Exhibit 10.1


 


DISTRIBUTION
AGREEMENT


 


BETWEEN


 


ANTE4,
INC. AND ANTE5, INC.


 


Dated: April 16, 2010


 

















 


DISTRIBUTION
AGREEMENT


 


TABLE
OF CONTENTS


 


	
  INTRODUCTION

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 1 DEFINITIONS

  	
  3

  
	
  1.01     

  	
  General

  	
  3

  
	
  1.02

  	
  Terms Defined Elsewhere in Agreement

  	
  7

  
	
  ARTICLE 2 TRANSFERS OF ASSETS AND
  TREATMENT OF LIABILITIES

  	
  7

  
	
  2.01

  	
  Performance of Subscription Agreement

  	
  7

  
	
  2.02

  	
  Corrective Transfers of Assets from Subsidiary to Parent

  	
  7

  
	
  2.03

  	
  Transfers Not Effected Before the Distribution

  	
  7

  
	
  2.04

  	
  Cooperation Concerning Assets

  	
  8

  
	
  2.05

  	
  No Representations or Warranties; Consents

  	
  8

  
	
  2.06

  	
  Ordinary Course Operations

  	
  9

  
	
  2.07

  	
  Allocation of Debt

  	
  9

  
	
  2.08

  	
  Settlement of Intercompany Accounts

  	
  9

  
	
  2.09

  	
  Limitation on Loans and Distributions by Subsidiary

  	
  9

  
	
  ARTICLE 3 OFFICERS AND DIRECTORS
  OF SUBSIDIARY

  	
  9

  
	
  3.01

  	
  Subsidiary Board and Officers

  	
  9

  
	
  ARTICLE 4 THE DISTRIBUTION

  	
  10

  
	
  4.01

  	
  Cooperation Before the Distribution

  	
  10

  
	
  4.02

  	
  Distribution Record Date, Distribution Date and Procedures

  	
  10

  
	
  4.03

  	
  Conditions Precedent to the Distribution

  	
  10

  
	
  4.04

  	
  The Distribution

  	
  11

  
	
  4.05

  	
  Adjustment of Parent Stock Options

  	
  12

  
	
  4.06

  	
  Redemption of Subsidiary Common Stock

  	
  12

  
	
  ARTICLE 5 SATISFACTION OF
  LIABILITIES

  	
  12

  
	
  5.01

  	
  Satisfaction of Liabilities

  	
  12

  
	
  5.02

  	
  Assumption and Satisfaction of Unallocated Contingent Liabilities

  	
  12

  
	
  ARTICLE 6 INDEMNIFICATION

  	
  12

  
	
  6.01

  	
  Indemnification by Subsidiary

  	
  12

  
	
  6.02

  	
  Indemnification by Parent

  	
  13

  
	
  6.03

  	
  Insurance Proceeds

  	
  13

  
	
  6.04

  	
  Procedure for Indemnification

  	
  14

  
	
  6.05

  	
  Remedies Cumulative

  	
  16

  
	
  6.06

  	
  Survival of Indemnities

  	
  16

  
	
  6.07

  	
  Coordination with Tax Allocation and Indemnity Provisions

  	
  16

  
	
  ARTICLE 7 ACCESS TO INFORMATION
  AND SERVICES

  	
  17

  
	
  7.01

  	
  Provision of Corporate Records

  	
  17

  
	
  7.02

  	
  Access to Information

  	
  17

  
	
  7.03

  	
  Production of Witnesses

  	
  18

  
	
  7.04

  	
  Reimbursement

  	
  18

  
	
  7.05

  	
  Retention of Records

  	
  18

  
	
  7.06

  	
  Confidentiality

  	
  18

  
	
  7.07

  	
  Privileged Matters

  	
  19

  



 


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  ARTICLE 8 INSURANCE

  	
  20

  
	
  8.01     

  	
  Definitions

  	
  20

  
	
  8.02

  	
  Policies and Rights Included within the Subsidiary Assets

  	
  21

  
	
  8.03

  	
  Policies and Rights Included within the Parent Assets

  	
  21

  
	
  8.04

  	
  Shared Policy Insurance Administration, Reserves and
  Premiums

  	
  22

  
	
  8.05

  	
  Insurance after the Distribution

  	
  23

  
	
  8.06

  	
  Agreement for Waiver of Conflict and Shared Defense

  	
  24

  
	
  ARTICLE 9 EMPLOYMENT AND EMPLOYEE
  BENEFIT MATTERS

  	
  24

  
	
  9.01

  	
  Definitions

  	
  24

  
	
  9.02

  	
  Employment and Related Obligations

  	
  27

  
	
  9.03

  	
  Stock Option Plans

  	
  28

  
	
  9.04

  	
  Parent’s 401(k) Plan

  	
  29

  
	
  9.05

  	
  Parent and Subsidiary Medical/Dental Plan

  	
  29

  
	
  9.06

  	
  Vacation and Sick Pay Liabilities

  	
  29

  
	
  9.07

  	
  Garnishments and Withholding

  	
  29

  
	
  9.08

  	
  Labor and Employment Matters

  	
  30

  
	
  9.09

  	
  Access to Information; Cooperation

  	
  30

  
	
  9.10

  	
  Reimbursement

  	
  31

  
	
  9.11

  	
  Preservation of Right To Amend or Terminate Plans

  	
  31

  
	
  9.12

  	
  Effect on Employees

  	
  31

  
	
  ARTICLE 10 TAX MATTERS

  	
  31

  
	
  10.01

  	
  Definitions

  	
  31

  
	
  10.02

  	
  Preparation and Filing of Tax
  Returns

  	
  34

  
	
  10.03

  	
  Taxable Years

  	
  35

  
	
  10.04

  	
  Advance Review of Tax Returns

  	
  36

  
	
  10.05

  	
  Consistent Positions on Tax
  Returns

  	
  36

  
	
  10.06

  	
  Allocation of Straddle Period
  Taxes

  	
  36

  
	
  10.07

  	
  Payment of Taxes

  	
  37

  
	
  10.08

  	
  Amendments to Tax Returns

  	
  37

  
	
  10.09

  	
  Refunds of Taxes

  	
  38

  
	
  10.10

  	
  Carrybacks

  	
  38

  
	
  10.11

  	
  NOL, ITC and AMT Credit Benefit

  	
  38

  
	
  10.12

  	
  Payroll Taxes

  	
  39

  
	
  10.13

  	
  Tax Indemnification

  	
  40

  
	
  10.14

  	
  Cooperation; Document Retention;
  Confidentiality

  	
  41

  
	
  10.15

  	
  Contests and Audits

  	
  42

  
	
  10.16

  	
  Tax Elections

  	
  43

  
	
  ARTICLE 11 MISCELLANEOUS

  	
  44

  
	
  11.01

  	
  Entire Agreement; No Third Party
  Beneficiaries

  	
  44

  
	
  11.02

  	
  Forbearance

  	
  44

  
	
  11.03

  	
  Expenses

  	
  44

  
	
  11.04

  	
  Governing Law

  	
  44

  
	
  11.05

  	
  Notices

  	
  44

  
	
  11.06

  	
  Amendments

  	
  44

  
	
  11.07

  	
  Assignments; Predecessors and
  Successors

  	
  45

  
	
  11.08

  	
  Termination and Effectiveness

  	
  45

  



 


ii

















 


	
  11.09    

  	
  Guarantees

  	
  45

  
	
  11.10

  	
  Specific Performance

  	
  45

  
	
  11.11

  	
  Headings; References;
  Rules of Construction

  	
  45

  
	
  11.12

  	
  Counterparts

  	
  45

  
	
  11.13

  	
  Severability; Enforcement

  	
  46

  
	
  11.14

  	
  Mediation and Arbitration of
  Disputes

  	
  46

  
	
  11.15

  	
  Payment Method and Character; No
  Setoffs

  	
  47

  
	
  11.16

  	
  Third-Party Beneficiaries

  	
  47

  
	
  11.17

  	
  Further Assurances

  	
  47

  



 


* * * * * * * * * *


 


iii

















 


DISTRIBUTION
AGREEMENT


 


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


 


INTRODUCTION


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


2

















 


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


 


AGREEMENT


 


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


 


ARTICLE 1

DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


5

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


6

















 


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


 


ARTICLE
2

TRANSFERS OF ASSETS AND TREATMENT OF LIABILITIES


 


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


 


(a)                                  Parent shall
contribute the Transferred Assets to the capital of Subsidiary, by taking or
causing to be taken all actions necessary to cause the transfer, assignment,
delivery and conveyance to Subsidiary of Parent’s right, title and interest in
the Transferred Assets and any other Subsidiary Assets held by Parent; and


 


(b)                                 in
consideration of the Parent’s obligation to make that capital contribution,
Subsidiary has issued the Subsidiary Common Stock to Parent and assumed the
Assumed Liabilities.


 


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


 


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


 


(a)                                  The parties
shall cooperate in good faith to effect such transfers as promptly as shall be
practicable after the Effective Time. 
Nothing herein shall be deemed to require the transfer of any assets
that, by their terms or operation of law, cannot be transferred; provided,
however, that Parent and Subsidiary shall cooperate in good faith in seeking to
obtain any necessary consents or approvals for the transfer of all assets
contemplated to be transferred pursuant to this Agreement.


 


(b)                                 The party
retaining such asset shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto); and take such other actions as may be reasonably required in order to
place the parties, insofar as reasonably possible, in the same position as
would have existed had such asset been transferred as contemplated hereby.  As and when any such asset becomes
transferable, such transfer shall be effected forthwith.


 


(c)                                  The parties
agree that, except as set forth in this Section 2.03, as of the
Distribution Effective Time, each party hereto shall be deemed to have acquired
complete and 


 


7

















 


sole beneficial ownership
over all of the assets, together with all rights, powers and privileges
incidental thereto, that such party is entitled to acquire pursuant to the
terms of this Agreement.


 


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


 


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


 


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


 


8

















 


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


 


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


 


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


 


(a)                                  Any Debt of
Parent, including without limitation any Debt secured by Parent Assets, shall
be Retained Debt to be satisfied by Parent.


 


(b)                                 Any Debt of
Subsidiary, including without limitation any Debt secured by Subsidiary Assets,
shall be (i) retained as an obligation to be satisfied by Subsidiary or (ii) assumed
by Subsidiary (as applicable) as part of the Assumed Liabilities.  As of the date of this Agreement, the parties
believe there will be no such Debt, except for a certain promissory note to be
issued by Subsidiary to Parent pursuant to the Merger Agreement, in the amount
of $500,000.


 


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


 


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


 


ARTICLE 3

OFFICERS AND DIRECTORS OF SUBSIDIARY


 


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


 


9
















 


ARTICLE 4

THE DISTRIBUTION


 


4.01                           Cooperation Before the Distribution.


 


(a)                                  Subject to Section 11.08,
Subsidiary and Parent shall use all reasonable best efforts to obtain any
consents or approvals from any Governmental Entity or other third-party Person
that are necessary or desirable in connection with the transactions
contemplated hereby.


 


(b)                                 Subject to Section 11.08,
Subsidiary and Parent will use all reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things necessary or
desirable under applicable law, to consummate the transactions contemplated
under this Agreement and the Related Agreements including, but not limited to,
actions relating to the satisfaction of the conditions indicated in Section 4.02.


 


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


 


(a)                                  The Parent
Board shall establish appropriate procedures in connection with the
Distribution and shall establish a Distribution Date that is not later than the
fifth (5th) business day following the satisfaction or waiver of all conditions
precedent to the Distribution, as set forth in Section 4.03.


 


(b)                                 If the
Distribution Date has not occurred on or prior to the 60th day following the
Distribution Record Date (the “Outside Distribution Date”), or the
Subsidiary Board determines in its discretion that such conditions are not
reasonably likely to be satisfied before the Outside Distribution Date, then
the Parent Board shall (i) establish a date designated by the Subsidiary
Board in its discretion as a new Distribution Record Date, and (ii) establish
a Distribution Date that is not later than the fifth (5th) business day
following the satisfaction or waiver of all conditions precedent to the
Distribution, as set forth in Section 4.03. This Section 4.02(b) shall
continue to apply successively if a Distribution Date has not occurred on or before
the applicable Outside Distribution Date (i.e., the 60th day following the
Distribution Record Date or any new Distribution Record Date, as applicable).


 


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


 


(a)                                  no order,
injunction or decree shall have been issued by any court of competent
jurisdiction to prevent consummation of the Distribution or any of the other
transactions contemplated by this Agreement or any of the Related Agreements;


 


(b)                                 all necessary
regulatory approvals and consents of Governmental Entities and other
third-party Persons shall have been received, except for any such approvals or
consents the failure of which to obtain would not have a material adverse
effect on the business, operations or condition (financial or otherwise) of
either Parent or Subsidiary;


 


10

















 


(c)                                  the Parent
Board shall not have reasonably determined in good faith that the Distribution
would not be permitted under the Delaware General Corporation Law;


 


(d)                                 the Merger
shall have been consummated; and


 


(e)                                  Subsidiary
shall have filed with the Securities and Exchange Commission (the “SEC”)
a registration statement on Form 10 for the purpose of registering the
Subsidiary Common Stock under the Securities Exchange Act of 1934, as amended;
and an information statement satisfying the requirements of Schedule 14A or
Schedule 14C of the Securities Exchange Act of 1934, as amended, shall have
been filed with the SEC and mailed to the Parent Shareholders.


 


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


 


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


 


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


 


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


 


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


 


11

















 


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


 


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


 


(a)                                  Subsidiary may
redeem for cash, as of the Distribution Effective Time, any shares of Subsidiary
Common Stock that are distributed in the Distribution to Plains Energy
Stockholders (and their assignees) who received shares of Parent Common Stock
in the Merger, or purchased shares of Parent Common Stock pursuant to converted
warrants previously issued by Plains Energy; and such redemption shall be
completed at a price of $0.001 per share.


 


ARTICLE 5

SATISFACTION OF LIABILITIES


 


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


 


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


 


ARTICLE 6

INDEMNIFICATION


 


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


 


12

















 


(a)                                  any failure or
alleged failure of Subsidiary to (i) pay, perform or otherwise discharge
in due course any of the Subsidiary Liabilities; or (ii) comply with the provisions
of Section 2.08;


 


(b)                                 the operation
or ownership of the Subsidiary Assets after the Distribution Date;


 


(c)                                  the
indemnification obligations of Parent pursuant to Section 9 of the
Purchase Agreement;


 


(d)                                 any Action or
threatened Action made or asserted by any Person (including, without
limitation, any Governmental Entity) who is not a party to this Agreement, any
of the Related Agreements or the Merger Agreement, that relates to operation or
ownership of the Transferred Assets, or relates to any act or omission of
Parent, in either case at any time on or before the Merger Closing Date; or


 


(e)                                  any Tax
Liability of Parent that is indemnifiable by Subsidiary under Section 10.13(b),
but only to the extent such Tax Liability is attributable to Parent,
Subsidiary, Merger Subsidiary or any other direct or indirect subsidiary of
Parent for any Taxable Period (as defined in Section 10.01) ending on or
before the Merger Closing Date, as such Tax Liability is determined pursuant to
the principles set forth in Section 10.06.


 


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


 


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


 


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


 


13

















 


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


 


6.04                           Procedure for Indemnification.


 


(a)                                  Notice of
Third-Party Claim.  If an
Indemnified Person shall receive written notice of the assertion by a Person
(including, without limitation, any Governmental Entity) who is not a party to
this Agreement or to any of the Related Agreements of any claim or of the
commencement by any such Person of any Action with respect to which an
Indemnifying Party may be obligated to provide indemnification pursuant to this
Agreement (a “Third-Party Claim”), such Indemnified Person shall give
the Indemnifying Party written notice thereof promptly after becoming aware of
such Third-Party Claim; provided, however, that the failure of any Indemnified
Person to give notice as required by this Section 6.04 shall not relieve
the Indemnifying Party of its obligations under this Article 6, except to
the extent that such Indemnifying Party is materially prejudiced by such failure
to give notice.  Such notice shall
describe the Third-Party Claim in reasonable detail, and shall indicate the
amount (estimated if necessary) of the Indemnifiable Loss that has been claimed
against or may be sustained by such Indemnified Person.


 


(b)                                 Notice of
Election to Defend Third-Party Claim.  Within 15 days after the receipt of notice
from an Indemnified Person in accordance with Section 6.04(a) (or
sooner, if the nature of such Third-Party Claim so requires), the Indemnifying
Party shall notify the Indemnified Person of its election whether to assume
responsibility for such Third-Party Claim (provided that, if the Indemnifying
Party does not so notify the Indemnified Person of its election within 15 days
after receipt of such notice from the Indemnified Person, the Indemnifying
Party shall be deemed to have elected not to assume responsibility for such
Third-Party Claim).  An election not to
assume responsibility for such Third-Party Claim may only be made in the event
of a good faith dispute that a Third-Party Claim is not covered as an
Indemnifiable Loss under the grounds specified in Section 6.01 or 6.02, as
the case may be.  Subject to Section 6.04(e) ,
an Indemnifying Party may elect to defend or to seek to settle or compromise,
at such Indemnifying Party’s own expense and by counsel reasonably satisfactory
to the Indemnified Person, any Third-Party Claim; provided, however, that (i) the
Indemnifying Party must confirm in writing that it agrees that the Indemnified
Person is entitled to indemnification hereunder in respect of such Third-Party
Claim; and (ii) no compromise or settlement shall be made without the
prior written consent of the Indemnified Person, which consent shall not be
reasonably withheld.


 


(c)                                  Cooperation
with Indemnifying Party; Defense Costs.  In the event that the Indemnifying Party
elects to assume responsibility for the Third-Party Claim, pursuant to Section 6.04(b) above,
(i) the Indemnified Person shall cooperate in good faith in the defense or
settlement or compromise of such Third-Party Claim, including making available
to the 


 


14

















 


Indemnifying Party any
personnel and any books, records or other documents within the Indemnified
Person’s control or which it otherwise has the ability to make available that
are necessary or appropriate for the defense of the Third-Party Claim; (ii) the
Indemnifying Party shall keep the Indemnified Person reasonably informed
regarding the strategy, status and progress of the defense of the Third-Party
claim; and (iii) the Indemnifying Party shall consider, in good faith, the
opinions and suggestions of the Indemnified Person with respect to the
Third-Party Claim.


 


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


 


(d)                                 Procedure if No
Defense Election is Made.  If
an Indemnifying Party elects not to assume responsibility for a Third-Party
Claim, the Indemnified Person may defend or (subject to the following sentence)
seek to compromise or settle such Third-Party Claim.  Notwithstanding the foregoing, an Indemnified
Person may not settle or compromise any claim without prior written notice to
the Indemnifying Party, which shall have the option within ten days following
the receipt of such notice (i) to disapprove the settlement, and to then
assume all past and future responsibility for the claim, including immediately
reimbursing the Indemnified Person for prior expenditures in connection with
the claim; (ii) to disapprove the settlement and continue to refrain from
participation in the defense of the claim, in which event the Indemnified
Person may, in its sole discretion, proceed with the settlement and the
Indemnifying Party shall have no further right to contest the amount or
reasonableness of the settlement; (iii) to approve and pay the amount of
the settlement, reserving the Indemnifying Party’s right to contest the
Indemnified Person’s right to indemnity; or (iv) to approve and pay the
settlement.  In the event the
Indemnifying Party makes no response to such written notice, the Indemnifying
Party shall be deemed to have elected option (ii).  When the Indemnifying Party chooses or is
deemed to have chosen option (ii) or (iii), the issue of whether the
Indemnified Person has a right to indemnity under this Article 6 shall be
resolved by arbitration pursuant to the provisions of Section 11.14.  If the Indemnifying Party does not prevail in
such arbitration, the Indemnifying Party shall promptly reimburse the
Indemnified Person for all Indemnifiable Losses, plus interest on such amounts
at the lower of (i) 10% or (ii) the highest legal interest rate,
accruing from the date of payment by the Indemnified Person.


 


(e)                                  Procedure if
Defense Election is Not Effective.  Notwithstanding the foregoing, if an
Indemnified Person reasonably and in good faith determines that (i) the
Indemnifying Party is not financially capable to defend a Third-Party Claim and
to provide full indemnification with respect to any settlement thereof, or (ii) the
Indemnifying Party or such Indemnifying Party’s attorney is not adequately
representing the Indemnified Person’s interests 


 


15

















 


with respect to such
Third-Party Claim, the Indemnified Person may, by notice to the Indemnifying
Party, assume the exclusive right to defend, compromise or settle such
Third-Party Claim and the Indemnifying Party shall remain responsible for, and
be bound by the resolution of, such Third-Party Claim.


 


(f)                                    Repayment of
Excess Indemnification.  In
addition to any adjustments required pursuant to Section 6.03, if the
amount of any Indemnifiable Loss shall, at any time subsequent to the payment
required by this Agreement, be reduced by recovery, settlement or otherwise,
the amount of such reduction, less any expenses incurred in connection
therewith, shall promptly be repaid by the Indemnified Person to the Indemnifying
Party.


 


(g)                                 Subrogation
Rights.  In the event of payment by an
Indemnifying Party to any Indemnified Person in connection with any Third-Party
Claim, such Indemnifying Party shall be subrogated to and shall stand in the
place of such Indemnified Person as to any events or circumstances in respect
of which such Indemnified Person may have any right or claim relating to such
Third-Party Claim against any claimant or plaintiff asserting such Third-Party
Claim or against any other party that may be liable.  Such Indemnified Person shall cooperate with
such Indemnifying Party in good faith and in a reasonable manner, and at the
cost and expense of such Indemnifying Party, in prosecuting any subrogated
right or claim.


 


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


 


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


 


6.07                           Coordination with Tax Allocation and
Indemnity Provisions.


 


(a)                                  Except as
expressly provided in Section 6.01 and this Section 6.07, this Article 6
shall not govern any Tax matter, and any and all Actions, losses, damages,
costs, expenses, Liabilities, refunds, deductions, write-offs, or benefits
relating to Taxes shall be exclusively governed by Article 10.


 


(b)                                 If, at the time
Subsidiary is required to make any payment to Parent under this Article 6,
Parent owes Subsidiary any amount under Article 10, then such amounts
shall be offset and the excess shall be paid by the party liable for such
excess.  Similarly, if, at the time
Parent is required to make any payment to Subsidiary under this Article 6,
Subsidiary owes Parent any amount under Article 10, then such amounts
shall be offset and the excess shall be paid by the party liable for such
excess.


 


16

















 


ARTICLE 7

ACCESS TO INFORMATION AND SERVICES


 


7.01                           Provision of Corporate Records.


 


(a)                                  Subsidiary
Books and Records.  Except as
otherwise provided in a Related Agreement, Parent shall deliver, on or as soon
as practicable after the Distribution Date, to the extent not previously
delivered in connection with the transactions contemplated in Article 2,
to Subsidiary (at Parent’s cost) all of the Subsidiary Books and Records in
Parent’s possession, except to the extent such items are already in the
possession of Subsidiary.  The Subsidiary
Books and Records shall be the property of Subsidiary, but the Subsidiary Books
and Records that reasonably relate to Parent or the Transferred Assets shall be
available to Parent for review and duplication until Parent shall notify
Subsidiary in writing that such records are no longer of use to Parent.


 


(b)                                 Parent Books
and Records.  Except as
otherwise provided in a Related Agreement, Subsidiary shall deliver, on or as
soon as practicable after the Distribution Date, to the extent not previously
delivered in connection with the transactions contemplated in Article 2,
to Parent (at Parent’s cost) all of the Parent Books and Records in Subsidiary’s
possession, except to the extent such items are already in the possession of
Parent.  The Parent Books and Records
shall be the property of Parent, but the Parent Books and Records that
reasonably relate to Subsidiary or the Transferred Assets shall be available to
Subsidiary for review and duplication until Subsidiary shall notify Parent in
writing that such records are no longer of use to Subsidiary.


 


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


 


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


 


17
















 


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


 


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


 


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


 


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


 


18

















 


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


 


(a)                                  Definitions.


 


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


 


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


 


(b)                                 Parent shall be
entitled, in perpetuity, to control the assertion or waiver of all Privileges
in connection with Privileged Information that relates solely to Parent,
whether or not the Privileged Information is in the possession of or under the
control of Parent or Subsidiary.  Parent
shall also be entitled, in perpetuity, to control the assertion or waiver of
all Privileges in connection with Privileged Information that relates solely to
the subject matter of any claims constituting Parent Liabilities, now pending
or which may be asserted in the future, in any Actions initiated against or by
Parent, whether or not the Privileged Information is in the possession of or
under the control of Parent or Subsidiary.


 


(c)                                  Subsidiary
shall be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information that relates solely to the
Subsidiary, whether or not the Privileged Information is in the possession of
or under the control of Parent or Subsidiary. 
Subsidiary shall also be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the subject matter of any claims constituting
Subsidiary Liabilities, now pending or which may be asserted in the future, in
any Actions initiated against or by Subsidiary, whether or not the Privileged
Information is in the possession of or under the control of Parent or Subsidiary.


 


(d)                                 Subsidiary and
Parent agree that they shall have a shared Privilege, with equal right to
assert or waive, subject to the restrictions in this Section 7.07, with
respect to all Privileges not allocated pursuant to the terms of Sections 7.07(a) and
(b).  All Privileges relating to any
Actions or other matters which involve both Subsidiary and Parent, or in
respect of which both Subsidiary and Parent retain any responsibility or
liability under this Agreement, shall be subject to a shared Privilege.


 


(e)                                  No party may
waive any Privilege that could be asserted under any applicable law, and in
which the other party has a shared Privilege, without the consent of the other
party, except to the extent reasonably required in connection with any
litigation with third-parties or as provided in subsection (e) below.  Any such consent shall be in writing, or
shall be 


 


19

















 


deemed to be granted unless
written objection is made within twenty (20) days after written notice upon the
other party requesting such consent.


 


(f)                                    In the event of
any litigation or dispute between Parent and Subsidiary, either party may waive
a Privilege in which the other party has a shared Privilege, without obtaining
the consent of the other party, provided that such waiver of a shared Privilege
shall be effective only as to the use of Information with respect to the
litigation or dispute between Parent and Subsidiary, and shall not operate as a
waiver of the shared Privilege with respect to third-parties.


 


(g)                                 If a dispute
arises between the parties regarding whether a Privilege should be waived to
protect or advance the interest of either party, each party agrees that it
shall negotiate in good faith, shall endeavor to minimize any prejudice to the
rights of the other party, and shall not unreasonably withhold consent to any
request for waiver by the other party. 
Each party specifically agrees that it will not withhold consent to
waiver for any purpose except to protect its own legitimate interests.


 


(h)                                 Upon receipt by
any party of any subpoena, discovery or other request which arguably calls for
the production or disclosure of Information subject to a shared Privilege or as
to which the other party has the sole right hereunder to assert a Privilege, or
if any party obtains knowledge that any of its current or former directors,
officers, agents or employees has received any subpoena, discovery or other
request that arguably calls for the production or disclosure of such Privileged
Information, such party shall promptly notify the other party of the existence
of the request and shall provide the other party a reasonable opportunity to
review the Information and to assert any rights it may have under this Section 7.07
or otherwise to prevent the production or disclosure of such Privileged
Information.


 


(i)                                     The transfer of
the Subsidiary Books and Records and the Parent Books and Records and other
Information between Parent and its subsidiaries and Subsidiary and its
subsidiaries is made in reliance on the agreement of Subsidiary and Parent, as
set forth in Sections 7.06 and 7.07, to maintain the confidentiality of
Privileged Information and to assert and maintain all applicable
Privileges.  The access to Information
being granted pursuant to Sections 7.01 and 7.02, the agreement to provide
witnesses and individuals pursuant to Section 7.03, and the transfer of
Privileged Information between Parent and its subsidiaries and Subsidiary and
its subsidiaries pursuant to this Agreement shall not be deemed a waiver of any
Privilege that has been or may be asserted under this Agreement or otherwise.


 


ARTICLE 8

INSURANCE


 


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


 


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


 


20

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


21

















 


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


 


8.04                           Shared Policy Insurance Administration,
Reserves and Premiums.


 


(a)                                  General.  Notwithstanding the provisions of Article 6,
but subject to any contrary provisions of any Related Agreement, from and after
the Distribution Date:


 


(i)                                     Subsidiary
shall be responsible for the Insurance Administration of the Shared Policies
(other than any Shared Policies providing insurance against employment, workers’
compensation or directors’ and officers’ liability); provided, however, that (A) Subsidiary
shall not take any action to remove Parent or Plains Energy (as successor to
Merger Subsidiary) as an insured or additional insured under the Shared
Policies administered by Subsidiary, until such time as any renewal or
replacement Shared Policy no longer provides coverage for any period before the
Distribution Effective Time; and (B) the administration of such Shared
Policies by Subsidiary is in no way intended to limit, inhibit or preclude any
right to insurance coverage for any Insured Claim of a named insured under the
Shared Policies including, but not limited to, Parent or Plains Energy (as
successor to Merger Subsidiary);


 


(ii)                                  Parent shall be
responsible for the Insurance Administration of the Shared Policies providing
insurance against employment, workers’ compensation and directors’ and officers’
liability; provided, however, that (A) Parent shall not take any action to
remove Subsidiary as an insured or additional insured under the Shared Policies
administered by Parent, until such time as any renewal or replacement Shared
Policy no longer provides coverage for any period before the Distribution
Effective Time; and (B) the administration of such Shared Policies by
Parent is in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Insured Claim of a named insured under such Shared
Policies including, but not limited to, Subsidiary;


 


(iii)                               Subsidiary
shall be entitled to the benefit of reserves held by any insurance carrier,
with respect to the Subsidiary Liabilities; and


 


(iv)                              Parent shall be
entitled to the benefit of reserves held by any insurance carrier, with respect
to the Parent Liabilities.


 


(b)                                 Shared Policy
Insurance Premiums.


 


(i)                                     Subsidiary
shall pay the premiums with respect to the Shares Policies for which Subsidiary
is responsible for Insurance Administration under the preceding subsection
(a).  To the extent that Subsidiary pays
premiums for Parent Liabilities (retrospectively-rated or otherwise), with
respect to Shared Policies as required under the terms and conditions of the
respective Policies, Parent shall upon the written request of Subsidiary
forthwith reimburse Subsidiary for that portion of such premiums paid by
Subsidiary as is attributable to Parent Liabilities.


 


(ii)                                  Parent shall
pay the premiums with respect to the Shared Policies for which Parent is
responsible for Insurance Administration under the preceding subsection (a). To
the extent that Parent pays premiums for Subsidiary Liabilities
(retrospectively-rated or 


 


22

















 


otherwise), with respect to
Shared Policies as required under the terms and conditions of the respective
Policies, Subsidiary shall upon the written request of Parent forthwith
reimburse Parent for that portion of such premiums paid by Parent as are
attributable to Subsidiary Liabilities.


 


(c)                                  Allocation of
Insurance Proceeds.  Insurance
Proceeds received with respect to claims, costs and expenses under the Policies
shall be paid to Subsidiary with respect to the Subsidiary Liabilities, and to
Parent with respect to the Parent Liabilities. 
Payment of the allocable portions of indemnity costs of Insurance
Proceeds resulting from the Liability policies will be made to the appropriate
party upon receipt from the insurance carrier. 
In the event that the aggregate limits on any Policies are exceeded, the
parties agree to provide an equitable allocation of Insurance Proceeds received
after the Distribution Date based upon their respective bona fide claims taking
into account their relative contributions towards premiums and the Insurance
Proceeds used by each party to satisfy Insured Claims.  The parties agree to use their reasonable
best efforts to cooperate in good faith with respect to insurance matters.


 


(d)                                 Shared Policy
Insurance Charges.


 


(i)                                     Subject to the
last paragraph of Section 6.01, Subsidiary assumes responsibility for and
shall pay to the appropriate insurance carriers or otherwise any premiums,
retrospectively rated premiums, defense costs, indemnity payments, deductibles,
retentions or other charges as appropriate (collectively “Insurance Charges”),
whenever arising, that become due and payable upon the terms and conditions of
any applicable Policy in respect of any Insured Claims against Subsidiary for
charges that relate to the period before the Distribution Effective Time.  If Subsidiary fails to pay any such Insurance
Charges when due and payable, whether at the request of the Person entitled to
payment or upon demand by Parent, Parent may (but shall not be required to) pay
such Insurance Charges for and on behalf of Subsidiary and thereafter
Subsidiary shall upon the written request of Parent forthwith reimburse Parent
for such payment.


 


(ii)                                  Subject to the
last paragraph of Section 6.01, Parent assumes responsibility for and
shall pay to the appropriate insurance carriers or otherwise any Insurance
Charges, whenever arising, that become due and payable upon the terms and
conditions of any applicable Policy in respect of any Insured Claims against Parent
for charges that relate to the period before the Distribution Effective
Time.  If Parent fails to pay any
Insurance Charges when due and payable, whether at the request of the Person
entitled to payment or upon demand by Subsidiary, then Subsidiary may (but
shall not be required to) pay such Insurance Charges for and on behalf of
Parent and thereafter Parent shall upon the written request of Subsidiary
forthwith reimburse Subsidiary for such payment.


 


8.05                           Insurance after the Distribution.


 


(a)                                  After the
Distribution Effective Time, Parent (for itself and its subsidiaries) shall be
responsible for obtaining or renewing and paying for its own insurance coverage
relating to the Parent Assets and the Parent Liabilities, with respect to all
Insured Claims and other injuries, losses, Liabilities, damages and expenses
incurred or claimed to have been incurred (i) after the Distribution
Effective Time by any Person or (ii) in connection with 


 


23

















 


the ownership or operation
of the Parent Assets or the Parent Liabilities after the Distribution Effective
Time.


 


(b)                                 After the
Distribution Effective Time, Subsidiary (for itself and its subsidiaries) shall
be responsible for obtaining or renewing and paying for its own insurance
coverage relating to the Subsidiary Assets and the Subsidiary Liabilities, with
respect to all Insured Claims and other injuries, losses, Liabilities, damages
and expenses incurred or claimed to have been incurred (i) after the
Distribution Effective Time by any Person or (ii) in connection with the
ownership or operation of the Subsidiary Assets or the Subsidiary Liabilities
after the Distribution Effective Time.


 


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


 


ARTICLE 9

EMPLOYMENT AND EMPLOYEE BENEFIT MATTERS


 


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


 


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


 


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


 


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


 


24

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


25

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


26

















 


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


 


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


 


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


 


9.02                           Employment and Related Obligations.


 


(a)                                  Subsidiary
Employment Agreements with Transferred Employees.  As of the Merger Closing Date, Parent shall
assign all rights, and Subsidiary shall assume all obligations and Liabilities
for, and arising under, all written and oral employment agreements, if any, in
each case with respect to Transferred Employees, if any (the “Transferred
Employment Agreements”); and Parent shall have no Liability or obligation
with respect thereto.  Subsidiary shall
take, or cause to be taken, all action necessary and appropriate to assume, as
of the Merger Closing Date, any Transferred Employment Agreements, with such
changes as may be necessary to reflect the change in the Employer thereunder
and such other changes as Subsidiary shall determine.  Any such Transferred Employment Agreements
shall otherwise have the same terms and conditions as in effect immediately
before the Merger Closing Date, except that references to employment by or
termination of employment with Parent and its Affiliates shall be changed to
refer to employment by or termination of employment with Subsidiary and its
Affiliates.


 


(b)                                 Allocation of
Responsibilities as Employer on Distribution Date.  As of the Merger Closing Date, except to the
extent assumed by Parent under this Agreement or any Related Agreement,
Subsidiary shall retain or assume, as the case may be, responsibility as
Employer for any Transferred Employees. 
After the Merger Closing Date, Parent shall not retain responsibility as
Employer for any Parent Terminees or Transferred Employees.


 


(c)                                  Assumption of
Other Employment-Related Liabilities on Distribution Date.  Except as specifically provided in this
Agreement, or as otherwise agreed by the parties hereto:


 


(i)                                     Except as
provided otherwise in Section 9.05(d), as of the Merger Closing Date,
Subsidiary shall assume all benefit obligations and all related rights in
connection with any Plan with respect to any Transferred Employees, Parent
Terminees and other Subsidiary Individuals; and Parent shall have no further
liability with respect thereto.  With
respect to any Parent Terminees who become employed by Subsidiary after the
Merger Closing Date, any benefit obligations and all related rights that accrue
after such employment in connection with any Plan that becomes or continues to
be sponsored by Subsidiary shall be assumed by Subsidiary.


 


27
















 


(ii)           Parent shall retain all
benefit obligations and all related rights that accrue before or after the
Distribution Date in connection with any Plan that continues to be sponsored by
Parent after the Merger Closing Date; and Subsidiary shall have no liability
with respect thereto.


 


(d)           Service Credits.


 


(i)            Distribution Date Transfers.  In connection with the Distribution and for
purposes of determining Service Credits under any Plan, Subsidiary shall credit
each Transferred Employee with such Employee’s Service Credits and original
hire date as reflected in the records of Parent as of the Distribution
Date.  Such Service Credits and hire date
shall continue to be maintained as described herein for as long as the Transferred
Employee does not terminate such employment or as otherwise may be required by
applicable law or any applicable Plan.


 


(ii)           Service Credits Following
the Distribution Date. 
Subject to the provisions of applicable law, (A) Subsidiary may, in
its sole discretion, make such decisions as it deems appropriate with respect
to determining Service Credits accrued by Transferred Employees after the
Merger Closing Date; and (B) Parent may, in its sole discretion, make such
decisions as it deems appropriate with respect to determining Service Credits
accrued by any Employees it may hire after the Merger Closing Date.


 


9.03         Stock Option Plans.


 


(a)           Parent Stock Option Plan.  Parent shall continue the Parent Stock Option
Plan and shall remain obligated under all Parent Stock Options it has
granted.  As of the Distribution
Effective Time, all Parent Stock Options that are outstanding as of the
Distribution Record Date shall be adjusted to also represent the right to
receive options to purchase one share of Subsidiary Common Stock (rounded in
the aggregate to the nearest full share, with any right to purchase exactly
one-half of one share being rounded up to a full share) for each share of
Parent Common Stock that may be purchased under the Parent Stock Options, as
required by the terms of the Distribution; and each such option to purchase
Subsidiary Common Stock shall be issued as by Subsidiary as a Subsidiary Stock
Option.  Pursuant to such adjustment, the
intrinsic value of the Parent Stock Options immediately before the Distribution
shall be preserved immediately after the Distribution; and the respective
exercise prices of the Parent Stock Options shall be allocated between the
Parent Stock Options (as so adjusted) and such Subsidiary Stock Options, based
upon the relative values of Parent Common Stock and Subsidiary Common Stock
following the Distribution, equitably taking into account the one-to-one ratio
of Subsidiary Common Stock to Parent Common Stock under the terms of the
Distribution (with those prices being rounded to the nearest penny, with any
price that ends in exactly one-half of one penny being rounded up to a full
penny), pursuant to the example set forth in Schedule
D attached hereto, all as mutually agreed by Parent and
Subsidiary.  To the extent necessary to
prevent forfeitures, Parent shall amend the Parent Stock Option Plan and other
instruments evidencing Parent Stock Options that are outstanding as of the
Merger Closing Date to provide that, with respect to Subsidiary Individuals,
including but not limited to any members of the Subsidiary Board holding Parent
Stock Options, all references to service or termination of service with 


 


28

















 


Parent and its Affiliates
shall be changed to references to service or termination of service with
Subsidiary and its Affiliates.


 


(b)           Subsidiary Stock Option Plan.  To the extent necessary, Subsidiary shall
cause the Subsidiary Stock Option Plan to authorize the Subsidiary Stock
Options that are to be granted pursuant to the adjustment of the Parent Stock
Options under subsection (a) above, which shall otherwise have the same
terms and conditions as the Parent Stock Options with respect to which they are
issued, except that with respect to Parent Individuals (including without
limitation any Parent Service Providers) receiving any such Subsidiary Stock
Options, references to service or termination of service with Subsidiary and
its Affiliates shall be changed to references to service or termination of
service with Parent and its Affiliates. 
From and after the Distribution Effective Time, Subsidiary shall assume
all obligations with respect to such Subsidiary Stock Options, and shall
administer the Subsidiary Stock Option Plan under terms governing such awards.


 


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


 


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


 


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


 


9.07         Garnishments and Withholding.


 


(a)           Garnishments, Tax Levies,
Child Support Orders, and Wage Assignment.  With respect to garnishments, Tax levies,
child support orders, and wage assignments in effect with Parent on the
Distribution Date, Subsidiary shall honor such payroll deduction authorizations
with respect to any Subsidiary Individuals; and will continue to make payroll
deductions and payments to the authorized payee, as specified by the court or
governmental order that was filed with Parent on or before the Merger Closing
Date, or with Subsidiary at any time. 
Parent shall, as of the day before the Merger, provide Subsidiary with
such information in the possession of Parent (and not already in the possession
of Subsidiary) as may be necessary or reasonably requested by Subsidiary, for
Subsidiary to make the payroll deductions and payments to the authorized payee
as required by this subsection (a).


 


(b)           Authorizations for Payroll
Deductions.  Unless
otherwise prohibited by this Agreement, a Related Agreement or any other
agreement entered into in connection with the Distribution, Subsidiary will
honor all payroll deductions in effect with Parent or Subsidiary as 


 


29

















 


of the Merger Closing Date
with respect to Subsidiary Individuals who are Employees; and Subsidiary shall
not require that any such individual submit a new authorization to the extent
that the type of deduction by Subsidiary after the Distribution Date does not
differ from that made by Parent or Subsidiary on or before the Distribution
Date.  Such deduction types include,
without limitation: scheduled loan repayments to any credit union and direct
deposit of payroll, bonus advances, employee relocation loans and other types
of authorized Employer receivables usually collectible through payroll
deductions.  Parent shall, as soon as
practicable after the Merger, provide Subsidiary with such information in the
possession of Parent (and not already in the possession of Subsidiary) as may
be necessary or reasonably requested by Subsidiary to honor the payroll
deduction authorizations contemplated by this subsection (b).


 


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


 


(a)           Separate Employers.  After the Merger Closing Date and the
employment of the Transferred Employees by Subsidiary, Parent and Subsidiary
will be separate and independent Employers of their respective Employees,
extent to the extent otherwise provided by applicable law.


 


(b)           Employment Policies and
Practices.  Subject to
the provisions of ERISA and the Code, and except as limited by applicable law
or agreement (including but not limited to Section 9.05(b) of this
Agreement), Parent and Subsidiary may adopt, continue, modify or terminate such
employment policies, compensation practices, Retirement Plans, Welfare Plans
and other employee benefit plans of any kind or description, as each may
determine, in its sole discretion, are necessary or appropriate.


 


(c)           Notice of Claims.  Without limitation to the scope and
application to each party in the performance of its duties herein, each party
hereto will notify in writing and consult with the other party before making
any settlement of an Employee claim, for the purpose of avoiding any prejudice
to such other party arising from the settlement.


 


(d)           Employees on Leave of
Absence.  As of the Merger Closing Date,
Subsidiary shall assume responsibility, if any, as Employer for all Employees
returning from an approved leave of absence who, before Merger Closing Date,
were employed by Parent; and any such Employee shall be treated as a
Transferred Employee.


 


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


 


30

















 


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


 


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


 


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


 


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


 


ARTICLE 10

TAX MATTERS


 


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


 


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


 


31

















 


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


 


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


 


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


 


“IRS” means the United States Internal Revenue
Service.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


32

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


33

















 


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


 


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


 


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


 


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


 


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


 


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


 


10.02       Preparation and Filing of Tax Returns.


 


(a)           By Parent.  Parent shall prepare and timely file (or
cause to be prepared and timely filed):


 


(i)            all Tax Returns of the
Pre-Distribution Group and any Pre-Distribution Member (other than such Returns
that relate solely to Subsidiary) for all Pre-Distribution Taxable Periods that
are required to be filed either before or after the Distribution Date, except
for Tax Returns of Plains Energy required to be filed on or before the Merger
Closing Date; and


 


(ii)           all Tax Returns of the
Post-Distribution Parent Group and any Post-Distribution Member for all
Straddle Periods and Post-Distribution Taxable Periods.


 


(b)           By Subsidiary.  Subsidiary shall prepare and timely file (or
cause to be prepared and timely filed):


 


34

















 


(i)            all Tax Returns that relate
solely to Subsidiary for all Pre-Distribution Taxable Periods that are required
to be filed before or after the Distribution Date; and


 


(ii)           all Tax Returns of the
Subsidiary Group and any Subsidiary Member for all Straddle Periods and
Post-Distribution Taxable Periods.


 


(c)           Sales and Transfer Taxes.  Parent and Subsidiary agree to cooperate in
good faith to determine the amount of sales, transfer or other Taxes (including,
without limitation, all real estate, patent, trademark and transfer Taxes and
recording fees, but excluding any Income Taxes), if any, incurred in connection
with the Subscription Agreement, the Distribution and other transactions (other
than the formation of Merger Subsidiary and the Merger) contemplated by this
Agreement (the “Distribution Transaction Taxes”).  Subsidiary agrees to file promptly and timely
the Tax Returns for such Distribution Transaction Taxes; and Parent will join
in the execution of any such Tax Returns and any related documentation.  Subsidiary shall be responsible for payment
of all such Transaction Taxes.


 


(d)           Provision of Filing
Information.  Subsidiary
(or Parent, as the case may be) shall cooperate in good faith and assist Parent
(or Subsidiary) in the preparation and filing of all Tax Returns subject to
this Section 10.03 and submit to Parent (or Subsidiary) (i) all
necessary filing information in a manner consistent with past Tax Practices,
and (ii) all other information reasonably requested by Parent (or
Subsidiary) in connection with the preparation of such Tax Returns promptly
after such request.  It is expressly
understood and agreed that Parent’s (or Subsidiary’s) ability to discharge its
Tax Return preparation and filing responsibilities is contingent upon
Subsidiary (or Parent) providing Parent (or Subsidiary) with all cooperation,
assistance and information reasonably necessary or requested for the filing of
such Income Tax Returns; and that Subsidiary (or Parent) shall indemnify Parent
(or Subsidiary) if, and to the extent that, Taxes are increased as a result of
material inaccuracies in such information or failures to provide such
information and assistance on a timely basis.


 


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


 


(a)           the Taxable Year of
Subsidiary that is included in the consolidated federal Income Tax Return of
the Pre-Distribution Group for the Pre-Distribution Taxable Period that
includes the Distribution Date (and all corresponding consolidated, combined or
unitary state, local or other Income Tax Returns of the Pre-Distribution Group)
shall end as of the Distribution Effective Time;


 


(b)           the Taxable Year of Plains
Energy (as a successor to Merger Subsidiary) that will be included in the
consolidated federal Income Tax Return of the Post-Distribution Parent Group
for the Post Distribution Taxable Period that begins on the day after the
Merger (and all corresponding consolidated, combined or unitary state, local or
other Income Tax Returns of the Pre-Distribution Group) for purposes of such
federal, state, local or other Income Taxes shall begin at the close of
business on the date of the Merger; and


 


35

















 


(c)           the Subsidiary Group and
each Subsidiary Member shall begin a new Taxable Year for purposes of such
federal, state, local or other Income Taxes as of the Distribution Effective
Time.


 


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


 


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


 


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


 


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


 


(a)           To the extent not
impractical, on the basis of the actual operations and Taxable income (if any)
for each such period, determined by closing the books of the entity as of the
Distribution Effective Time; or


 


36

















 


(b)           To the extent that an
allocation based on a closing of the books is impractical, on the basis of any
reasonable method or methods, including allocations based on (i) allocations
of Taxable income, loss, gain, deduction and credits made for the entity for
federal Income Tax purposes, (ii) rounding to the next nearest accounting
period-end, or (iii) the actual number of days in the Pre-Distribution
Straddle Period and Post-Distribution Straddle Period in proportion to the
number of days in the entire Straddle Period.


 


10.07       Payment of Taxes.


 


(a)           Parent shall pay: (i) all
Taxes shown to be due and payable on all Tax Returns filed pursuant to Section 10.02(a);
and (ii) subject to Section 10.08, all Taxes that shall thereafter
become due and payable as a result of a Final Determination with respect to all
Tax Returns filed by Parent pursuant to Section 10.02(a); provided,
however, that Subsidiary shall reimburse Parent, for the amount of any Taxes
required to be paid as a result of clause (i) or (ii), within fifteen (15)
days after receipt of written notification from Parent, if and to the extent
such Taxes are directly attributable to either (x) the Tax Liability of
Subsidiary or one or more Subsidiary Members, as a result of Subsidiary being a
Pre-Distribution Member or otherwise, after Parent takes into account any Tax
Benefit (including but not limited to any Carry-forward described in Section 10.11)
that reduces the amount of Parent’s Tax Liability attributable to such Tax
Liability of Subsidiary; or (y) subject to the limitation in the last
paragraph of Section 6.01, the Tax Liability of the Pre-Distribution Group
for any period ending on or before the Merger Closing Date; and the attribution
of such Tax Liability of the Pre-Distribution Group shall be determined
pursuant to the principles set forth in Section 10.06.


 


(b)           Subsidiary shall pay: (i) all
Taxes shown to be due and payable on all Tax Returns filed by Subsidiary
pursuant to Section 10.02(b); and (ii) subject to Section 10.08,
all Taxes that shall thereafter become due and payable as a result of a Final
Determination with respect to all Tax Returns filed by Subsidiary pursuant to Section 10.02(b);
provided, however, that Parent shall reimburse Subsidiary, for the amount of
any Taxes required to be paid as a result of clause (i) or (ii), within
fifteen (15) days after receipt of written notification from Subsidiary, if and
to the extent such Taxes are directly attributable to the Tax Liability of
Parent or Plains Energy (or any of their subsidiaries other than Subsidiary)
for any period beginning after the Merger Closing Date; and the attribution of
such Tax Liability shall be determined pursuant to the principles set forth in Section 10.06.


 


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


 


37
















 


10.09       Refunds of Taxes.


 


(a)           Parent shall be entitled to
any refund of Taxes attributable to either a Tax Return filed by Parent
pursuant to Section 10.02(a) or a Final Determination with respect to
any such Tax Return; provided, however, that (except as otherwise provided in
this Agreement) Parent shall pay to Subsidiary (in accordance with Section 11.16),
promptly after receipt of such refund, any portion of such refund (including
any interest received on that portion) directly attributable to a Tax for which
Subsidiary reimbursed Parent under Section 10.07(a).


 


(b)           Subsidiary shall be entitled
to any refund of Taxes attributable to either a Tax Return filed by Subsidiary
pursuant to Section 10.02(b) or a Final Determination with respect to
any such Tax Return; provided, however, that (except as otherwise provided in
this Agreement) Subsidiary shall pay to Parent (in accordance with Section 11.16),
promptly after receipt of such refund, any portion of such refund (including
any interest received on that portion) directly attributable to a Tax for which
Parent reimbursed Subsidiary under Section 10.07(b).


 


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


 


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


 


38

















 


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


 


10.12       Payroll Taxes.


 


(a)           Reporting on Forms W-2 and
941.  Parent and Subsidiary hereby
agree to adopt the “alternative procedure” for preparing and filing Treasury
Forms W-2 (Wage and Tax Statements), as described in Section 5 of IRS
Revenue Procedure 84-77, 1984-2 IRS Cumulative Bulletin 753 (“Rev. Proc.
84-77”).  In connection with such
agreement, the Transferred Assets and all related business operations are being
assigned to Subsidiary, all current Employees of Parent are becoming
Transferred Employees on the Merger Closing Date; and each Subsidiary
Individual associated with such operations shall be assigned for payroll
reporting purposes to Subsidiary.  Under
Rev. Proc. 84-77, Subsidiary as the successor Employer for Subsidiary
Individuals shall provide them with all required Treasury Forms W-2 for the
calendar year 2010, reflecting all wages paid and Taxes withheld by both Parent
as the predecessor Employer and Subsidiary as the successor Employer for the
entire year in which the Distribution takes place.  Parent and Subsidiary shall each be
responsible for filing Treasury Forms 941 for its Employees, with respect
to each quarterly Taxable Period in which such Employer pays its Employees’
compensation.  Parent shall provide all
Parent Individuals with all required Treasury Forms W-2 for the calendar year
2010, reflecting all wages and Taxes paid and withheld by Parent as a separate
Employer after the Distribution Date.


 


(b)           Forms W-4 and W-5.  Parent and Subsidiary also agree to adopt the
alternative procedure of Rev. Proc. 84-77 for purposes of filing Treasury Forms
W-4 (Employee’s Withholding Allowance Certificate) and W-5 (Earned Income
Credit Advance Payment Certificate). 
Under this procedure, Parent shall provide to Subsidiary all Treasury
Forms W-4 and W-5 on file with Parent for Transferred Employees and other
Subsidiary Individuals; and Subsidiary will honor these forms after the Merger
Closing Date until such time, if any, that such Subsidiary Individual submits a
revised form.


 


(c)           Assumption of Unemployment
Tax Rates.  Parent’s
state unemployment Tax experience as of the Merger Closing Date shall be
handled as follows.  If an option exists
under applicable law to allocate any such state unemployment Tax experience of
Parent to Subsidiary as the successor to Parent’s business included in the
Transferred Assets, Subsidiary may elect in writing, at any time before January 1,
2011, but no later than the time permitted under applicable law, to have Parent
transfer such experience to Subsidiary as soon as practicable after Parent
receives notice of such election.


 


39

















 


10.13       Tax Indemnification.


 


(a)           By Parent.  Subject to the following subsections of this Section 10.13,
other than subsection 10.13(b), Parent shall indemnify, defend and hold Subsidiary
and the Subsidiary Members harmless (on an After-Tax Basis) against:


 


(i)            each and every Liability for
any and all Taxes for which Parent is ultimately liable under Section 10.07;
and


 


(ii)           each and every Liability for
any and all Taxes of the Post-Distribution Parent Group under Treasury
Regulations Section 1.1502-6 or any similar law, rule or regulation
administered by any Tax Authority.


 


(b)           By Subsidiary.  Subsidiary shall indemnify, defend and hold
Parent, Plains Energy, the Post-Distribution Parent Group and the
Post-Distribution Members harmless (on an After-Tax Basis) against each and
every Liability for any and all Taxes for which Subsidiary is ultimately liable
under Section 10.07; provided, however, that to the extent any such Tax
Liability is attributable to Parent, Subsidiary, Merger Subsidiary or any other
direct or indirect subsidiary of Parent for any Taxable Period ending on or
before the Merger Closing Date, as determined pursuant to the principles set
forth in Section 10.06, Subsidiary’s indemnification obligation under this
subsection shall be subject to the limitations in the last paragraph of Section 6.01.


 


(c)           Assumed Tax Treatments.


 


(i)            The parties expressly agree
for all purposes to treat the formation of Subsidiary as a Tax-free transaction
under Code Section 351(a) (the “Tax Treatment”).  Each party hereto also expressly agrees not
to take (and to cause each of its Affiliates not to take) any action (except
where such action is required by law) that is inconsistent with the treatment
of the Distribution and all related transactions in accordance with the Tax
Treatment and to take (and to cause each of its Affiliates to take) any and all
actions reasonably available to such party (or any of its Affiliates) to
support and defend such treatment.


 


(ii)           Notwithstanding anything to
the contrary in Sections 10.07, 10.03(a) or 10.03(b):


 


(A)          If there is a Final
Determination that results in the disallowance, in whole or in part, of the Tax
Treatment, and if one or more members of both the Post-Distribution Parent
Group and the Subsidiary Group have taken actions after the Distribution that
materially contributed to such disallowance, then any Liability of Parent for
Taxes as a result of such disallowance shall be divided between Parent and
Subsidiary in the ratio provided in Section 5.02.


 


(B)           If there is a Final
Determination that results in the disallowance, in whole or in part, of the Tax
Treatment and any member of the Subsidiary Group (and no member of the
Post-Distribution Parent Group) has taken any action after the Distribution
that materially contributes to such disallowance, then Subsidiary shall
indemnify and hold the Post-Distribution Parent Group harmless for any Taxes
that would not have been 


 


40

















 


payable but for such
disallowance.


 


(C)           If there is a Final
Determination that results in the disallowance, in whole or in part, of the Tax
Treatment, and any member of the Post-Distribution Parent Group (and no member
of the Subsidiary Group) has taken any action after the Distribution that
materially contributes to such disallowance, then Parent shall indemnify and
hold the Subsidiary Group harmless for any Taxes that would not have been
payable but for such disallowance.


 


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


 


(d)           Certain Reimbursements.  Subsidiary (or Parent, as the case may be)
shall notify Parent (or Subsidiary) of any Taxes paid by the Subsidiary Group
or any Subsidiary Member (or the Post-Distribution Parent Group or any
Post-Distribution Parent Member) that are subject to indemnification under this
Section 10.13; provided, however, that no Tax Liability of $10,000 or less
in the aggregate shall in any event be indemnified hereunder.  To the extent not otherwise provided in this Section 10.13,
any other notification contemplated by this subsection (d) shall
include a detailed calculation (including, if applicable, separate allocations
of such Taxes between Pre- and Post-Distribution Taxable Periods and supporting
work papers) and a brief explanation of the basis for indemnification
hereunder.  Whenever a notification
described in this subsection (d) is given, the notified party shall pay
the amount requested in such notice to the notifying party in accordance with Section 11.16,
but only to the extent that the notified party agrees with such request.  To the extent the notified party disagrees
with such request, it shall, within twenty (20) days, so notify the notifying
party, whereupon the parties shall use their best efforts to resolve any such
disagreement.  To the extent not
otherwise provided for in this Section 10.13 or in Section 11.16, any
payment made after such 20-day period shall include interest at the Overdue
Rate from the date such payment would have been made under Section 11.16
based upon the original notice given by the notifying party.


 


(e)           Loss of Tax Benefits.  Appropriate payments shall be made between
the parties to take account of subsequent losses of, or changes in, any Tax
Benefit that has been taken into account for purposes of determining the After-Tax
Basis of any indemnification payment.


 


10.14       Cooperation; Document Retention; Confidentiality.


 


(a)           Provision of Cooperation,
Documents and Other Information.  Upon reasonable request by a requesting
party, Parent and Subsidiary shall promptly provide (and shall cause the
members of their respective Affiliated Groups to provide) such requesting party
with such cooperation and assistance, documents, and other information, without
charge, as may be necessary or reasonably helpful in connection with (i) the
preparation and filing of any original or amended Tax Return; (ii) the
conduct of any audit or other examination or any judicial or administrative
proceeding involving to any extent Taxes, Tax Returns within the scope of this
Agreement; or (iii) the verification by a party of an amount payable
hereunder to, or receivable hereunder from, another party.


 


41

















 


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


 


(b)           Retention of Books and
Records.  Parent, each Post Distribution
Member, and Subsidiary shall retain or cause to be retained all Tax Returns
required to be prepared with respect to each Pre-Distribution Taxable Period
and each Straddle Period; and all books, records, schedules, work papers, and
other documents relating thereto, until the expiration of the later of (i) all
applicable statutes of limitations (including any waivers or extensions
thereof), and (ii) any retention period required by law or pursuant to any
record retention agreement.  The parties
hereto shall notify each other in writing of any waivers, extensions or
expirations of applicable statutes of limitations.  The parties hereto shall provide at least
thirty (30) days prior written notice of any intended destruction of the
documents referred to in this subsection (c). 
A party giving such a notification shall not dispose of any of the
foregoing materials without first obtaining the written approval (which may not
be unreasonably withheld) of the notified party.


 


(c)           Status and Other Information
Regarding Audits and Litigation.  Parent (or Subsidiary, as the case may be) shall
use reasonable best efforts to keep Subsidiary (or Parent) advised, as to the
status of Tax audits and litigation involving any issue relating to any Taxes,
Tax Returns or Tax Benefits subject to indemnification under this Agreement.  To the extent relating to any such issue,
Parent (or Subsidiary) shall promptly furnish Subsidiary (or Parent) with
copies of any inquiries or requests for information from any Tax Authority or
any other administrative, judicial or other Governmental Entity, as well as copies
of any revenue agent’s report or similar report, notice of proposed adjustment
or notice of deficiency.


 


(d)           Confidentiality of Documents
and Information.  Except as
required by law or with the prior written consent of the other party, all Tax
Returns, documents, schedules, work papers and similar items and all
information contained therein, which Tax Returns and other materials are within
the scope of this Agreement shall be kept confidential by the parties hereto
and their Representatives, shall not be disclosed to any other Person and shall
be used only for the purposes provided herein.


 


10.15       Contests and Audits.


 


(a)           Notification of Audits or
Disputes.  Upon the
receipt by Parent or any Post-Distribution Parent Member (or Subsidiary or any
Subsidiary Member, as the case may be) 


 


42

















 


of notice of any pending or
threatened Tax audit, contest or assessment that could reasonably be expected
to affect any Liability for Taxes subject to indemnification hereunder, Parent
(or Subsidiary) shall promptly notify Subsidiary (or Parent) in writing of the
receipt of such notice.


 


(b)           Control and Settlement.


 


(i)            Control and Consultation by
Parent.  Parent shall have the right to
control, and to represent the interests of all affected taxpayers in, any Tax
audit or administrative, judicial or other proceeding relating in whole or in
part, to any Pre-Distribution Taxable Period or any other Taxable Period for
which Parent is responsible, in whole or in part, for Taxes under Section 10.07(a) and
Section 10.13; and to employ counsel of its choice at its expense;
provided, however, that, with respect to such issues that may impact Subsidiary
or any Subsidiary Member for any Post-Distribution Taxable Period or for which
Subsidiary may be responsible in part under Section 10.07(b) and Section 10.13,
Parent shall (A) afford Subsidiary full opportunity to observe at any such
proceedings and to review any submissions related to such issues, (B) in
good faith consult with Subsidiary regarding its comments with respect to such
proceedings and submissions in an effort to resolve any differences with
respect to Parent’s positions with regard to such issues, (C) in good
faith consider Subsidiary’s recommendations for alternative positions with
respect to such issues, and (D) advise Subsidiary of the reasons for
rejecting any such alternative position. 
In the event of any disagreement regarding the proceedings, Parent shall
have the ultimate control of the contest and any settlement or other resolution
thereof.


 


(ii)           Control and Consultation by
Subsidiary.  Subsidiary
shall have the right to control, and to represent the interests of all affected
taxpayers in, any Tax audit or administrative, judicial or other proceeding
relating solely to any Post-Distribution Taxable Period of the Subsidiary Group
or any Subsidiary Member, or relating to any other Taxable Period for which
Subsidiary is solely responsible for Taxes under Section 10.07 and Section 10.13;
and to employ counsel of its choice at its expense; provided, however, that
Subsidiary shall (A) afford Parent full opportunity to observe at any such
proceedings and to review any submissions related thereto and (B) not
agree to settle any such proceeding in a manner that could reasonably be
expected to have a material and adverse effect on (1) any indemnification
obligation of Parent hereunder, (2) any Tax Liability of the
Pre-Distribution Group or any Pre-Distribution Member for any Pre-Distribution
Taxable Period or (3) any Tax Liability of the Post-Distribution Parent
Group or any Post-Distribution Parent Member for any Post-Distribution Taxable
Period, without the prior written consent of Parent, which consent shall not be
unreasonably withheld.


 


(iii)          Delivery of Powers of
Attorney.  Subsidiary
(and, to the extent necessary, any other member of any Subsidiary Group) shall
execute and deliver to Parent, promptly upon request, such powers of attorney
authorizing Parent to extend statutes of limitations, receive refunds and take
such other actions that Parent reasonably considers to be appropriate in
exercising its control pursuant to this Section 10.15.


 


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


 


43

















 


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


 


ARTICLE 11

MISCELLANEOUS


 


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


 


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


 


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


 


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


 


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


 


	
  if
  to Parent, to

  	
  ante4, Inc.

  
	
   

  	
  2812 1st Avenue North, Suite 506

  
	
   

  	
  P.O. Box 1500

  
	
   

  	
  Billings, Montana 59103-1500

  
	
   

  	
   

  
	
  if to Subsidiary, to

  	
  ante5, Inc.

  
	
   

  	
  c/o Lyle Berman

  
	
   

  	
  One Hughes Center Drive,
  Suite 606

  
	
   

  	
  Las Vegas, Nevada 89169

  



 


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


 


44

















 


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


 


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


 


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


 


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


 


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


 


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


 


11.11       Headings; References; Rules of Construction. 
The article, section and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.  All
references herein to “Articles,” “Sections,” “Exhibits” or “Schedules” shall be
deemed to be references to Articles or Sections of this Agreement or Exhibits
or Schedules attached hereto unless otherwise indicated.


 


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


 


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


 


45

















 


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


 


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


 


11.14       Mediation and Arbitration of Disputes.


 


(a)           Dispute Resolution.  Except for any dispute that is a proper
subject for injunctive relief, any dispute, controversy or disagreement (“Dispute”)
between the parties that is related to their obligations under this Agreement
and cannot be settled, shall be submitted for mediation to a committee made up
of an equal number of members of each party’s Board of Directors who are not on
the Board of Directors of the other party (“Committee”).  If the parties are unable to reach an
amicable resolution of a Dispute within thirty days after submission to the
Committee, then, to the maximum extent allowed by law, the Dispute shall be
submitted and resolved by final and binding arbitration in Minnesota; provided,
however, that any party may seek injunctive relief or enforcement of any award
rendered pursuant to the arbitration provisions of this Section 11.14 by
bringing a suit in any court of competent jurisdiction.  Any award issued as a result of such
arbitration shall be final and binding between the parties thereto and shall be
enforceable by any court having jurisdiction over the party against whom
enforcement was sought and application may be made to such court for judicial
acceptance of the award and order of enforcement.  The fees and expenses of arbitration (including
reasonable attorneys’ fees) shall be paid by the party that does not prevail in
such arbitration.


 


(b)           Attorneys’ Fees.  If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing party shall
be entitled to recover its costs and expenses, including without limitation
reasonable attorneys’ fees, incurred in connection with such action, including
any appeal of such action.


 


(c)           Specific Performance.  Nothing contained in this Section 11.14
shall limit or restrict in any way the right or power of a party at any time to
seek injunctive relief in any court and to litigate the issues relevant to such
request for injunctive relief before such court (i) to restrain the other
party from breaching this Agreement or (ii) for specific enforcement of
this Section 11.14.  The parties
agree that any legal remedy available to a party with respect to a breach of
this Section 11.14 will not be adequate and that, in addition to all other
legal remedies, each party is entitled to an order specifically enforcing this Section 11.14.


 


(d)           Consent to Jurisdiction.  The parties hereby consent to the
jurisdiction of the federal and state courts located in the State of California
for all purposes under this Agreement.


 


46

















 


(e)           Confidentiality.  Neither party nor the arbitrators may
disclose the existence or results of any arbitration under this Agreement or
any evidence presented during the course of the arbitration without the prior
written consent of both parties, except as required to fulfill applicable
disclosure and reporting obligations, or as otherwise required by law.


 


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


 


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


 


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


 


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


 


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


 


[Signature Page to Follow]


 


47

















 


[Signature Page of Distribution Agreement]


 


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


 


	
   

  	
  ante4, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Steven Lipscomb

  
	
   

  	
  Steven
  Lipscomb

  
	
   

  	
  Its
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  “PARENT”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Ante5, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Steven Lipscomb

  
	
   

  	
  Steven
  Lipscomb

  
	
   

  	
  Its
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  “SUBSIDIARY”

  



 


48
















 


SCHEDULE
A


 


to Distribution Agreement


between ante4, Inc.


and ante5, Inc.


 


Dated April 16, 2010


 


TRANSFERRED ASSETS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


50

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


51

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


52

















 


SCHEDULE
B


 


to Distribution Agreement


between ante4, Inc.


and ante5, Inc.


 


Dated April 16, 2010


 


ASSUMED LIABILITIES


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


53

















 


SCHEDULE
C


 


to Distribution Agreement


between ante4, Inc.


and ante5, Inc.


 


Dated April 16, 2010


 


1.             Directors of ante5, Inc.:


 


Lyle Berman


Steven Lipscomb


Bradley Berman


 


2.             Officers of ante5, Inc.:


 


	
  Steven Lipscomb

  	
  Chairman
  of the Board and Chief Executive Officer

  
	
  John Simonelli

  	
  Interim
  Chief Financial Officer

  
	
  Steven Lipscomb

  	
  Secretary

  



 


54

















 


SCHEDULE
D


 


to Distribution Agreement


between ante4, Inc.


and ante5, Inc.


 


Dated April 16, 2010


 


EXAMPLE OF ADJUSTMENT OF PARENT STOCK OPTIONS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


55

















 


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


 


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


 


56