administrative Agent, income and franchise taxes imposed on (or measured by) its net income by the United States of America or by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or its principal office is located or is or should be qualified to do business or any political subdivision thereof, or in the case of any Lender, in which its applicable Lending Office is located (provided, however, that no Lender shall be deemed to be located in any jurisdiction solely as a result of taking any action related to this Agreement or the Revolving Credit Notes or Letters of Credit) and (ii) any branch profits tax imposed by the United States of America or any similar tax imposed by any other jurisdiction described in clause (i) above (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Revolving Credit Note or Letter of Credit to any Lender or the Administrative Agent, (A) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.12) such Lender or the Administrative Agent (as the case may be) receives an amount equal to the amount such party would have received had no such deductions been made, (B) the Borrower shall make such deductions, (C) the Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable law, and (D) the Borrower shall deliver to the Administrative Agent evidence of such payment to the relevant taxing authority or other authority in the manner provided in Section 5.12(d). The Borrower shall not, however, be required to pay any amounts pursuant to clause (A) of the preceding sentence to any Foreign Lender or the Administrative Agent not organized under the laws of the United States of America or a state thereof (or the District of Columbia) if such Foreign Lender or the Administrative Agent fails to comply with the requirements of paragraph (e) of this Section 5.12 or Section 5.9(d), as the case may be. (b) Stamp and Other Taxes. In addition, the Borrower shall pay any present or future stamp, registration, recordation or documentary taxes or any other similar fees or charges or excise or property taxes, levies of the United States or any state or political subdivision thereof or any applicable foreign jurisdiction which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the Revolving Credit Loans, the Letters of Credit, the other Loan Documents (hereinafter referred to as "Other Taxes"). (c) Indemnity. The Borrower shall indemnify each Lender and the Administrative Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 5.12) paid by such Lender or the Administrative Agent (as the case may be) and any liability (including penalties, interest and reasonable expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. A certificate as to the amount of such payment or liability prepared by a Lender or the Administrative Agent, absent manifest error, shall be conclusive, provided that if the Borrower reasonably believes that such Taxes or Other Taxes were not correctly or legally asserted, such Lender or the Administrative Agent (as the case may be) shall use reasonable efforts to cooperate with the Borrower, at the Borrower's expense, to obtain a refund of such Taxes or Other Taxes. Such 28 <PAGE> 29 indemnification shall be made within thirty (30) days from the date such Lender or the Administrative Agent (as the case may be) makes written demand therefor. If a Lender or the Administrative Agent shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes, it promptly shall notify the Borrower of the availability of such refund and shall, within sixty (60) days after receipt of a request by the Borrower pursue or timely claim such refund at the Borrower's expense. If any Lender or the Administrative Agent receives a refund in respect of any Taxes or Other Taxes for which such Lender or the Administrative Agent has received payment from the Borrower hereunder, it promptly shall repay such refund (plus interest received, if any) to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 5.12 with respect to Taxes or Other Taxes giving rise to such refund), provided that the Borrower, upon the request of such Lender or the Administrative Agent, agrees to return such refund (plus any penalties, interest or other charges required to be paid) to such Lender or the Administrative Agent in the event such Lender or the Administrative Agent is required to repay such refund to the relevant taxing authority. (d) Evidence of Payment. Within thirty (30) days after the date of any payment of Taxes or Other Taxes, the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 14.1, the original or a certified copy of a receipt evidencing payment thereof or other evidence of payment satisfactory to the Administrative Agent. (e) Delivery of Tax Forms. Each Foreign Lender shall deliver to the Borrower, with a copy to the Administrative Agent, on the Closing Date or concurrently with the delivery of the relevant Assignment and Acceptance, as applicable, (i) two United States Internal Revenue Service Forms W-8ECI or Forms W-8BEN, as applicable (or successor forms) properly completed and certifying in each case that such Foreign Lender is entitled to a complete exemption from withholding or deduction for or on account of any United States federal income taxes, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding taxes. Each Foreign Lender further agrees to deliver to the Borrower, with a copy to the Administrative Agent, a Form W-8BEN or W-8ECI and Form W-8 or W-9, or successor applicable forms or manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, certifying in the case of a Form W-8BEN or W-8ECI that such Foreign Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes (unless in any such case an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders such forms inapplicable or the exemption to which such forms relate unavailable and such Foreign Lender notifies the Borrower and the Administrative Agent that it is not entitled to receive payments without deduction or withholding of United States federal income taxes) and, in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. (f) Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 5.12 shall survive the payment in full of the Obligations and the termination of the Revolving Credit Commitment. ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING SECTION 6.1 Closing. The closing shall take place at the offices of Shearman & Sterling at 10:00 a.m. on June 13, 2000 or at such other location, on such other date and at such other time as the parties hereto shall mutually agree. SECTION 6.2 Conditions to Closing and Initial Revolving Credit Loans and Letters of Credit. The obligation of the Lenders to close this Agreement and to make the initial Revolving Credit Loans or issue the initial Letters of Credit is subject to the satisfaction or waiver of each of the following conditions: (a) Executed Loan Documents. This Agreement and the Revolving Credit Notes (to the extent requested as provided herein) shall have been duly authorized, executed and delivered 29 <PAGE> 30 to the Administrative Agent by the parties thereto, shall be in full force and effect and no default shall exist thereunder, and the Borrower shall have delivered original counterparts thereof to the Administrative Agent. (b) Closing Certificates; Etc. (i) Officers' Certificate of the Borrower. The Administrative Agent shall have received a certificate from a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, to the effect that all representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true, correct and complete in all material respects; that the Borrower is not in violation of any of the covenants contained in this Agreement and the other Loan Documents; that, after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing; and that each of the closing conditions has been satisfied or waived (assuming satisfaction of the Administrative Agent where not advised otherwise). (ii) General Certificate of the Borrower. The Administrative Agent shall have received a certificate of the secretary, assistant secretary or general counsel of the Borrower certifying as to the incumbency and genuineness of the signature of each officer of the Borrower executing Loan Documents to which it is a party and certifying that attached thereto is a true, correct and complete copy of (A) the articles of incorporation of the Borrower and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation, (B) the bylaws of the Borrower as in effect on the date of such certifications, (C) resolutions duly adopted by the Board of Directors of the Borrower authorizing the borrowings contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and (D) each certificate required to be delivered pursuant to Section 6.2(b)(iii). (iii) Certificates of Good Standing. The Administrative Agent shall have received long-form certificates as of a recent date of the good standing of the Borrower under the laws of its jurisdiction of organization and short-form certificates as of a recent date of the good standing of the Borrower under the laws of each of California, Georgia, New York, North Carolina, Texas, Tennessee, Virginia and Washington. (iv) Opinions of Counsel. The Administrative Agent shall have received favorable opinions of Ira M. Dansky, General Counsel to the Borrower, Cravath, Swaine & Moore, special counsel to the Borrower, and Mesirov, Gelman, Jaffe, Cramer & Jamieson, Pennsylvania counsel to the Borrower, addressed to the Administrative Agent and the Lenders with respect to the Borrower, the Loan Documents and such other matters as the Lenders shall reasonably request. (c) Consents; Defaults. (i) Governmental and Third Party Approvals. The Borrower shall have obtained all material approvals, authorizations and consents of any Person and of all Governmental Authorities and courts having jurisdiction with respect to the transactions contemplated by this Agreement and the other Loan Documents. (ii) No Event of Default. No Default or Event of Default shall have occurred and be continuing. (d) Financial Matters. (i) Financial Statements. The Administrative Agent shall have received the audited Consolidated financial statements of Jones Apparel Group and its Subsidiaries for the Fiscal Year ended on December 31, 1999 and the unaudited financial statements of Jones Apparel Group and its Subsidiaries for the fiscal quarter ended on April 2, 2000. 30 <PAGE> 31 (ii) Financial Condition Certificate. The Borrower shall have delivered to the Administrative Agent a certificate, in form and substance reasonably satisfactory to the Administrative Agent, and certified by a Responsible Officer, that the financial projections previously delivered to the Administrative Agent were prepared in good faith based upon assumptions believed to be reasonable at the time. (iii) Payment at Closing; Fee Letters. The Borrower shall have paid the fees set forth or referenced in Section 5.3(c) and any other accrued and unpaid fees or commissions due hereunder (including, without limitation, reasonable legal fees and expenses) to the Administrative Agent and Lenders, and to any other Person such amount as may be due thereto in connection with the transactions contemplated hereby, including all taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of any of the Loan Documents. The Administrative Agent shall have received duly authorized and executed copies of the fee letter agreement referred to in Section 5.3(c). (e) Miscellaneous. (i) Notice of Revolving Credit Borrowing. The Administrative Agent shall have received a Notice of Revolving Credit Borrowing from the Borrower in accordance with Section 2.2(a) and Section 4.2, and a Notice of Account Designation specifying the account or accounts to which the proceeds of any Revolving Credit Loans made after the Closing Date are to be disbursed. (ii) Proceedings and Documents. All opinions, certificates and other instruments and all proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory in form and substance to the Lenders. (iii) Investment Policy. The Borrower shall have delivered to the Administrative Agent a true and complete copy of the investment policy referenced in Section 11.4(b) in form and content reasonably acceptable to the Administrative Agent. (f) Refinancing. On the Closing Date hereunder, (i) all outstanding loans under the Prior Credit Agreement ("Existing Loans") shall be replaced by Revolving Credit Loans hereunder and the Administrative Agent shall make such transfers of funds as are necessary in order that the outstanding balance of such Revolving Credit Loans, together with any Revolving Credit Loans funded on the Closing Date, reflect the Revolving Credit Commitment of the Lenders hereunder, (ii) all outstanding letters of credit issued pursuant to the Prior Credit Agreement shall be deemed Letters of Credit hereunder and each Lender shall purchase a participation therein pursuant to Section 3.4 in accordance with its Revolving Credit Commitment Percentage, (iii) there shall have been paid in cash in full all accrued but unpaid interest due on the Existing Loans up to but excluding the Closing Date, (iv) there shall have been paid in cash in full all accrued but unpaid fees due under the Prior Credit Agreement up to but excluding the Closing Date and all other amounts, costs and expenses then owing to any of the Prior Lenders and/or any Agent, as agent under the Prior Credit Agreement, in each case to the satisfaction of such Agent or Prior Lender, as the case may be, regardless of whether or not such amounts would otherwise be due and payable at such time pursuant to the terms of the Prior Credit Agreement, (v) all outstanding promissory notes issued by the Borrower to the Prior Lenders under the Prior Credit Agreement shall be deemed canceled and the originally executed copies thereof shall be canceled and promptly returned to the Administrative Agent who shall promptly forward such notes to the Borrower and (vi) the commitments and, except as expressly set forth in the Prior Credit Agreement, other obligations and rights of the Borrower and the Prior Lenders shall be terminated without any further action hereunder or thereunder. 31 <PAGE> 32 SECTION 6.3 Conditions to All Extensions of Credit. The obligations of the Lenders to make any Extensions of Credit are subject to the satisfaction of the following conditions precedent on the relevant borrowing or issue date, as applicable: (a) Continuation of Representations and Warranties. The representations and warranties contained in Article VII shall be true and correct on and as of such borrowing or issuance date with the same effect as if made on and as of such date; except for any representation and warranty made as of an earlier date, which representation and warranty shall remain true and correct as of such earlier date. (b) No Existing Default. No Default or Event of Default shall have occurred and be continuing hereunder (i) on the borrowing date with respect to such Revolving Credit Loan or after giving effect to the Revolving Credit Loans to be made on such date or (ii) on the issue, extension or renewal date with respect to such Letter of Credit or after giving effect to such Letter of Credit on such date. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE CREDIT PARTIES SECTION 7.1 Representations and Warranties. To induce the Administrative Agent and Lenders to enter into this Agreement and to induce the Lenders to make Extensions of Credit, the Credit Parties hereby represent and warrant to the Administrative Agent and Lenders that: (a) Organization; Power; Qualification. Each of the Credit Parties and their Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification and authorization, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. (b) Ownership. Each Subsidiary of each of the Credit Parties as of the Closing Date is listed on Schedule 7.1(b). As of the Closing Date, the capitalization of the Credit Parties and their Subsidiaries consists of the number of shares, authorized, issued and outstanding, of such classes and series, with or without par value, described on Schedule 7.1(b). As of the Closing Date, all outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. The shareholders of the Subsidiaries of the Credit Parties and the number of shares owned by each as of the Closing Date are described on Schedule 7.1(b). As of the Closing Date, there are no outstanding stock purchase warrants, subscriptions, options, securities, instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of capital stock of the Credit Parties or their Subsidiaries, except as described on Schedule 7.1(b). (c) Authorization of Agreement, Loan Documents and Borrowing. Each of the Credit Parties and, if applicable, their Subsidiaries has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of each of the Loan Documents to which it is a party in accordance with their respective terms. Each of the Loan Documents have been duly executed and delivered by the duly authorized officers of the Credit Parties and each of their Subsidiaries party thereto, as applicable, and each such document constitutes the legal, valid and binding obligation of the Credit Parties and, if applicable, each of their Subsidiaries party thereto, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors' rights in general and the availability of equitable remedies. 32 <PAGE> 33 (d) Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc. The execution, delivery and performance by the Credit Parties and their Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the borrowings hereunder and the transactions contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any of the Credit Parties or any of their Subsidiaries to obtain any Governmental Approval not otherwise already obtained or violate any Applicable Law relating to the Credit Parties or any of their Subsidiaries, (ii) conflict with, result in a breach of or constitute a default under the articles of incorporation, bylaws or other organizational documents of the Credit Parties or any of their Subsidiaries or any indenture or other material agreement or instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such Person except as could not reasonably be expected to have a Material Adverse Effect, or (iii) result in or require the creation or imposition of any material Lien upon or with respect to any property now owned or hereafter acquired by such Person. (e) Compliance with Law; Governmental Approvals. Other than with respect to environmental matters, which are treated exclusively in Section 7.1(h) hereof, each of the Credit Parties and their Subsidiaries (i) has all Governmental Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending or, to the best of its knowledge, threatened attack by direct or collateral proceeding, and (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other Applicable Laws relating to it or any of its respective properties; in each case, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. (f) Tax Returns and Payments. Each of the Credit Parties and their Subsidiaries has timely filed or caused to be timely filed all federal and state, local and other tax returns required by Applicable Law to be filed, and has paid, or made adequate provision for the payment of, all federal and state, local and other taxes, assessments and governmental charges or levies upon it and its property, income, profits and assets which are due and payable, except (a) taxes that are being contested in good faith by appropriate proceedings and for which such Credit Party or Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect. No Governmental Authority has asserted any material Lien or other claim against the Credit Parties or any Subsidiary thereof with respect to unpaid taxes (except for taxes not yet due) which has not been discharged or resolved. (g) Intellectual Property Matters. Each of the Credit Parties and its Subsidiaries owns or possesses rights to use all franchises, licenses, copyrights, copyright applications, patents, patent rights or licenses, patent applications, trademarks, trademark rights, trade names, trade name rights, copyrights and rights with respect to the foregoing which are required to conduct its business except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. No event has occurred which, to the knowledge of the Credit Parties, permits, or after notice or lapse of time or both would permit, the revocation or termination of any such rights, and, to the knowledge of the Credit Parties, neither the Credit Parties nor any Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to any such rights as a result of its business operations, except as could not reasonably be expected to have a Material Adverse Effect. (h) Environmental Matters. Except as could not reasonably be expected to have a Material Adverse Effect: (i) The properties of the Credit Parties and their Subsidiaries do not contain, and to their knowledge have not previously contained, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a violation of applicable Environmental Laws or (B) could give rise to liability under applicable Environmental Laws; 33 <PAGE> 34 (ii) The properties of the Credit Parties and their Subsidiaries and all operations conducted in connection therewith are in compliance, and have been in compliance, with all applicable Environmental Laws, and there are no Hazardous Materials at, under or about such properties or such operations in amounts or concentrations which could reasonably be expected to interfere with the continued operation of such properties; (iii) Neither any of the Credit Parties nor any Subsidiary thereof has received any notice of violation, alleged violation, non- compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws, nor does any of the Credit Parties or any Subsidiary thereof have knowledge or reason to believe that any such notice will be received or is being threatened; (iv) To the knowledge of the Credit Parties, Hazardous Materials have not been transported or disposed of from the properties of the Credit Parties or any of their Subsidiaries in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, Environmental Laws, nor, to the knowledge of the Credit Parties, have any Hazardous Materials been generated, treated, stored or disposed of at, on or under any of such properties in violation of, or in a manner which could reasonably be expected to give rise to liability under, any Environmental Laws; (v) No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Credit Parties, threatened, under any Environmental Law to which any of the Credit Parties or any Subsidiary thereof will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the properties or operations of the Credit Parties and their Subsidiaries; and (vi) To the knowledge of the Credit Parties, there has been no release, or to the best of the Credit Parties' knowledge, the threat of release, of Hazardous Materials at or from the properties of the Credit Parties or any of their Subsidiaries, in violation of or in amounts or in a manner that could reasonably be expected to give rise to liability under Environmental Laws. (i) ERISA. (i) Each of the Credit Parties and each ERISA Affiliate is in compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans except where any such non-compliance could not reasonably be expected to have a Material Adverse Effect. Except for any failure that would not reasonably be expected to have a Material Adverse Effect, each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code. No liability that could reasonably be expected to result in a Material Adverse Effect has been incurred by the Credit Parties or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (ii) No accumulated funding deficiency (as defined in Section 412 of the Code) has been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan; (iii) Neither the Credit Parties nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC which remains outstanding other than the payment of 34 <PAGE> 35 premiums and there are no premium payments which are due and unpaid, (C) failed to make a required contribution or payment to a Multiemployer Plan, or (D) failed to make a required installment or other required payment under Section 412 of the Code except where any of the foregoing individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect; (iv) No Termination Event that could reasonably be expected to result in a Material Adverse Effect has occurred or is reasonably expected to occur; and (v) No proceeding, claim, lawsuit and/or investigation is existing or, to the knowledge of the Credit Parties, threatened concerning or involving any Employee Benefit Plan that could reasonably be expected to result in a Material Adverse Effect. (j) Margin Stock. Neither the Credit Parties nor any Subsidiary thereof is engaged principally or as one of its activities in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each such term is defined or used in Regulation U of the Board of Governors of the Federal Reserve System). No part of the proceeds of any of the Revolving Credit Loans or Letters of Credit will be used for purchasing or carrying margin stock, unless the Credit Parties shall have given the Administrative Agent and Lenders prior notice of such event and such other information as is reasonably necessary to permit the Administrative Agent and Lenders to comply, in a timely fashion, with all reporting obligations required by Applicable Law, or for any purpose which violates, or which would be inconsistent with, the provisions of Regulation T, U or X of such Board of Governors. (k) Government Regulation. Neither the Credit Parties nor any Subsidiary thereof is an "investment company" or a company "controlled" by an "investment company" (as each such term is defined or used in the Investment Company Act of 1940, as amended) and neither the Credit Parties nor any Subsidiary thereof is, or after giving effect to any Extension of Credit will be, subject to regulation under the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as amended. (l) Burdensome Provisions. Neither the Credit Parties nor any Subsidiary thereof is a party to any indenture, agreement, lease or other instrument, or subject to any corporate or partnership restriction, Governmental Approval or Applicable Law which is so unusual or burdensome as in the foreseeable future could be reasonably expected to have a Material Adverse Effect. The Credit Parties and their Subsidiaries do not presently anticipate that future expenditures needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental Authority will be so burdensome as to have a Material Adverse Effect. (m) Financial Statements. The (i) Consolidated balance sheets of Jones Apparel Group and its Subsidiaries as of December 31, 1999, and the related statements of income, stockholders' equity and cash flows for the Fiscal Years then ended and (ii) unaudited Consolidated balance sheet of Jones Apparel Group and its Subsidiaries as of April 2, 2000, and related unaudited interim statements of income, stockholders' equity and cash flows, copies of which have been furnished to the Administrative Agent and each Lender, are complete in all material respects and fairly present in all material respects the assets, liabilities and financial position of Jones Apparel Group and its Subsidiaries as at such dates, and the results of the operations and changes of financial position for the periods then ended, subject to normal year end adjustments. All such financial statements, including the related notes thereto, have been prepared in accordance with GAAP. (n) No Material Adverse Change. Since the later to occur of (i) April 2, 2000 or (ii) the date of the most recently delivered audited financial statements of Jones Apparel Group and its Subsidiaries, there has been no Material Adverse Effect. (o) Liens. None of the properties and assets of the Credit Parties or any Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to Section 11.3. 35 <PAGE> 36 (p) Debt and Guaranty Obligations. Schedule 7.1(p) is a complete and correct listing of all Debt and Guaranty Obligations of the Credit Parties and their Subsidiaries as of the Closing Date in excess of $5,000,000. (q) Litigation. Except for matters existing on the Closing Date and set forth on Schedule 7.1(q), there are no actions, suits or proceedings pending nor, to the knowledge of the Credit Parties, threatened against or affecting the Credit Parties or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental Authority, which could reasonably be expected to have a Material Adverse Effect or which relate to the enforceability of any Loan Documents. (r) Absence of Defaults. To the knowledge of the Credit Parties, no event has occurred or is continuing which constitutes a Default or an Event of Default. (s) Accuracy and Completeness of Information. The Credit Parties have disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which they or any of their Subsidiaries are subject, and all other matters known to them, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The written information, taken as a whole, furnished by or on behalf of the Credit Parties to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) does not contain any material misstatement of fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Credit Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. SECTION 7.2 Survival of Representations and Warranties, Etc. All representations and warranties set forth in this Article VII and all representations and warranties contained in any certificate, or any of the Loan Documents (including but not limited to any such representation or warranty made in or in connection with any amendment thereto) shall constitute representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date, shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the Lenders or any borrowing hereunder. ARTICLE VIII FINANCIAL INFORMATION AND NOTICES Until all the Obligations (other than Obligations under Hedging Agreements) have been paid and satisfied in full and the Revolving Credit Commitment terminated, unless consent has been obtained in the manner set forth in Section 14.11 hereof, the Credit Parties will furnish or cause to be furnished to the Administrative Agent and to the Lenders at their respective addresses as set forth on Schedule 1.1(a), or such other office as may be designated by the Administrative Agent and Lenders from time to time: SECTION 8.1 Financial Statements and Projections. (a) Quarterly Financial Statements. As soon as practicable and in any event within forty-five (45) days after the end of the first three fiscal quarters of each Fiscal Year, an unaudited Consolidated balance sheet of Jones Apparel Group and its Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated statements of income, stockholders' equity and cash flows for the fiscal quarter then ended and that portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the preceding Fiscal Year and prepared by Jones Apparel Group in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the period, and certified by a Responsible Officer to present fairly in all material respects the financial condition of Jones Apparel Group and its Subsidiaries as of their 36 <PAGE> 37 respective dates and the results of operations of Jones Apparel Group and its Subsidiaries for the respective periods then ended, subject to normal year end adjustments. (b) Annual Financial Statements. As soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year, an audited Consolidated balance sheet of Jones Apparel Group and its Subsidiaries as of the close of such Fiscal Year and audited Consolidated statements of income, stockholders' equity and cash flows for the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures for the preceding Fiscal Year and prepared by a nationally recognized independent certified public accounting firm in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operation of any change in the application of accounting principles and practices during the year, and accompanied by a report thereon by such certified public accountants that is not qualified with respect to scope limitations imposed by Jones Apparel Group or any of its Subsidiaries or with respect to accounting principles followed by Jones Apparel Group or any of its Subsidiaries not in accordance with GAAP. SECTION 8.2 Officer's Compliance Certificate. At each time financial statements are delivered pursuant to Section 8.1(a) or (b) a certificate of a Responsible Officer in the form of Exhibit F attached hereto (an "Officer's Compliance Certificate"). SECTION 8.3 Accountants' Certificate. At each time financial statements are delivered pursuant to Section 8.1(b), a certificate of the independent public accountants certifying such financial statements addressed to the Administrative Agent for the benefit of the Lenders: (a) stating that in making the examination necessary for the certification of such financial statements, they obtained no knowledge of any Default or Event of Default or, if such is not the case, specifying such Default or Event of Default and its nature and period of existence; and (b) including the calculations prepared by such accountants required to establish whether or not the Credit Parties and their Subsidiaries are in compliance with the financial covenants set forth in Article X hereof as at the end of each respective period. SECTION 8.4 Other Reports. (a) Promptly but in any event within ten (10) Business Days after the filing thereof, a copy of (i) each report or other filing made by the Credit Parties or any or their Subsidiaries with the Securities and Exchange Commission and required by the Securities and Exchange Commission to be delivered to the shareholders of the Credit Parties or any or their Subsidiaries, (ii) each report made by the Credit Parties or any of their Subsidiaries to the Securities and Exchange Commission on Form 8-K and (iii) each final registration statement of the Credit Parties or any of their Subsidiaries filed with the Securities and Exchange Commission, except in connection with pension plans and other employee benefit plans; and (b) Such other information regarding the operations, business affairs and financial condition of the Credit Parties or any of their Subsidiaries as the Administrative Agent or any Lender may reasonably request. SECTION 8.5 Notice of Litigation and Other Matters. Prompt (but in no event later than ten (10) Business Days after a principal officer of the Credit Parties obtains knowledge thereof) telephonic (confirmed in writing) or written notice of: (a) the commencement of all proceedings and investigations by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator against or involving the Credit Parties or any Subsidiary thereof or any of their respective properties, assets or businesses which in the reasonable judgment of the Credit Parties could reasonably be expected to have a Material Adverse Effect; (b) any notice of any violation received by the Credit Parties or any Subsidiary thereof from any Governmental Authority including, without limitation, any notice of violation of 37 <PAGE> 38 Environmental Laws, which in the reasonable judgment of the Credit Parties in any such case could reasonably be expected to have a Material Adverse Effect; (c) any Default or Event of Default; and (d) (i) any unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code (along with a copy thereof) which could reasonably be expected to have a Material Adverse Effect, (ii) all notices received by the Credit Parties or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (iii) all notices received by the Credit Parties or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA which could reasonably have a Material Adverse Effect and (iv) the Credit Parties obtaining knowledge or reason to know that the Credit Parties or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA. SECTION 8.6 Accuracy of Information. All written information, reports, statements and other papers and data furnished by or on behalf of the Credit Parties to the Administrative Agent or any Lender (other than financial forecasts) whether pursuant to this Article VIII or any other provision of this Agreement, shall be, at the time the same is so furnished, true and complete in all material respects. ARTICLE IX AFFIRMATIVE COVENANTS Until all of the Obligations (other than any Obligations under any Hedging Agreement) have been paid and satisfied in full and the Revolving Credit Commitment terminated, unless consent has been obtained in the manner provided for in Section 14.11, the Credit Parties will, and will cause each of their Subsidiaries to: SECTION 9.1 Preservation of Corporate Existence and Related Matters. Except as permitted by Section 11.5, preserve and maintain its separate corporate existence and all rights, franchises, licenses and privileges necessary to the conduct of its business, and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction where the nature and scope of its activities require it to so qualify under Applicable Law in which the failure to so qualify would have a Material Adverse Effect. SECTION 9.2 Maintenance of Property. Protect and preserve all properties useful in and material to its business, including copyrights, patents, trade names and trademarks; maintain in good working order and condition all buildings, equipment and other tangible real and personal property material to the conduct of its business, ordinary wear and tear excepted; and from time to time make or cause to be made all renewals, replacements and additions to such property necessary for the conduct of its business, so that the business carried on in connection therewith may be properly and advantageously conducted at all times. SECTION 9.3 Insurance. Maintain insurance with financially sound and reputable insurance companies against such risks and in such amounts as are customarily maintained by similar businesses and as may be required by Applicable Law. SECTION 9.4 Accounting Methods and Financial Records. Maintain a system of accounting, and keep such books, records and accounts (which shall be true and complete in all material respects) as may be required or as may be necessary to permit the preparation of financial statements in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of its properties. SECTION 9.5 Payment and Performance of Obligations. Pay and perform all Obligations under this Agreement and the other Loan Documents, and pay (a) all material taxes, assessments and other 38 <PAGE> 39 governmental charges that may be levied or assessed upon it or any of its property, and (b) all other material indebtedness, obligations and liabilities in accordance with customary trade practices; provided, that the Credit Parties or such Subsidiary may contest any item described in clause (a) or (b) of this Section 9.5 in good faith so long as adequate reserves are maintained with respect thereto to the extent required by GAAP. It is expected that all payments in respect of the Obligations, the Existing Debt Securities and the Additional Debt Securities will be made by the Borrower. SECTION 9.6 Compliance With Laws and Approvals. Observe and remain in compliance with all Applicable Laws and maintain in full force and effect all Governmental Approvals, in each case applicable to the conduct of its business except where the failure to observe or comply could not reasonably be expected to have a Material Adverse Effect. SECTION 9.7 Environmental Laws. In addition to and without limiting the generality of Section 9.6, (a) comply with, and use best efforts to ensure such compliance by all tenants and subtenants with all applicable Environmental Laws and obtain and comply with and maintain, and use its best efforts to ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except where the failure to comply could not reasonably have a Material Adverse Effect, (b) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, and promptly comply with all lawful orders and directives of any Governmental Authority regarding Environmental Laws except (i) where the failure to do so could not reasonably be expected to have a Material Adverse Effect or (ii) to the extent the Credit Parties or any of their Subsidiaries are contesting, in good faith, any such requirement, order or directive before the appropriate Governmental Authority so long as adequate reserves are maintained with respect thereto to the extent required by GAAP, and (c) defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Credit Parties or such Subsidiaries, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing directly result from the gross negligence or willful misconduct of the party seeking indemnification therefor. SECTION 9.8 Compliance with ERISA. In addition to and without limiting the generality of Section 9.6, (a) comply with all applicable provisions of ERISA and the Code and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans, except where the failure to comply could not reasonably be expected to have a Material Adverse Effect, (b) not take any action or fail to take action the result of which would result in a liability to the PBGC or to a Multiemployer Plan in an amount that could reasonably be expected to have a Material Adverse Effect, and (c) furnish to the Administrative Agent upon the Administrative Agent's request such additional information about any Employee Benefit Plan concerning compliance with this covenant as may be reasonably requested by the Administrative Agent. SECTION 9.9 Conduct of Business. Engage only in businesses in substantially the same fields as the businesses conducted on the Closing Date (including, without limitation, the apparel and/or footwear industry generally) and in lines of business reasonably related thereto (collectively, "Permitted Lines of Business"), or as otherwise permitted pursuant to the terms of this Agreement. SECTION 9.10 Visits and Inspections. Permit representatives of the Administrative Agent or any Lender, from time to time upon reasonable prior notice to visit and inspect its properties; inspect and make extracts from its books, records and files, including, but not limited to, management letters prepared by independent accountants; and discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. 39 <PAGE> 40 SECTION 9.11 Use of Proceeds. The Credit Parties shall use the proceeds of the Revolving Credit Loans to (a) refinance certain existing Debt, (b) for working capital and general corporate purposes of the Credit Parties and their Subsidiaries, including acquisitions and stock repurchases and (c) the payment of certain fees and expenses incurred in connection with the transactions contemplated hereby or thereby. ARTICLE X FINANCIAL COVENANTS Until all of the Obligations (other than any Obligations under any Hedging Agreement) have been paid and satisfied in full and the Revolving Credit Commitment terminated, unless consent has been obtained in the manner set forth in Section 14.11 hereof, the Credit Parties and their Subsidiaries on a Consolidated basis will not: SECTION 10.1 Interest Coverage Ratio. As of the end of any fiscal quarter, permit the ratio (the "Interest Coverage Ratio") of (a) EBITDAR for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date to (b) the sum of (i) Interest Expense paid or payable in cash and (ii) Rental Expense, both for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date, to be less than (i) 2.0 to 1.0 for the period from the Closing Date through and including the fiscal quarter ending closest to September 30, 2000; (ii) 2.25 to 1.0 thereafter for the period through and including the end of the fiscal quarter ending closest to September 30, 2001; (iii) 2.5 to 1.0 thereafter for the period through and including the fiscal quarter ending closest to September 30, 2002; and (iv) 2.75 to 1.0 for all times thereafter. SECTION 10.2 Minimum Net Worth. As of the end of any fiscal quarter, permit Consolidated Net Worth to be less than $905,772,400. ARTICLE XI NEGATIVE COVENANTS Until all of the Obligations (other than any Obligations under any Hedging Agreement) have been paid and satisfied in full and the Revolving Credit Commitment has expired or been terminated, unless consent has been obtained in the manner set forth in Section 14.11 hereof, the Credit Parties will not and will not permit any of their Subsidiaries to: SECTION 11.1 Limitations on Debt and Guaranty Obligations. Create, incur, assume or suffer to exist any Debt, including Guaranty Obligations, except: (a) the Obligations of the Credit Parties; (b) the Five-Year Credit Agreement Obligations; (c) Debt existing on the Closing Date (other than the Five-Year Credit Agreement Obligations), including the Debt as set forth on Schedule 7.1(p); (d) Debt in the form of additional credit facilities of the Credit Parties or their Subsidiaries for borrowings denominated in currencies other than Dollars; provided that the equivalent Dollar Amount of the aggregate commitment thereunder does not exceed $50,000,000 on any date of determination; (e) Debt of the Credit Parties and their Subsidiaries, not otherwise permitted under this Section 11.1, incurred in connection with (i) Capitalized Leases, (ii) purchase money Debt, (iii) Debt of a Subsidiary incurred and outstanding on or prior to the date on which such Subsidiary was acquired by any Credit Party or otherwise became a Subsidiary of such Credit Party (other than Debt incurred as consideration in, or to provide all or any portion of the funds or 40 <PAGE> 41 credit support utilized to consummate, the transaction or series of transactions pursuant to which such Subsidiary became a Subsidiary of such Credit Party or was otherwise acquired by such Credit Party) and (iv) any other unsecured Debt of the Subsidiaries of the Credit Parties in an aggregate outstanding amount (excluding any attributable Debt from the contemplated sale leaseback transaction involving the Credit Parties' distribution warehouse at South Hill, Virginia) not to exceed fifteen percent (15%) of Consolidated Net Worth of the Credit Parties and their Subsidiaries on any date of determination; (f) additional Debt of the Credit Parties, not otherwise permitted under this Section 11.1, arising under or in connection with public or privately placed notes, debentures, bonds, or debt securities or related indentures or other agreements (the "Additional Debt Securities") so long as no Default or Event of Default exists on the date any such Additional Debt Security is created or arises as a result of any borrowing thereunder, except in connection with the issuance of exchange securities in connection with any exchange offer registered under the Securities Act of 1933, as amended, following a private placement of Additional Debt Securities; (g) other Debt of the Credit Parties, not otherwise permitted under this Section 11.1, in an aggregate outstanding amount not to exceed $300,000,000 on any date of determination; (h) Debt of the Credit Parties to any Subsidiary or any other Credit Party and of any Subsidiary to the Credit Parties or any other Subsidiary; (i) Debt incurred in respect of the extension, renewal, refinancing, replacement or refunding (collectively, the "refinancing") of Debt incurred pursuant to clause (a), (b), (c) or (e); provided, that (i) such Debt is an aggregate principal amount (or if incurred with original issue discount, an aggregate issue price) not in excess of the sum of (x) the aggregate principal amount (or if incurred with original issue discount, the aggregate accreted value) then outstanding of the Debt being refinanced and (y) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, related to such refinancing, (ii) the average life of such Debt is equal to or greater than the average life of the Debt being refinanced, (iii) the stated maturity of such Debt is no earlier than the stated maturity of the Debt being refinanced; and (iv) the new Debt shall not be senior in right of payment to the Debt that is being refinanced; provided, that none of the Debt permitted to be incurred by this Section shall expressly restrict, limit or otherwise encumber (unless such restriction, limitation or other encumbrance is a Permitted Encumbrance (as defined below)), the ability of any Subsidiary of the Credit Parties to make any payment to the Credit Parties or any of their Subsidiaries (in the form of dividends, intercompany advances or otherwise) for the purpose of enabling the Credit Parties to pay the Obligations. For purposes of this Section 11.1, with regard to any Debt, a "Permitted Encumbrance" shall mean any restriction, limitation or other encumbrance that applies solely if a default or event of default (other than a default resulting solely from the breach of a representation or warranty) occurs and is continuing under such Debt; provided further that, with respect to any default or event of default (other than a payment default, including as a result of acceleration, or a bankruptcy event with respect to the obligor of such Debt), such encumbrance or restriction may not prohibit dividends to the Credit Parties or any Subsidiary hereof to pay the Obligations for more than one hundred eighty (180) days in any consecutive three hundred sixty (360) day period. SECTION 11.2 [Reserved]. SECTION 11.3 Limitations on Liens. Create, incur, assume or suffer to exist, any Lien on or with respect to any of its assets or properties (including without limitation shares of capital stock or other ownership interests), real or personal, whether now owned or hereafter acquired, except: (a) Liens for taxes, assessments and other governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due or as to which the period of grace, if any, related thereto has not expired or which are 41 <PAGE> 42 being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP; (b) the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals incurred in the ordinary course of business, (i) which are not overdue for a period of more than thirty (30) days or (ii) which are being contested in good faith and by appropriate proceedings; (c) Liens consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers' compensation, unemployment insurance or similar legislation or obligations under customer service contracts; (d) Liens constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which do not, in any case, materially detract from the value of such property or materially impair the use thereof in the ordinary conduct of business; (e) Liens of the Administrative Agent for the benefit of the Administrative Agent and the Lenders; (f) Liens incurred in the ordinary course of business securing Debt of the Credit Parties permitted under Section 11.1 not to exceed $75,000,000 in the aggregate outstanding in addition to Liens existing on the Closing Date; (g) Liens existing on any property or asset prior to the acquisition thereof by the Credit Parties or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary or is merged with or into the Credit Parties or any Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary or is so merged; (h) Liens in existence on the Closing Date and described on Schedule 11.3; (i) Liens securing Debt incurred in connection with Capitalized Leases and purchase money Debt permitted under Section 11.1(e); provided that (i) such Liens shall be created substantially simultaneously with the acquisition of the related asset, (ii) such Liens do not at any time encumber any property other than the property financed by such Debt, (iii) the amount of Debt secured thereby is not increased and (iv) the principal amount of Debt secured by any such Lien shall at no time exceed one hundred percent (100%) of the original purchase price of such property at the time it was acquired; (j) Liens incurred to secure appeal bonds and judgment and attachment Liens in respect of judgments or orders that do not constitute an Event of Default under Section 12.1(m); (k) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of setoff or similar rights and remedies, in each case as to deposit accounts or other funds maintained with a creditor depository institution; (l) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (m) Liens arising in the ordinary course of business that do not secure monetary obligations; (n) Liens arising by the terms of letters of credit entered into in the ordinary course of business to secure reimbursement obligations thereunder; (o) Liens securing Debt or other obligations between the Credit Parties and a Subsidiary or between Subsidiaries or Credit Parties; 42 <PAGE> 43 (p) Liens granted to any bank or other institution securing the payments to be made to such bank or other institution by the Credit Parties or a Subsidiary of the Credit Parties pursuant to any Hedging Agreement; provided that, such agreements are entered into in, or are incidental to, the ordinary course of business; and (q) The refinancing of any Lien referred to in clause (g), (h), (i) or (p) provided, that the principal amount of Debt (or, if incurred with original issue discount, an aggregate issue price) secured thereby and not otherwise authorized by clause (g), (h), (i) or (p) shall not exceed the principal amount of Debt (or if incurred without original issue discount, the aggregate accreted value) plus any fees and expenses, including premiums and defeasance costs, payable in connection with any such extension, renewal, replacement or refunding, so secured at the time of such extension, renewal, replacement or refunding. SECTION 11.4 Limitations on Loans, Advances, Investments and Acquisitions. Purchase, own, invest in or otherwise acquire, directly or indirectly, any capital stock (other than capital stock of the Credit Parties), interests in any partnership, limited liability company or joint venture (including without limitation the creation or capitalization of any Subsidiary), evidence of Debt or other obligation or security, substantially all or a portion of the business or assets of any other Person or any other investment or interest whatsoever in any other Person, or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, or any investment in cash or by delivery of property in, any Person, or enter into, directly or indirectly, any commitment or option in respect of the foregoing (collectively, "Investments") except: (a) Investments in Subsidiaries existing on the Closing Date and the other existing loans, advances and Investments described on Schedule 11.4; (b) Investments made in accordance with the investment policy of the Credit Parties, provided that any material amendment or other material modification to such policy shall have been approved by the Administrative Agent and determined to be acceptable in its reasonable discretion; (c) Investments by the Credit Parties or any Subsidiary in the form of acquisitions, including acquisitions of all or substantially all of the business or a line of business (whether by the acquisition of capital stock, assets or any combination thereof) of any other Person, so long as (i) a Responsible Officer certifies to the Administrative Agent and the Required Lenders that no Default or Event of Default has occurred and is continuing or would result from the closing of such acquisition, such certification to include, for any acquisition involving a purchase price in excess of $50,000,000, either individually or in an series of related transactions, a financial condition certificate to which is attached a pro forma balance sheet of Jones Apparel Group and its Subsidiaries setting forth on a pro forma basis the financial conditions of Jones Apparel Group and its Subsidiaries on a Consolidated basis as of December 31, 1999, reflecting on a pro forma basis the effect of the transactions contemplated by such acquisition, including all fees and expenses in connection therewith, and evidencing compliance on a pro forma basis with the covenants contained in Article X hereof, and (ii) such acquisition meets either of the following requirements: (A) such acquisition is within a Permitted Line of Business, or (B) such acquisition is outside a Permitted Line of Business but the price for such acquisition, together with all other acquisitions outside the Permitted Lines of Business, does not exceed $50,000,000 in the aggregate; (d) Investments (other than acquisitions) in the Permitted Lines of Business; (e) Investments (other than acquisitions) outside Permitted Lines of Business not in excess of $50,000,000 in the aggregate; (f) loans and advances to third party contractors in the ordinary course of business and consistent with past practice not to exceed in an aggregate outstanding amount $6,000,000 (excluding such loans and advances consisting of prepayments or advances for inventory or 43 <PAGE> 44 services); and loans and advances to employees of the Credit Parties and their Subsidiaries in an aggregate outstanding amount not to exceed $4,000,000; and (g) intercompany loans and advances among the Credit Parties and their Subsidiaries so long as permitted under the terms of Sections 11.1 and 11.3. SECTION 11.5 Limitations on Mergers and Liquidation. Merge, consolidate or enter into any similar combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except so long as no Default or Event of Default has occurred and is continuing, or would result therefrom: (a) any Credit Party may merge with or into any Person; provided that (i) such Credit Party shall be the survivor of such merger or (ii) the survivor assumes and succeeds to the Obligations of such Credit Party pursuant to an assumption agreement in form reasonably satisfactory to the Administrative Agent and the Required Lenders; (b) any Wholly-Owned Subsidiary of the Credit Parties may merge with or into any other Wholly-Owned Subsidiary of the Credit Parties; (c) any Wholly-Owned Subsidiary may merge with or into the Person such Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition permitted by Section 11.4(b), (c) or (d); (d) any Wholly-Owned Subsidiary of the Credit Parties may merge with or into any Credit Party; provided that, such Credit Party is the survivor of such merger; and (e) any Credit Party may merge with or into any other Credit Party. SECTION 11.6 Limitations on Sale or Transfer of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets, whether now owned or hereafter acquired (collectively, "sale"), except for the following: (a) the sale of inventory or the factoring of accounts receivable in the ordinary course of business; (b) the sale of obsolete assets no longer used or usable in the business of the Credit Parties or any of their Subsidiaries; (c) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; (d) the sale of assets between the Credit Parties and any Subsidiary or between Subsidiaries or Credit Parties; (e) the sale of any other assets of the Credit Parties and their Subsidiaries outside the ordinary course of business so long as the total fair market value for all such sales on an aggregate basis does not at any time exceed thirty-three percent (33%) of Consolidated Net Worth; and (f) the contemplated sale leaseback transaction involving the Credit Parties' distribution warehouse in South Hill, Virginia. SECTION 11.7 Limitations on Dividends and Distributions. Declare or pay any dividends upon any of its capital stock; purchase, redeem, retire or otherwise acquire, directly or indirectly, any shares of its capital stock, or make any distribution of cash, property or assets among the holders of shares of its capital stock, or make any change in its capital structure that could reasonably be expected to have a Material Adverse Effect; provided that: (a) the Credit Parties may pay dividends solely in shares of their own capital stock or other ownership interest (including dividends consisting of rights to purchase such 44 <PAGE> 45 capital stock or other ownership interest), (b) any Subsidiary may pay dividends or make distributions to the Credit Parties or any Wholly-Owned Subsidiary of the Credit Parties, (c) any Credit Party may pay dividends or make distributions to any other Credit Party and (d) as long as no Default or Event of Default has occurred and is continuing or would be created thereby (i) the Credit Parties may declare and pay dividends on shares of their capital stock or other ownership interests, (ii) the Credit Parties or any Subsidiary may redeem shares of their capital stock or other ownership interest pursuant to a plan approved by the Board of Directors of the Credit Parties or such Subsidiary, as applicable and (iii) the Credit Parties or any Subsidiary may take any action otherwise prohibited by this Section 11.7. SECTION 11.8 Transactions with Affiliates. Directly or indirectly enter into, or be a party to, any transaction with any of its Affiliates, except (i) on terms that are no less favorable to it than it would obtain in a comparable arm's length transaction with a Person not its Affiliate, (ii) as contemplated by the Sun Acquisition Agreement or (iii) for transactions between Credit Parties or between Credit Parties and Subsidiaries of Credit Parties. SECTION 11.9 Changes in Fiscal Year End. Change its Fiscal Year. SECTION 11.10 Amendments; Payments and Prepayments of Material Debt and Subordinated Debt. Upon the occurrence and continuation of a Default or an Event of Default, amend or modify (or permit the modification or amendment of) in any manner materially adverse to the Lenders any of the terms or provisions of any Debt in excess of $25,000,000, including without limitation the Additional Debt Securities, if any, or any Subordinated Debt, or cancel or forgive, make any voluntary or optional payment or prepayment on, or redeem or acquire for value (including without limitation by way of depositing with any trustee with respect thereto money or securities before due for the purpose of paying when due) any Subordinated Debt. ARTICLE XII DEFAULT AND REMEDIES SECTION 12.1 Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise: (a) Default in Payment of Principal of Loans and Reimbursement Obligations. The Borrower shall default in any payment of principal of any Revolving Credit Loan or Reimbursement Obligation when and as due (whether at maturity, by reason of acceleration or otherwise). (b) Other Payment Default. The Borrower shall default in the payment when and as due (whether at maturity, by reason of acceleration or otherwise) of interest on any Revolving Credit Loan or Reimbursement Obligation or the payment of any other Obligation (other than any Obligation under any Hedging Agreement), and such default shall continue unremedied for three (3) Business Days. (c) Misrepresentation. Any representation or warranty made or deemed to be made by the Credit Parties or any of their Subsidiaries, if applicable, under this Agreement, any Loan Document or any amendment hereto or thereto, shall at any time prove to have been incorrect or misleading in any material respect when made or deemed made. (d) Default in Performance of Certain Covenants. Any of the Credit Parties shall default in the performance or observance of any covenant or agreement contained in Article X or XI of this Agreement. (e) Default in Performance of Other Covenants and Conditions. Any of the Credit Parties or any Subsidiary thereof, if applicable, shall default in the performance or observance of 45 <PAGE> 46 any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in this Section 12.1) or any other Loan Document and such default shall continue for a period of thirty (30) days after written notice thereof has been given to the Borrower by the Administrative Agent. (f) Hedging Agreement. Any termination payments in an amount greater than $35,000,000 shall be due by any Credit Party under any Hedging Agreement and such amount is not paid within thirty (30) Business Days of the due date thereof. (g) Debt Cross-Default. Any of the Credit Parties or any of their Subsidiaries shall (i) default in the payment of any Debt (other than the Revolving Credit Loans or any Reimbursement Obligation) the aggregate outstanding amount of which Debt is in excess of $35,000,000, including, without limitation, the obligations under the Five-Year Credit Agreement, beyond the period of grace if any, provided in the instrument or agreement under which such Debt was created, or (ii) default in the observance or performance of any other agreement or condition relating to any Debt (other than the Revolving Credit Loans or any Reimbursement Obligation), including, without limitation, the obligations under the Five-Year Credit Agreement and any other documents executed in connection therewith, the aggregate outstanding amount of which Debt is in excess of $35,000,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice if required, any such Debt to become due prior to its stated maturity (any applicable grace period having expired). (h) Change in Control. Any person or group of persons (within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended) shall obtain ownership or control in one or more series of transactions of more than thirty three and one-third percent (33.33%) of the common stock or thirty-three and one-third percent (33.33%) of the voting power of any Credit Party entitled to vote in the election of members of the board of directors of such Credit Party or there shall have occurred under any indenture or other instrument evidencing any debt in excess of $35,000,000 any "change in control" (as defined in such indenture or other evidence of debt) obligating the Borrower to repurchase, redeem or repay all or any part of the debt or capital stock provided for therein (any such event, a "Change in Control"). Further, except as set forth in Section 11.5, Jones Apparel Group shall at all times own 100% of the capital stock of Jones Apparel Group Holdings and Jones Apparel Group Holdings shall at all times own 100% of the capital stock of the Borrower. (i) Voluntary Bankruptcy Proceeding. Any Credit Party or any Subsidiary thereof shall (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due, (vi) make a general assignment for the benefit of creditors, or (vii) take any corporate action for the purpose of authorizing any of the foregoing. (j) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against any Credit Party or any Subsidiary thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for any Credit Party or any Subsidiary thereof or for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue without dismissal or stay for a period of sixty (60) consecutive days, or an order granting the relief 46 <PAGE> 47 requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered. (k) [Reserved] (l) Termination Event. The occurrence of any of the following events: (i) the Borrower or any ERISA Affiliate fails to make full payment to an Employee Benefit Plan when due (after giving effect to any applicable grace period) of contributions in excess of $2,000,000 (ii) an accumulated funding deficiency in excess of $2,000,000 occurs or exists, whether or not waived, with respect to any Pension Plan or (iii) a Termination Event that could reasonably be expected to result in liability in excess of $5,000,000 to the Borrower or any ERISA Affiliate. (m) Judgment. A judgment or order for the payment of money which causes the aggregate amount of all such judgments to exceed $35,000,000 in any Fiscal Year shall be entered against any Credit Party or any Subsidiary thereof by any court and such judgment or order shall continue without discharge or stay for a period of thirty (30) days. SECTION 12.2 Remedies. Upon the occurrence of an Event of Default, with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Credit Parties: (a) Acceleration; Termination of Facilities. Declare the principal of and interest on the Revolving Credit Loans, the Reimbursement Obligations at the time outstanding, and all other amounts owed to the Lenders and to the Administrative Agent under this Agreement or any of the other Loan Documents (other than any Hedging Agreement) (including, without limitation, all L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and all other Obligations (other than Obligations owing under any Hedging Agreement), to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived, anything in this Agreement or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to request borrowings or Letters of Credit thereunder; provided, that upon the occurrence of an Event of Default specified in Section 12.1(i) or (j) with respect to the Credit Parties, the Credit Facility shall be automatically terminated and all Obligations (other than obligations owing under any Hedging Agreement) shall automatically become due and payable. (b) Letters of Credit. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, require the Borrower at such time to deposit or cause to be deposited in a cash collateral account opened by the Administrative Agent an amount equal to the Dollar Amount of the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay the other Obligations. After all such Letters of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been satisfied and all other Obligations shall have been paid in full, the balance, if any, in such cash collateral account shall be promptly returned to the Borrower. (c) Rights of Collection. Exercise on behalf of the Lenders all of its other rights and remedies under this Agreement, the other Loan Documents and Applicable Law, in order to satisfy all of the Obligations. SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of the rights and remedies of the Administrative Agent and the Lenders set forth in this Agreement is not intended to be exhaustive and the exercise by the Administrative Agent and the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in 47 <PAGE> 48 addition to any other right or remedy given hereunder or under the Loan Documents or that may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of the Administrative Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing between the Credit Parties, the Administrative Agent and the Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the other Loan Documents or to constitute a waiver of any Event of Default. ARTICLE XIII THE ADMINISTRATIVE AGENT SECTION 13.1 Appointment. Each of the Lenders hereby irrevocably designates and appoints First Union as Administrative Agent of such Lender under this Agreement and the other Loan Documents for the term hereof and each such Lender irrevocably authorizes First Union as Administrative Agent for such Lender, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and such other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or such other Loan Documents, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Loan Documents or otherwise exist against the Administrative Agent. Any reference to the Administrative Agent in this Article XIII shall be deemed to refer to the Administrative Agent solely in its capacity as Administrative Agent and not in its capacity as a Lender. SECTION 13.2 Delegation of Duties. The Administrative Agent may execute any of its respective duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by the Administrative Agent with reasonable care. SECTION 13.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Loan Documents (except for actions occasioned solely by its or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any of its Subsidiaries or any officer thereof contained in this Agreement or the other Loan Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or the other Loan Documents or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the other Loan Documents or for any failure of the Borrower or any of its Subsidiaries to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. SECTION 13.4 Reliance by the Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the holder of any Revolving Credit Loan as the owner thereof for all purposes unless such Revolving Credit Loan shall have been transferred 48 <PAGE> 49 in accordance with Section 14.10 hereof. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement and the other Loan Documents unless it shall first receive such advice or concurrence of the Required Lenders (or, when expressly required hereby or by the relevant other Loan Document, all the Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action except for its own gross negligence or willful misconduct. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, when expressly required hereby, all the Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Revolving Credit Loans. SECTION 13.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless it has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, it shall promptly give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders, except to the extent that other provisions of this Agreement expressly require that any such action be taken or not be taken only with the consent and authorization or the request of the Lenders or Required Lenders, as applicable. SECTION 13.6 Non-Reliance on the Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in- fact, Subsidiaries or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries and made its own decision to make its Revolving Credit Loans and issue or participate in Letters of Credit hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder or by the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its respective officers, directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates. SECTION 13.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such and (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to the respective amounts of their Revolving Credit Commitment Percentage from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Revolving Credit Loans or any Reimbursement Obligation) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents, or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any 49 <PAGE> 50 action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent they result from the Administrative Agent's bad faith, gross negligence or willful misconduct. The agreements in this Section 13.7 shall survive the payment of the Revolving Credit Loans, any Reimbursement Obligation and all other amounts payable hereunder and the termination of this Agreement. SECTION 13.8 The Administrative Agent in Its Individual Capacity. The Administrative Agent and its respective Subsidiaries and Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower as though the Administrative Agent were not an Administrative Agent hereunder. With respect to any Revolving Credit Loans made or renewed by it and with respect to any Letter of Credit issued by it or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. SECTION 13.9 Resignation of the Administrative Agent; Successor Administrative Agent. Subject to the appointment and acceptance of a successor as provided below, the Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Credit Parties. Upon any such resignation, the Required Lenders shall have the right, subject to the approval of the Credit Parties (so long as no Default or Event of Default has occurred and is continuing), to appoint a successor Administrative Agent, which successor shall have minimum capital and surplus of at least $500,000,000. If no successor Administrative Agent shall have been so appointed by the Required Lenders, been approved (so long as no Default or Event of Default has occurred and is continuing) by the Credit Parties or have accepted such appointment within thirty (30) days after the Administrative Agent's giving of notice of resignation, then the Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent reasonably acceptable to the Credit Parties (so long as no Default or Event of Default has occurred and is continuing), which successor shall have minimum capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 13.9 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. SECTION 13.10 Syndication Agents. Each Syndication Agent in their capacity as Syndication Agent shall have no duties or responsibilities and no liabilities under this Agreement or any other Loan Document but shall be entitled, in such capacity, to the same protections afforded to the Administrative Agent under this Article XIII. ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. (a) Method of Communication. Except as otherwise provided in this Agreement, all notices and communications hereunder shall be in writing, or by telephone subsequently confirmed in writing. Any notice shall be effective if delivered by hand delivery or sent via telecopy, recognized overnight courier service or certified mail, return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt requested. A telephonic notice to the Administrative Agent as understood by the Administrative Agent will be deemed to be the controlling and proper notice in the event of a discrepancy with or failure to receive a confirming written notice. (b) Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to which all the other parties are notified in writing. 50 <PAGE> 51 If to the Credit Parties Jones Apparel Group, Inc. 250 Rittenhouse Circle Bristol, Pennsylvania 19007 Attention: Chief Financial Officer Telephone No.: (215) 785-4000 Telecopy No.: (215) 785-1228 If to First Union as First Union National Bank Administrative Agent: One First Union Center, TW 4 301 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Telephone No.: (704) 374-2698 Telecopy No.: (704) 383-0288 With copies to: First Union National Bank 1345 Chestnut Street, PA4830 Philadelphia, Pennsylvania 19107-7618 Attention: Syndication Agency Services Telephone No.: (215) 973-6621 Telecopy No.: (215) 973-1887 If to any Lender: To the Address set forth on Schedule 1.1(a) hereto (c) Administrative Agent's Office. The Administrative Agent hereby designates its office located at the address set forth above, or any subsequent office which shall have been specified for such purpose by written notice to the Borrower and the Lenders, as the Administrative Agent's Office referred to herein, to which payments due are to be made and at which Revolving Credit Loans will be disbursed. SECTION 14.2 Expenses; Indemnity. The Borrower will (a) pay all reasonable out-of-pocket expenses of the Administrative Agent in connection with (i) the preparation, execution and delivery of this Agreement and each other Loan Document, whenever the same shall be executed and delivered, including without limitation the reasonable out-of-pocket syndication and due diligence expenses and reasonable fees and disbursements of counsel for the Administrative Agent and (ii) the preparation, execution and delivery of any waiver, amendment or consent by the Administrative Agent or the Lenders relating to this Agreement or any other Loan Document, including without limitation reasonable fees and disbursements of counsel for the Administrative Agent, (b) pay all reasonable out-of-pocket expenses of the Administrative Agent actually incurred in connection with the administration of the Credit Facility, (c) pay all reasonable out-of-pocket expenses of the Administrative Agent and each Lender actually incurred in connection with the enforcement of any rights and remedies of the Administrative Agent and the Lenders under the Credit Facility, including to the extent reasonable under the circumstances consulting with accountants, attorneys and other Persons concerning the nature, scope or value of any right or remedy of the Administrative Agent or any Lender hereunder or under any other Loan Document or any factual matters in connection therewith, which expenses shall include without limitation the reasonable fees and disbursements of such Persons, and (d) defend, indemnify and hold harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, Administrative Agents, officers and directors, from and against any losses, penalties, fines, liabilities, settlements, damages, costs and expenses, suffered by any such Person in connection with any claim, investigation, litigation or other proceeding (whether or not the 51 <PAGE> 52 Administrative Agent or any Lender is a party thereto) and the prosecution and defense thereof, arising out of or in any way connected with this Agreement, any other Loan Document or the Revolving Credit Loans, including without limitation reasonable attorney's and consultant's fees, except to the extent that any of the foregoing result from the gross negligence or willful misconduct of any indemnified party. SECTION 14.3 Set-off. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, upon and after the occurrence of any Event of Default and during the continuance thereof, the Lenders and any assignee or participant of a Lender in accordance with Section 14.10 are hereby authorized by the Credit Parties at any time or from time to time, without notice to the Credit Parties or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by the Lenders, or any such assignee or participant to or for the credit or the account of the Borrower against and on account of the Obligations irrespective of whether or not (a) the Lenders shall have made any demand under this Agreement or any of the other Loan Documents or (b) the Administrative Agent shall have declared any or all of the Obligations to be due and payable as permitted by Section 12.2 and although such Obligations shall be contingent or unmatured. SECTION 14.4 Governing Law. This Agreement, the Revolving Credit Notes and the other Loan Documents, unless otherwise expressly set forth therein, shall be governed by, construed and enforced in accordance with the laws of the State of New York. SECTION 14.5 Consent to Jurisdiction. Each of the parties hereto hereby irrevocably consents to the personal jurisdiction of the state and federal courts located in New York County, New York, in any action, claim or other proceeding arising out of any dispute in connection with this Agreement and the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations. Each of the parties hereto hereby irrevocably consents to the service of a summons and complaint and other process in any action, claim or proceeding brought by any other party hereto in connection with this Agreement or the other Loan Documents, any rights or obligations hereunder or thereunder, or the performance of such rights and obligations, on behalf of itself or its property, in the manner specified in Section 14.1. Nothing in this Section 14.5 shall affect the right of any of the parties hereto to serve legal process in any other manner permitted by Applicable Law or affect the right of any of the parties hereto to bring any action or proceeding against any other party hereto or its properties in the courts of any other jurisdictions. SECTION 14.6 Waiver of Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND EACH CREDIT PARTY HEREBY ACKNOWLEDGE THEY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY JUDICIAL PROCEEDING, ANY DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF, CONNECTED WITH OR RELATING TO THE LOAN DOCUMENTS ("Dispute") IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. SECTION 14.7 Reversal of Payments. To the extent any Credit Party makes a payment or payments to the Administrative Agent for the ratable benefit of the Lenders or the Administrative Agent receives any payment or proceeds of the collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the Obligations or part thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Administrative Agent. SECTION 14.8 Injunctive Relief; Punitive Damages. (a) Each of the parties to this Agreement recognizes that, in the event such party fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to the other parties hereto. Therefore, each of the parties hereto agrees that the other parties hereto, at such other party's option, 52 <PAGE> 53 shall be entitled to pursue temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. (b) The Administrative Agent, Lenders and the Credit Parties (on behalf of themselves and their Subsidiaries) hereby agree that no such Person shall have a remedy of punitive or exemplary damages against any other party to a Loan Document and each such Person hereby waives any right or claim to punitive or exemplary damages that they may now have or may arise in the future in connection with any Dispute, whether such Dispute is resolved through arbitration or judicially. SECTION 14.9 Accounting Matters. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time, provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance therewith. SECTION 14.10 Successors and Assigns; Participations. (a) Benefit of Agreement. This Agreement shall be binding upon and inure to the benefit of the Credit Parties, the Administrative Agent and the Lenders, all future holders of the Revolving Credit Notes, and their respective successors and permitted assigns, except that the Borrower shall not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender other than pursuant to Section 11.5. (b) Assignment by Lenders. Each Lender may, with the consent of the Borrower (so long as no Default or Event of Default has occurred and is continuing) and the consent of the Administrative Agent, which consents shall not be unreasonably withheld, assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of the Extensions of Credit at the time owing to it and the Revolving Credit Notes held by it); provided that: (i) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's Revolving Credit Commitment and all other rights and obligations under this Agreement; (ii) if less than all of the assigning Lender's Revolving Credit Commitment or Revolving Credit Loans is to be assigned, the Revolving Credit Commitment or Revolving Credit Loans so assigned shall not be less than $10,000,000; (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance in the form of Exhibit G attached hereto (an "Assignment and Acceptance"), together with any Revolving Credit Note or Revolving Credit Notes subject to such assignment; (iv) such assignment shall not, without the consent of the Borrower, on behalf of itself and the other Credit Parties, require the Borrower, or any Credit Party, to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Revolving Credit Loans or the Revolving Credit Notes under the blue sky laws of any state; (v) the assigning Lender shall pay to the Administrative Agent an assignment fee of $3,000 upon the execution by such Lender of the Assignment and Acceptance; provided that no such fee shall be payable upon any assignment by a Lender to an Affiliate thereof; and (vi) no consents will be required for assignments where the Eligible Assignee is an Affiliate of the assigning Lender. 53 <PAGE> 54 Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least ten (10) Business Days after the execution thereof, (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned in such Assignment and Acceptance, have the rights and obligations of a Lender hereby and (B) the Lender thereunder shall, to the extent of the interest assigned in such assignment, be released from its obligations under this Agreement. (c) Rights and Duties upon Assignment. By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as set forth in such Assignment and Acceptance. (d) Register. The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and record the names and addresses of the Lenders and the amount of the Extensions of Credit with respect to each Lender from time to time in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Issuance of New Revolving Credit Notes. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Eligible Assignee together with any Revolving Credit Note or Revolving Credit Notes if any have been issued pursuant to this Agreement, subject to such assignment and the written consent to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is substantially in the form of Exhibit G: (i) accept such Assignment and Acceptance; (ii) record the information contained therein in the Register; (iii) give prompt notice thereof to the Lenders and the Borrower, on behalf of itself and the other Credit Parties; and (iv) promptly deliver a copy of such Assignment and Acceptance to the Borrower. Within ten (10) Business Days after receipt of notice, if requested by the Eligible Assignee the Borrower shall execute and deliver to the Administrative Agent, in exchange for the surrendered Revolving Credit Note or Revolving Credit Notes, a new Revolving Credit Note or Revolving Credit Notes to the order of such Eligible Assignee in amounts equal to the Revolving Credit Commitment assumed by it pursuant to such Assignment and Acceptance and a new Revolving Credit Note or Revolving Credit Notes to the order of the assigning Lender in an amount equal to the Revolving Credit Commitment retained by it hereunder. Such new Revolving Credit Note or Revolving Credit Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Revolving Credit Note or Revolving Credit Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Revolving Credit Notes delivered to the assigning Lender. Each surrendered Revolving Credit Note or Revolving Credit Notes shall be canceled and returned to the Borrower. (f) Participations. Each Lender may sell participations to one or more banks or other entities in all or a portion of its rights and/or obligations under this Agreement (including, without limitation, all or a portion of its Extensions of Credit and the Revolving Credit Notes held by it); provided that: (i) each such participation shall be in an amount not less than $10,000,000; 54 <PAGE> 55 (ii) such Lender's obligations under this Agreement (including, without limitation, its Revolving Credit Commitment) shall remain unchanged; (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; (iv) the Credit Parties, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement; (v) such Lender shall not permit such participant the right to approve any waivers, amendments or other modifications to this Agreement or any other Loan Document other than waivers, amendments or modifications which would reduce the principal of or the interest rate on any Revolving Credit Loan or Reimbursement Obligation, extend the term or increase the amount of the Revolving Credit Commitment, reduce the amount of any fees to which such participant is entitled, or extend any scheduled payment date for principal, interest or fees of any Revolving Credit Loan, except as expressly contemplated hereby or thereby; and (vi) any such disposition shall not, without the consent of the Borrower, on behalf of itself and the other Credit Parties, require the Borrower or any other Credit Party, to file a registration statement with the Securities and Exchange Commission or apply to or qualify the Revolving Credit Loans or the Revolving Credit Notes under the blue sky law of any state. (g) Disclosure of Information; Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (g) with the prior written consent of the Credit Parties, (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Administrative Agent, the Issuing Lenders or any Lender on a nonconfidential basis from a source other than the Credit Parties or (i) to Gold Sheets and other similar bank trade publications, such information to consist of deal terms and other information (customarily found in such publications) upon the Credit Parties' prior review and approval, which shall not be unreasonably withheld or delayed. For the purposes of this Section, "Information" means all information received from the Credit Parties or any of their Subsidiaries relating to the Credit Parties or their business, other than any such information that is available to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Credit Parties; provided that, in the case of information received from the Credit Parties after the Closing Date (other than certificates or other information specifically required by the terms of this Agreement), such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. (h) Special Purpose Funding Vehicles. Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle organized for the specific purpose of making or acquiring participations or investing in loans of the type made pursuant to this Agreement (a "SPC"), correctly identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Extension of Credit that such Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to 55 <PAGE> 56 make any Extension of Credit and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Extension of Credit, the Granting Lender shall be obligated to make such Extension of Credit pursuant to the terms hereof. The making of an Extension of Credit by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Extension of Credit were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this clause, any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interest in any Extension of Credit to the Granting Lender or to any financial institution (consented to by the Borrower and Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Extensions of Credit and (ii) disclose on a confidential basis any non-public information relating to Extensions of Credit to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. This clause may not be amended without the written consent of each SPC. (i) Certain Pledges or Assignments. Nothing herein shall prohibit any Lender from pledging or assigning any Revolving Credit Note to any Federal Reserve Bank in accordance with Applicable Law. SECTION 14.11 Amendments, Waivers and Consents. Except as set forth below, any term, covenant, agreement or condition of this Agreement or any of the other Loan Documents may be amended or waived by the Lenders, and any consent given by the Lenders, if, but only if, (a) in the case of an amendment, waiver or consent for which a substantially similar corresponding amendment, waiver or consent with regard to the Five-Year Credit Agreement will be made effective thereunder contemporaneously, such amendment, waiver or consent is in writing signed by the Required Lenders (or by the Administrative Agent with the consent of the Required Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Credit Parties and (b) in the case of any other amendment, waiver or consent specifically impacting only this Agreement and the other Loan Documents, such amendment, waiver or consent is in writing signed by the Required Agreement Lenders (or by the Administrative Agent with the consent of the Required Agreement Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Credit Parties; provided, in each case, that: (a) no amendment, waiver or consent shall (i) release any of the Credit Parties, (ii) increase the amount or extend the time of the obligation of the Lenders to make Revolving Credit Loans or issue or participate in Letters of Credit (except as expressly contemplated by Section 2.6), (iii) extend the originally scheduled time or times of payment of the principal of any Revolving Credit Loan or Reimbursement Obligation or the time or times of payment of interest or fees on any Revolving Credit Loan or Reimbursement Obligation, (iv) reduce the rate of interest or fees payable on any Revolving Credit Loan or Reimbursement Obligation, (v) reduce the principal amount of any Revolving Credit Loan or Reimbursement Obligation, (vi) permit any subordination of the principal or interest on any Revolving Credit Loan or Reimbursement Obligation, (vii) permit any assignment (other than as specifically permitted or contemplated in this Agreement) of any of the Credit Parties' rights and obligations hereunder or (viii) amend the provisions of this Section 14.11 or the definition of Required Lenders or Required Agreement Lenders, without the prior written consent of each Lender affected thereby; and (b) no amendment, waiver or consent to the provisions of (i) Article XIII shall be made without the written consent of the Administrative Agent and (ii) Article III without the written consent of each Issuing Lender affected thereby. 56 <PAGE> 57 SECTION 14.12 Performance of Duties. The Credit Parties' obligations under this Agreement and each of the Loan Documents shall be performed by the Credit Parties at their sole cost and expense. SECTION 14.13 All Powers Coupled with Interest. All powers of attorney and other authorizations granted to the Lenders, the Administrative Agent and any Persons designated by the Administrative Agent or any Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid or unsatisfied or the Credit Facility has not been terminated. SECTION 14.14 Survival of Indemnities. Notwithstanding any termination of this Agreement, the indemnities to which the Administrative Agent and the Lenders are entitled under the provisions of this Article XIV and any other provision of this Agreement and the Loan Documents shall continue in full force and effect and shall protect the Administrative Agent and the Lenders against events arising after such termination as well as before. SECTION 14.15 Titles and Captions. Titles and captions of Articles, Sections and subsections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. SECTION 14.16 Severability of Provisions. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 14.17 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. Delivery of any executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 14.18 Term of Agreement. This Agreement shall remain in effect from the Closing Date through and including the date upon which all Obligations (other than obligations owing by any Credit Party to any Lender or Affiliate of a Lender or the Administrative Agent under any Hedging Agreement) shall have been indefeasibly and irrevocably paid and satisfied in full. No termination of this Agreement shall affect the rights and obligations of the parties hereto arising prior to such termination. SECTION 14.19 Inconsistencies with Other Documents; Independent Effect of Covenants. (a) In the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control. (b) The Borrower expressly acknowledges and agrees that each covenant contained in Article IX, X, or XI hereof shall be given independent effect. [Signature pages to follow] 57 <PAGE> 58 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed under seal by their authorized officers, all as of the day and year first written above. JONES APPAREL GROUP USA, INC. as Borrower By: /s/ Wesley R. Card Name: Wesley R. Card Title: Chief Financial Officer JONES APPAREL GROUP, INC. as Additional Obligor By: /s/ Wesley R. Card Name: Wesley R. Card Title: Chief Financial Officer JONES APPAREL GROUP HOLDINGS, INC. as Additional Obligor By: /s/ Ira M. Dansky Name: Ira M. Dansky Title: President NINE WEST GROUP INC. as Additional Obligor By: /s/ Jeffrey K. Howald Name: Jeffrey K. Howald Title: Chief Financial Officer [Signature pages continue] 58 <PAGE> 59 FIRST UNION NATIONAL BANK, as Administrative Agent, Issuing Lender and Lender By: /s/ Joan Anderson Name: Joan Anderson Title: VP [Signature pages continue] 59 <PAGE> 60 THE CHASE MANHATTAN BANK, as Issuing Lender and Lender By: /s/ D. Reid Morgan Name: D. Reid Morgan Title: Managing Director [Signature pages continue] 60 <PAGE> 61 CITIBANK, N.A., as Lender By: /s/ Robert M. Spence Name: Robert M. Spence Title: Managing Director Branded Consumer 399 Park Ave./5th Fl./Zone 9 (212) 559-0312 [Signature pages continue] 61 <PAGE> 62 FLEET NATIONAL BANK as Lender By: /s/ Stephen J. Garvin Name: Stephen J. Garvin Title: Director [Signature pages continue] 62 <PAGE> 63 BANK OF AMERICA, N.A., as Lender By: /s/ Deirdre B. Doyle Name: Deirdre B. Doyle Title: Principal [Signature pages continue] 63 <PAGE> 64 ABN AMRO BANK, N.V. as Lender By: /s/ Cameron Gateman Name: Cameron Gateman Title: Group Vice President [Signature pages continue] By: /s/ Tracie Elliot Name: Tracie Elliot Title: Vice President 64 <PAGE> 65 BANCA NAZIONALE DELL'AGRICOLTURA, NEW YORK BRANCH as Lender By: /s/ Domenico P. Loschiavo Name: Domenico P. Loschiavo Title: Senior Vice President & Deputy Branch Mgr. #1744 By: /s/ Constantine I. Manzini Name: Constantine I. Manzini Title: Counsel #1532 [Signature pages continue] 65 <PAGE> 66 BANK ONE, NA as Lender By: /s/ Vincent R. Henchek Name: Vincent R. Henchek Title: Vice President [Signature pages continue] 66 <PAGE> 67 HSBC BANK USA, as Lender By: /s/ Adriana D. Collins Name: Adriana D. Collins Title: Vice President [Signature pages continue] 67 <PAGE> 68 THE BANK OF NEW YORK as Lender By: /s/ Russell A. Buri Name: Russell A. Buri Title: SVP [Signature pages continue] 68 <PAGE> 69 BANCO DI NAPOLI, as Lender By: /s/ Vito Spaca Name: Vito Spaca Title: Executive Vice President By: /s/ Claude P. Mapes Name: Claude P. Mapes Title: First Vice President [Signature pages continue] 69 <PAGE> 70 BANK OF CHINA, NEW YORK BRANCH as Lender By: /s/ Chuanjie Li Name: Chuanjie Li Title: General Manager [Signature pages continue] 70 <PAGE> 71 LAND BANK OF TAIWAN, LOS ANGELES BRANCH as Lender By: /s/ Mayer Chen Name: Mayer Chen Title: SVP & General Manager [Signature pages continue] 71 <PAGE> 72 BANK OF TAIWAN, NEW YORK AGENCY as Lender By: /s/ Maw-Yan Lin Name: Maw-Yan Lin Title: SVP & General Manager [Signature pages continue] 72 <PAGE> 73 BANCA NATIONALE DEL LAVORO S.P.A. as Lender By: /s/ Roberto Mancone Name: Roberto Mancone Title: Vice President By: /s/ Leonardo Valentini Name: Leonardo Valentini Title: First Vice President [Signature pages continue] 73 <PAGE> 74 THE DAI-ICHI KANGYO BANK, LTD. as Lender By: /s/ Nicholas A. Fiore Name: Nicholas A. Fiore Title: Vice President [Signature pages continue] 74 <PAGE> 75 DEN DANSKE BANK as Lender By: /s/ John A. O'Neill Name: John A. O'Neill Title: Vice President By: /s/ Peter L. Hargraves Name: Peter L. Hargraves Title: Vice President [Signature pages continue] 75 <PAGE> 76 THE FUJI BANK, LIMITED as Lender By: /s/ Yeh Tanaka Name: Yeh Tanaka Title: Vice President & Manager [Signature pages continue] 76 <PAGE> 77 BANCA MONTE DEI PASCHI DI SIENA, NEW YORK BRANCH as Lender By: /s/ S. M. Sondak Name: S. M. Sondak Title: F.V.P. & Dep. General Manager By: /s/ Brian R. Landy Name: Brian R. Landy Title: Vice President [Signature pages continue] 77 <PAGE> 78 BANK OF NOVA SCOTIA as Lender By: /s/ Philip N. Adsetts Name: Philip N. Adsetts Title: Director [Signature pages continue] 78 <PAGE> 79 BANCO BILBAO VIZCAYA ARGENTARIA as Lender By: /s/ Alan B. Lefkowitz Name: Alan B. Lefkowitz Title: Senior Vice President By: /s/ Alberto Conde Name: Alberto Conde Title: Vice President Corporate Banking [Signature pages continue] 79 <PAGE> 80 CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH as Lender By: /s/ Wan-Tu Yeh Name: Wan-Tu Yeh Title: VP & General Manager [Signature pages continue] 80 <PAGE> 81 FIRSTAR CORPORATION as Lender By: /s/ Stephen M. Reese Name: Stephen M. Reese Title: Vice President [Signature pages continue] 81 <PAGE> 82 HUA NAN COMMERCIAL BANK, LTD. NEW YORK AGENCY as Lender By: /s/ Yun-Peng Chang Name: Yun-Peng Chang Title: SVP & General Manager [Signature pages continue] 82 <PAGE> 83 BANQUE SUDAMERIS, MIAMI AGENCY as Lender By: /s/ Hubert de la Feld Name: Hubert de la Feld Title: Senior Vice President and Manager By: /s/ Efrain C. Lopez Name: Efrain C. Lopez Title: Assistant Vice President [Signature pages continue] 83 <PAGE> 84 BANCA DI ROMA as Lender By: /s/ James B. Sieger Name: James B. Sieger Title: Vice President By: /s/ Allesandro Paoli Name: Allesandro Paoli Title: Asst. Treasurer [Signature pages continue] 84 <PAGE> 85 BANK HAPOALIM as Lender By: /s/ James P. Surless Name: James P. Surless Title: VP By: /s/ Conrad Wagner Name: Conrad Wagner Title: First Vice President [Signature pages continue] 85 <PAGE> 86 BANK LEUMI USA as Lender By: /s/ Steven Farrow Name: Steven Farrow Title: Vice President [Signature pages continue] 86 <PAGE> 87 NATIONAL CITY BANK as Lender By: /s/ Tara M. Handforth Name: Tara M. Handforth Title: Corp. Banking Officer [Signature pages continue] 87 <PAGE> 88 ISRAEL DISCOUNT BANK OF NEW YORK as Lender By: /s/ Howard Weinberg Name: Howard Weinberg Title: First Vice President By: /s/ R. David Korngrum Name: David Korngrum Title: Vice President [Signature pages continue] 88 <PAGE> 89 FIRST COMMERCIAL BANK, NEW YORK AGENCY as Lender By: /s/ Vincent T. Chen Name: Vincent T. Chen Title: SVP & GM [Signature pages continue] 89 <PAGE> 90 PNC BANK, N.A. as Lender By: /s/ William F. Cattell Name: William F. Cattell Title: Vice President [Signature pages continue] 90 <PAGE> 91 EXHIBIT A To $750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents FORM OF REVOLVING CREDIT NOTE $_____________________________________________________, 2000 FOR VALUE RECEIVED, the undersigned JONES APPAREL GROUP USA, INC., a corporation organized under the laws of Pennsylvania, (the "Borrower"), JONES APPAREL GROUP, INC., a corporation organized under the laws of Pennsylvania, JONES APPAREL GROUP HOLDINGS, INC., a corporation organized under the laws of Delaware, and NINE WEST GROUP INC., a corporation organized under the laws of Delaware (collectively, with the Borrower, the "Debtors"), hereby jointly and severally promise to pay to the order of _________________, (the "Lender"), at the place and times provided in the Credit Agreement referred to below, the principal sum of ______________________ DOLLARS ($_____________) or, if less, the aggregate unpaid principal amount of all Revolving Credit Loans made to the Borrower by the Lender pursuant to that certain Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement") by and among Jones Apparel Group USA, Inc., the Additional Obligors referred to therein, the Lenders who are or may become a party thereto (collectively, the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement. The unpaid principal amount of Revolving Credit Loans from time to time outstanding is subject to mandatory repayment from time to time as provided in the Credit Agreement and shall bear interest as provided in Section 5.1 of the Credit Agreement. All payments of principal and interest on Revolving Credit Loans shall be payable in lawful currency of the United States of America in immediately available funds to the account designated in the Credit Agreement. This Revolving Credit Note (the "Revolving Credit Note") is entitled to the benefits of, and evidences Obligations incurred under, the Credit Agreement, to which reference is made for a statement of the terms and conditions on which the Borrower is permitted and required to make prepayments and repayments of principal of the Obligations evidenced by this Revolving Credit Note and on which such Obligations may be declared to be immediately due and payable. THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF. The Debt evidenced by this Revolving Credit Note is senior in right of payment to all Subordinated Debt referred to in the Credit Agreement. 91 <PAGE> 92 The Debtors hereby waive all requirements as to diligence, presentment, demand of payment, protest and (except as required by the Credit Agreement) notice of any kind with respect to this Revolving Credit Note. IN WITNESS WHEREOF, the undersigned have executed this Revolving Credit Note under seal as of the day and year first above written. JONES APPAREL GROUP USA, INC. By: Name: Title: JONES APPAREL GROUP, INC. By: Name: Title: JONES APPAREL GROUP HOLDINGS, INC. By: Name: Title: NINE WEST GROUP INC. By: Name: Title: 92 <PAGE> 93 EXHIBIT B To $750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents FORM OF NOTICE OF REVOLVING CREDIT BORROWING NOTICE OF REVOLVING CREDIT BORROWING Dated as of: ______________ First Union National Bank, as Administrative Agent One First Union Center, TW-4 301 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Ladies and Gentlemen: This irrevocable Notice of Revolving Credit Borrowing is delivered to you under Section 2.2(a) of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement"), by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. 1. The Borrower hereby requests that the Lenders make a Revolving Credit Loan to the Borrower in the aggregate principal amount of $___________. (Complete with an amount in accordance with Section 2.2(a) of the Credit Agreement.) 2. The Borrower hereby requests that such Revolving Credit Loan be made on the following Business Day: _____________________. (Complete with a Business Day in accordance with Section 2.2(a) of the Credit Agreement). 3. The Borrower hereby requests that the Revolving Credit Loan bear interest at the following interest rate, plus the Applicable Margin, as set forth below: 93 <PAGE> 94 Termination Date for Interest Period (LIBOR Interest Period (If Component of Loan Interest Rate Rate only) applicable) ----------------- ------------- ---------------------- -------------------- Base Rate or LIBOR Rate 4. The principal Dollar Amount of all Revolving Credit Loans and L/C Obligations outstanding as of the date hereof (including the requested Revolving Credit Loan) does not exceed the maximum Dollar Amount permitted to be outstanding pursuant to the terms of the Credit Agreement. 5. The Borrower hereby represents and warrants that the conditions specified in Section 6.3 of the Credit Agreement have been satisfied or waived as of the date hereof. 6. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement. IN WITNESS WHEREOF, the undersigned has executed this Notice of Revolving Credit Borrowing as of the ____ day of _______, ____. JONES APPAREL GROUP USA, INC. By:______________________________ Name: Title: 94 <PAGE> 95 EXHIBIT C To $750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents FORM OF NOTICE OF ACCOUNT DESIGNATION NOTICE OF ACCOUNT DESIGNATION Dated as of: _________ First Union National Bank, as Administrative Agent One First Union Center, TW-4 301 South College Street Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Ladies and Gentlemen: This Notice of Account Designation is delivered to you under Section 2.2(b) of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement"), by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent (the "Administrative Agent"), and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. 1. The Administrative Agent is hereby authorized to disburse all Loan proceeds into the following account(s): ________________________________________ ABA Routing Number:_____________________ Account Number:_________________________ 2. This authorization shall remain in effect until revoked or until a subsequent Notice of Account Designation is provided by the Borrower to the Administrative Agent. 3. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement. 95 <PAGE> 96 IN WITNESS WHEREOF, the undersigned has executed this Notice of Account Designation as of the _____ day of _______, ____. JONES APPAREL GROUP USA, INC. By:_______________________ Name: Title: 96 <PAGE> 97 EXHIBIT D To $750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents FORM OF NOTICE OF PREPAYMENT NOTICE OF PREPAYMENT Dated as of: _____________ First Union National Bank, as Administrative Agent One First Union Center 301 South College Street, TW-4 Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Ladies and Gentlemen: This irrevocable Notice of Prepayment is delivered to you under Section 2.3(c) of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement") by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. 1. The Borrower hereby provides notice to the Administrative Agent that it shall repay the following [Base Rate Loans] and/or [LIBOR Rate Loans]: ____________________. (Complete with an amount in accordance with Section 2.3(c) of the Credit Agreement.) 2. The Borrower shall repay the above-referenced Revolving Credit Loans on the following Business Day: _______________. (Complete in accordance with Section 2.3(c) of the Credit Agreement.) 3. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement. 97 <PAGE> 98 IN WITNESS WHEREOF, the undersigned has executed this Notice of Prepayment as of the ____ day of _______, ____. JONES APPAREL GROUP USA, INC. By:_______________________ Name: Title: 98 <PAGE> 99 EXHIBIT E To $750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents FORM OF NOTICE OF CONVERSION/CONTINUATION NOTICE OF CONVERSION/CONTINUATION Dated as of: _____________ First Union National Bank, as Administrative Agent One First Union Center 301 South College Street, TW-4 Charlotte, North Carolina 28288-0608 Attention: Syndication Agency Services Ladies and Gentlemen: This irrevocable Notice of Conversion/Continuation (the "Notice") is delivered to you under Section 5.2 of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement"), by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. 1. This Notice is submitted for the purpose of: (Check one and complete applicable information in accordance with the Credit Agreement.) Converting all or a portion of a Base Rate Loan into a LIBOR Rate Loan (a) The aggregate outstanding principal balance of such Revolving Credit Loan is $_______________. (b) The principal amount of such Revolving Credit Loan to be converted is $_______________. (c) The requested effective date of the conversion of such Revolving Credit Loan is _______________. 99 <PAGE> 100 (d) The requested Interest Period applicable to the converted Revolving Credit Loan is _______________. Converting all or a portion of a LIBOR Rate Loan into a Base Rate Loan (a) The aggregate outstanding principal balance of such Revolving Credit Loan is $_______________ (b) The last day of the current Interest Period for such Revolving Credit Loan is _______________. (c) The principal amount of such Revolving Credit Loan to be converted is $_______________. (d) The requested effective date of the conversion of such Revolving Credit Loan is _______________. Continuing all or a portion of a LIBOR Rate Loan as a LIBOR Rate Loan (a) The aggregate outstanding principal balance of such Revolving Credit Loan is $_______________. (b) he last day of the current Interest Period for such Revolving Credit Loan is _______________. (c) The principal amount of such Revolving Credit Loan to be continued is $_______________. (d) The requested effective date of the continuation of such Revolving Credit Loan is _______________. (e) The requested Interest Period applicable to the continued Revolving Credit Loan is _______________. 2. The principal Dollar Amount of all Revolving Credit Loans and L/C Ob ligations outstanding as of the date hereof does not exceed the maximum Dollar Amount permitted to be outstanding pursuant to the terms of the Credit Agreement. 3. The Borrower hereby represents and warrants that no Default or Event of Default (as defined in the Credit Agreement) has occurred and is continuing. 4. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement. IN WITNESS WHEREOF, the undersigned has executed this Notice of Conversion/Continuation as of the ____ day of __________, ____. JONES APPAREL GROUP USA, INC. By:_________________________ Name: Title: 100 <PAGE> 101 EXHIBIT F To $750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents FORM OF OFFICER'S COMPLIANCE CERTIFICATE OFFICER'S COMPLIANCE CERTIFICATE The undersigned, on behalf of JONES APPAREL GROUP USA, INC. (the "Borrower"), hereby certifies to the Administrative Agent and the Lenders, each as defined in the Credit Agreement referred to below, as follows: 1. This Certificate is delivered to you pursuant to Section 8.2 of the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 (as amended, restated, supplemented or otherwise modified, the "Credit Agreement"), by and among the Borrower, the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent (the "Administrative Agent"), and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. Capitalized terms used herein and not defined herein shall have the meanings assigned thereto in the Credit Agreement. 2. I have reviewed the consolidated financial statements of Jones Apparel Group, Inc. and its Subsidiaries dated as of _______________ and for the _______________ period[s] then ended and such statements present fairly in all material respects the consolidated financial condition of Jones Apparel Group, Inc. and its Subsidiaries as of their respective dates and the results of the consolidated operations of Jones Apparel Group, Inc. and its Subsidiaries for the respective period[s] then ended, subject to normal year end adjustments for interim statements. 3. I have reviewed the terms of the Credit Agreement, and the related Loan Documents and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and the condition of Jones Apparel Group, Inc. and its Subsidiaries during the accounting period covered by the financial statements referred to in Paragraph 2 above. Such review has not disclosed the existence during or at the end of such accounting period of any condition or event that constitutes a Default or an Event of Default, nor do I have any knowledge of the existence of any such condition or event as at the date of this Certificate [except, if such condition or event existed or exists, describe the nature and period of existence thereof and what action the Borrower has taken, is taking and proposes to take with respect thereto]. 4. The Applicable Margin and information as to the debt ratings necessary for determining such figure are set forth on the attached Schedule 1. 101 <PAGE> 102 5. Jones Apparel Group, Inc. and its Subsidiaries are in compliance with the financial covenants contained in Article X of the Credit Agreement as shown on such Schedule 1. [Signature Page Follows] WITNESS the following signature as of the _____ day of _________, ____. JONES APPAREL GROUP USA, INC. By:________________________ Name: Title: 102 <PAGE> 103 Schedule 1 to Officer's Compliance Certificate [To be provided by Borrower in form reasonably acceptable to the Administrative Agent] 103 <PAGE> 104 EXHIBIT F To $750,000,000 Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000 by and among JONES APPAREL GROUP USA, INC., as Borrower, the Additional Obligors referred to therein, the Lenders party thereto Chase Securities Inc. and Salomon Smith Barney Inc. as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents FORM OF ASSIGNMENT AND ACCEPTANCE ASSIGNMENT AND ACCEPTANCE Dated as of: _________ Reference is made to the Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000, as amended, restated, supplemented or otherwise modified (the "Credit Agreement") by and among JONES APPAREL GROUP USA, INC., a Pennsylvania corporation (the "Borrower"), the Additional Obligors referred to therein, the lenders party thereto (the "Lenders"), Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents. Capitalized terms used herein which are not defined herein shall have the meanings assigned thereto in the Credit Agreement. ___________________________ (the "Assignor") and _________________________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, as of the Effective Date (as defined below), a ____% interest in and to all of the Assignor's interest, rights and obligations with respect to its Revolving Credit Commitment and Revolving Credit Loans (including such percentage of the outstanding L/C Obligations), which percentage represents not less than $10,000,000, unless such percentage equals 100% of such Lender's Revolving Credit Commitment, and the Assignor thereby retains ____% of its interest therein. This Assignment and Acceptance is entered pursuant to, and authorized by, Section 14.10 of the Credit Agreement. 2. The Assignor (i) represents that, as of the date hereof, its Revolving Credit Commitment Percentage (without giving effect to assignments thereof which have not yet become effective) under the Credit Agreement is ____%, the outstanding balances of its Revolving Credit Loans (including its Revolving Credit Commitment Percentage of the outstanding L/C Obligations); (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto, other than that the Assignor is the legal and beneficial owner of the interest being assigned by it hereunder and that such 104 <PAGE> 105 interest is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or its Subsidiaries or the performance or observance by the Borrower or its Subsidiaries of any of their obligations under the Credit Agreement or any other instrument or document furnished or executed pursuant thereto; and (iv) to the extent it has received Revolving Credit Note(s) from the Borrower, attaches the applicable Revolving Credit Note(s) delivered to it under the Credit Agreement and requests that the Borrower exchange such Revolving Credit Note(s) for new Revolving Credit Notes payable to each of the Assignor and the Assignee as follows: Revolving Credit Note Payable to the Order of: Principal Amount of Note: _______________________ _______________________ _______________________ _______________________ 3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iii) agrees that it will, independently and without reliance upon the Assignor or any other Lender or the Administrative Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) confirms that it is an Eligible Assignee; (v) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as a Lender; (vii) agrees to hold all confidential information in accordance with the provisions of Section 14.10(g) of the Credit Agreement; and (viii) includes herewith for the Administrative Agent the forms required by Section 5.11(e) of the Credit Agreement (if not previously delivered). 4. The effective date for this Assignment and Acceptance shall be as set forth in Section 1 of Schedule 1 hereto (the "Effective Date"), subject to the consents referred to in the following sentence. Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for, to the extent required by the Credit Agreement, consent by the Borrower and the Administrative Agent and acceptance and recording in the Register. 5. Upon such consents, acceptance and recording, from and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and the other Loan Documents to which Lenders are parties and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender under each such agreement, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents. 6. Upon such consents, acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the interest assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves. 7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A CONTRACT UNDER SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF. 105 <PAGE> 106 WITNESS the following signatures as of the ____ day of ______, ____. ASSIGNOR: By: ___________________________ Title: ________________________ ASSIGNEE: By: ___________________________ Name: _________________________ Title: ________________________ Acknowledged and Consented to on behalf of the Credit Parties: JONES APPAREL GROUP USA, INC. By: ___________________________ Name: ________________________ Title: _________________________ Consented to and Accepted by: FIRST UNION NATIONAL BANK, as Administrative Agent By: ______________________________ Name: ___________________________ Title: ____________________________ 106 <PAGE> 107 Schedule 1 to Assignment and Acceptance 1. Effective Date: _________________, ______ 2. Assignor's Interest Prior to Assignment: (a) Revolving Credit Commitment Percentage % (b) Outstanding balance of Revolving Credit Loans $ (c) Outstanding balance of Assignor's Revolving Credit Commitment Percentage of the L/C Obligations $ 3. Assigned Interest (from Section 1) of: (a) Revolving Credit Loans % 4. Assignee's Extensions of Credit After Effective Date: (a) Total outstanding balance of Assignee's Revolving Credit Loans (line 2(b) times line 3(a)) $ (b) Total outstanding balance of Assignee's Revolving Credit Commitment Percentage of the L/C Obligations (line 2(c) times line 3(a)) $ 5. Retained Interest of Assignor after Effective Date: (a) Retained Interest (from Section 1): (i) Revolving Credit Commitment Percentage % (b) Outstanding balance of Assignor's Revolving Credit Loans (line 2(b) times line 5(a)(i)) $ (c) Outstanding balance of Assignor's Revolving Credit Commitment Percentage of L/C Obligations (line 2(c) times line 5(a)(i)) $ 6. Payment Instructions: (a) If payable to Assignor, to the account of Assignor to: ABA No.: Account Name: Account No. Attn: Ref: 107 <PAGE> 108 (b) If payable to Assignee, to the account of Assignee to: ABA No.: Account Name: Account No.: Attn: Ref: 108

Exhibit 10(i) Contract No. 117119   NATURAL GAS PIPELINE COMPANY OF AMERICA (Natural) TRANSPORTATION RATE SCHEDULE FTS AMENDMENT NO. 2 DATED April 28, 2000 TO AGREEMENT DATED February 25, 2000 (Agreement)   1. [X] Exhibit A dated April 28, 2000. Changes Primary Receipt Point(s)/Secondary Receipt Point(s) and Point MDQ's. This Exhibit A replaces any previously dated Exhibit A. 2. [ ] Exhibit B dated April 28, 2000. Changes Primary Delivery Point(s)/Secondary Delivery Point(s) and Point MDQ's. This Exhibit B replaces any previously dated Exhibit B. 3. [ ] Exhibits A and B dated April 28, 2000. Changes Primary Receipt and Delivery Points/Secondary Receipt and Delivery Points. These Exhibits A and B replace any previously dated Exhibits A and B. 4. [X] Exhibit C dated April 28, 2000. Changes the Agreement's Path. This Exhibit C replaces any previously dated Exhibit C. 5. [ ] Revise Agreement MDQ: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute 0 MMBTU for MMBTU. [ ] Revise Agreement MAC: [ ] Increase [ ] Decrease In Section 2. of Agreement substitute MMBtu for MMBtu. 6. [X] Revise Service Options Service option selected (check any or all): [ ] LN [ ] SW [X] NB 7. [ ] The term of this Agreement is extended through _______________________. 8. [ ] Other:____________________________ This Amendment No. 2 becomes effective April 20, 2000. Except as hereinabove amended, the Agreement shall remain in full force and effect as written. Agreed to by: AGREED TO BY: NATURAL GAS PIPELINE COMPANY OF AMERICA   THE PEOPLES GAS LIGHT AND COKE COMPANY "Natural"   "Shipper"       By: /s/ David J. Devine   By: /s/ William E. Morrow       Name: David J. Devine   Name: William E. Morrow       Title: Vice President, Business Planning   Title: Executive Vice President     EXHIBIT A DATED: April 28, 2000 EFFECTIVE DATE: April 20, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117119   RECEIPT POINT/S   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             PRIMARY RECEIPT POINT/S                       1. SABINEPL/NGPL HENRY PLT VERMILION LA 3592 05 25,000 VERMILION           INTERCONNECT WITH SABINE           PIPELINE COMPANY'S GAS PLANT           ON TRANSPORTER'S LOUISIANA           MAINLINE IN SEC. 21-T13S-R4E,           VERMILION PARISH, LOUISIANA.               SECONDARY RECEIPT POINT/S All secondary receipt points, and the related priorities and volumes, as provided under the Tariff provisions governing this Agreement. RECEIPT PRESSURE, ASSUMED ATMOSPHERIC PRESSURE Natural gas to be delivered to Natural at the Receipt Point/s shall be at a delivery pressure sufficient to enter Natural's pipeline facilities at the pressure maintained from time to time, but Shipper shall not deliver gas at a pressure in excess of the Maximum Allowable Operating Pressure (MAOP) stated for each Receipt Point. The measuring party shall use or cause to be used an assumed atmospheric pressure corresponding to the elevation at such Receipt Point/s. RATES Except as provided to the contrary in any written agreement(s) between the parties in effect during the term hereof, Shipper shall pay Natural the maximum rate and all other lawful charges as specified in Natural's applicable rate schedule. FUEL GAS AND GAS LOST AND UNACCOUNTED FOR PERCENTAGE (%) Shipper will be assessed the applicable percentage for Fuel Gas and Gas Lost and Unaccounted For. TRANSPORTATION OF LIQUIDS Transportation of liquids may occur at permitted points identified in Natural's current Catalog of Receipt and Delivery Points, but only if the parties execute a separate liquids agreement.     EXHIBIT C DATED April 28, 2000 EFFECTIVE DATE: April 20, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117119   Pursuant to Natural's tariff, an MDQ exists for each primary transportation path segment and direction under the Agreement. Such MDQ is the maximum daily quantity of gas which Natural is obligated to transport on a firm basis along a primary transportation path segment. A primary transportation path segment is the path between a primary receipt, delivery, or node point and the next primary receipt, delivery, or node point. A node point is the point of interconnection between two or more of Natural's pipeline facilities. A segment is a section of Natural's pipeline system designated by asegment number whereby the Shipper under the terms of their agreement based on the points within the segment identified on Exhibit C have throughput capacity rights. The segment numbers listed on Exhibit C reflect this Agreement's path corresponding to Natural's most recent Pipeline System Map which identifies segments and their corresponding numbers. All information provided in this Exhibit C is subject to the actual terms and conditions of Natural's Tariff.     EXHIBIT C DATED April 28, 2000 EFFECTIVE DATE: April 20, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117119   Segment   Upstream   Forward/Backward   Flow Through Number   Segment   Haul(Contractual)   Capacity 18   0   F   0 20   18   F   0 22   20   F   0 23   24   B   25,000 24   0   B   0 25   23   B   25,000 26   22   F   0 26   25   F   25,000 27   26   F   25,000 28   27   F   25,000 31   28   F   25,000     EXHIBIT D - (NB Service Option) DATED April 28, 2000 EFFECTIVE DATE: April 20, 2000   COMPANY: THE PEOPLES GAS LIGHT AND COKE COMPANY CONTRACT: 117119   FTS-NB DELIVERY POINT/S           NB           Service   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)             1. PGLC/NGPL CRAWFORD COOK COOK IL 904360 08 25,000 INTERCONNECT WITH THE           PEOPLES GAS LIGHT AND COKE           COMPANY AT TRANSPORTER'S           CRAWFORD METER STATION IN           SEC. 34-T39N-R13E, COOK COUNTY,           ILLINOIS.               NGPL STORAGE AGREEMENTS DEDICATED TO FTS-NB SERVICE : 113417 THIRD PARTY STORAGE PROVIDER/POINT NO.   County/Parish   PIN   MDQ Name / Location Area State No. Zone (MMBtu/d)   SPSSO Agreement No.* *FTS-NB Service utilizing a Third Party Storage Point (as such term is defined in Natural's Tariff) is expressly contingent upon the continuing existence of a valid SPSSO Agreement and Operational Balancing Agreement at such point.     Contract No. 117119

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10(g) PACCAR Inc DEFERRED INCENTIVE COMPENSATION PLAN SECTION 1. ESTABLISHMENT AND PURPOSE.     The Plan was adopted by the Company on November 25, 1991, to provide certain employees with an opportunity to defer payment of their bonuses under the Company's year-end Incentive Compensation Program. The Plan is also intended to establish a method of paying bonus awards that will assist the Company in attracting and retaining employees of outstanding achievement and ability. SECTION 2. DEFINITIONS.     (a)  "Account" means the bookkeeping account established pursuant to Section 6 on behalf of an Executive who elects to participate in the Plan.     (b)  "Beneficiary" means the person or persons designated by the Executive or by the Plan to receive payment of the Executive's Income Account in the event of the death of the Executive.     (c)  "Board" means the Board of Directors of the Company, as constituted from time to time.     (d)  "Bonus Award" means the amount of compensation awarded by the Company to an Executive as a bonus under the Company's year-end Incentive Compensation Program.     (e)  "Cause" means (i) an act of embezzlement, fraud or theft, (ii) the deliberate disregard of the rules of the Company or a Subsidiary, (iii) any unauthorized disclosure of any of the secrets or confidential information of the Company or a Subsidiary, (iv) any conduct which constitutes unfair competition with the Company or a Subsidiary or (v) inducing any customers of the Company or a Subsidiary to breach any contracts with the Company or a Subsidiary.     (f)  "Company" means PACCAR Inc, a Delaware corporation.     (g)  "Committee" means the Compensation Committee of the Board.     (h)  "Executive" means an employee of the Company or a Subsidiary who is eligible to participate in the Plan under Section 4.     (i)  "Incentive Compensation Program" refers to the incentive plan for executives of PACCAR Inc and its eligible subsidiaries who are in grades 41 and above.     (j)  "Permanent and Total Disability" is as defined under PACCAR's Long Term Disability Plan.     (k)  "Plan" means this PACCAR Inc Deferred Incentive Compensation Plan, as it may be amended from time to time.     (l)  "Service" means employment with the Company or any Subsidiary. A transfer among the Company and its Subsidiaries shall not be considered a termination of Service.     (m)  "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.     (n)  "Year" means a calendar year. 1 -------------------------------------------------------------------------------- SECTION 3. ADMINISTRATION.     The Committee shall have the authority to administer the Plan in its sole discretion. To this end, the Committee is authorized to construe and interpret the Plan, to promulgate, amend and rescind rules relating to the implementation of the Plan and to make all other determinations necessary or advisable for the administration of the Plan. Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe such conditions and limitations as it may deem appropriate. Any determination, decision or action of the Committee in connection with the construction, interpretation or administration of the Plan shall be final, conclusive and binding upon all persons participating in the Plan and any person validly claiming under or through persons participating in the Plan. SECTION 4. ELIGIBILITY.     An employee of the Company or of a Subsidiary shall be eligible to participate in the Plan for a Year if he or she:     (a) Is eligible to be considered for a bonus that will have been earned in such Year under the Company's Incentive Compensation Program; and     (b) Has attained age 40 on or before January 1 of such Year. SECTION 5. ELECTION TO PARTICIPATE IN PLAN.     An Executive may elect to participate in the Plan for a Year by filing with the Committee, on or before December 15 of such Year, a written election to defer his or her Bonus Award earned in such Year. The deferral election will become irrevocable after December 15. The deferral election shall apply solely to the Bonus Award, if any, to be earned in the Year in which the election is filed and shall specify the amount or portion of such Bonus Award that is subject to the election (Deferred Award). The amount of the Bonus Award earned in a given Year shall be determined by the Company in the following year. SECTION 6. ESTABLISHMENT AND TREATMENT OF ACCOUNT.     In the event a Bonus Award is made to an Executive who has filed a timely deferral election with respect to such Bonus Award, the Company shall establish an Account for the Executive. The Account shall be credited with an amount equal to that portion of the Bonus Award which is not payable currently to the Executive because of the terms of the deferral election. A separate Account shall be maintained for each Bonus Award deferred by an Executive, except as the Company may otherwise determine.     Participants may elect to have their Deferred Award allocated to one or both of the two unfunded accounts described below:     (a)  Income Account.  Means a bookkeeping entry established on behalf of the Executive who elected to participate in the Plan. A deferred Award shall be credited to the Income Account as of January next following the Year in which such bonus Award was earned. Interest shall be credited on the balance in each Income Account, commencing with the date as of which any amount is credited to the Income Account and continuing up to the close of the calendar quarter immediately preceding the date when the last payment from the Income Account is made. Such interest for each calendar quarter during the deferral period shall be credited at a rate equal to the simple combined average of the monthly Aa Industrial Bond yield average for the immediately preceding calendar quarter, as reported in Moody's Bond Record. Such interest shall be compounded quarterly. Such interest shall become a part of the Income Account and shall be paid at the same time or times as the principal balance of the Income Account. 2 --------------------------------------------------------------------------------     (b)  PACCAR Stock Account.  Means a bookkeeping entry established on behalf of the Executive who elected to participate in the Plan. A deferred Award shall be credited to the Stock Account as of January next following the Year in which such bonus Award was earned. The initial account balance will be equal to the number of shares of PACCAR Common Stock that the Deferred Award could have purchased at the average closing market price for the first five (5) business days the market is open in January. Thereafter, any dividends earned will be treated as if those dividends had been invested in additional shares at the closing market price on the date the dividends are paid. Account balances will be adjusted pursuant to Article 10 of the Long Term Incentive Plan.     (c)  Statements.  As soon as practicable after July 1 of each Year (and after such other dates as the Company may determine), the Company shall prepare and deliver to each participating Executive a written statement showing the balance in his or her Income Account as of the applicable date. SECTION 7. FORM AND TIME OF PAYMENT ACCOUNT.     Distribution of the Income and/or PACCAR Stock Accounts shall be made at such time or times and in such form as the Committee shall determine in its sole discretion. In order to assist the Committee in making such determinations, the following procedures are established:     (a)  Request of Form and Time of Payment.  An Executive may elect to receive distribution of the Income and/or PACCAR Stock Account at the time and in the manner described in (i) and (ii) below. For payment to be made or commence prior to leaving the Company, a Payment election form must be completed at the time the Deferral Election is made. Otherwise, elections shall be made by filing the prescribed form with the Committee not later than the earlier of (A) 30 days after the Executive's termination of employment with the Company or (B) December 1 of the year before the year in which distribution is to be made or commence. Distribution will be made in accordance with the Executive's election unless the Committee has disapproved the election or has determined that the distribution shall be made at some other time.     (i)  Form of Payment.  Payment of an Income Account shall be made in cash, either in a lump sum or in annual installments over a period not in excess of 15 years. The amount of any installment to be paid from an Income Account shall be determined by dividing the balance remaining in such Income Account by the number of installments then remaining to be distributed. Payment of the PACCAR Stock Account will be paid in shares of PACCAR Common Stock at the end of the deferral period. The source of shares for this plan will be the Long Term Incentive Plan.     (ii)  Time of Payment.  Payment of the Income and/or PACCAR Stock Account shall occur or commence on any January, but not later than the first January after the year in which Executive attains age 701/2. In the event an Executive who elects installment payments is reemployed by the Company, all installments will be suspended until the Executive's service ends.     (b)  Changing a Request.  Any request that an approved method of payment be changed, or any request subsequent to the deferral election for distribution prior to termination is subject to approval by the Committee in its sole and absolute discretion. Such request shall be in writing to the Committee and shall set forth the reasons for the request.     (c)  Failing to Request.  In the event that an Executive fails to make a timely election pursuant to Section 7 (a), distribution of the Income or Stock Account shall be made in full in the first January following sixty (60) days after the Executive's termination of employment. In such 3 -------------------------------------------------------------------------------- case, the entire account balance in effect as of the distribution date will be distributed to the Executive.     (d)  Committee Guidelines.  From time to time, the Committee may establish guidelines for its own use in determining what election made pursuant to Section 7 (a) or (b) above shall be disapproved, but such guidelines shall not in any way limit the Committee's sole discretion to determine the terms and form of distribution of the recipient's Cash Account.     (e)  Withholding Taxes.  All payments under the Plan shall be subject to reduction to reflect the withholding of applicable taxes. SECTION 8. EFFECT OF DEATH OF EXECUTIVE.     (a)  Distribution of Account. Upon the death of a participating Executive, the amount (if any) remaining in his or her Income and/or Stock Account shall be distributed to his or her Beneficiary. The distribution shall be made at the time(s) and in the form specified in the election filed by the Executive under Section 7, unless the Committee determines in its sole discretion that payment shall be made at an earlier date or in a different form. If the Executive did not file an election under Section 7 prior to his or her death, then the distribution shall be made at the time(s) and in the form determined by the Committee in its sole discretion. If a designated Beneficiary dies before receiving payment of his or her entire share of the Executive's Income and/or Stock Account, then the remaining payments shall be made to such Beneficiary's personal representative.     (b)  Designation of Beneficiary. Upon commencement of participation in the Plan, each Executive shall, by filing the prescribed form with the Company, name a person or persons as the Beneficiary who will receive any distribution payable under the Plan in the event of the Executive's death. If the Executive has not named a Beneficiary or if none of the named Beneficiaries survives the Executive, then the Executive's personal representative shall be the Beneficiary. The Executive may change his or her Beneficiary designation from time to time. Any designation of a Beneficiary (or an amendment or revocation thereof) shall be effective only if it is made in writing on the prescribed form and is received by the Company prior to the Executive's death. Any other provision of this Subsection (b) notwithstanding, in the case of a married Executive, any designation of a person other than his or her spouse as the sole primary Beneficiary shall be valid only if the spouse consented to such designation in writing. SECTION 9. FORFEITURE OF ACCOUNTS.     All of an Executive's Income and/or Stock Accounts shall be forfeited in the event that his or her Service ends because of a discharge for Cause or in the event that he or she, after his or her Service ended for any other reason, fails or refuses to provide advice or counsel to the Company or a Subsidiary when reasonably requested to do so. The Committee's good-faith determination of the existence of facts justifying forfeiture shall be conclusive. SECTION 10. INCOMPETENCE.     If, in the opinion of the Committee, any individual becomes unable to handle properly any amount payable to such individual under the Plan, then the Committee may make such arrangements for payment on such individual's behalf as it determines will be beneficial to such individual, including (without limitation) payment to such individual's guardian, conservator, spouse or dependent. 4 -------------------------------------------------------------------------------- SECTION 11. EXECUTIVES' RIGHTS UNSECURED.     The Plan is unfunded. The interest under the Plan of any participating Executive, and such Executive's right to receive a distribution of his or her Income and/or Stock Account, shall be an unsecured claim against the general assets of the Company. The Income and/or Stock Accounts shall be bookkeeping entries only, and no Executive shall have an interest in or claim against any specific asset of the Company pursuant to the Plan. SECTION 12. NONASSIGNABILITY OF INTERESTS.     The interest and property rights of any Executive under the Plan shall not be subject to option nor be assignable either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any act in violation of this Section 12 shall be void. SECTION 13. LIMITATION OF RIGHTS.     (a)  No Right to Bonuses.  Nothing in the Plan shall be construed to give any Executive any right to be granted a Bonus Award.     (b)  No Right to Employment.  Neither the Plan nor the deferral of any Bonus Award, nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company or a Subsidiary will employ an Executive for any period of time, in any position or at any particular rate of compensation. SECTION 14. DOMESTIC RELATIONS ORDERS.     The procedures established by the Company for the determination of the qualified status of domestic relations orders and for making distributions under qualified domestic relations orders, as provided in Section 206 (d) of ERISA, shall apply to the Plan. SECTION 15. CLAIMS AND INQUIRIES.     (a)  Application for Benefits.  Applications for benefits and inquiries concerning the Plan (or concerning present or future rights to benefits under the Plan) shall be submitted to the Committee in writing. An application for benefits shall be submitted on the prescribed form and shall be signed by the Executive or, in the case of a benefit payable after his or her death, by the Beneficiary.     (b)  Denial of Application.  In the event that an application for benefits is denied in whole or in part, the Committee shall notify the applicant in writing of the denial and of the right to a review of the denial. The written notice shall set forth, in a manner calculated to be understood by the applicant, specific reasons for the denial, specific references to the provisions of the Plan on which the denial is based, a description of any information or material necessary for the applicant to perfect the application, an explanation of why the material is necessary, and an explanation of the review procedure under the Plan. The written notice shall be given to the applicant within a reasonable period of time (not more than 90 days) after the Committee received the application, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the notice be given more than 180 days after the Committee received the application.     (c)  Request for Review.  An applicant whose application for benefits was denied in whole or in part, or the applicant's duly authorized representative, may appeal the denial by submitting to the Committee a request for a review of the application within 90 days after receiving written notice of the denial from the Committee. The Committee shall give the applicant or his or her representative an opportunity to review pertinent materials, other than legally privileged documents, in preparing the request for a review. The request for a review shall be in writing and addressed to the Committee. The 5 -------------------------------------------------------------------------------- request for a review shall set forth all of the grounds on which it is based, all facts in support of the request, and any other matters that the applicant deems pertinent. The Committee may require the applicant to submit such additional facts, documents or other material as it may deem necessary or appropriate in making its review.     (d)  Decision on Review.  The Committee shall act on each request for an appeal within 60 days after receipt, unless special circumstances require further time for processing and the applicant is advised of the extension. In no event shall the decision on review be rendered more than 120 days after the Committee received the request for a review. The Committee shall give prompt written notice of its decision to the applicant. In the event that the Committee confirms the denial of the application for benefits in whole or in part, the notice shall set forth, in a manner calculated to be understood by the applicant, the specific reasons for the decision and specific references to the provisions of the Plan on which the decision is based.     (e)  Rules and Interpretations.  The Committee shall adopt such rules, procedures and interpretations of the Plan as it deems necessary or appropriate in carrying out its responsibilities under this Section 15.     (f)  Exhaustion of Remedies.  No legal action for benefits under the Plan shall be brought unless and until the claimant (i) has submitted a written application for benefits in accordance with Subsection (a) above, (ii) has been notified by the Committee that the application is denied, (iii) has filed a written request for a review of the application in accordance with Subsection (c) above and (iv) has been notified in writing that the Committee has affirmed the denial of the application; provided, however, that legal action may be brought after the Committee has failed to take any action on the claim within the time prescribed by Subsections (b) and (d) above, respectively. SECTION 16. AMENDMENT OR TERMINATION OF THE PLAN.     The Board or appropriate committee thereof, may amend, suspend or terminate the Plan at any time. In the event of a termination of the Plan, the Income and/or Stock Accounts of participating Executives shall be paid at the time(s) and in the form determined under Sections 7 and 8, unless the Committee prescribes an earlier time or different form for the payment of such Income and/or PACCAR Stock Accounts. SECTION 17. CHANGE OF CONTROL     In the event of a Change of Control of the Company, as defined in the PACCAR Supplemental Retirement Plan, each Executive shall be entitled to the lump sum payment of his or her Income and/or Stock Account. This amount shall be paid within 30 days of the Change of Control. SECTION 18. CHOICE OF LAW.     The validity, interpretation, construction and performance of the Plan shall be governed by the Employee Retirement Income Security Act of 1974 and, to the extent they are not preempted, by the laws of the State of Washington. SECTION 19. EXECUTION.     To record the amendment and restatement of the Plan to read as set forth herein, PACCAR Inc by its Chairman, Compensation Committee, has executed this Plan on December 9, 1999. 6 -------------------------------------------------------------------------------- QUICKLINKS PACCAR Inc DEFERRED INCENTIVE COMPENSATION PLAN SECTION 1. ESTABLISHMENT AND PURPOSE. SECTION 2. DEFINITIONS. SECTION 3. ADMINISTRATION. SECTION 4. ELIGIBILITY. SECTION 5. ELECTION TO PARTICIPATE IN PLAN. SECTION 6. ESTABLISHMENT AND TREATMENT OF ACCOUNT. SECTION 7. FORM AND TIME OF PAYMENT ACCOUNT. SECTION 8. EFFECT OF DEATH OF EXECUTIVE. SECTION 9. FORFEITURE OF ACCOUNTS. SECTION 10. INCOMPETENCE. SECTION 11. EXECUTIVES' RIGHTS UNSECURED. SECTION 12. NONASSIGNABILITY OF INTERESTS. SECTION 13. LIMITATION OF RIGHTS. SECTION 14. DOMESTIC RELATIONS ORDERS. SECTION 15. CLAIMS AND INQUIRIES. SECTION 16. AMENDMENT OR TERMINATION OF THE PLAN. SECTION 17. CHANGE OF CONTROL SECTION 18. CHOICE OF LAW. SECTION 19. EXECUTION.

> EXECUTIVE SEVERANCE/CHANGE IN CONTROL AGREEMENT          In this Executive Severance/Change in Control Agreement dated as of August 26, 2000 (the "Agreement"), General Binding Corporation, including its subsidiaries (collectively referred to as "GBC"), and Govi C. Reddy ("Executive"), intending to be legally bound and for good and valuable consideration, agree as follows: (1)     Severance Pay.  Should Executive's employment with GBC be involuntarily terminated for any reason other than Cause (as defined below in Section 2(b)), death, total and permanent disability, voluntary resignation, or retirement at or after age 65, and other than a Change in Control Termination (as defined below in Section 2(a)) or if Executive terminates his employment immediately after he is no longer employed by GBC as its President and CEO, GBC agrees to pay severance to Executive in the form of three (3) years of salary continuation. In addition, Executive will receive a prorated annual bonus for the year in which such termination occurs based on the degree of achievement of goals under the bonus program in effect at the time of termination and the portion of the year elapsed as of the date of termination. The degree of achievement of goals shall be determined in accordance with the bonus program, except that should any goals be of a subjective nature, the degree of achievement then shall be determined by GBC in its sole discretion. Any such bonus amount shall be paid at the same time as annual bonuses for the year are paid to GBC's officers generally. During the period of salary continuation, Executive and his family shall be entitled to continue to participate in medical and dental plans as provided by GBC to its employees generally to the same extent and on the same cost-sharing basis as if Executive's employment had continued during such period; provided, however, that in the event Executive becomes employed by another employer and is covered by such employer's health benefits plan or program, the medical and dental benefits provided by GBC hereunder shall be discontinued. GBC agrees that, for as long as it is making salary continuation payments to Executive, that it will maintain and provide for the aforesaid medical and dental plans or a comparable substitute therefor. Executive shall have the right to exercise any outstanding and fully vested stock option, stock appreciation right, or other exercisable equity-based award until the earlier to occur of (a) the expiration of the salary continuation period and (b) the expiration date of such stock option, stock appreciation right or other equity-based award as set forth in the agreement evidencing such award. (2)     Change in Control. > (a)     GBC shall pay to Executive the severance described in Section 3, and > Executive shall be entitled to receive Change in Control Severance Pay > described in Section 3, if Executive's employment is terminated under the > circumstances described below (a "Change in Control Termination"): > > > (i)     Executive's employment with GBC and all of its subsidiaries is > > terminated: 1 -------------------------------------------------------------------------------- > > > > (1)     On the day of, or within twenty-four (24) months after, the > > > > occurrence of a Change in Control, as such term is defined in > > > > Appendix A; or > > > > > > > > (2)     Prior to a Change in Control but at the request of any third > > > > party participating in or causing the Change in Control; or > > > > > > > > (3)     Otherwise in connection with or in anticipation of a Change in > > > > Control; and > > > > > > (ii)     Executive's termination of employment was not: > > > > > > >  (1)     On account of Executive's death or total and permanent > > > > disability; > > > > > >           (2)     For Cause (as defined below); or > > > > > > > (3)     On account of Executive's retirement, or Executive's resignation > > > > other than for Good Reason (as defined below). > > In addition, if Executive elects to terminate his employment for any reason > during a thirty (30) day period beginning on the date of the six (6) month > anniversary of a Change in Control, such termination shall also be deemed to > be a Change in Control Termination. > > > (b)     For purposes of this Agreement, the following terms shall have the > > definitions as set forth below: > > (i)     "Cause" shall mean (1) a material breach by Executive of those duties > and responsibilities that do not differ in any material respect from > Executive's duties and responsibilities during the ninety (90) day period > immediately prior to termination of employment, which breach is demonstrably > willful and deliberate on Executive's part, is committed in bad faith or > without reasonable belief that such breach is in the best interests of GBC and > is not remedied in a reasonable period of time after receipt of written notice > from GBC specifying such breach, (2) the commission by Executive of a felony > involving moral turpitude, or (3) dishonesty or willful misconduct in > connection with Executive's employment; and > > (ii)     "Good Reason" shall mean a significant reduction in Executive's > annual base salary or annual bonus potential from those in effect immediately > prior to the Change in Control, or Executive's mandatory relocation to an > office more than 50 miles from the primary location at which Executive is > required to perform Executive's duties immediately prior to the Change in > Control, and which reduction or relocation is not remedied in a reasonable > period of time (which shall not be greater than thirty (30) days) after > receipt of written notice from Executive specifying that "Good Reason" exists > for purposes of this Agreement. > > 2 -------------------------------------------------------------------------------- > (3)     Change in Control Severance Pay. > > > (a)     In the event of a Change in Control Termination, GBC agrees to pay > > Executive's base salary and annual bonus target as previously established by > > GBC's Executive Compensation Committee, prorated through the date of the > > Change in Control Termination, plus severance pay equal to 3.25 multiplied > > by the sum of (i) Executive's annual base salary in effect at the date of > > the Change in Control Termination, or, if greater, immediately prior to the > > Change in Control, plus (ii) Executive's target bonus for the year in which > > the Change in Control occurs or Executive's bonus based on actual > > performance for the year, whichever is greater. Such amount will be paid in > > an undiscounted lump sum. During the three (3) year, three (3) month period > > following the Change in Control Termination, Executive and his family shall > > be entitled to continue to participate in medical and dental plans as > > provided by GBC to its employees generally to the same extent and on the > > same cost-sharing basis as if Executive's employment had continued during > > such period. GBC agrees that, during this period, it will maintain and > > provide for the aforesaid medical and dental plans or a comparable > > substitute therefor. > > > > (b)     Any stock awards, stock options, stock appreciation rights or other > > equity-based awards that were outstanding immediately prior to the Change in > > Control Termination shall, to the extent not then vested, fully vest and > > become exercisable as of the date of the Change in Control Termination and > > Executive shall have the right to exercise any such stock option, stock > > appreciation right, or other exercisable equity-based award until the > > earlier to occur of (i) one (1) year from the date of the Change in Control > > Termination and (ii) the expiration date of such stock option, stock > > appreciation right or other equity-based award as set forth in the agreement > > evidencing such award. > > > > (c)     In addition, upon a Change in Control Termination, Executive shall > > be entitled to receive an additional payment equal to the basic and > > supplemental retirement plan match equal to the severance multiple-period > > determined in accordance with Paragraph 3(a) multiplied by the prior two (2) > > calendar years' average corporate contribution rate and will be paid in a > > lump sum with the severance payment as determined in Paragraph 3(a). > > (4)     Gross-Up Payment. If, for any reason, any part or all of the amounts > payable to Executive under this Agreement (or otherwise, if such amounts are > in the nature of compensation paid or payable by GBC or any of its > subsidiaries after there has been a Change in Control) are deemed to be > "excess parachute payments" within the meaning of Section 280G(b)(1) of the > Internal Revenue Code of 1986, as amended (the "Code") or any successor or > similar provision, subject to the following provisions of this Section (4), > GBC shall pay to such Executive, in addition to all other amounts that he may > be entitled to receive, an amount which, after all federal, state, and local > taxes (of whatever kind) imposed on Executive with respect to such amount are > subtracted therefrom, is equal to the excise taxes (which shall include any > interest and penalties related thereto) imposed on such excess parachute > payments pursuant to Section 4999 of the Code or any successor or similar > provision. In the event the amount of excess parachute payments paid or > payable to Executive > > 3 -------------------------------------------------------------------------------- > do not exceed 330% of Executive's "base amount" determined pursuant to Section > 280G of the Code, then the additional payment described in the preceding > sentence shall not be paid and the severance pay payable to Executive > hereunder shall be reduced such that no amounts paid or payable to Executive > shall be deemed excess parachute payments subject to excise tax under Section > 4999 of the Code. > > (5)     Protective Covenants. Executive acknowledges that the above > consideration, absent this Agreement, is beyond what GBC is obligated to pay. > Executive further acknowledges that this Agreement constitutes additional > consideration beyond what GBC is obligated to pay. In consideration of the > opportunity for severance benefits and special grant payments specified above, > and other good and valuable consideration, Executive agrees to the following: > > > (a)     The confidential and proprietary information and trade secrets of > > GBC are among its most valuable assets and include non-public information > > relating to its business such as its customer and vendor lists, databases, > > computer programs, frameworks, models, marketing programs, sales, financial, > > marketing, training and technical information, and any other information, > > whether communicated orally, electronically, in writing or in other tangible > > forms concerning how GBC creates, develops, acquires or maintains its > > products and its marketing plans, targets its potential customers and > > operates its businesses and which confers an economic advantage on GBC and > > is not generally known in the market place. GBC has invested, and continues > > to invest, considerable amounts of time and money in obtaining and > > developing its external relationships, its data systems and databases, and > > all the information described in the preceding sentence (hereinafter > > collectively referred to as "GBC Confidential Information"). Any > > misappropriation or unauthorized disclosure of GBC Confidential Information > > in any form would irreparably harm GBC. Executive will not, except as is > > necessary to carry on the business of GBC or except as GBC may otherwise > > consent or direct in writing, reveal, disclose, sell, use, lecture upon or > > publish any GBC Confidential Information. Executive's obligation under this > > paragraph will cease as to any information which becomes publicly known > > through a source other than Executive. > > > > (b)     Executive acknowledges and agrees that because of his receipt of > > Confidential Information and because of his importance to GBC, GBC would > > likely suffer irreparable harm from Executive's competing with GBC during > > his employment and for some period after termination of employment. > > Executive also acknowledges and agrees that GBC has a protectible interest > > in a stable workforce. Accordingly, Executive agrees that during his > > employment and: > > > > > (i)     in the case of involuntary termination as set forth in Section 1 > > > for the period during which Executive continues to receive pay (provided, > > > however, Executive may elect to waive such pay continuation after receipt > > > of one (1) year's pay in which event GBC shall waive the restriction set > > > forth in subparagraph (2) below for any further period); and > > > > > > (ii)     in the case of any other termination, including a Change of > > > Control Termination, for a period of one (1) year from Executive's last > > > day of employment, whether or not severance is payable, > > 4 -------------------------------------------------------------------------------- > Executive shall not, directly or indirectly (through another business or > person), engage in the following activities or assist others in such > activities, anywhere in the United States or in any other jurisdiction outside > of the United States in which GBC conducts its business at the time of > termination of Executive's active employment with GBC: > > > > (1)     Hiring, recruiting, or attempting to recruit for any person or > > > business entity that is a Competitor (as defined below in paragraph (c)) > > > of GBC, any person employed by GBC; and > > > > > > (2)     Being employed by, being connected to, or consulting for any > > > person who or business entity which is a Competitor of any GBC business at > > > the time of the termination of Executive's active employment with GBC as > > > identified in Appendix B. > > > > The provisions of paragraph 5(b) will apply should Executive's employment be > > terminated by either party for any reason (including but not limited to > > resignation or retirement). > > > > (c)     For the purposes of this Agreement, "Competitor" shall be defined as > > any business and any branch, office or operation thereof, which is in > > material competition with GBC, including without limitation, any direct > > marketing or electronic commerce business engaged in the manufacture, direct > > or indirect distribution, sale or service of binding equipment and supplies, > > laminating equipment and supplies, visual communications products, paper > > shredders, thermal laminating film, other products or services that GBC > > actively engages in the production and/or sale of, or similar office > > products. Executive acknowledges that GBC's business is global in nature, > > and, accordingly, a geographic limitation will not adequately protect GBC. > > > > (d)     Executive agrees that the restrictions set forth above are necessary > > to prevent the use and disclosure of GBC Confidential Information and to > > otherwise protect the legitimate business interests of GBC. Executive > > further agrees and acknowledges that the provisions of this Agreement are > > reasonable. > > > > (e)     Irreparable harm would result from any breach by Executive of the > > provisions of this Agreement, and monetary damages alone would not provide > > adequate relief for any such breach. Accordingly, if Executive breaches this > > Agreement, injunctive relief in favor of GBC is proper. Moreover, any award > > of injunctive relief shall not preclude GBC from seeking or recovering any > > lawful compensatory damages which may have resulted from a breach of this > > Agreement, including a forfeiture of any payments not made. > > > > (f)     Any waiver, or failure to seek enforcement or remedy for any breach > > or suspected breach of any provision of this Agreement by GBC in any > > instance shall not be deemed a waiver of such provision in the future. > > (6)     For a period of up to two (2) years from the date of the termination > of Executive's employment, GBC shall provide outplacement services to > Executive up to a maximum cost to GBC of ten percent of Executive's base > salary in effect at the time of employment termination. > > 5 -------------------------------------------------------------------------------- > Outplacement services shall be provided by an entity mutually agreed upon by > GBC and Executive. > > (7)     In the event Executive becomes eligible for severance benefits as > provided under either Section (1) and Section (3) herein, then (a) at the time > Executive receives his first severance payment hereunder, GBC will also > deliver to Executive as additional compensation the title of the company car > that Executive is using at that time, and (b) after the expiration of any > active health care benefits during the applicable severance period as provided > under Section (1) or (3)(a), as the case may be, Executive shall be entitled > to retiree health care coverage until age 65 according to GBC's normal > practice for long service employees. > > (8)     In no event shall Executive be obligated to seek other employment or > take any other action by way of mitigation of the amounts payable to him > hereunder, and except as specifically provided in Section 1 with respect to > certain medical and dental benefits, such amounts shall not be reduced whether > or not Executive obtains other employment. > > (9)     If any provision(s) of this Agreement shall be found invalid, illegal, > or unenforceable, in whole or in part, then such provision(s) shall be deemed > to be modified or restricted to the extent and in the manner necessary to > render the same valid and enforceable or shall be deemed excised from this > Agreement, as the case may require, and this Agreement shall be construed and > enforced to the maximum extent permitted by law, as if such provision(s) had > been originally incorporated herein as so modified or restricted or as if such > provision(s) had not been originally incorporated herein, as the case may be. > > (10)     THIS AGREEMENT WILL BE GOVERNED UNDER THE INTERNAL LAWS OF THE STATE > OF ILLINOIS. EXECUTIVE AGREES THAT THE STATE AND FEDERAL COURTS LOCATED IN THE > STATE OF ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION IN ANY ACTION, SUIT OR > PROCEEDING BASED ON OR ARISING OUT OF THIS AGREEMENT, AND EXECUTIVE HEREBY: > (a) SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS; (b) CONSENTS TO THE > SERVICE OF PROCESS IN CONNECTION WITH ANY ACTION, SUIT, OR PROCEEDING AGAINST > EXECUTIVE; AND (c) WAIVES ANY OTHER REQUIREMENT (WHETHER IMPOSED BY STATUTE, > RULE OF COURT, OR OTHERWISE) WITH RESPECT TO PERSONAL JURISDICTION, VENUE OR > SERVICE OF PROCESS. > > (11)     Executive and GBC agree that, in the event a dispute arises that > concerns this Agreement, the Prevailing Party shall be entitled to recover all > of their reasonable fees and expenses, including, without limitation, > reasonable attorneys' fees and expenses incurred in connection with the > dispute. A Prevailing Party is one who is successful on any significant > substantive issue in the action and achieves either a judgment in such party's > favor or some other affirmative recovery. > > (12)     This Agreement does not constitute a contract of employment, and > Executive acknowledges that Executive's employment with GBC is terminable at > will by either party with or without cause and with or without notice. > > 6 -------------------------------------------------------------------------------- > (13)     If any provision of this Agreement conflicts with any other > agreement, policy, plan, practice or other GBC document, then the provisions > of this Agreement will control. This Agreement will supersede any prior > agreement between Executive and GBC with respect to the subject matter > contained herein and may be amended only by a writing signed by an officer of > GBC and the Executive. > > (14)     All compensation paid or provided to Executive under this Agreement > shall be subject to any applicable income, payroll or other tax withholding > requirements. > > (15)     This Agreement shall be for the benefit of and shall be binding upon > GBC and Executive and their respective heirs, personal representatives, legal > representatives, successors and assigns. > > (16)     This Agreement may be executed in one or more counterparts, which > together shall constitute a valid and binding agreement. > > IN WITNESS WHEREOF, Executive and GBC, by its duly authorized representatives, > have executed this Agreement effective as of the date set forth below. > > > GENERAL BINDING CORPORATION > > > > [s] Govi C. Reddy > > > > [s] James A. Miller > > > > Govi C. Reddy > > > > James A. Miller, Chairman > > > >          September 1, 2000 > > > >        August 28, 2000 > > > > Date > > > > Date > > > >   > > > >   > > > >   > > 7 -------------------------------------------------------------------------------- > Appendix A > > to Executive Severance/Change in Control Agreement > >   > >      "Change in Control" shall mean the first to occur of: > > > (a)     Any "person" (as defined in Section 13(d) and 14(d) of the > > Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding > > for this purpose, (i) any person who, as of June 28, 2000, was the > > beneficial owner of 10% or more of the combined voting power of the voting > > securities of General Binding Corporation (the "Company"), or (ii) the > > Company or any subsidiary of the Company, or (iii) any employee benefit plan > > of the Company or any subsidiary of the Company, or any person or entity > > organized, appointed or established by the Company for or pursuant to the > > terms of any such plan which acquires beneficial ownership of voting > > securities of the Company, is or becomes the "beneficial owner" (as defined > > in Rule 13d-3 under the Exchange Act), directly or indirectly of securities > > of the Company representing more than 50% of the combined voting power of > > the Company's then outstanding securities; provided, however, that no Change > > in Control will be deemed to have occurred as a result of a change in > > ownership percentage resulting solely from an acquisition of securities by > > the Company; and provided further that no Change in Control will be deemed > > to have occurred if a person inadvertently acquires an ownership interest of > > more than 50% but then promptly reduces that ownership interest below > > 50%; or > > (b)     During any two (2) consecutive years (not including any period > beginning prior to June 28, 2000), individuals who at the beginning of such > two (2) year period constitute the Board of Directors of the Company and any > new director (except for a director designated by a person who has entered > into an agreement with the Company to effect a transaction described elsewhere > in this definition of Change in Control) whose election by the Board or > nomination for election by the Company's stockholders was approved by a vote > of at least two-thirds of the directors then still in office who either were > directors at the beginning of the period or whose election or nomination for > election was previously so approved (such individuals and any such new > director, the "Incumbent Board") cease for any reason to constitute at least a > majority of the Board; or > > (c)     Consummation of a reorganization, merger or consolidation or sale or > other disposition of all or substantially all of the assets of  > > A-1 -------------------------------------------------------------------------------- >   > > the Company (a "Business Combination"), in each case, unless, following such > Business Combination, (i) all or substantially all of the individuals and > entities who were the beneficial owners of outstanding voting securities of > the Company immediately prior to such Business Combination beneficially own, > directly or indirectly, more than 50% of the combined voting power of the then > outstanding voting securities entitled to vote generally in the election of > directors, as the case may be, of the company resulting from such Business > Combination (including, without limitation, a company which as a result of > such transaction owns the Company or all or substantially all of the Company's > assets either directly or through one or more subsidiaries) in substantially > the same proportions as their ownership, immediately prior to such Business > Combination of the outstanding voting securities of the Company; or > > > (d)      Approval by the stockholders of the Company of a complete > > liquidation or dissolution  of the Company.    > >         > > > >   > >     A-2 --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document STATE OF MINNESOTA POLLUTION CONTROL AGENCY AND DEPARTMENT OF NATURAL RESOURCES IN THE MATTER OF THE AMERICAN CRYSTAL SUGAR COMPANY EAST GRAND FORKS, MINNESOTA   STIPULATION AGREEMENT I. Recitals A.  PARTIES.     The parties to this Stipulation Agreement (hereinafter "Agreement") are: 1.The Minnesota Pollution Control Agency (hereinafter "MPCA"); 2.The Minnesota Department of Natural Resources (hereinafter "MDNR") and 3.The American Crystal Sugar Company (hereinafter "ACSC"). B.  MPCA AUTHORITY.     The MPCA is a statutory agency of the state of Minnesota charged with overall powers and duties to administer and enforce all laws, statutes, standards, rules, permits, and stipulation agreements relating to the prevention, control or abatement of water, air, noise, and land pollution and to the management, collection, treatment, transportation, storage and disposal of solid and hazardous waste in the state. This authority is specifically described in Minn. Stat. chs. 115, 115A, 115B, 115C, and 116 (1998). Unless otherwise specified in this Agreement, where this Agreement requires or allows the MPCA to take action, the Commissioner of the MPCA or her designee shall act on the MPCA's behalf. Where this Agreement refers to "Commissioner" it means the Commissioner of the MPCA, unless the Commissioner of the MDNR is specified. C.  MDNR AUTHORITY.     The MDNR is a statutory agency of the state of Minnesota charged with overall powers and duties to manage, protect and conserve all public lands, parks, timber, waters, minerals, wild animals, wild plants and other natural resources of the state, and to administer and enforce all laws, statutes, standards, rules, contracts, agreements and permits relating thereto. This authority is specifically described in Minn. Stat. chs. 83A through 103G (1998). Unless otherwise specified in this Agreement, where this Agreement requires or allows the MDNR to take action, the Commissioner of the MDNR or his designee shall act on the MDNR's behalf. D.  RULES.     The MPCA and MDNR, after legal notice and hearing, have adopted, filed in the Office of the Secretary of State, and published in the State Register, rules that have the force and effect of law and general application throughout the state of Minnesota. E.  STATEMENT OF FACTS.     The following constitutes a summary of the facts upon which this agreement is based. In executing this Agreement, ACSC is settling a disputed matter with the MPCA and does not admit either the violations alleged or the appropriateness of the penalty assessed by the MPCA. ACSC is committed to environmental protection, to compliance with all environmental laws, and to cooperation with the environmental regulatory agencies. None of the facts alleged in this Agreement shall be construed to constitute an 1 -------------------------------------------------------------------------------- admission by ACSC with respect to any claim made by a person or entity who is not a party to this Agreement.     1.  ACSC owns and operates a sugar beet processing facility at Highway 2 East, Polk County, East Grand Forks, Minnesota (hereinafter "Facility") which converts sugar beets to sugar and sugar products. The Facility consists of sugar beet collection and stockpiling areas, sugar beet processing and refining operations, an industrial wastewater treatment system, a storm water collection and treatment system, and a permitted industrial solid waste site (SW 434). The ACSC Facility is a hazardous waste generator (MND006174809). It collects hazardous waste on site at various locations and wastes are shipped off site for treatment and/or disposal.     2.  ACSC generates wastewater and collects storm water that contains pollutants as a result of contact with various sources at its Facility. ACSC is required to manage, provide treatment for and discharge these waste streams in accordance with the terms of Minnesota statutes and rules pertaining to water pollution and, the terms and conditions of National Pollutant Discharge Elimination System/State Disposal System (NPDES/SDS) Permit Number MN0001937 (hereinafter "Permit") effective June 15, 1994 to the present.     3.  In the spring of 1997, the Red River Valley including the East Grand Forks area, experienced extensive flooding. This flooding, plus above average precipitation during the winter and spring of 1997-98 caused the Facility to have unexpectedly large amounts of waste water in the spring of 1998.     4.  In early March of 1998, ACSC requested permission to make a direct discharge of excess storm water. The MPCA denied this request. After consideration of other requests, the MPCA allowed the Facility to create a temporary holding pond between two existing lime ponds.     5.  Due to rainfall in early June 1998, the temporary holding pond reached capacity. At some time before June 24, 1998, the berm of the temporary holding pond broke and waste water escaped from the Facility.     6.  On June 24, 1998, the MPCA received a citizen report of dead fish and other aquatic species on Grand Marais Creek in Section 32 of Sullivan Township. The MPCA contacted the MDNR office in Bemidji, Minnesota to request an investigation of the reported kill.     7.  On June 24, 1998, Conservation Officer Greg Spaulding arrived at the reported site, interviewed the resident and observed dead northern pike, sunfish, carp, suckers, crayfish and other aquatic organisms on the banks of the Grand Marais Creek. Officer Spaulding also observed an odor and a sheen on the creek. He then followed the creek upstream until he discovered black liquid flowing in from an east/ west drainage ditch and discharging into Grand Marais Creek in Section 32. Downstream of the point of discharge, Officer Spaulding observed the same black water, dead aquatic organisms and a similar odor. Observations on the Grand Marais Creek upstream of the discharge from the east/west drainage ditch, included clear water and no dead aquatic organisms. Officer Spaulding then traced the black effluent west, under U.S. Highway 2, south and the west again through ditches that led to the facility grounds of American Crystal Sugar Company. He observed the source of the black effluent to be coming from an area near the spent lime ponds at the ACSC Facility.     8.  On June 24, 1998, Officer Spaulding retained two samples of the effluent, as directed by the MPCA, in the drainage ditch system prior to the Grand Marais Creek. An independent laboratory analyzed those samples and the results are as follows: Carbonaceous Biochemical Oxygen Demand concentrations of 6,957 and 4,800 mg/l, Chemical Oxygen Demand concentrations of 12,247 and 5,911 mg/l, Specific Conductance values of 6,693 and 5,975 umhos/cm, Ammonia concentrations of 22.7 and 37.3 mg/l, Total Phosphorous concentrations of 16.2 and 8.77 mg/l, Total Suspended Solids concentrations of 300 and 58 mg/l and Total Solids concentrations of 12,410 and 8,616 mg/l. 2 --------------------------------------------------------------------------------     9.  At approximately 4:30 P.M. on June 24, 1998, MPCA contacted the Facility by phone and Officer Spaulding met with ACSC company officials, interviewed them, and investigated the area of concern inside of the Facility grounds. Officer Spaulding noted that a pump had recently been pumping water into a containment area between two spent lime ponds and the engine of the pump was hot to the touch. He also observed a breech in the north end of the containment area and effluent discharging from the containment area in the direction of the ditch system from which he earlier took samples of the black effluent. At approximately 6:30 p.m. the investigation was turned over to MPCA personnel.     10.  MPCA personnel met with ACSC personnel to investigate the site on June 24, 1998. MPCA staff observed the containment area for storm water, the area of the breech, the pump used to pump storm water from a ditch to the containment area, and an agricultural field owned by ACSC directly to the south of the spent lime ponds.     11. MPCA staff instructed ACSC officials to strategically plug any ditches prior to Grand Marais Creek to stop the flow and begin recovering all storm water from the ditch system between the containment area and the creek. At this time, MPCA staff instructed ACSC officials to report the release to the Minnesota Duty Officer since ACSC officials had not reported the spill.     12. ACSC began work to plug the discharge from the Facility property to the drainage ditch and began pumping pooled water from the highway ditch back into the field ditch for recovery. Recovery work continued for several days.     13. MPCA staff then began sampling for dissolved oxygen. Concentrations of dissolved oxygen in the released storm water were 0.78 mg/l, a concentration of 0.50 mg/l was discovered on the Grand Marais Creek downstream of the confluence with the released water, and 7.8 mg/l upstream of the confluence of the released storm water. Storm water from the City of East Grand Forks was also tested for dissolved oxygen which resulted in a reading of 7.68 mg/l.     14. In accordance with Minn. Stat. §§ 97A.025, 97A.341, and 115.071, subd. 3(b), the MDNR Area Fisheries Manager determined that an estimated 351,640 fish were killed which included northern pike, crappie, brook stickleback, fathead minnow, black bullhead, white sucker and carp during this discharge incident. Based on restitution as determined by Minn. Stat. § 97A.345 and Minn. R. ch. 6133, the restitution values for these fish were determined to be $11,610.36. Numerous dead invertebrates and plants were also observed by MDNR investigators on June 24, 25 and 26, indicating that this was an extensive kill of in stream aquatic biota. The cost of the investigation to the MDNR was determined to be an additional $5,636.84 for a total of $17,247.20     15. On September 24, 1998, the MPCA issued a Notice of Violation to ACSC to allege violations associated with the aquatic organism kill on June 24.     16. On October 7, 1998, MPCA staff were notified of strong odors that had been occurring all summer in an agricultural field in Section 15 of Grand Forks Township, directly north of the City of East Grand Forks wastewater treatment ponds. The property consists of 120 acres of land. The site was used as a composting facility by R. J. Zavoral and Sons, a contractor hired by ACSC to do general maintenance work including, but not limited to, excavation work, dirt hauling, cleaning ponds and disposal of pulp and beet tailings. On October 8, 1998, MPCA staff investigated the site and found an area being used for application of waste sugar beet tailings and beet pulp. At the time of the inspection, the beet pulp was spread from one to two feet thick and beet tailings were piled up to five feet thick around a low area on the west side of the field. The area of the waste beet pulp and beet tailings had a very strong odor characteristic of waste sugar beet material. Run-off from the field was moving west into a ravine and was collecting in an oxbow area adjacent to the Red River of the North. The water run off from the field was very black and odiferous. The oxbow area eventually led to the Red River of the North.     17. On October 18, 1998, MPCA staff obtained a sample from the direct run-off from the field. Results are as follows: the Carbonaceous Biochemical Oxygen Demand concentration was 19,218 mg/l, a 3 -------------------------------------------------------------------------------- Total Suspended Solids concentration of 2,140 mg/l, a Specific Conductance value of 13,087 umhos/cm, a Total Phosphorous concentration of 26.7 mg/l, Ammonia-Nitrogen concentration of 182 mg/l and Total Kjeldahl Nitrogen concentration of 210 mg/l. At 11:30 a.m., MPCA staff took a sample of the pooled water in the oxbow and the results were as follows: a Carbonaceous Biochemical Oxygen Demand concentration of 1,758 mg/l, a Total Suspended Solids concentration of 180 mg/l, Specific Conductivity value of 3,128 umhos/cm, a Total Phosphorous concentration of 5.31 mg/l, Ammonia-Nitrogen concentration of 18.6 mg/l, and a Total Kjeldahl Nitrogen concentration of 36 mg/l.     18. On October 9, 1998, ACSC officials were contacted regarding the field in Section 15. A discussion of management practices of the waste beet pulp and tailings took place and MPCA staff instructed ACSC officials to block the run-off from the field from entering the oxbow, pump all recoverable high strength water from the oxbow and bring the water to the facility for treatment. MPCA staff also instructed ACSC officials to spread the waste beet tailings and pulp in the field at agronomic rates.     19. On October 19, 1998, a representative from Wenck and Associates, a consulting firm retained by Zavoral, called and explained the progress of the site in Section 15 and explained that 346,000 gallons of water were pumped from the oxbow into ACSC's wastewater treatment system between October 9, and October 15, 1998. A report from Wenck and Associates dated October 20, 1998, verified this information. ACSC submitted another report on November 9, 1998, that indicated that approximately 225 tons per acre of waste beet tailings were applied to the field in Section 15. At the time of the inspection, MPCA staff calculated an application rate as high as 1,600 tons/acre in some areas of the agricultural field in Section 15.     20. On December 9, 1998, MPCA staff responded to a citizen complaint alleging that waste beet tailings and beet pulp were transported to a landfill area near the Red River of the North. After investigating the City of East Grand Forks Demolition Landfill, MPCA learned that waste beet tailings were hauled to an area referred to as "the pit" located in the NW1/4 of Section 27 in Grand Forks Township. The area referred to as "the pit" is located south of the East Grand Forks Demo Landfill, due west of the Grand Forks Cable T.V. communications tower and directly adjacent to the Red River of the North. MPCA staff discovered that as many as 11,000 tons of waste beet tailings were hauled in to this area since 1994, and most recently at least 50 tons were pushed towards the river. A characteristic sugar beet odor was present. An area of frozen water was present between the Red River of the North and the tailings. Subsequent phone calls with ACSC personnel revealed that ASCS contracted with R.J. Zavoral and Sons, Inc. of East Grand Forks, to among other things, haul the waste beet tailings to this area since 1994 and during the 1997/1998 sugar beet campaign. The section of land is currently "in care of" by RJ Zavoral and Sons, Inc. according to Polk County records. R.J. Zavoral and Sons, Inc. has a Polk County Conditional Use permit for a clay mining operation and a yard for recycling non-reinforced concrete and soil cement at the site.     21. On June 21, 1999, MPCA staff inspected the Facility in response to an odor complaint. During the complaint investigation, MPCA staff observed that ACSC was hydraulically dredging a mud pond. The operation consisted of a hydraulic dredge pumping wastewater containing mud solids to an area located between Ponds 12 and 13. ACSC used this area to temporarily hold high strength storm water that discharged to the Grand Marais Creek during June 1998. During the inspection MPCA staff observed that ACSC had created two large berms on the north and south end of the area between Ponds 12 and 13. ASCS had filled the area with approximately 53,000 cubic yards of mud solids and 800,000 to 1,000,000 gallons of high strength wastewater from Mud Pond #2a, close to the capacity created in that area. MPCA staff instructed ACSC officials to discontinue this operation immediately because the area is not constructed in accordance with approved plans and specifications and is not permitted as a waste storage facility.     22. Also during the investigation on June 21, 1999, MPCA staff observed construction activities related to a new wastewater treatment clarifier. ACSC officials stated that construction of the project 4 -------------------------------------------------------------------------------- began as early as March 3, 1999, and the clarifier tank construction was approximately 75 percent complete during the investigation. MPCA staff received the plans and specifications for this project on June 1, 1999, and had not approved the plans and specifications at the time of the investigation.     23. On July 1, 1999, MPCA staff issued a letter informing ACSC of the alleged violations related to the activities discovered on June 21, 1999. F.  ALLEGED VIOLATIONS.     The MPCA and MDNR allege that ACSC violated the following fish and wildlife protection statutes and water quality and solid waste statutes, rules, and permit requirements:     1.  Minn. Stat. § 115.061 [DUTY TO NOTIFY AND AVOID WATER POLLUTION] States in part "It is the duty of every person to notify the agency immediately of the discharge, accidental or otherwise, of any substance or material under its control which, if not recovered, may cause pollution of waters of the state, and the responsible person shall recover as rapidly and as throughly as possible such substances or material and take immediately such other action as may be reasonably possible to minimize or abate pollution of waters of the state caused thereby."     ACSC failed to immediately notify the MPCA of a discharge of high strength storm water from a temporary containment area between Ponds 12 and 13 at its East Grand Forks facility. The discharge of high strength storm water began at least as early as Monday afternoon June 22, 1998. ACSC did not report the discharge from the temporary containment area until Wednesday June 24, 1998, after 7:00 p.m. when instructed by MPCA staff. Furthermore, ACSC failed to take immediate action to minimize pollution of waters of the state and failed to recover the high strength storm water as rapidly as possible. ACSC staff either observed and did not act upon or failed to observe that the high strength storm water was overflowing from the temporary containment area for at least 48 hours prior to ACSC recovering the remainder of the storm water after it was discharged from outside the temporary containment area.     2.  Minn. R. 7050.0210, Subp. 2 [GENERAL STANDARDS FOR DISCHARGES TO WATERS OF THE STATE; Nuisance conditions prohibited] States, "No sewage, industrial waste, or other wastes shall be discharged from either point or nonpoint sources into any waters of the state so as to cause any nuisance conditions, such as the presence of significant amounts of floating solids, scum, visible oil film, excessive suspended solids, material discoloration, obnoxious odors, gas ebullition, deleterious sludge deposits, undesirable slimes or fungus growths, aquatic habitat degradation, excessive growths of aquatic plants, or other offensive or harmful effects."     ACSC discharged between 1.8 and 2.4 million gallons of high strength storm water to waters of the state when the storm water breached the temporary holding area. The high strength storm water ultimately entered a borrow pit, the drainage ditch and then Grand Marais Creek, all of which are waters of the state. The discharge caused nuisance conditions in the township ditch and in Grand Marais Creek, including obnoxious odors, a visible film, material discoloration and aquatic habitat degradation. In addition, the discharge caused other harmful effects including the suppression of dissolved oxygen levels to a point that caused fish and other aquatic organisms in and around Grand Marais Creek to die.     3.  Minn. R. 7060.0600, Subp. 2 [STANDARDS: Prohibitions against discharge into the unsaturated zone] States, "No sewage, industrial waste, or other pollutants shall be allowed to be discharged to the unsaturated zone or deposited in such place, manner, or quantity that the effluent or residue therefrom, upon reaching the water table, may actually or potentially preclude or limit the use of the underground waters as a potable water supply, nor shall any such discharge or deposit be allowed which may pollute the underground waters. All such possible sources of pollutants shall be monitored at the discharger's expense as directed by the agency." 5 --------------------------------------------------------------------------------     On June 21, 1999, ACSC disposed of approximately 800,000 to 1,000,000 gallons of wastewater containing approximately 53,000 cubic yards of mud solids into such place, manner and quantity that the effluent or residue may reach the water table. The disposal of the waste may have polluted underground waters and was not approved by the MPCA.     4.  Minn. Rules 7001.1030, Subp. 1 [PERMIT REQUIREMENT AND EXEMPTIONS; Permit Required] States "except as provided in subpart 2, no person may discharge a pollutant from a point source into the waters of the state without obtaining a National Pollutant Discharge Elimination System permit from the agency."     ACSC failed to obtain an NPDES permit for the discharge of high strength storm water that caused a fish kill on Grand Marais Creek in Polk County, Minnesota.     ACSC does have an NPDES/SDS permit (MN0001937) that authorizes the discharge of treated wastewaters to the Red River of the North pursuant to specific requirements. MPCA staff alleges that the discharge of high strength wastewater, which caused a fish kill in the Grand Marais Creek, was not authorized by the existing NPDES/SDS permit.     5.  NPDES/SDS Permit MN 0001937 Part II, A. 4. [MANAGEMENT REQUIREMENTS; Adverse Impact] States in part "the Permittee shall take all reasonable steps to minimize any adverse impact to waters of the state resulting from effluent limitation violations from an unauthorized discharge."     ACSC did not take all reasonable steps to minimize the impact of waters of the state from the discharge of high strength storm water, by failing to stop the overflow from the temporary containment area when it was first observed. Also, ACSC failed to stop pumping high strength storm water into the same holding area after the overflow first occurred.     6.  NPDES/SDS Permit MN 001937 Part II, A. 6. d. [Facilities Operation and Quality Control] States in part "all waste collection, control, treatment, and disposal facilities shall be operated in a manner consistent with the following:     The Permittee shall at all times maintain in good working order and operate as efficiently as possible all facilities or systems of control installed or used to achieve compliance with the terms and conditions of this permit. Proper operation and maintenance includes effective performance, adequate funding, adequate operator staffing and training, and adequate laboratory and process controls, including appropriate quality assurance procedures.     ACSC failed to maintain in good working order and operate as efficiently as possible the temporary containment area for high strength storm water by allowing a release form the temporary containment area. ACSC continued to pump high strength storm water into the temporary containment area after an overflow, which ACSC employees observed, occurred from the area. Also, ACSC failed to adequately train its employees to maintain, operate, and inspect the temporary high strength storm water containment area.     7.  NPDES/SDS Permit MN 00-01937 Part II, A. 8. [System Reliability] States in part "the Permittee is responsible for maintaining adequate safeguards to prevent the discharge of untreated or inadequately treated wastes at all times. The Permittee is responsible for insuring system reliability by means of alternate power sources, back-up systems, storage of inadequately treated effluent, or other appropriate methods of maintaining system reliability."     By failing to adequately maintain and inspect the temporary high strength storm water containment area, ACSC did not ensure system reliability. 6 --------------------------------------------------------------------------------     8.  Minn. R. 7001.3050, Subp. 1 [PERMIT REQUIREMENTS] States "Permit required. Except as provided in subpart 2, a solid waste management facility permit or permit modification is required to:     A.  treat, store, process, or dispose of solid waste;     B.  establish, construct, or operate a solid waste management facility; or     C.  change, add, or expand a permitted solid waste management facility.     During June 1999, as identified by an MPCA staff inspection on June 21, 1999, ACSC changed, added and expanded the permitted portion of the solid waste management facility by disposing of an unacceptable waste material in an area between two solid waste areas. The waste consisted of approximately 800,000 to 1,000,000 gallons of wastewater containing approximately 53,000 cubic yards of mud solids and was disposed of in the area between Ponds 12 and 13.     9.  Minn. R. 7035.0800 Subp. 1 [Collection and Transportation of Solid Waste] States in part "The owner and occupant of any premises, business establishment, or industry and/or the refuse collection service are responsible for the satisfactory collection and transportation of all solid waste accumulated at the premise, business establishment, or industry to a solid waste disposal facility for which a permit has been issued by the agency, unless otherwise provided in these parts."     ACSC failed to ensure that waste beet tailings and pulp generated at the Facility were adequately collected and transported to an Agency permitted facility.     10.  Minn. Stat. 115.07, Subd. 1 [Obtain Permit] States in part that "it is unlawful for any person to construct, install or operate a disposal system, or any part thereof, until plans therefor shall have been submitted to the agency unless the agency shall have waived the submission thereof to it and a written permit therefor shall have been granted by the agency."     ACSC failed to submit plans and specifications prior to the construction of a wastewater clarifier at the Facility. MPCA staff observed that construction of the clarifier was approximately 75% complete during an inspection on June 21, 1999. The construction began on March 3, 1999, however ACSC did not submit plans and June 1, 1999. The MPCA did not approve plans and specification prior to construction.     Also, in June 1999, ACSC failed to submit plans and specifications of the disposal of wastewater containing mud solids in an area outside the permitted wastewater treatment facility.     11.  NPDES Permit MN0001937, Part II, A, 9. [Construction] States "This permit only authorizes the construction of treatment works to attain compliance with the limitations and conditions of this permit, after plans and specifications for treatment facilities have been submitted to and approved in writing by the Commissioner prior to the start of any construction."     ACSC failed to submit plans and specifications prior to the construction of a wastewater clarifier at the Facility. The construction began around March 3, 1999 while ACSC did not submit the plans and specification until June 1, 1999.     12.  NPDES Permit MN0001937 Part II. A. 5, b, and c [Changes in Discharge] States in part;     b.  Facility modification, additions, and/or expansions that increase plant capacity shall be reported to the Commissioner (Attn: Industrial Section, Water Quality Division) and this permit may then be modified or reissued to reflect such changes. 7 --------------------------------------------------------------------------------     c.  Any anticipated change in the facility discharge, including any facility expansions, production increase, process modifications, new or modified industrial discharges, or changes in the quality of existing industrial discharges to the treatment system that may result in a new or increased discharge of pollutants shall be reported to the Commissioner (Attn: Industrial Section, Water Quality Division). Modification to the permit may then be made to reflect any necessary change in permit conditions, including any necessary effluent limitations for any pollutant not identified and limited herein.     ACSC failed to notify the agency of the transport of wastewater containing mud solids from Mud Pond #2a into an area that is not permitted for wastewater storage/treatment or solid waste storage/disposal.     13.  MPCA Solid Waste Permit SW-434, Part I. D. [Waste Characteristics] States in part "This permit does not authorize the placement of any other waste at the Facility unless permission is requested from and approval is given by the Commissioner. This permit does not authorize the placement of hazardous wastes."     ACSC failed to notify the agency of the transport of wastewater containing mud solids from Mud Pond #2a into an area that is not permitted for wastewater storage/treatment or solid waste storage/disposal.     14.  Minn. Stat. § 97A.025 [OWNERSHIP OF WILD ANIMALS] States "The ownership of wild animals of the state is in the state, in its sovereign capacity for the benefit of all the people of the state. A person may not acquire a property right in wild animals or destroy them, unless authorized under the game and fish laws, sections 84.09 to 84.15, or sections 17.47 to 17.498."     Minn. Stat. § 97A.341, subd. 1 [LIABILITY FOR RESTITUTION] states, in part, "A person who kills, injures, or possesses a wild animal in violation of the game and fish laws is liable to the state for the value of the wild animal as provided in this section."     Minn. Stat. § 97C.065 [POLLUTANTS IN WATER] states, in part, "A person may not dispose of any substance in state waters, or allow any substance to enter state waters, in quantities that injure or are detrimental to the propagation of wild animals or taint the flesh of wild animals."     Minn. Stat § 115.071, subd. 3(b) [CIVIL PENALTIES] states, in part, "The defendant may be required to forfeit and pay to the state an additional sum to constitute just compensation for any loss or destruction of wildlife, fish or other aquatic life and for other actual damages to the state caused by an unauthorized discharge of pollutants."     The discharge of storm waters containing pollutants into the environment destroyed fish and aquatic animals. Wild animals, including fish, belong to the state of Minnesota and persons who destroy wild animals without lawful authority are liable to the state for its value, Minn. R. ch. 6133 [DNR RESTITUTION VALUE FOR FISH AND WILDLIFE], as prescribed in Minn. Stat. § 97A.345 [RESTITUTION VALUE OF WILD ANIMALS], provides the restitution values to the state of the various wild animals (fish species) destroyed by ACSC's unlawful discharge of pollutants. ACSC is responsible to provide restitution to the state in the amount determined in accordance with these rules. 8 -------------------------------------------------------------------------------- II. AGREEMENT     NOW, THEREFORE, the MPCA, MDNR, and ACSC hereby agree and stipulate as follows: A.  PURPOSE OF AGREEMENT.     The purpose of this Agreement is to resolve the violations alleged in paragraph I.F. of this Agreement. If there is any conflict between the terms of this Agreement and any permit issued to the ACSC, ACSC shall comply with the most restrictive term. In entering this Agreement, ACSC is settling a disputed matter between itself and the MPCA and MDNR and, except as expressly stated in II.C.2., does not admit that violations alleged in this Agreement occurred. B.  ACSC REQUIREMENTS.     1.  Civil Penalty  ACSC agrees to pay Twenty-Seven Thousand and Two Hundred Eighty Dollars $27,280 to the MPCA as a civil penalty for the violations alleged in Part F within 30 days after the effective date of this Agreement. Payment of the penalty amount of $27,280 is to be by check or money order payable to the Minnesota Pollution Control Agency. The check should be mailed to: Loren Voigt, Enforcement Supervisor, North District, Minnesota Pollution Control Agency, 520 Lafayette Road, St. Paul, Minnesota 55155-4194.     If ACSC fails to make timely payment, the MPCA may assess and the ACSC agrees to pay a late payment charge, in addition to the civil penalty, to be assessed as follows. Forty-five (45) days after the effective date of this Agreement, ACSC shall be obligated to pay a late charge in an amount equal to ten percent (10%) of the unpaid civil penalty. Sixty (60) days after the effective date of this Agreement, ACSC shall be obligated to pay an additional late charge in an amount equal to twenty percent (20%) of the unpaid civil penalty. Supplemental Environmental Project.     a.  ACSC has proposed and the MPCA accepts the proposal to perform a Supplemental Environmental Project (SEP) at a cost to ACSC of One Hundred Thousand Dollars ($100,000). The SEP shall include the following:     ACSC agrees to pay $100,000 to the West Polk County Soil and Water Conservation District (SWCD). This penalty amount shall be used as part of the Sand Hill River Restoration Project to improve water quality, fish migration and stream bank stabilization in a 10-mile stretch of the Sand Hill River in Polk County.     ACSC understands that the actual cost to ACSC of the Project will be One Hundred Thousand Dollars ($100,000). ACSC agrees to expend the amount of money as described, and agrees that ACSC shall receive no payment or other compensation for the work performed in completion of the Project. ACSC shall maintain copies of all invoices, contracts, manifests, receipts, and any and all other documentation of the actual costs ACSC incurs in completing the Project.     b.  If the Project is abandoned prior to completion, ACSC shall pay to the MPCA the balance of the unused portion of the SEP as a penalty.     2.  Reimbursement  ACSC agrees that within thirty (30) days after the effective date of this Agreement, ACSC shall pay for the reimbursement of the MDNR's costs related to this Agreement and including the restitution values for the fish killed in June of 1998. The payment of this sum shall be made payable to the "State of Minnesota" in the amount of $17,247.20 and tendered to the MDNR Commissioner, 500 Lafayette Road, St. Paul, MN 55155-4037. 9 --------------------------------------------------------------------------------     3.  Stipulated Civil Penalties for Violations of this Agreement.  In the event that ACSC violates any specified provision or provisions of this Agreement, ACSC shall pay a stipulated civil penalty for each violation specified below in the following amounts.     A.  $500.00 for each week or portion thereof that ACSC fails to complete an activity in accordance with the conditions, time schedules and deadlines contained in Paragraphs II.B.4., items a, b, c and d. Determinations of failure to complete required activities shall be made separately for each required act listed in Paragraphs II.B.4., items a, b, c and d.     $5000.00 for each week or portion thereof that ACSC fails to complete an activity in accordance with the conditions, time schedules and deadlines contained in the MPCA staff approved Mud Solids Removal Plan and Mud Solids Management Plan contained in Paragraphs II.B.4, items e. and f. Determinations of failure to complete required activities shall be made separately for each required act listed in Paragraphs II.B.4., items e. and f.     B.  If the MPCA Commissioner determines that ACSC has failed to comply with the requirements of Paragraph II.B.4, the MPCA Commissioner shall give written notice to ACSC of the failure and specify the provision of this Agreement with which ACSC has not complied. ACSC shall pay the required stipulated civil penalty within thirty (30) days after receipt of notification from the MPCA Commissioner that payment is due. Payment shall be by check made payable to the "State of Minnesota" and tendered to the District Manager, North District, MPCA, 520 Lafayette Road, St. Paul, Minnesota, 55155-4194. ACSC retains the right to dispute the factual basis for the MPCA Commissioner's determination that ACSC has failed to comply with the requirements of this Agreement. However, ACSC waives any rights it may have to challenge, on legal grounds, the requirements that it pay a civil penalty pursuant to Part II.B. of this agreement.     C.  The payment of stipulated civil penalties pursuant to this paragraph shall not relieve ACSC of its obligation to comply with the terms and conditions of this Agreement and any related NPDES permit, and the MPCA does not waive its rights to enforce this Agreement or to seek redress for other violations of this Agreement.     4.  Requirements.     a.  Waste and By-Products Management Plan  Within thirty (30) days upon receiving comments from MPCA on the draft plan dated February 1999, ACSC shall develop and submit for approval a final Waste and By-Products Management Plan that outlines proper management of industrial solid wastes such as spoiled beets, beet tailings, beet pulp and related beet soils generated at the Facility. This plan has been submitted and this requirement completed.     Within 30 days after execution of this Agreement, ACSC shall submit the applicable information for application of MPCA permits for regulated waste materials identified in the Waste and By-Products Management Plan.     Immediately after execution of this Agreement, ACSC shall follow all land application guidelines as outlined in Attachment A of this Agreement until permits are issued for the land application management activities.     b.  Emergency Response and Contingency Plan  Within sixty (60) days after execution of this Agreement, ACSC shall develop a comprehensive Emergency Response and Contingency Plan (ERCP) to train its employees and outline actions that will be taken during a crisis event that occurs at the Facility. The ERCP shall include, but is not limited to, a training program and schedule to ensure that employees are familiar with and can respond to emergency situations at the facility as it pertains to their job responsibility, training to ensure that employees are adequately operating and maintaining waste management systems at the Facility, a list of emergency equipment available at the facility, specific response actions to 10 -------------------------------------------------------------------------------- potential emergencies, a list of emergency contacts and a schedule for updating the ERCP to ensure it is maintained and kept up to date.     c.  Wastewater and Storm Water Study  Within ninety (90) days after execution of this Agreement, ACSC shall conduct and submit an evaluation study of the company's wastewater and storm water transport, storage and treatment capabilities for the facility.     d.  Supplemental Environmental Project  Within one hundred eighty (180) days after execution of this Agreement, ACSC shall submit a report detailing the utilization of the $100,000 by the West Polk County SWCD. The report shall detail how the money was spent and when, along with the environmental improvements gained by the use of the penalty dollars.     e.  Mud Solid Removal Plan  Within thirty (30) days after execution of this Agreement, ACSC shall submit a plan for MPCA staff approval that addresses the removal and management of mud solids placed between Pond 12 and Pond 13. This plan shall include a method of removal, locations for proper placement of the mud solids and a schedule for implementation. ACSC shall commence implementation of the Mud Solids Removal Plan within 10 days upon receiving MPCA staff approval for those activities. Upon MPCA staff approval of the Mud Solids Removal Plan, the schedule for implementation shall become an integral and enforceable part of this Agreement and Stipulated Civil Penalties required by Part II.B.3. shall apply to violations of the approved schedule.     f.   Mud Solid Management Plan  Within ninety (90) days after execution of this Agreement, ACSC shall submit to MPCA staff for approval, a plan that addresses how the Company will manage mud solids generated at the East Grand Forks Facility. The plan may include such long-term options as mud presses, centrifuges or other methods of reducing, treating and managing mud solids at this facility. The plan shall include a schedule for implementation that will be completed prior to the 2000-01 sugar beet campaign. Upon MPCA staff approval of the Mud Solids Management Plan, the schedule for implementation shall become an integral and enforceable part of this Agreement and Stipulated Civil Penalties required by Part II.B.3. shall apply to violations of the approved schedule. C.  GENERAL CONDITIONS.      1. Covenant Not to Sue.  With respect to ACSC, the MPCA and MDNR agrees not to exercise any administrative, legal or equitable remedies available to the MPCA and MDNR to address the violations alleged and described in Part F as long as ACSC performs according to and has complied with the terms, covenants and agreements contained in this Agreement. The MPCA and MDNR reserves the right to enforce this Agreement or take any action authorized by law, if ACSC fails to comply with the terms and conditions of this Agreement. Further, the MPCA and MDNR reserves the right to seek to enjoin violations of this Agreement and to exercise its emergency powers pursuant to Minn. Stat. § 116.11 (1998) in the event conditions or ACSC's conduct warrant such action. Nothing in this Agreement shall prevent the MPCA and MDNR from exercising these rights nor shall anything in this Agreement constitute a waiver of these rights.     ACSC agrees to waive all claims it may now have, as of the effective date of this Agreement, under Minn. Stat. § 15.472 for fees and expenses arising out of matters leading up to and addressed in this Agreement.      2. Repeat Violations.  Federal and state environmental programs establish harsher penalties for violations of environmental laws or rules that constitute repeat violations. In a proceeding by the MPCA or MDNR to resolve violations, if any, occurring after the date of this Agreement, the MPCA may rely on the violations alleged in Paragraph I.F. for the purpose of (1) characterizing such future violations as repeat violations, and (2) determining appropriate penalties for those future violations. In any proceeding, ACSC may dispute both the MPCA's characterization of any future violations as repeat violations and the appropriateness of any penalty determination by the MPCA, but shall not dispute the existence of the 11 -------------------------------------------------------------------------------- violations alleged in this Agreement. The MPCA agrees to identify which violations occurring after the effective date of this Agreement it alleges to be repeat violations and how the repeat nature of the violations affects the penalty amount for such later violations.      3. Hold Harmless.  ACSC agrees to indemnify and save and hold the MPCA and the MDNR, their agents and employees, harmless from any and all claims or causes of action arising from or on account of acts or omissions of ACSC, their officers, employees, agents or contractors in carrying out the activities conducted pursuant to this Agreement; provided, however, ACSC shall not indemnify the MPCA or the MDNR nor save nor hold their employees and agents harmless from any claims or causes of action arising out of the acts or omissions of the MPCA, the MDNR, or their employees and agents. When ACSC is required to hold the MPCA or the MDNR harmless, ACSC shall have the right to participate in the defense against any claim or cause of action.      4. Remedies of the Parties.  The terms of this Agreement shall be legally enforceable by any party in a court of competent jurisdiction and the parties retain the right to assert any legal, equitable, or administrative right of action or defense which may be available by law in any proceeding to implement or enforce the terms of this Agreement.      5. Liability and Obligation.  Except as specifically set forth in paragraph II.C.1. of this Agreement, this Agreement shall not release ACSC from any liability or obligation imposed by Minnesota statutes, rules, permits or local ordinances now in effect or which may be adopted in the future.      6. MPCA Monitoring.  ACSC shall allow the MPCA or any authorized member, employee or agent thereof, upon presentation of credentials, access at reasonable times to ACSC property and facilities to obtain such information and documentation as authorized by Minn. Stat. §§ 116.091 and 115.04 (1998) which are relevant to making a determination that ACSC is in compliance with the terms of this Agreement. MPCA representatives entering upon ACSC properties or into ACSC facilities agree to comply with all company health and safety rules applicable to those properties or facilities, such as the wearing of eyeguards and hardhats.      7. Emergency Powers.  Nothing in this Agreement shall prevent the MPCA from exercising its emergency powers pursuant to Minn. Stat. § 116.11 (1998) in the event conditions warranting such action shall arise.      8. Successors.  This Agreement shall be binding upon ACSC and its successors and assigns, upon the MDNR and its successors and assigns, and upon the MPCA and its successors and assigns.      9. Continuing ACSC Obligation.  Should ACSC sell or otherwise convey or assign any of its rights, title or interest in the facilities or sites described in paragraph I.E.1 of this Agreement, such sale or other conveyance shall not release ACSC from any obligation imposed by this Agreement, unless the party to whom the right, title or interest was transferred or assigned agrees in writing to the terms of this Agreement and to fulfill the obligations of this Agreement and the MPCA approves such transfer or assignment. The MPCA's approval of any such transfer or assignment shall not be unreasonably withheld.     10. Amendments.  This Agreement may be amended at any time by written agreement of the parties.     11. Claims.  Nothing contained in this Agreement shall constitute a waiver by the MPCA or MDNR of any governmental immunity afforded by law, nor shall anything in this Agreement constitute a waiver or release by ACSC of any claims it may have against any party.     12. Duty to Inform.  Upon the discovery of any errors in any statement, representation or certification in any record, report, or other document filed or required to be submitted to the MPCA or made by the MPCA about ACSC and its operations, the parties shall immediately report these errors to the other parties. 12 --------------------------------------------------------------------------------     13. Resolution of Disputes.  The parties to this Agreement shall attempt to resolve disputes regarding the meaning of any part of this Agreement through an exchange of correspondence. If a dispute cannot be informally resolved with forty (40) days after one party notifies the other party of a dispute, the MPCA Commissioner shall issue a ruling on the disputed issue. Following issuance of this ruling, ACSC shall have 30 days in which to file a complaint seeking a declaratory judgment resolving the issue in dispute. If ACSC does not file a complaint in 30 days, ACSC agrees to comply with the MPCA Commissioner's interpretation of the disputed portions of this Agreement. Throughout any dispute resolution process, ACSC shall comply with all portions of this Agreement that the MPCA Commissioner determines are not in dispute.     14. Effective Date.  This Agreement shall be effective upon the date it is signed by the MPCA Commissioner.     15. Termination.  This Agreement shall terminate upon receipt by ACSC of written notice from the MPCA Commissioner that the Commissioner has determined that the requirements of this Agreement have been satisfactorily completed. ACSC may request that the Commissioner terminate this Agreement under this paragraph and may challenge, under paragraph 13, any decision of the Commissioner to continue this Agreement in effect.     16. Extension of Schedules.  ACSC may request an extension of time to complete any requirement set forth in Part II.B. by submitting that request in writing before the date on which the applicable requirement must be completed and by specifying the reason(s) why the extension is needed. A requested extension shall not be effective until approved by the MPCA, and the MPCA shall not unreasonably delay the review of or deny requests for extensions. The MPCA shall grant an extension, for such time as reasonable under the circumstances, if the request for the extension is timely and good cause exists for granting the extension. "Good Cause" includes, but is not limited to the following: a.Circumstances beyond the reasonable control of ACSC; b.Delays caused by the MPCA in reviewing submittals required by this Agreement which make it not feasible for ACSC to meet the required schedule; and c.Review resulting from the good faith invocation by ACSC of the resolution of disputes provisions of paragraph 13 of this Agreement, which review results in delays in implementation of this Agreement making it not feasible for ACSC to meet the required schedule. ACSC may challenge, under paragraph 13 of this Agreement, the reasonableness of a decision by the MPCA to deny a request for an extension. 13 --------------------------------------------------------------------------------     BY THEIR SIGNATURES BELOW, THE UNDERSIGNED REPRESENT THAT THEY HAVE AUTHORITY TO BIND THE PARTIES THEY REPRESENT, THEIR AGENTS AND CONTRACTORS. AMERICAN CRYSTAL SUGAR COMPANY East Grant Forks, Minnesota       BY:  /s/ James J. Horvath -------------------------------------------------------------------------------- James J. Horvath, Chief Executive Officer           Dated this 17 day of March, 2000           MINNESOTA DEPARTMENT OF NATURAL RESOURCES         St. Paul, Minnesota       BY:  /s/ Allen Garber -------------------------------------------------------------------------------- Allen Garber, Commissioner           Dated this 27 day of March, 2000           MINNESOTA POLLUTION CONTROL AGENCY St. Paul, Minnesota           BY:  /s/ Gordon E. Wegwart -------------------------------------------------------------------------------- Gordon E. Wegwart, P.E., Assistant Commissioner           Dated this 4th day of April, 2000         14 -------------------------------------------------------------------------------- Attachment A     1.1 Plan for the sampling, analysis, and field equipment calibration. In order to allow more flexibility in how samples will be taken and address storage management and land application schedules, a plan for sampling, analysis, and field equipment calibration must be prepared and submitted for MPCA review and approval within 60 days of attachment issuance. This plan must address the following at a minimum: a.A description of how samples will be collected to ensure representative samples of the industrial by-product(s) land applied are obtained, with sampling locations identified, and a sampling schedule that will be followed. b.A list of all parameters that will be analyzed, the frequency they will be analyzed, maximum holding times, and preservation methods that will be used. c.The laboratory methods used for analysis and reporting limits necessary (supplied by MPCA and/or lab). d.A schedule and detailed procedure which will be followed for calibration of field equipment to determine actual application rates of industrial by-products. e.Example of record keeping forms that will be used for sampling, analysis, and equipment calibration. f.Position of the person(s) responsible for sampling and calibration of field equipment. 2.  Soil Testing Requirements / Limits     Soil testing must be conducted on each site that an industrial by-product is land applied before the site is used for the first time and each cropping year the site is used. A minimum of one composite sample per site is required. On sites, which are greater than 40 acres in size, a minimum of one composite sample is required per 40 acres of area. Soil samples must be collected and analyzed prior to industrial by-product application for the parameters listed in Table 3. If any limits in Table 3 are exceeded, the site shall not be used for land application. Table 3. Soil analysis requirements and associated limits. Parameter --------------------------------------------------------------------------------   Units --------------------------------------------------------------------------------   Sample Type --------------------------------------------------------------------------------   Limit -------------------------------------------------------------------------------- Soil Texture   USDA   Composite(1)   NA PH   Standard units   Composite(1)   NA Organic Matter   Percent   Composite(1)   NA Exchangeable Phosphorous   ppm   Composite(1)   200(2) Extractable Potassium   ppm   Composite(1)   NA Soluble Salts   mmhos/cm   Composite(1)   4 -------------------------------------------------------------------------------- (1)The composite shall consist of a mixture of 15-20 sub-samples taken in the plow layer. (2)The soil test method used for this determination is the Bray P-1 test. 1 --------------------------------------------------------------------------------     3.3. The separation distances in Table 6 shall be maintained on all land application sites. Table 6. Minimum separation distances from the land application site.         Separation Distances in Feet -------------------------------------------------------------------------------- Feature --------------------------------------------------------------------------------   Surface Applied --------------------------------------------------------------------------------   Incorporated Within 48 Hours --------------------------------------------------------------------------------   Injected -------------------------------------------------------------------------------- Private drinking water supply wells       200   200   200   Public drinking water supply wells               1000       1000       1000   Down gradient lakes, rivers, streams, type 3, 4, and 5 wetlands, intermittent streams, or tile inlets connected to these surface water features(1), and sinkholes       Slope 0% to 6%   Slope 6% to 12%   Winter (0% to 2%)       300   Not Allowed   600       50   100   Not Applicable       50   100   Not Applicable   Grassed Water Ways(2)       Slope 0% to 6% Slope 6% to 12%       100 Not Allowed       33 33       33 33                                     -------------------------------------------------------------------------------- (1)Intermittent stream means a drainage channel with definable banks that provides for runoff flow to any of the surface waters listed in the above table during snow melt or rainfall events. (2)Grassed waterways are natural or constructed and seeded to grass as protection against erosion. Separation distances are from the centerline of grassed waterways. For a grassed waterway which is wider than the separation distances required, application is allowed to the edge of the grass strip.     3.4 In addition to the separation distances required by Table 7, the additional separation distances in Table 8 must be maintained from the application site for Type 3 Industrial By-Products. Table 7.  Additional minimum separation distances from application sites for Type 3 Industrial By-Products. Feature --------------------------------------------------------------------------------   Surface Applied --------------------------------------------------------------------------------   Incorporated Within 48 Hours --------------------------------------------------------------------------------   Injected -------------------------------------------------------------------------------- Residences(1)   200 feet   200 feet   100 feet Residential development(1)   600 feet   600 feet   300 feet Public contact site   600 feet   600 feet   300 feet -------------------------------------------------------------------------------- (1)This distance may be reduced with written permission from all persons responsible for residential developments, places of recreation, and all persons inhabiting residence within the designated separation distance. 6.  End User Information     For each site used for land application of an industrial by-product the end user must receive at a minimum the information necessary to meet the requirements of this attachment. This includes information such as actual nutrient application rates, any restrictions on the industrial by-product use, crop restrictions, etc. The end user must be provided with this information in writing as soon as possible and in no case more than 6 weeks after application has been completed. End users should take appropriate credits for all plant nutrients supplied by industrial and municipal by-products, manure, and fertilizers so that maximum allowable application rates are not exceeded. 2 -------------------------------------------------------------------------------- 7.  Site Management, Limitations, and Restrictions 7.1.  Nitrogen supplying industrial by-products.     The requirements in 7.1.a through c of this section are only applicable to industrial by-products that supply 25 pounds per acre or more of available nitrogen to any site during a cropping year. This section does not apply to Tare 2 materials. a.Total available nitrogen.  The total quantity of nitrogen available for crop uptake during the cropping year will be the sum of available organic nitrogen, ammonia nitrogen, and nitrate nitrogen as determined in items 1), 2), and 3) that follow. 1)Available organic nitrogen - The available organic nitrogen shall be determined by one of the methods in items a), b), or c) that follow. a)The total quantity of organic nitrogen present in the industrial by-product will be considered 100 percent available during the cropping year it is applied (see attachment for calculations). b)The total quantity of potentially mineralizeable nitrogen will be considered to be 100 percent available during the cropping year it is applied. The potentially mineralizeable nitrogen is determined by conducting a laboratory incubation study. c)The total quantity of organic nitrogen available will be the total quantity of organic nitrogen mineralized in the cropping year it is applied and any organic nitrogen mineralized from previous years' applications (carry over nitrogen) as determined by conducting a field mineralization study. The field mineralization study will determine the rate and quantity of organic nitrogen mineralized during the cropping year it is applied and the 7.2.  Maximum Application Rates for Specific Industrial By-Products. a.The maximum application rate allowed for Tare 1, Beet Piling Site Cleanup, Weeds, Spoiled Beets, Off-Specification Beet Pulp, and Stormwater Sediment is 100 tons per acre. This rate cannot cause other application rate limits within this attachment to be exceeded. b.The maximum application rate allowed for Tare 2 materials is 6 inches per acre per year. This application rate may be increased with MPCA written approval. In order to obtain this approval, American Crystal Sugar shall submit a plan for evaluating the effects the increased application rates have on the environment and the soils where applied. This plan must be reviewed and approved by the MPCA in writing prior to conducting the evaluation. Once results of the evaluation are completed, American Crystal Sugar shall submit a summary of the evaluation and a request for changing the maximum application rate allowed if justified by the evaluation. Written MPCA approval must be obtained prior to increasing application rates for the Tare 2 materials. 3 -------------------------------------------------------------------------------- QUICKLINKS I. Recitals II. AGREEMENT Attachment A

AMENDMENT TO THE TELLABS, INC. 1984 INCENTIVE STOCK OPTION PLAN (As Amended and Restated Effective June 26, 1992)   WHEREAS, Tellabs, Inc. (the "Corporation") has heretofore established the Tellabs, Inc. 1984 Incentive Stock Option Plan (the "Plan") for the benefit of participating officers and other key employees of the Corporation and its subsidiaries; WHEREAS, the Corporation deems it desirable to make certain amendments to the Plan relating to the vesting of options and/or the post-employment exercise period in the event of the death, disability, or retirement of an option holder, or a change in control of the Corporation; WHEREAS, the Compensation Committee of the Corporation has considered the recommendations and recommended that the Board of Directors of the Corporation approve this Amendment to the Plan; and WHEREAS, the Board of Directors of the Corporation has approved this Amendment to the Plan. NOW, THEREFORE, BE IT RESOLVED, that the Plan is hereby amended, effective June 30, 2000, as follows : I. Under Article 2 of the Plan, the following definition of "Change in Control" shall be added: (o) "Change in Control" means the first to occur of: (i) Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, the Corporation or any subsidiary of the Corporation, or any employee benefit plan of the Corporation or any subsidiary of the Corporation, or any person or entity organized, appointed or established by the Corporation for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Corporation; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (ii) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board of Directors of the Corporation and any new director (except for a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Corporation immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the company resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of the Corporation; (B) no person (excluding any company resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such company resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such company except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the company resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation. II. Under Article 2 of the Plan, the following definition of "Disability" shall be added: (r) "Disability" shall have the meaning ascribed to such term in Section 22(e)(3) of the Code. III. Article 14 shall be amended in its entirety to read as follows: 14. Termination of Employment. Except as set forth in Article 14A with respect to the effect of a Change in Control or except as the Committee may otherwise expressly provide in the Option Agreement, the following rules shall apply upon termination of the Grantee's employment with the Corporation and all subsidiaries: (a) Except as set forth in subsections (b), (c) and (d) below, in the event a Grantee ceases to be an employee of the Corporation and its subsidiaries for any reason, any Option or unexercised portion thereof granted under this Plan may be exercised, to the extent such Option would have exercisable by the Grantee hereunder on the date on which the Grantee ceased to be an employee, within three months of such date (seven months in the event such termination occurs after the occurrence of a Change in Control), but in no event later than the date of expiration of the term of the Option. (b) In the event of termination of employment due to the death the Grantee, each Option held by the Grantee shall become exercisable in full and may be exercised at any time prior to the expiration date of the Option or within one year after the date of the Grantee's death, whichever period is shorter. (c) In the event of termination of employment due to the Disability of the Grantee, each Option held by the Grantee may, to the extent exercisable at the time of such termination, be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's termination of employment, whichever period is shorter. (d) In the event of termination of employment due to the retirement of the Grantee on or after attaining age 55, all or a portion of each Option held by the Grantee, to the extent not then exercisable, shall become exercisable in accordance with the schedule set forth below based upon one point for the Grantee's attained age and one point for each year of continuous service with the Corporation or its subsidiaries as of the date of retirement (including for this purpose, continuous service with an entity prior to the date such entity was acquired by the Corporation or an affiliate of the Corporation, but excluding any service prior to January 1, 1975), At least 70 but less than 80 points           50% of each unvested option shall vest At least 80 but less than 90 points           75% of each unvested option shall vest At least 90 points                                   100% of each unvested option shall vest and all Options held by the Grantee to the extent then exercisable may be exercised at any time prior to the expiration date of the Option or within three years after the date of the Grantee's retirement, whichever period is shorter. (e) Notwithstanding anything in this Plan to the contrary, any Incentive Stock Option which is exercised after the expiration of three months following the cessation of employment for any reason other than Disability or death or one year after the date of termination of employment due to Disability or death, shall be treated as a non-qualified stock option. IV. The Plan shall hereby be amended by adding a new Article 14A to read: 14A. Change in Control. (a) Upon the occurrence of a Change in Control, any and all Options granted hereunder shall become immediately exercisable and remain exercisable until such Options expire or terminate under the provisions of this Plan. (b) Upon the occurrence of a Change in Control not approved by the Incumbent Board, any and all Options granted hereunder shall become immediately exercisable, and shall remain exercisable throughout their entire term without regard to termination of employment subsequent to such Change in Control. V. Article 15 of the Plan shall be amended in its entirety to read as follows: 15. Effect of Change in Stock Subject to Plan. Except as provided below, the Board shall make equitable adjustments in the number and class of shares of stock subject to the Plan, and to the Option rights granted hereunder and the exercise prices of such Option rights, in the event of a stock dividend, stock split, reverse stock split, recapitalization, reorganization, merger, consolidation, acquisition, separation or other change in the capital structure of the Corporation. IN WITNESS WHEREOF, the foregoing amendments to the Tellabs, Inc. 1984 Incentive Stock Option Plan are hereby adopted as of the 30th day of June, 2000, by the undersigned officer duly authorized by resolutions adopted by the written consent of the Board of Directors dated June 30, 2000. TELLABS, INC.   By:/s Michael J. Birck Name: Michael J. Birck Its: President and Chief Executive Officer

Exhibit 10 CONSULTING AGREEMENT ___________________________ This consulting agreement (hereinafter referred to as "Agreement") is entered into as of the 30th day of September, 2000, by and between e-Solutions, LLC (Thomas W. Strouble, owner and principal) (hereinafter referred to as "Consultant") and The Timken Company (hereinafter referred to as "Company"), a corporation organized and existing under the laws of the State of Ohio. WHEREAS, Consultant has been employed for many years as an officer of the Company and has acquired extensive experience and developed important relationships which the Company wishes to utilize by retaining Consultant to perform certain services as described herein; and WHEREAS, Consultant will resign as an officer and retire as an employee on September 30, 2000, under the Company's retirement program. NOW, THEREFORE, in consideration of the mutual promises and covenants, it is hereby agreed by and between the parties as follows: 1. In consideration of Consultant's services as hereinafter described, the Company agrees to pay Consultant a retainer at the rate of $80,000 per year to be paid quarterly on the first day of each calendar quarter beginning October 1, 2000. 2. The services to be performed by Consultant shall consist of the following: (1) provide counsel and advice to the Company on various matters from time to time as requested by the Chairman and CEO, the President and Chief Operating Officer or the Senior Vice President - e - business of the Company; and (2) provide advice to the Company regarding the Company's use of technology, intellectual property, "e-business" and the Company's strategy relating thereto; and (3) provide counsel and advice to the President - Industrial regarding the development and implementation of the Company's global industrial business' e- business initiative (known internally as "PerformanceOne" or "Laser") in Europe and Asia. 3. It is anticipated that Consultant will devote the equivalent of approximately 5 days per month to the performance of the services described above. The days on which Consultant will perform services under this Agreement, and the number of hours devoted to the performance of such services on any given day, will be determined by Consultant in his sole discretion. 4. The Company will reimburse Consultant for all reasonable and necessary expenses (including business class travel on international flights) incurred in the performance of the services described in this Agreement. 5. Consultant agrees that he shall treat confidentially any material, non-public information, trade secrets, or proprietary data of the Company that he obtains during the course of performing his services under this Agreement. 6. Consultant agrees that, during the term of this Agreement and for three years after the termination of this Agreement, he shall not provide services to any third party that is a direct competitor of the Company; provided, however, that Consultant may, with the prior written consent of the Company, provide services to a group or consortium of companies that may include direct competitors of the Company. Subject to the foregoing, Consultant may provide consulting or other services to other parties during the term of this Agreement and at anytime thereafter. 7. It is agreed that Consultant shall render his services as an independent contractor and that no relationship of employer- employee shall result from the execution of this Agreement or from the performance of any services hereunder. Consultant shall have no authority to initial or sign contracts or otherwise to take any action that would create any legally-binding obligation on the part of the Company or any of its subsidiaries or affiliates, and shall at all times avoid any action or statement that would in any way represent himself or hold himself out as an agent or employee of the Company or any of its subsidiaries or affiliates. 8. Consultant shall have the right to determine when, where, how and in what manner he will perform the services under this Agreement. It is understood that as an independent contractor, Consultant is not under the direction or control of the Company when rendering the services requested of him under this Agreement and is expected to exercise independent judgment when providing services under this Agreement. Moreover, Consultant shall not be entitled to any Company benefits as a result of performing services under this Agreement, and the Company shall not pay or withhold any federal, state, or local income tax or payroll tax of any kind on behalf of the Consultant. 9. This Agreement shall be for a term of one year, terminating on September 30, 2001; provided, however, that either party may cancel and terminate this Agreement at any time by giving a thirty-day written notice to the other party of its the desire to do so. Moreover, this Agreement will terminate immediately if Consultant dies, becomes permanently disabled, or breaches any material term of this Agreement. If this Agreement is terminated prior to September 30, 2001, the quarterly payment to which Consultant would otherwise be entitled will be pro-rated based on the number of days the Agreement was in effect during the quarter in which the Agreement was terminated. The provisions of Paragraphs 5 and 6 hereof shall continue in full force and effect notwithstanding the termination of this Agreement. 10. This Agreement constitutes the entire agreement between the parties relative to the services referred to herein and supersedes all previous negotiations and understandings, oral or written, relative to such services. Notwithstanding the foregoing, nothing contained herein shall affect or adversely impact any compensation or benefits to which Consultant is entitled as a result of his employment by the Company prior to September 30, 2000, and his retirement on said date. 11. This Agreement shall be construed, interpreted and applied, and the legal relationship created herein shall be determined, in accordance with the laws of the State of Ohio. In witness whereof, the parties have executed this Agreement as of the date first above written. THE TIMKEN COMPANY By: ________________________________ ________________________________ (Title) ________________________________ Thomas W. Strouble 

EMPLOYMENT AGREEMENT         This Employment Agreement is made effective as of March 1, 2000 between Farmland Industries, Inc., a Kansas cooperative corporation (the “Company”) and H. D. Cleberg, who is presently the President and Chief Executive Officer of the Company, (“Executive”) and supersedes the Employment Agreement between the parties dated May 1, 1999, which is hereby terminated in its entirety.         WHEREAS, Executive is the principal officer of the Company and an integral part of its management and the Company desires to retain the services of Executive.         NOW THEREFORE, it is hereby agreed by and between the parties as follows: 1. Employment. The Company hereby employs Executive as Chief Executive Officer and Executive hereby accepts employment with the Company, subject to the terms and conditions hereinafter provided. 2. Term. The employment of Executive hereunder will be for the period commencing on the effective date of this Agreement and ending on December 31, 2002, provided, however, that either party may terminate the employment relationship prior to the expiration date as hereinafter provided. 3. Position, Duties, Responsibilities. The employment of Executive hereunder will be for the period commencing on the effective date of Executive shall be employed as the Chief Executive Officer. Executive shall exercise authority and perform duties and services consistent with such position as may be assigned to him from time to time by the Board of Directors (the "Board"). 4. Devotion of Time and Best Efforts. Except for vacations and absences due to temporary illness, Executive shall devote his full time, best efforts and undivided attention and energies during his employment to the performance of his duties and to advance the Company’s interests, as determined by the Board. During his employment, Executive shall not, without the prior approval of the Board, be engaged in any other business activity which conflicts with the duties of Executive hereunder, whether or not such business activity is pursued for gain, profit or other pecuniary advantage. Executive may continue his current civic and charitable activities and his current service on various boards. 5. Early Termination. (a) Death. Executive's employment shall terminate upon Executive's death. (b) Termination by the Company. .   (1) Request For Resignation. The Company, by action of the Board, may request Executive’s resignation at any time and for any reason whatsoever, without cause, effective in accordance with the delivery of a written request for resignation to Executive or in accordance with the terms of a Board-approved Chief Executive Officer succession decision.   (2) For Cause. The Company, by action of the Board, may terminate the Executive’s employment at any time for Cause, effective upon delivery of written notice of termination to Executive. If such termination by the Company is asserted to be for Cause, such termination notice shall state the grounds that the Board claims constitute Cause.   As used herein, “Cause” shall mean (a) willful misconduct by Executive which is damaging or detrimental to the business and affairs of the Company, monetarily or otherwise, as determined by the Board in the exercise of its good faith business judgment; (b) a material breach of this Agreement by Executive, (c) chronic alcoholism or any other form of substance addiction on the part of Executive, (d) the commission by Executive of any act involving fraud or dishonesty or moral turpitude, (e) the indictment for, being bound over for trial following a preliminary hearing, or the conviction of Executive of any felony in either a state or federal court proceeding, or (f) willful refusal to implement policies promulgated by the Board.   (3) Disability. The Company, by action of the Board, may terminate the Executive’s employment if Executive sustains a disability which is serious enough that Executive is not able to perform the essential functions of Executive’s job, with or without reasonable accommodations, as defined and if required by applicable state and federal disability laws. Executive shall be presumed to have such a disability for purpose of this Agreement if Executive qualifies, because of illness or incapacity, to begin receiving disability income insurance payments under the long-term disability income insurance policy that Company maintains for the benefit of Executive. If there is no such policy in effect at the date of Executive’s potential disability, or if Executive does not qualify for such payments, Executive shall nevertheless be presumed to have such a disability if Executive is substantially incapable of performing Executive’s duties for a period of more than twelve (12) weeks. (c) Termination by Executive.   (1) Voluntary Resignation. Executive may terminate the Employment Period and Executive's employment at any time and for any reason whatsoever, effective upon delivery of written notice of termination to the Company.   (2) Good Reason Resignation. Executive may terminate the Employment Period and Executive’s employment at any time for Good Reason, effective upon delivery of written notice of termination to the Company. If such termination by Executive is asserted to be for “Good Reason”, such termination notice shall state the grounds that Executive claims constitute Good Reason. As used herein “Good Reason” shall mean a material breach of this Agreement by the Company, or a demotion such that Executive does not serve as the Chief Executive Officer of the Company. 6. Compensation. (a) Base Salary. During his employment, the Company shall pay Executive an initial “Base Salary” at the rate of Six Hundred, Thirty-Five Thousand, Six Hundred Dollars ($635,600) per year, payable in accordance with the Company’s regular payroll practices and policies which are in effect from time to time. The Board shall annually review the amount of Base Salary. Such review and any increase shall occur on the current customary schedule. Any such upward adjustment shall not require a written amendment to this Agreement and shall not affect any other provisions of this Agreement, which shall remain in effect unless changed by a written amendment to this Agreement or terminated by either party as provided herein. (b) Annual Variable and Long-Term Incentive Compensation. During his employment, Executive shall be entitled to receive compensation under the annual Variable Compensation Plan and the Management Long-Term Incentive Plan payable within the current customary time frame on terms that are no less favorable to Executive than the terms currently in existence. In the event that either of these plans is discontinued or amended effective during his employment, and the amount of variable compensation due Executive under the replacement or amended plans is less than Executive would have received under the current plans, the Executive shall be entitled to receive the amount of variable compensation that would have been payable under the current plans. 7. Benefit Plans. (a) General. During the Employment Period, Executive shall be eligible to participate in all executive compensation and employee benefit plans or programs generally applicable to senior management employees of the Company pursuant to the terms and conditions of such plans and programs. Nothing contained in this Agreement shall preclude the Company from terminating or amending any such plan or program. (b) Qualified Plans. Executive shall be entitled to Company contributions and benefits with respect to Base Salary under the Company’s qualified pension plans determined in the same manner as for other participants in those plans, subject to any contribution or benefit limitations. However, if such plans as in effect on the date of execution of this Agreement are modified in a manner, which will reduce future benefits under those plans for Executive, then, as a means to make up for those reductions, the Company shall establish a new nonqualified plan or amend an existing nonqualified plan which shall provide for any lost benefits under the Company’s pension plan. (c) Nonqualified Plans.   (1) Deferred Compensation Plan. Executive shall continue to be eligible to participate in the Deferred Compensation Plan. If this plan should be amended or terminated prior to the end of the Employment Period, the terms of the plan will be maintained with respect to Executive, unless Executive agrees to accept the modified provisions of a revised plan or a new plan intended to replace the plan.   (2) Supplemental Executive Retirement Plan. Executive will be entitled to benefits under this plan on terms no less favorable than those set forth in the restatement of the plan that became effective in 1999; however, if this plan should be amended or terminated prior to the completion of payments under it to Executive, the terms of the plan will be maintained with respect to Executive, unless Executive agrees to accept the modified provisions of a revised plan or a new plan intended to replace that restatement. 8. Post-Termination Payments by the Company. (a) Resignation Requested by Company or Resignation for Good Reason. In the event that Executive's employment is terminated prior to December 31, 2002 by the Company through a Request for Resignation or by Executive for Good Reason, and the Executive:       1) signs (and does not rescind, as allowed by law) a Release of Claims in a form satisfactory to the Company which assures, among other things, that Executive will not commence any type of litigation or other claims as a result of his employment or termination of employment;       2) agrees to be available to consult with the Company at no additional compensation, other than reimbursement of costs, an average of forty (40) hours per month for one year following his termination; and       3) honors all of Executive's other obligations as required by this Agreement. The Company will provide Executive a severance benefit ("the Severance Benefit”) by assisting Executive in purchasing life insurance under a split dollar agreement. Under the split dollar agreement, the Company will pay premiums having a present value cost to the Company (calculated using an 8% discount rate) equal to two times Executive’s average annual income from the Company included in Executive’s gross income for the five calendar years ending December 31, 1999. The Severance Benefit shall not be considered as income or compensation in determining Executive’s benefits under any non-qualified benefit plan, including the Supplemental Executive Retirement Plan. In addition, if such Request for Resignation or Good Reason Resignation results in termination prior to December 31, 2000, the Company will continue to pay Executive all of the compensation provided for in Paragraph 6 of this Agreement as if he had remained employed through December 31, 2000 provided that Executive agrees to be available for consulting on a regular, full time basis through December 31, 2000.. (b) Termination For Cause, or Voluntary Resignation. If Executive’s employment is terminated prior to December 31, 2002 by the Company for Cause or by Executive as a Voluntary Resignation, Executive shall be entitled only to his rights (a) to receive the unpaid portion of his Base Salary, prorated to the date of termination, (b) to receive reimbursement for any ordinary and reasonable business expenses for which he had not yet been reimbursed, (c) to receive payment for accrued and unused vacation days, (d) to receive his incentive compensation for each full or partial (on a pro rata basis) year during which he was employed, to the extent earned and accrued, pursuant to the terms and conditions of the applicable incentive compensation plan(s), (e) to receive payments under the Company’s pension, profit sharing, deferred compensation or other benefit plans in which the Executive has participated, all to the extent and in accordance with the terms of such plans, and (f) to continue certain health insurance at his expense pursuant to COBRA. 9. Consulting. If Executive qualifies for the Severance Benefit , Executive agrees to make himself available to the Company as needed to consult for a period of one year following termination of employment. Such consulting shall be without additional compensation, other than reimbursement of expenses, up to an average of forty (40) hours per month. Executive shall be entitled to reasonable compensation for his time in providing such consulting services to the extent he provides services in excess of an average of forty (40) hours per month. 10. Other Executive Obligations. Executive agrees that the following provisions will apply throughout Executive’s period of active or inactive employment, and will continue to apply even if Executive’s employment and the Employment Period are terminated under Paragraph 5, regardless of the reason for termination: (a) Nondisclosure of Confidential Information. Except to the extent required in furtherance of the Company’s business in connection with matters as to which Executive is involved as an employee, Executive will not, during the term of his employment and for an unlimited period thereafter, directly or indirectly: (1) disclose or furnish to, or discuss with, any other person or entity any confidential information concerning the Company or its business or employees, acquired during the period of his employment by the Company; (2) individually or in conjunction with any other person or entity, employ or cause to be employed, any such confidential information in any way whatsoever or (3) without the written consent of the Company, publish or deliver any copies, abstracts or summaries of any papers, documents, lists, plans, specifications or drawings containing any such confidential information. (b) Non-Interference. Executive will not, during the term of his employment and for an unlimited period thereafter, directly or indirectly attempt to encourage, induce or otherwise solicit any employee or other person or entity to breach any agreement with the Company or otherwise interfere with the advantageous business relationship of the Company with any person or entity. Executive specifically agrees not to solicit, on Executive’s own behalf or on behalf of another, any of the Company’s employees to resign from their employment with the Company in order to go to work elsewhere. Executive further specifically agrees not to make any disparaging remarks of any sort or otherwise communicate any disparaging remarks about the Company or any of its members, equity holders, directors, officers or employees, directly or indirectly, to any of the Company’s employees, members, equity holders, directors, customers, vendors, competitors, or other people or entities with whom the Company has a business or employment relationship. (c) Non-Competition. Executive agrees that during the term of his employment and thereafter for a period of two (2) years, Executive will not directly or indirectly engage in or carry on a business that is in direct competition with any significant business unit of the Company as conclusively determined by the Board of Directors. Further, Executive agrees that during this same period of time he will not act as an agent, representative, consultant, officer, director, independent contractor or employee of any entity or enterprise that is in direct competition with any significant business unit of the Company as conclusively determined by the Board of Directors. (d) Cooperation in Claims. During the term of his employment and for an unlimited period thereafter, at the request of the Company, Executive will cooperate with the Company with respect to any claims or lawsuits by or against the Company where Executive has knowledge of the facts involved in such claims or lawsuits. Executive shall be entitled to reasonable compensation for Executive’s time and expense in rendering such cooperation. Further, Executive will decline to voluntarily aid, assist or cooperate with any party who has claims or lawsuits against the Company, or with their attorneys or agents. The Company and Executive both acknowledge, however, that nothing in this paragraph shall prevent Executive from honestly testifying at an administrative hearing, arbitration, deposition or in court, in response to a lawful and properly served subpoena in a proceeding involving the Company. (e) Remedies. The parties recognize and agree that, because any breach by Executive of the provisions of this Paragraph 9 would result in damages difficult to ascertain, the Company shall be entitled to injunctive and other equitable relief to prevent a breach or threatened breach of the provisions of this Paragraph 9. Accordingly, the parties specifically agree that the Company shall be entitled to temporary and permanent injunctive relief to enforce the provisions of this Paragraph 9, that such relief may be granted without the necessity of proving actual damages. The parties further agree that the right to such relief shall be in lieu of any right to recover money damages for any such breach. (f) Enforceability. Executive agrees that considering Executive’s relationship with the Company, and given the terms of this Agreement, the restrictions and remedies set forth in Paragraph 9 are reasonable. Notwithstanding the foregoing, if any of the covenants set forth above shall be held to be invalid or unenforceable, the remaining parts thereof shall nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts have not been included therein. In the event the provisions relating to time periods and/or areas of restriction shall be declared by a court of competent jurisdiction to exceed the maximum time periods or areas of restriction permitted by law, then such time periods and areas of restriction shall be amended to become and shall thereafter be the maximum periods and/or areas of restriction which said court deems reasonable and enforceable. Executive also agrees that the Company’s action in not enforcing a particular breach of any part of Paragraph 9 will not prevent the Company from enforcing any other breaches that the Company discovers, and shall not operate as a waiver by the Company against any future enforcement of a breach. 11. Notices. Notices hereunder shall be in writing and shall be delivered personally or sent return receipt requested and postage prepaid, addressed as follows: If to Executive: H.D. Cleberg c/o Farmland Industries, Inc. 3315 North Oak Trafficway Kansas City, MO 64116 If to the Company: Chairman of the Board c/o Corporate Secretary Farmland Industries, Inc. 3315 North Oak Trafficway Kansas City, MO 64116 with a copy to: Vice President and General Counsel Farmland Industries, Inc. 3315 North Oak Trafficway Kansas City, MO 64116 12. Assignment. This Agreement is personal in its nature and the parties hereto shall not, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder. 13. Binding Agreement. The provisions of this Agreement shall be binding upon, and shall inure to the benefit of, the respective heirs, legal representatives and successors of the parties hereto. 14. Missouri Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Missouri, unless otherwise pre-empted by federal law. 15. Captions and Section Headings. Captions and paragraph headings used herein are for convenience only and are not a part of this Agreement and shall not be used in construing it. 16. Invalid Provisions. If any provision of this Agreement shall be unlawful, void, or for any reason unenforceable, it shall be deemed severable from, and shall in no way affect the validity or enforceability of, the remaining provisions of this Agreement. 17. Waiver of Breach. The failure to enforce at any time any of the provisions of the Agreement, or to require at any time performance by the other party of any of the provisions hereof, shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement or any part hereof or the right of either party thereafter to enforce each and every provision in accordance with the terms of this Agreement. 18. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations and understandings of the parties with respect thereto. No modification or amendment of any of the provisions of this Agreement shall be effective unless in writing specifically referring hereto and signed by Executive and a member of the Board upon authorization of the Board to do so.         IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date set forth above. EXECUTIVE FARMLAND INDUSTRIES, INC. ________________________________ By: ______________________________ H. D. Cleberg Albert Shivley, Chairman of the Board of Directors By: ______________________________ Jody Bezner, Vice-Chairman of the Board of Directors