Document:

Purchase Agreement

 Exhibit 10.1 
  
 EXECUTION COPY 
  
 LEVI STRAUSS & CO. 
  
 $380,000,000 Floating Rate Senior Notes due 2012 
 €150,000,000 8-5/8% Senior Notes due 2013 
  
 PURCHASE AGREEMENT 
  
 March 7, 2005 
  
 BANC OF AMERICA SECURITIES LLC 
 CITIGROUP GLOBAL MARKETS INC. 
 J.P. MORGAN SECURITIES INC. 
 GOLDMAN, SACHS & CO. 
 SCOTIA CAPITAL (USA) INC. 
 BEAR, STEARNS & CO. INC. 
 CREDIT SUISSE FIRST BOSTON LLC 
  
 As Representatives of the Several Floating Rate Notes Purchasers 
 c/o Banc of America Securities LLC 
 9 West
57th Street 
 New York, New York 10019 
  
 BANC OF AMERICA SECURITIES LIMITED 
 CITIGROUP GLOBAL MARKETS LIMITED

 J.P. MORGAN SECURITIES LTD. 
 GOLDMAN, SACHS & CO.

 SCOTIA CAPITAL INC. 
 BEAR, STEARNS & CO. INC. 

CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED 
  
 As Representatives of the Several Euro Notes Purchasers 
 c/o
Banc of America Securities Limited 
 5 Canada Square 
 London E14 5AQ 
 United Kingdom 
  
 Ladies and Gentlemen: 
  
 Levi Strauss & Co., a corporation organized under the laws of Delaware (the “Company”), proposes to issue and sell (i) to the several
parties named in Schedule I hereto (the “Floating Rate Notes Purchasers”), $380,000,000 principal amount of its Senior Notes due 2012 (the “Floating Rate Notes”) and (ii) to the several parties named in Schedule II hereto (the
“Euro Notes Purchasers” and, together with the Floating Rate Notes Purchasers, the “Initial Purchasers”), €150,000,000 principal amount of its Senior Notes due 2013 (the “Euro Notes” and, together with the Floating
Rate Notes, the 

  

 
“Notes”). You are acting as the representatives (the “Representatives”) of the Floating Rate Notes Purchasers and/or the Euro Notes
Purchasers as indicated above. The Floating Rate Notes are to be issued under an indenture to be dated as of the Closing Date (the “Floating Rate Notes Indenture”) between the Company and Wilmington Trust Company, as trustee (the
“Floating Rate Notes Trustee”), and will have the benefit of a registration rights agreement dated as of the Closing Date (the “Floating Rate Notes Registration Rights Agreement”) between the Company and the Floating Rate Notes
Purchasers pursuant to which the Company will agree to register the Floating Rate Notes under the Act subject to the terms and conditions therein specified; and the Euro Notes are to be issued under an indenture dated as of the Closing Date (the
“Euro Notes Indenture” and, together with the Floating Rate Notes Indenture, the “Indentures”) between the Company and Wilmington Trust Company, as trustee (the “Euro Notes Trustee” and, together with the Floating Rate
Notes Trustee, the “Trustees”), and will have the benefit of a registration rights agreement dated as of the Closing Date (the “Euro Notes Registration Rights Agreement” and, together with the Floating Rate Notes Registration
Rights Agreement, the “Registration Rights Agreements”) between the Company and the Euro Notes Purchasers pursuant to which the Company will agree to register the Euro Notes under the Act subject to the terms and conditions therein
specified. The use of the neuter in this Agreement shall include the feminine and masculine wherever appropriate. Certain terms used herein are defined in Section 17 hereof. 
  
 The sale of the Floating Rate Notes to the Floating Rate Notes Purchasers and the Euro Notes to the Euro Notes Purchasers
will be made without registration of the Floating Rate Notes or the Euro Notes under the Act in reliance upon exemptions from the registration requirements of the Act. 
  
 In connection with the sale of the Notes, the Company has prepared a preliminary offering memorandum, dated February 24,
2005 (as amended or supplemented at the Execution Time, including any and all exhibits thereto and any information incorporated by reference therein, the (“Preliminary Offering Memorandum”), and a final offering memorandum, dated March 7,
2005 (as amended or supplemented at the Execution Time, including any and all exhibits thereto and any information incorporated by reference therein, the “Final Offering Memorandum”). Each of the Preliminary Offering Memorandum and the
Final Offering Memorandum sets forth certain information concerning the Company and the Notes. The Company hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Final Offering Memorandum, and any amendment or
supplement thereto, in connection with the offer and sale of the Notes by the Initial Purchasers. Unless stated to the contrary, references herein to the Final Offering Memorandum at the Execution Time are not meant to include any information
incorporated by reference therein subsequent to the Execution Time, and any references herein to the terms “amend”, “amendment” or “supplement” with respect to the Final Offering Memorandum shall be deemed to refer to
and include any information filed under the Exchange Act subsequent to the Execution Time which is incorporated by reference therein. 
  

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 1. Representations and Warranties. The Company represents and warrants to each Initial Purchaser
as set forth below in this Section 1. 
  
 (a) The Preliminary
Offering Memorandum, at the date thereof, did not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not
misleading. At the Execution Time and on the Closing Date (as defined in Section 3 hereof), the Final Offering Memorandum did not, and will not (and any amendment or supplement thereto, at the date thereof and at the Closing Date will not), contain
any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company
makes no representation or warranty as to the information contained in or omitted from the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement thereto, in reliance upon and in conformity with information
furnished in writing to the Company by or on behalf of the Initial Purchasers through the Representatives specifically for inclusion therein. 
  
 (b) All documents filed by the Company under the Exchange Act (the “Exchange Act Documents”), when they were filed with the Commission, complied
as to form in all material respects with the requirements of the Exchange Act, and the rules and regulations of the Commission thereunder, and, when they were so filed, did not contain any untrue statement of material fact or omit to state any
material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 
  
 (c) Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf (other than the Initial Purchasers, as to whom the
Company makes no representations) has, directly or indirectly, made offers or sales of any security, or solicited offers to buy any security, under circumstances that would require the registration of the Notes under the Act. 
  
 (d) Neither the Company, nor any of its Affiliates, nor any person acting on
its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representations) has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale
of the Notes in the United States. 
  
 (e) The Notes satisfy the
eligibility requirements of Rule 144A(d)(3) under the Act. 
  
 (f)
Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf (other than the Initial Purchasers, as to whom the Company makes no representations) has engaged in any directed selling efforts with respect to the Notes,
and each of them has complied with the offering restrictions requirements of Regulation S. Terms used in this paragraph have the meanings given to them by Regulation S. 
  

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 (g) The Company will use its best efforts to cause both the Floating Rate Notes and the Euro Notes to be
listed on the Luxembourg Stock Exchange. 
  
 (h) The Company is
not, and after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Final Offering Memorandum will not be, an “investment company” within the meaning of the Investment Company
Act, without taking account of any exemption arising out of the number of holders of the Company’s Notes. 
  
 (i) The Company is subject to and in full compliance with the reporting requirements of Section 13 and Section 15(d) of the Exchange Act. 
  
 (j) The Company has not paid or agreed to pay to any person any compensation
for soliciting another to purchase any Notes of the Company (except as contemplated by this Agreement and the tender offer and consent solicitation for the Company’s dollar-denominated 11-5/8% Notes due 2008 and the Company’s
euro-denominated 11-5/8% Notes due 2008 (collectively, the “11-5/8% Notes”). 
  
 (k) The Company has not taken, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, the stabilization
or manipulation of the price of any security of the Company to facilitate the sale or resale of the Notes. 
  
 (l) Each of the Company and its subsidiaries has been duly incorporated or organized and is validly existing as a corporation or other valid legal entity
in good standing under the laws of the jurisdiction in which it is chartered or organized with full corporate or company power and authority to own or lease, as the case may be, and to operate its properties and conduct its business as described in
the Final Offering Memorandum, and is duly qualified to do business as a foreign corporation or other valid legal entity and is in good standing under the laws of each jurisdiction which requires such qualification, except in jurisdictions in which
the failure to be so qualified or to be in good standing has not had and would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect
on, or a material adverse change in, the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole. 
  
 (m) All the outstanding shares of capital stock of each subsidiary have been duly and validly authorized and issued and are
fully paid and nonassessable, and, except as otherwise set forth in the Final Offering Memorandum and other than the Company’s subsidiaries in Japan and Turkey, all outstanding shares of capital stock of the subsidiaries are owned by the
Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest or any other security interests, claims, liens or encumbrances. 
  
 (n) The Company’s authorized equity capitalization is as set forth in the Final Offering Memorandum, and the Voting
Trust Agreement entered into as of 

  

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April 15, 1996, among the Voting Trustees and stockholders of the Company conforms in all material respects to the description thereof contained in the Final
Offering Memorandum. 
  
 (o) The statements in the Final Offering
Memorandum under the headings “Important U.S. Federal Income Tax Considerations”, “Description of Notes”, “Exchange Offer; Registration Rights”, “Risk Factors—Risks Relating to Our Business—Our success
depends on the continued protection of our trademarks and other proprietary intellectual property rights”, and in the Company’s Annual Report on Form 10-K for the fiscal year ended November 28, 2004 (the “2004 10-K”) under the
headings “Business —Trademarks”, “Business—Government Regulation” and “Legal Proceedings” insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are, in all
material respects, accurate and fair summaries of such legal matters, agreements, documents or proceedings. 
  
 (p) This Agreement has been duly authorized, executed and delivered by the Company; each of the Floating Rate Notes Indenture and the Euro Notes Indenture
has been duly authorized and, assuming due authorization, execution and delivery thereof by the Floating Rate Notes Trustee or the Euro Notes Trustee, as applicable, when executed and delivered by the Company, will constitute a legal, valid and
binding instrument enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally
from time to time in effect and to general principles of equity); the Notes have been duly authorized, and, when executed and authenticated in accordance with the provisions of the Floating Rate Notes Indenture or the Euro Notes Indenture, as
applicable, and delivered to and paid for by the Initial Purchasers, will have been duly executed and delivered by the Company and will constitute the legal, valid and binding obligations of the Company entitled to the benefits of the applicable
Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity); and each of the
Registration Rights Agreements has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery thereof by the other parties thereto, constitutes a legal, valid and binding instrument
enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in
effect and to general principles of equity). 
  
 (q) No consent,
approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein or in the Indentures or the Registration Rights Agreements, except such as will be obtained
under the Act and the Trust Indenture Act in connection with the transactions contemplated by the Registration Rights Agreements and such as may be required under the blue sky or securities laws of any jurisdiction in connection with the
transactions contemplated by this Agreement and the Registration Rights Agreements. 
  

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 (r) Neither the execution and delivery of the Floating Rate Notes Indenture, the Euro Notes Indenture,
this Agreement or the Registration Rights Agreements, the issue and sale of the Notes, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof or thereof will conflict with,
result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company or any of its subsidiaries; (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which any of
their respective properties is subject; or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator
or other authority of the United States or any state thereof having jurisdiction over the Company, any of its subsidiaries or any of their respective properties or to the Company’s knowledge, any statute, law, rule, regulation, judgment, order
or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority outside of the United States having jurisdiction over the Company, any of its
subsidiaries or any of their respective properties, except, with respect to (x) clause (ii) and (y) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority outside of the United States described in clause (iii) as to which the Company has no knowledge, for conflicts, violations, breaches or impositions that would not reasonably be
expected to have a Material Adverse Effect. 
  
 (s) The
consolidated historical financial statements and schedules of the Company and its consolidated subsidiaries included in the Final Offering Memorandum or the Exchange Act Documents present fairly in all material respects the financial condition,
results of operations and cash flows of the Company as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of the Act and the Exchange Act and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the periods involved (except as otherwise noted therein); and the selected financial data set forth under the caption “Selected Historical Consolidated Financial Data”
in the Final Offering Memorandum fairly present, on the basis stated in the Final Offering Memorandum, the information included therein. Arthur Andersen LLP audited the financial statements of the Company as of and for the fiscal year ended November
26, 2000. The Company has prepared restated financial statements (the “Restated Financial Statements”) for such fiscal year. The Restated Financial Statements were prepared on a basis consistent with the restated financial statements of
the Company as of and for the fiscal years ended November 25, 2001 and November 24, 2002 audited by KPMG LLP. All financial data as of and for the fiscal year ended November 26, 2000 included in the Final Offering Memorandum have been derived from,
and are in agreement with, the Restated Financial Statements. 
  

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 (t) No action, suit or proceeding by or before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its subsidiaries or its or their property is pending or, to the best knowledge of the Company, threatened that (i) could reasonably be expected to have a material adverse effect on the performance of this
Agreement, the Indentures or the Registration Rights Agreements, or the consummation of any of the transactions contemplated hereby or thereby; or (ii) could reasonably be expected to have a Material Adverse Effect, whether or not arising from
transactions in the ordinary course of business, except as set forth in or contemplated in the Final Offering Memorandum (exclusive of any amendment or supplement thereto). 
  
 (u) The Company and each of its subsidiaries own, lease or license all such properties as are necessary to the conduct of
their respective operations as presently conducted. 
  
 (v)
Neither the Company nor any subsidiary is in violation or default of (i) any provision of its charter or bylaws; (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject; or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any
court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any of its properties, as applicable, other than such violations or defaults the occurrence of
which would not reasonably be expected to have a Material Adverse Effect, whether or not arising from the transactions in the ordinary course of business. 
  
 (w) KPMG LLP, who have reviewed certain financial statements of the Company and its consolidated subsidiaries included in the Exchange Act Documents that
are part of the Final Offering Memorandum, are independent registered public accountants with respect to the Company within the meaning of the Act and the applicable published rules and regulations thereunder. Arthur Andersen LLP, who has previously
certified certain financial statements of the Company and its consolidated subsidiaries and previously delivered their report with respect to the audited consolidated financial statements and schedules included in the Final Offering Memorandum or
the Exchange Act Documents, were at all times during their engagement by the Company independent public accountants with respect to the Company within the meaning of the Act and the applicable published rules and regulations thereunder. 

 
 (x) To the Company’s knowledge, there are no material stamp or other
issuance or transfer taxes or duties or other material similar fees or charges required to be paid in connection with the execution and delivery of this Agreement or the issuance or sale by the Company of the Notes. 
  
 (y) The Company has filed all foreign, federal, state and local tax returns
that are required to be filed or has requested extensions thereof (except in any case in which the failure so to file would not have a Material Adverse Effect, whether or 

  

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not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Offering Memorandum (exclusive of any
amendment or supplement thereto) and has paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except for any such tax or other assessment,
fine or penalty that is currently being contested in good faith or as would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Offering
Memorandum (exclusive of any amendment or supplement thereto). 
  
 (z) No labor problem or dispute with the employees of the Company or any of its subsidiaries exists or is threatened or imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or
its subsidiaries’ principal suppliers, contractors or customers that in any such case could have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in
the Final Offering Memorandum (exclusive of any amendment or supplement thereto). 
  
 (aa) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are reasonable and customary in the businesses in which
they are engaged; all policies of insurance and fidelity or surety bonds insuring the Company or any of its subsidiaries or their respective businesses, assets, employees, officers and directors are in full force and effect, except when the failure
to be in full force and effect would not have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms of such policies and instruments in all material respects; except as would not have a Material Adverse Effect,
there are no claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Offering Memorandum (exclusive of any amendment or supplement thereto).

  
 (bb) No subsidiary of the Company is currently contractually
prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by (i) the Final Offering Memorandum, (ii) the Company’s Credit Agreement dated as of
September 29, 2003, among the Company, Levi Strauss Financial Center Corporation, the financial institutions listed on the signature pages thereto and Bank of America, N.A., as agent, as amended on September 30, 2003, October 14, 2003, March 18,
2004, August 13, 2004 and November 24, 2004 and including the limited waiver dated as of February 15, 2005 

  

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granted to the Company with respect to such agreement (the “Revolving Credit Facility”), and (iii) the Company’s Credit Agreement dated as of
September 29, 2003, among the Company, the lender’s party thereto and Bank of America, N.A., as administrative agent, as amended on August 30, 2004 (the “Term Loan Facility” and, together with the Revolving Credit Facility, the
“Existing Bank Credit Facilities”). 
  
 (cc) The Company
and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, other than such licenses,
certificates, permits or other authorizations, the failure of which to possess would not have a Material Adverse Effect, and neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in the Final Offering Memorandum (exclusive of any amendment or supplement thereto). 
  
 (dd) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles
and to maintain asset accountability; and (iii) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company maintains disclosure
controls and procedures (as such term is defined in Rule 13a-14 under the Exchange Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission, including, without limitation, controls and procedures designed to ensure that information required to
be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or
officers, as appropriate to allow timely decisions regarding required disclosure. 
  
 (ee) In the ordinary course of its business, the Company periodically reviews the effect of applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”) on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws, or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties); on the basis of such review, the Company has reasonably concluded that such associated 

  

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costs and liabilities would not, singly or in the aggregate, have a Material Adverse Effect, whether or not arising from transactions in the ordinary course
of business, except as set forth in or contemplated in the Final Offering Memorandum (exclusive of any amendment or supplement thereto). 
  
 (ff) Except as would not have a Material Adverse Effect, each of the Company and its subsidiaries has fulfilled its obligations, if any, under the minimum
funding standards of Section 302 of the United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the regulations and published interpretations thereunder with respect to each “plan” (as defined in
Section 3(3) of ERISA and such regulations and published interpretations) in which employees of the Company and its subsidiaries are eligible to participate and each such plan is in compliance in all material respects with the presently applicable
provisions of ERISA and such regulations and published interpretations; the Company and its subsidiaries have not incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other than for the payment of premiums in the ordinary
course) or to any such plan under Title IV of ERISA. 
  
 (gg) The
subsidiaries listed on Annex A attached hereto are the only significant subsidiaries of the Company as defined by Rule l-02 of Regulation S-X under the Act (the “Subsidiaries”). 
  
 (hh) The Company and its subsidiaries own, possess, license or have other rights to use, on reasonable terms, all patents,
patent applications, trade and service marks (including the Levi’s®, Dockers® and Levi
Strauss SignatureTM trademarks), trade and service
mark registrations, trade names, copyrights, licenses, inventions, trade secrets, technology, know-how and other intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of the Company’s business as
now conducted free and clear of any material security interests, claims, liens or encumbrances, except as would not have a Material Adverse Effect or as set forth in or contemplated in (i) the Final Offering Memorandum (exclusive of any amendment or
supplement thereto) or (ii) the Existing Bank Credit Facilities, and none of the Intellectual Property, to the best knowledge of the Company, conflicts with the valid trademark, trade name, copyright, patent, patent right or intangible asset of any
other Person to the extent that such conflict has or would have a Material Adverse Effect. 
  
 (ii) Except as would not have a Material Adverse Effect, none of the Company, its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee or Affiliate of the Company or any of its
subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such Persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”),
including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift,
promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in
contravention of the 

  

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FCPA; and except as would not have a Material Adverse Effect, the Company, its subsidiaries and, to the knowledge of the Company, its Affiliates have
conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith. 
  
 (jj) Except as would not have a Material Adverse Effect, the operations of
the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering
Laws”) and except as would not have a Material Adverse Effect, no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the
Money Laundering Laws is pending or, to the knowledge of the Company, threatened. 
  
 (kk) Except as disclosed in the Final Offering Memorandum, there is and has been no failure on the part of the Company and any of the Company’s directors or officers, in their capacities as such, to comply with
any provision of the Sarbanes- Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications. 
  
 (ll) None of the Company, any of its subsidiaries or, to the knowledge of the
Company, any director, officer, agent, employee or Affiliate of the Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury
(“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering of the Notes hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or, to its knowledge,
any other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC. 
  
 (mm) Neither the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee or Affiliate of the Company
or any of its subsidiaries has distributed and, prior to the later to occur of (i) the Closing Date and (ii) the completion of the distribution of the Notes, will distribute any material referring to the offering and sale of the Notes other than the
Preliminary Offering Memorandum or the Final Offering Memorandum or other materials, if any, permitted by the Securities Act and the Financial Services and Markets Act 2000 (the “FSMA”) (or regulations promulgated pursuant to the
Securities Act or the FSMA). 
  
 (nn) Neither the Company nor any
subsidiary has taken any action or omitted to take any action (such as issuing any press release relating to the Notes without an appropriate legend) which may result in the loss by any of the Initial Purchasers of the ability to rely on any
stabilization safe harbour provided under the FSMA. The Company 

  

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and its subsidiaries have been informed of the existence (and have received a copy) of the UK Financial Services Authority’s informational guidance
referred to in MAR 2.3.2R(4) of the price stabilizing rules made under Section 144(1) of the FSMA. 
  
 Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Initial Purchasers in connection with the
offering of the Notes shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Initial Purchaser. 
  
 2. Purchase and Sale. Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth: 
  
 (a) the Company agrees to sell to each Floating Rate Notes
Purchaser, and each Floating Rate Notes Purchaser agrees, severally and not jointly, to purchase from the Company at the purchase price set forth in Schedule III, the principal amount of Floating Rate Notes set forth opposite such Floating Rate
Notes Purchaser’s name on Schedule I hereto; and 
  
 (b) the Company agrees to sell to each Euro Notes Purchaser, and each Euro Notes Purchaser agrees, severally and not jointly, to purchase from the Company at the purchase price set forth in Schedule III, the principal amount of Euro Notes
set forth opposite such Euro Notes Purchaser’s name on Schedule II hereto. 
  
 3. Delivery and Payment. Delivery of and payment for the Euro Notes shall be made at 10:00 A.M., London time, and delivery of and payment for the Floating Rate Notes shall be made at 10:00 A.M., New York City
time, on March 11, 2005, or at such time on such later date (not later than three Business Days after the foregoing date) as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the
Company or as provided in Section 9 hereof (such date and time of delivery and payment for the Notes being herein called the “Closing Date”). Delivery of the Notes shall be made to the Representatives for the respective accounts of the
several Initial Purchasers against payment by the several Initial Purchasers through the Representatives of the purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to the account specified by the
Company. Delivery of the Floating Rate Notes shall be made through the facilities of The Depository Trust Company and delivery of the Euro Notes shall be made through the facilities of the Euroclear System and Clearstream, Luxembourg, unless the
Representatives shall otherwise instruct. 
  
 4. Offering by
Initial Purchasers. Each Initial Purchaser, severally and not jointly, represents and warrants to and agrees with the Company that: 
  
 (a) It has not offered or sold, and will not offer or sell, any Floating Rate Notes or Euro Notes, as applicable, except (i) to those persons it
reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Act) and that, in connection with each such sale, it has taken or will take reasonable steps to ensure that 

  

 12 

 
the purchaser of such Floating Rate Notes or Euro Notes, as applicable, is aware that such sale is being made in reliance on Rule 144A; or (ii) in accordance
with the restrictions set forth in Exhibit A hereto. 
  
 (b)
Neither it nor any person acting on its behalf has made or will make offers or sales of the Floating Rate Notes or Euro Notes, as applicable, in the United States by means of any form of general solicitation or general advertising (within the
meaning of Regulation D) in the United States. 
  
 5.
Agreements. The Company agrees with each Initial Purchaser that: 
  
 (a) The Company will furnish to each Initial Purchaser and to counsel for the Initial Purchasers, without charge, during the period referred to in paragraph (c) below, as many copies of the Final Offering Memorandum and any amendments and
supplements thereto as you may reasonably request. 
  
 (b) The
Company will not amend or supplement the Final Offering Memorandum without the prior written consent of Banc of America Securities LLC and Citigroup Global Markets Inc. 
  
 (c) If at any time prior to the completion of the sale of the Notes by the Initial Purchasers (as determined by Banc of
America Securities LLC and Citigroup Global Markets Inc.), any event occurs as a result of which the Final Offering Memorandum, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it shall be necessary to amend or supplement the Final Offering Memorandum to comply with applicable law, the Company
promptly (i) will notify the Representatives of any such event; (ii) subject to the requirements of paragraph (b) of this Section 5, will prepare an amendment or supplement that will correct such statement or omission or effect such compliance; and
(iii) will supply any supplemented or amended Final Offering Memorandum to the several Initial Purchasers and counsel for the Initial Purchasers without charge in such quantities as you may reasonably request. 
  
 (d) The Company will arrange, if necessary, for the qualification of the
Notes for sale by the Initial Purchasers under the laws of such jurisdictions in the United States and the European Union as the Representatives may reasonably designate and will maintain such qualifications in effect so long as required for the
sale of the Notes; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than
those arising out of the offering or sale of the Notes, in any jurisdiction where it is not now so subject. The Company will promptly advise the Representatives of the receipt by the Company of any notification with respect to the suspension of the
qualification of the Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. 
  

 13 

 (e) The Company will not, and will not permit any of its Affiliates (other than the Initial Purchasers,
as to whom the Company makes no covenant) to, resell, under circumstances that would require the registration of the Notes under the Act, any Notes that have been acquired by any of them. 
  
 (f) Neither the Company, nor any of its Affiliates (other than the Initial Purchasers, as to whom the Company makes no
covenant), nor any person acting on its or their behalf will, directly or indirectly, make offers or sales of any security, or solicit offers to buy any security, under circumstances that would require the registration of the Notes under the Act.

  
 (g) Neither the Company, nor any of its Affiliates (other than
the Initial Purchasers, as to whom the Company makes no covenant), nor any person acting on its or their behalf will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer
or sale of the Notes in the United States. 
  
 (h) So long as any
of the Notes are “restricted Notes” within the meaning of Rule 144(a)(3) under the Act, the Company will, during any period in which it is not subject to and in compliance with Section 13 or 15(d) of the Exchange Act or it is not exempt
from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder of such restricted Notes and to each prospective purchaser (as designated by such holder) of such restricted Notes,
upon the request of such holder or prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the Act. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such
holders, from time to time of such restricted Notes. 
  
 (i)
Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf will engage in any directed selling efforts with respect to the Notes, and each of them will comply with the offering restrictions requirements of
Regulation S. Terms used in this paragraph have the meanings given to them by Regulation S. 
  
 (j) The Company will cooperate with the Representatives and use its best efforts to (i) permit the Floating Rate Notes to be eligible for clearance and settlement through The Depository Trust Company, (ii) permit the
Euro Notes to be eligible for clearance and settlement through the Euroclear System and Clearstream, Luxembourg, and (iii) cause both the Floating Rate Notes and the Euro Notes to be approved for listing on the Luxembourg Stock Exchange. 

 
 (k) The Company will not offer, sell, contract to sell, grant any other
option to purchase or otherwise dispose of, directly or indirectly, or announce the offering of, or file a registration statement for, any debt securities issued or guaranteed by the Company or any of its direct or indirect subsidiaries, or enter
into any agreement to do any of the foregoing (other than (i) the Notes and the New Securities (as defined in the Registration Rights Agreements or the Registration Rights Agreement dated December 

  

 14 

 
22, 2004 between the Company and Citigroup Global Markets Inc. and Banc of America Securities LLC), (ii) pursuant to any credit facility permitted under the
Indentures and (iii) purchase money debt and any other non-capital markets debt permitted under the Indentures for a period of 60 days from the date the Notes are issued without the prior written consent of Banc of America Securities LLC and
Citigroup Global Markets Inc. 
  
 (l) The Company will not take,
directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Notes. 
  
 (m) The Company
will not, at any time prior to the expiration of three years after the Closing Date, be or become an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the
Investment Company Act, and will not be or become a closed-end investment company required to be registered but not registered thereunder. 
  
 (n) The Company agrees to pay the costs and expenses relating to the following matters: (i) the preparation of the Floating Rate Notes Indenture, the Euro
Notes Indenture and the Registration Rights Agreements, the issuance of the Notes and the fees of the Trustees; (ii) the preparation, printing or reproduction of the Preliminary Offering Memorandum and Final Offering Memorandum and each amendment or
supplement to either of them; (iii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Preliminary Offering Memorandum and Final Offering Memorandum, and
all amendments or supplements to either of them, as may, in each case, be reasonably requested for use in connection with the offering and sale of the Notes; (iv) the preparation, printing, authentication, issuance and delivery of certificates for
the Notes, including any stamp or transfer taxes in connection with the original issuance and sale of the Notes; (v) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Notes; (vi) any registration or qualification of the Notes for offer and sale under the Notes or blue sky laws of the several states (including filing fees and the reasonable fees
and expenses of counsel for the Initial Purchasers relating to such registration and qualification); (vii) admitting (A) the Floating Rate Notes for trading in The Portal Market of the NASD and (B) the Floating Rate Notes and the Euro Notes for
listing on the Luxembourg Stock Exchange; (viii) the transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective purchasers of the Notes; (ix) the fees and expenses of the
Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company; and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder. It is understood,
however, that, except as provided in this Section, and Sections 7 and 8 hereof, the Initial Purchasers will pay all of their own costs and expenses, including the fees of their counsel, Cravath, Swaine & Moore LLP. 
  

 15 

 6. Conditions to the Obligations of the Initial Purchasers. The obligations of the Initial
Purchasers to purchase the Notes shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein at the Execution Time and the Closing Date, to the accuracy of the statements of the Company made in
any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: 
  

(a) The Company shall have requested and caused Shearman & Sterling LLP, counsel for the Company, to furnish to the Representatives its opinion,
dated the Closing Date and addressed to the Representatives, to the effect that: 
  
 (i) each of the Indentures has been duly authorized, executed and delivered, and, assuming due authorization, execution and delivery by
the Floating Rate Notes Trustee or the Euro Notes Trustee, as applicable, constitutes a legal, valid and binding instruments enforceable against the Company in accordance with its terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); the Notes have been duly and validly authorized and, when executed and authenticated in accordance with the provisions of the Floating Rate Notes
Indenture or the Euro Notes Indenture, as applicable, and delivered to and paid for by the Floating Rate Notes Purchasers or Euro Notes Purchasers, as the case may be, under this Agreement, will constitute legal, valid and binding obligations of the
Company entitled to the benefits of the applicable Indenture (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in
effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law); each of the Registration Rights
Agreements has been duly authorized, executed and delivered and, assuming due authorization, execution and delivery by the other parties thereto, constitutes a legal, valid and binding instrument enforceable against the Company in accordance with
its terms (subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors’ rights generally from time to time in effect and to general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law, and provided that such counsel need not express any opinion as to the
enforceability of any rights to indemnification which may be violative of the public policy underlying any Federal or state Notes law, rule or regulation); and the statements set forth under the heading “Description of Floating Rate Notes and
Euro Notes” and “Exchange Offer; Registration Rights” in the Final Offering Memorandum, insofar as such statements purport to summarize certain provisions of the Notes, the Indentures 

  

 16 

 
and the Registration Rights Agreements, provide, in all material respects, a fair summary of such provisions; 
  
 (ii) the statements in the Final Offering Memorandum under
the heading “Important Federal Income Tax Considerations”, insofar as such statements summarize legal matters, agreements, documents or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements,
documents or proceedings; 
  
 (iii) no facts have
come to the attention of such counsel which give such counsel reason to believe that the Final Offering Memorandum (other than the financial statements and other financial data contained therein or omitted therefrom, as to which such counsel has not
been requested to comment), as of its date or as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; 
  
 (iv) this Agreement has been duly authorized, executed and delivered by the Company; 
  
 (v) neither the execution and delivery of the Floating Rate Notes Indenture, the Euro Notes Indenture, this Agreement or the Registration
Rights Agreements, the issue and sale of the Notes, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or
imposition of any lien, charge or encumbrance upon any property or asset of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company; (ii) the terms of the Existing Bank Credit Facilities, including any covenant
contained therein; (iii) the terms of the Indenture, dated as of November 6, 1996, between the Company and Citibank, N.A., the U.S. Dollar Indenture, dated as of January 18, 2001, between the Company and Citibank, N.A., the Euro Indenture, dated as
of January 18, 2001, between the Company and Citibank, N.A., and the Indenture, dated as of December 22, 2004, between the Company and Wilmington Trust Company (together, the “Existing Indentures”), and any amendments thereto, including
any covenant contained therein; or (iv) any law, rule or regulation of the United States applicable to Notes transactions or the General Corporation Law of the State of Delaware; 
  
 (vi) assuming the accuracy of the representations and warranties and compliance with the agreements
contained herein, no registration of the Notes under the Act, and no qualification of an indenture under the Trust Indenture Act, is required for the offer and sale by the Initial Purchasers of the Notes in the manner contemplated by this Agreement;
and 
  
 (vii) the Company is not and, after
giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Final 

  

 17 

 
Offering Memorandum, will not be an “investment company” as defined in the Investment Company Act without taking account of any exemption arising
out of the number of holders of the Company’s Notes. 
  
 In
rendering such opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the States of California, Delaware and New York or the Federal laws of the United States, to the extent they deem proper
and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Initial Purchasers; and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such opinion may contain customary assumptions, exceptions, limitations, qualifications and comments reasonably satisfactory to the Initial Purchasers. References to the Final
Offering Memorandum in this Section 6(a) include any amendment or supplement thereto at the Closing Date. 
  
 (b) The Company shall have requested and caused Albert F. Moreno, Esq., Senior Vice President and General Counsel for the Company, to furnish to the
Representatives his opinion, dated the Closing Date and addressed to the Representatives, to the effect that: 
  
 (i) each of the Company and the Subsidiaries has been duly incorporated or organized and is validly existing as a corporation or other
valid legal entity in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate or company power and authority to own or lease, as the case may be, and to operate its properties and conduct its
business as described in the Final Offering Memorandum, and is duly qualified to do business as a foreign corporation or other valid legal entity and is in good standing under the laws of each jurisdiction which requires such qualification, except
in jurisdictions in which the failure to be so qualified or to be in good standing has not had and would not reasonably be expected to have a Material Adverse Effect; 
  
 (ii) all the outstanding shares of capital stock of the Company and each Subsidiary have been duly and
validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Final Offering Memorandum and other than the Company’s subsidiaries in Japan and Turkey, all outstanding shares of capital stock of
the Subsidiaries are owned by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest and, to the knowledge of such counsel, after due inquiry, any other security interests, claims, liens or
encumbrances; 
  
 (iii) the Company’s
authorized equity capitalization is as set forth in the Final Offering Memorandum; 
  
 (iv) to the best knowledge of such counsel, there is no pending or threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company or any of its 

  

 18 

 
subsidiaries or its or their property that is not adequately disclosed in the Final Offering Memorandum, except in each case for such proceedings that, if
the subject of an unfavorable decision, ruling or finding in such counsel’s judgment are not reasonably likely, singly or in the aggregate, to result in a Material Adverse Effect; 
  
 (v) such counsel has no reason to believe that at the Execution Time or on the Closing Date the Final
Offering Memorandum contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading
(in each case, other than the financial statements and other financial information contained therein, as to which such counsel need express no opinion); 
  
 (vi) assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 4 of this Agreement, no consent,
approval, authorization, filing with or order of any court or governmental agency or body is required in connection with the transactions contemplated herein or in the Indentures and the Registration Rights Agreements, except such as will be
obtained under the Act and the Trust Indenture Act in connection with the transactions contemplated by the Registration Rights Agreements and such as may be required under the blue sky or securities laws of any jurisdiction in connection with the
transactions contemplated by this Agreement and the Registration Rights Agreements and such other approvals (specified in such opinion) as have been obtained; and 
  
 (vii) neither the execution and delivery of the Floating Rate Notes Indenture, the Euro Notes Indenture,
this Agreement or the Registration Rights Agreements, the issue and sale of the Notes, nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof or thereof will conflict with,
result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or asset of the Company or any of its subsidiaries pursuant to, (1) the charter or by-laws of the Company or any of its subsidiaries; (2) the
terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries is a party or bound or to which any of
their respective properties is subject; or (3) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or
other authority of the United States or any state thereof having jurisdiction over the Company, any of its subsidiaries or any of their respective properties or to the knowledge of such counsel, any statute, law, rule, regulation, judgment, order or
decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority outside of the United States having jurisdiction over the Company, any of its
subsidiaries or any of their respective properties, except, with respect to (x) clause (2) and 

  

 19 

 
(y) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority outside of the United States described in clause (3) as to which such counsel has no knowledge, for conflicts, violations, breaches or impositions that would not reasonably be
expected to have a Material Adverse Effect. 
  
 In rendering such
opinion, such counsel may rely (A) as to matters involving the application of laws of any jurisdiction other than the States of Delaware and California or the Federal laws of the United States, to the extent he deems proper and specified in such
opinion, upon the opinion of other counsel of good standing whom he believes to be reliable and who are satisfactory to counsel for the Initial Purchasers; and (B) as to matters of fact, to the extent he deems proper, on certificates of other
responsible officers of the Company and public officials. Such opinion may contain customary assumptions, exceptions, limitations, qualifications and comments. References to the Final Offering Memorandum in this Section 6 (b) include any amendment
or supplement thereto at the Closing Date. 
  
 (c) The
Representatives shall have received from Cravath, Swaine & Moore LLP, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Notes,
the Indentures, the Registration Rights Agreements, the Final Offering Memorandum (as amended or supplemented at the Closing Date) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them to pass upon such matters. 
  
 (d) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Chief Financial Officer and the Treasurer, dated
the Closing Date, to the effect that the signers of such certificate have carefully examined the Final Offering Memorandum, any amendment or supplement to the Final Offering Memorandum and this Agreement and that: 
  
 (i) the representations and warranties of the Company in
this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company has complied in all material respects with all the agreements and satisfied all the
conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and 
  
 (ii) since the date of the most recent financial statements included in the Final Offering Memorandum (exclusive of any amendment or
supplement thereto), there has been no material adverse change in the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated by the Final Offering Memorandum (exclusive of any amendment or supplement thereto). 
  

 20 

 (e) The Company shall have furnished to the Representatives such further certificates and documents as
the Representatives may reasonably request evidencing the derivation from the Company’s accounting books and records of financial statements or other financial data included in the Final Offering Memorandum and any amendment or supplement to
the Final Offering Memorandum for periods during which the Company’s financial statements were audited by Arthur Andersen LLP. 
  
 (f) At the Execution Time and at the Closing Date, the Company shall have requested and caused KPMG LLP to furnish to the Representatives letters, dated
respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Representatives, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective
applicable rules and regulations adopted by the Commission thereunder, and stating in effect that: 
  
 (i) the audited condensed consolidated financial statements and financial statement schedules of the Company included in the Final
Offering Memorandum and reported on by them comply in form in all material respects with applicable accounting requirements and with the related rules and regulations adopted by the Commission with respect to financial statements included in annual
reports on Form 10-K under the Exchange Act; and said audited condensed consolidated financial statements are in conformity with generally accepted accounting principles; and 
  
 (ii) on the basis of a reading of the latest unaudited financial statements made available by the Company
and its subsidiaries; carrying out certain specified procedures (but not an examination in accordance with generally accepted auditing standards), which would not necessarily reveal matters of significance with respect to the comments set forth in
such letter; a reading of the minutes of the meetings of the Board of Directors and the Human Resources, Audit and Finance Committees of the Board of Directors of the Company and the Subsidiaries; and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters of the Company and its subsidiaries as to transactions and events subsequent to November 28, 2004, nothing came to their attention which caused them to believe that: 
  
 (1) with respect to the period from November 28, 2004 to
January 31, 2005, there was any increase in long-term debt or stockholders’ deficit, change in capital stock, decrease in total assets of the Company as compared with the amounts shown in the November 28, 2004 audited condensed consolidated
balance sheet included in the Final Offering Memorandum, or for the two-month period ended January 31, 2005, there were any decreases as compared to the corresponding two-month period ended January 31, 2004 in consolidated net sales, gross profit,
operating income, interest expense, income before taxes or in the total or per share amounts of net income of the Company and its subsidiaries, except in all instances for changes or decreases set forth in such 

  

 21 

 
letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed
necessary by the Representatives; or 
  
 (2) with
respect to the period subsequent to January 31, 2005 to a specified date not more than five days prior to the date of such letter, there was any increase in long-term debt, or change in capital stock as compared with the amounts shown in the
November 28, 2004 audited condensed consolidated balance sheet included in the Final Offering Memorandum, or any decrease as compared to the corresponding period in the fiscal month ended February 28, 2004 in consolidated net sales, except in all
instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Representatives; and

  
 (iii) they have performed certain other
specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of
the Company and its subsidiaries) set forth in the Final Offering Memorandum or the Exchange Act Documents, including the information set forth under the captions “Summary”, “Risk Factors” and “Selected Historical
Consolidated Financial Data” in the Final Offering Memorandum, and under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” the information included in
the “Quantitative and Qualitative Disclosures About Market Risk” included in the 2004 10-K agrees with the accounting records of the Company and its subsidiaries, excluding any questions of legal interpretation. 
  
 References to the Final Offering Memorandum in this Section 6(f) include any
amendment or supplement thereto at the date of the applicable letter. 
  
 (g) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Final Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been (i) any change or decrease
specified in the letter or letters referred to in paragraph (f) of this Section 6; or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Offering Memorandum (exclusive of any amendment or
supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to market the Notes as contemplated by
the Final Offering Memorandum (exclusive of any amendment or supplement thereto). 
  

 22 

 (h) The Floating Rate Notes and the Euro Notes shall have been designated as Portal-eligible Notes in
accordance with the rules and regulations of the NASD; and the Floating Rate Notes shall be eligible for clearance and settlement through The Depository Trust Company and the Euro Notes shall be eligible for clearance and settlement through the
Euroclear System and Clearstream, Luxembourg. 
  
 (i) Subsequent
to the Execution Time, there shall not have been any decrease in the rating of any of the Company’s debt securities by any “nationally recognized statistical rating organization” (as defined for purposes of Rule 436(g) under the Act)
or any notice given of any intended or potential decrease in any such rating (including notice of an adverse change in the outlook for such rating) or of a possible change in any such rating that does not indicate the direction of the possible
change. 
  
 (j) Prior to the Closing Date, the Company shall have
furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request. 
  
 (k) Concurrent with the closing of the offering of the Notes, the Company shall (i) purchase all 11-5/8% Notes validly transferred prior to the Early
Consent Date (as defined in the Offer to Purchase and Consent Solicitation Statement dated February 24, 2005 (the “Statement”)) in the tender offer and consent solicitation (the “Tender Offer”) for the 11-5/8% Notes, (ii) apply
the net proceeds of the sale of the Notes to the Tender Offer as described in the Final Offering Memorandum and (iii) execute supplemental indentures amending or eliminating certain restrictive covenants and certain other related provisions
(including certain events of default) in the indentures governing the 11-5/8% Notes; in each case on the terms and conditions set forth in the Statement. 
  
 (l) The Company shall have entered into an amendment and waiver to the Existing Bank Credit Facility satisfactory in form and substance to Banc of America
Securities LLC and Citigroup Global Markets Inc., whereby the lenders shall have granted a waiver to and amended the Existing Bank Credit Facility to permit the application of the proceeds from the sale of the Notes as described in the Offering
Memorandum and such amendment and waiver shall be in full force and effect. 
  
 If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Representatives and counsel for the Initial Purchasers, this Agreement and all obligations of the Initial Purchasers hereunder may
be canceled at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancelation shall be given to the Company in writing or by telephone or facsimile confirmed in writing. 
  
 The documents required to be delivered by this Section 6 will be delivered at
the office of counsel for the Initial Purchasers, at Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, NY 10019, on the Closing Date. 
  

 23 

 7. Reimbursement of Expenses. If the sale of the Notes provided for herein is not consummated
because any condition to the obligations of the Initial Purchasers set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Initial Purchasers, the Company will reimburse the Initial Purchasers severally through Banc of America Securities LLC on demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Notes. 
  
 8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Initial Purchaser,
the directors, officers, employees and agents of each Initial Purchaser and each person who controls any Initial Purchaser within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum, the Final Offering Memorandum (or in any supplement or amendment thereto) or arise out of
or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees
to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in the Preliminary
Offering Memorandum or the Final Offering Memorandum, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Initial Purchasers through the
Representatives specifically for inclusion therein; and provided further, however, that with respect to any untrue statement or omission of a material fact made in the Preliminary Offering Memorandum, the indemnity agreement
contained in this Section 8(a) shall not inure to the benefit of any Initial Purchaser from whom the person asserting any such loss, claim, damage or liability purchased the Notes concerned in any initial resale of the Notes by the Initial
Purchaser, to the extent that any such loss, claim, damage or liability of such Initial Purchaser occurs under the circumstance where it shall have been determined by a court of competent jurisdiction by final and nonappealable judgment that (i) the
untrue statement or omission of a material fact contained in the Preliminary Offering Memorandum was corrected in the Final Offering Memorandum, (ii) the Company had previously furnished copies of the Final Offering Memorandum to the Initial
Purchasers and (iii) such loss, claim, damage or liability results from the fact that there was not sent or given to such person at or prior to the written confirmation of the sale of such Notes to such person, a copy of the Final Offering
Memorandum. This 

  

 24 

 
indemnity agreement will be in addition to any liability which the Company may otherwise have. 
  
 (b) Each Initial Purchaser severally and not jointly agrees to indemnify and hold harmless the Company, each of its
directors, each of its officers, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Initial Purchaser, but only with reference to
written information relating to such Initial Purchaser furnished to the Company by or on behalf of such Initial Purchaser through the Representatives specifically for inclusion in the Preliminary Offering Memorandum or the Final Offering Memorandum
(or in any amendment or supplement thereto). This indemnity agreement will be in addition to any liability which any Initial Purchaser may otherwise have. The Company acknowledges that the statements set forth in the last paragraph of the cover page
regarding the delivery of the Notes and, under the heading “Plan of Distribution”, (i) the list of Initial Purchasers; and (ii) the sentences related to concessions and reallowances; and (iii) the paragraph related to overallotment,
stabilization and syndicate covering transactions in the Preliminary Offering Memorandum and the Final Offering Memorandum, constitute the only information furnished in writing by or on behalf of the Initial Purchasers for inclusion in the
Preliminary Offering Memorandum or the Final Offering Memorandum (or in any amendment or supplement thereto). 
  
 (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying
party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of
any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party’s
election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party; (iii) the indemnifying party shall not have 

  

 25 

 
employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution
of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified
parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent (i) does not include an admission of fault and (ii) includes an unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding. The indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for fees and expenses of more than one separate law firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as incurred. Such firm shall be
designated by Banc of America Securities LLC and Citigroup Global Markets Inc. in the case of the parties indemnified pursuant to Section 8(a) and by the Company in the case of parties indemnified pursuant to Section 8(b). Each indemnified party
shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. 
  
 (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Company and the Initial Purchasers severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending
same) (collectively “Losses”) to which the Company and one or more of the Initial Purchasers may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Initial
Purchasers on the other from the offering of the Notes; provided, however, that in no case shall any Initial Purchaser (except as may be provided in any agreement among the Initial Purchasers relating to the offering of the Notes) be
responsible for any amount in excess of the purchase discount or commission applicable to the Notes purchased by such Initial Purchaser hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the
Company and the Initial Purchasers severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Initial Purchasers on the other in
connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (after
deducting discounts and commissions to the Initial Purchasers, but before deducting expenses) received by it, and benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions in each case
set forth in this Agreement. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to
information provided by the Company on the one hand or the Initial 

  

 26 

 
Purchasers on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Initial Purchasers agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Initial Purchaser within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Initial
Purchaser shall have the same rights to contribution as such Initial Purchaser, and each person who controls the Company within the meaning of either the Act or the Exchange Act and each officer and director of the Company shall have the same rights
to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). 
  
 9. Default by an Initial Purchaser. (a) If any one or more Floating Rate Notes Initial Purchasers shall fail to purchase and pay for any of the
Floating Rate Notes agreed to be purchased by such Floating Rate Notes Initial Purchaser hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Floating
Rate Notes Initial Purchasers shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Floating Rate Notes set forth opposite their names on Schedule I hereto bears to the aggregate principal
amount of Floating Rate Notes set forth opposite the names of all the remaining Floating Rate Notes Initial Purchasers) the Floating Rate Notes which the defaulting Floating Rate Notes Initial Purchaser or Floating Rate Notes Initial Purchasers
agreed but failed to purchase; provided, however, that in the event that the aggregate principal amount of Floating Rate Notes which the defaulting Floating Rate Notes Initial Purchaser or Floating Rate Notes Initial Purchasers agreed
but failed to purchase shall exceed 10% of the aggregate principal amount of Floating Rate Notes set forth on Schedule I hereto, the remaining Floating Rate Notes Initial Purchasers shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Floating Rate Notes, and if such nondefaulting Floating Rate Notes Initial Purchasers do not purchase all the Floating Rate Notes, this Agreement will terminate without liability to any nondefaulting Floating Rate
Notes Initial Purchaser or the Company. In the event of a default by any Floating Rate Notes Initial Purchaser as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as Banc of America
Securities LLC and Citigroup Global Markets Inc. shall determine in order that the required changes in the Final Offering Memorandum or in any other documents or arrangements may be effected. 
  
 (b) If any one or more Euro Notes Initial Purchasers shall fail to purchase
and pay for any of the Euro Notes agreed to be purchased by such Euro Notes Initial Purchaser hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Euro
Notes Initial Purchasers shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Euro Notes set forth opposite their names on 

  

 27 

 
Schedule II hereto bears to the aggregate principal amount of Euro Notes set forth opposite the names of all the remaining Euro Notes Initial Purchasers) the
Euro Notes which the defaulting Euro Notes Initial Purchaser or Euro Notes Initial Purchasers agreed but failed to purchase; provided, however, that in the event that the aggregate principal amount of Euro Notes which the defaulting
Euro Notes Initial Purchaser or Euro Notes Initial Purchasers agreed but failed to purchase shall exceed 10% of the aggregate principal amount of Euro Notes set forth on Schedule II hereto, the remaining Euro Notes Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of the Euro Notes, and if such nondefaulting Euro Notes Initial Purchasers do not purchase all the Euro Notes, this Agreement will terminate without liability to any
nondefaulting Euro Notes Initial Purchaser or the Company. In the event of a default by any Euro Notes Initial Purchaser as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as Banc
of America Securities LLC and Citigroup Global Markets Inc. shall determine in order that the required changes in the Final Offering Memorandum or in any other documents or arrangements may be effected. 
  
 (c) Nothing contained in this Agreement shall relieve any defaulting Initial
Purchaser of its liability, if any, to the Company or any nondefaulting Initial Purchaser for damages occasioned by its default hereunder. 
  
 10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company
prior to delivery of and payment for the Notes, if at any time prior to such time (i) trading in securities generally on the New York Stock Exchange or the Nasdaq National Market shall have been suspended or limited or minimum prices shall have been
established on such Exchange or the Nasdaq National Market; (ii) a banking moratorium shall have been declared either by Federal or New York State authorities; or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration
by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impracticable or inadvisable to proceed with the offering or
delivery of the Notes as contemplated by the Final Offering Memorandum (exclusive of any amendment or supplement thereto). 
  
 11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Initial Purchasers or the Company or any of the
officers, directors, employees, agents or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Notes; provided, however, that the representations and warranties of the Company shall be
deemed to be made at the Execution Time and the Closing Date only. The provisions of Sections 7 and 8 hereof shall survive the termination or cancelation of this Agreement. 
  
 12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the
Representatives, will be mailed, delivered or 

  

 28 

 
telefaxed to the Banc of America Securities LLC General Counsel (fax no.: (646) 313-4803) and confirmed to the General Counsel, Banc of America Securities
LLC at 40 West 57th Street, New York, New York 10019, Attention: General Counsel, and the Citigroup Global Markets
Inc. General Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel, Citigroup Global Markets Inc. at 388 Greenwich Street, New York, New York 10013, Attention: General Counsel; or, if sent to the Company, will be mailed, delivered
or telefaxed to (415) 501-7650 and confirmed to it at Levi’s Plaza, 1155 Battery Street, San Francisco, CA 94111, attention of the Legal Department. 
  
 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and, except as expressly set forth in Section 5(h) hereof, no other person will have any right or obligation hereunder. 
  
 14. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York. 
  
 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which together
shall constitute one and the same instrument. 
  
 16.
Headings. The section headings used herein are for convenience only and shall not affect the construction hereof. 
  
 17. Definitions. The terms which follow, when used in this Agreement, shall have the meanings indicated. 
  
 “Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder. 
  
 “Affiliate” shall have the meaning specified in Rule 501(b) of Regulation D. 
  
 “Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies
are authorized or obligated by law to close in the City of New York. 
  
 “Clearstream, Luxembourg” means Clearstream Banking, S.A. 
  
 “Commission” shall mean the Notes and Exchange Commission. 
  
 “Euroclear System” means the Euroclear Bank S.A./N.V., as operator of the Euroclear Clearance System. 
  
 “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder. 
  

 29 

 “Execution Time” shall mean the date and time that this Agreement is executed and delivered by
the parties hereto. 
  
 “Investment Company Act” shall
mean the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder. 
  
 “NASD” shall mean the National Association of Securities Dealers, Inc. 
  
 “Regulation D” shall mean Regulation D under the Act. 
  
 “Regulation S” shall mean Regulation S under the Act. 

 
 “Trust Indenture Act” shall mean the Trust Indenture Act of
1939, as amended, and the rules and regulations of the Commission promulgated thereunder. 
  

 30 

 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us
the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement between the Company and the several Initial Purchasers. 
  

			
	Very truly yours,
	
	Levi Strauss & Co.
		
	by	 	 /s/ Miguel Silva Gonzalez

	 	 	 Name: Miguel Silva Gonzalez

	 	 	 Title: Vice President & Treasurer

  

 31 

			
	The foregoing Agreement is hereby confirmed and accepted as of the date first above written.
	
	BANC OF AMERICA SECURITIES LLC
CITIGROUP GLOBAL MARKETS INC.
J.P. MORGAN SECURITIES INC.
GOLDMAN, SACHS & CO.
SCOTIA CAPITAL (USA) INC.
BEAR, STEARNS & CO.
INC.
CREDIT SUISSE FIRST BOSTON LLC
		
	By:	 	Banc of America Securities LLC
		
	by	 	 /s/ Bruce R. Thompson

	 	 	 Name: Bruce R. Thompson

	 	 	 Title: Managing Director

  

 32 

			
	By:	 	Citigroup Global Markets Inc.
		
	by	 	 /s/ Barbara R. Matas

	 	 	 Name: Barbara R. Matas

	 	 	 Title: Managing Director

	
	For themselves and the other several Initial Purchasers named in Schedule I to the foregoing Agreement.

  

 33 

			
	The foregoing Agreement is hereby confirmed and accepted as of the date first above written.
	
	BANC OF AMERICA SECURITIES LIMITED
J.P. MORGAN SECURITIES LTD.
GOLDMAN, SACHS & CO.
SCOTIA CAPITAL INC.
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON
(EUROPE) LIMITED
		
	By:	 	Banc of America Securities Limited
		
	by	 	 /s/ Rommie Bhutani

	 	 	 Name: Rommie Bhutani

	 	 	 Title: Duly Appointed Attorney

  

 34 

			
	By:	 	Citigroup Global Markets Limited
		
	by	 	 /s/ Barbara R. Matas

	 	 	 Name: Barbara R. Matas

	 	 	 Title:   Managing Director

  

 35Form of the Company's Stock Option Plan

 Exhibit 10.4 
  

  
 LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. 
  
 FORM OF 2005 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 
  
 Effective as of [                    ], 2005 
  

 TABLE OF CONTENTS 
  
 Page 

					
			
	1.	  	Purpose of the Plan.	  	1
			
	2.	  	Definitions.	  	1
			
	3.	  	Effective Date/Expiration of Plan.	  	3
			
	4.	  	Administration.	  	3
			
	5.	  	Shares; Adjustment Upon Certain Events.	  	4
			
	6.	  	Awards and Terms of Options.	  	6
			
	7.	  	Effect of Termination of Service.	  	9
			
	8.	  	Nontransferability of Options.	  	10
			
	9.	  	Rights as a Stockholder.	  	10
			
	10.	  	Determinations.	  	10
			
	11.	  	Termination, Amendment and Modification.	  	10
			
	12.	  	Non-Exclusivity.	  	11
			
	13.	  	Use of Proceeds.	  	11
			
	14.	  	General Provisions.	  	11
			
	15.	  	Issuance of Stock Certificates; Legends and Payment of Expenses.	  	12
			
	16.	  	Listing of Shares and Related Matters.	  	13
			
	17.	  	Governing Law.	  	13

 LIGHTSTONE VALUE PLUS REAL ESTATE INVESTMENT TRUST, INC. 
  
 FORM OF 2005 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN 
  
 Effective as of
[                    ], 2005 
  
 1. Purpose of the Plan. 
  
 The purpose of this Lightstone Value Plus Real Estate Investment Trust, Inc. 2005 Non-Employee Director Stock Option Plan is to enhance the Company’s
profitability and value for the benefit of stockholders to enable the Company to attract, retain and motivate Non-Employee Directors and who are important to the success of the Company and to create and strengthen a mutuality of interest between the
Non-Employee Directors and the stockholders of the Company by granting such directors options to purchase Common Stock of the Company. 
  
 2. Definitions. 
  
 (a) “Acquisition Event” means a merger or consolidation in which the Company is not the surviving entity, or any transaction that
results in the acquisition of all or substantially all of the Company’s outstanding Common Stock by a single person or entity or by a group of persons and/or entities in concert, or the sale or transfer of all or substantially all of the
Company’s assets. 
  
 (b) “Act” means
the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder. 
  
 (c) Annual Date of Grant” has the meaning set forth in Section 6(a). 
  
 (d) “Board” means the Board of Directors of the Company. 
  
 (e) “Cause” has the meaning set forth in Section
7(b). 
  
 (f) “Change of Control” has the
meaning set for in Section 6(d). 
  
 (g)
“Code” means the Internal Revenue Code of 1986, as amended. 
  
 (h) “Committee” means the Board of a duly appointed committee of the Board to which the Board has delegated its powers and functions hereunder. 
  
 (i) “Common Stock” means the voting common stock of
the Company, par value $.01, any common stock into which the common stock may be converted and any common stock resulting from any reclassification of the common stock. 
  
 (j) “Company” means Lightstone Value Plus Real Estate Investment Trust, Inc., a Maryland
corporation. 
  
 (k) “Company Voting
Securities” has the meaning set forth in Section 6(d)(i). 

 (l) “Corporate Transaction” has the meaning set forth in Section 6(d)(i).

  
 (m) “Disability” means a permanent and
total disability, as determined by the Committee in its sole discretion, provided that in no event shall any disability that is not permanent and total disability within the meaning of Section 22(e)(3) of the Code be treated as a Disability. A
Disability shall be deemed to occur at the time of the determination by the Committee of the Disability. 
  
 (n) “Effective Date” has the meaning set forth in Section 3. 
  
 (o) “Fair Market Value” means, for purposes of this Plan, unless otherwise required by any
applicable provision of the Code or any regulations issued thereunder, as of any date and except as provided below, the last sales price reported for the Common Stock on the applicable date: (i) as reported on the principal national securities
exchange in the United States on which it is then traded or The Nasdaq Stock Market; or (ii) if not traded on any such national securities exchange or The Nasdaq Stock Market, as quoted on an automated quotation system sponsored by the National
Association of Securities Dealers, Inc. or if the Common Stock shall not have been reported or quoted on such date, on the first day prior thereto on which the Common Stock was reported or quoted; provided, that the Committee may modify the
definition of Fair Market Value to reflect any changes in the trading practices of any exchange on which the Common Stock is listed or traded. If the Common Stock is not readily tradable on a national securities exchange, The Nasdaq Stock Market or
any automated quotation system sponsored by the National Association of Securities Dealers, Inc., its Fair Market Value shall be set in good faith by the Committee. For purposes of the grant of any Option, the applicable date shall be the date on
which the Stock Option is granted. 
  
 (p) “Incumbent
Board” has the meaning set forth in Section 6(d)(ii). 
  
 (q) “Non-Employee Directors” means, except for purposes of the definition of Committee, directors of the Company who are not employees of the Company or its subsidiaries. 
  
 (r) “Option” means the right to purchase the number
of Shares granted in the Option agreement at a prescribed purchase price on the terms specified in the Plan and the Option agreement. No Option awarded under this Plan is intended to be an “incentive stock option” within the meaning of
Section 422 of the Code. 
  
 (s)
“Participant” means a Non-Employee Director who is granted an Option under the Plan, which Option has not expired or been cancelled. 
  
 (t) “Person” means an individual, entity or group within the meaning of Section l3d-3 or 14d-1 of the Act. 
  
 (u) “Plan” means the Lightstone Value Plus Real
Estate Investment Trust, Inc. 2005 Non-Employee Director Stock Option Plan, as amended from time to time. 
  
 (v) “Purchase Price” means the purchase price per Share. 
  
 (w) “Securities Act” means the Securities Act of 1933, as amended. 
  

 2 

 (x) “Share” means a share of Common Stock. 
  
 (y) “Termination of Service” means termination of the
relationship with the Company so that an individual is no longer a director of the Company. 
  
 3. Effective Date/Expiration of Plan. 
  
 The Plan became effective [                    ] 2005 (the “Effective Date”). No Option shall be
granted under the Plan on or after the tenth anniversary of the Effective Date, but Options previously granted may extend beyond that date. 
  
 4. Administration. 
  
 (a) Duties of the Committee. The Plan shall be administered by the Committee. The Committee shall have full authority to interpret the Plan and to
decide any questions and settle all controversies and disputes that may arise in connection with the Plan; to establish, amend, and rescind rules for carrying out the Plan, to administer the Plan, subject to its provisions; to prescribe the form or
forms of instruments evidencing Options and any other instruments required under the Plan (which need not be uniform) and to change such forms from time to time; and to make all other determinations and to take all such steps in connection with the
Plan and the Options as the Committee, in its sole discretion, deems necessary or desirable; provided, that all such determinations shall be in accordance with the express provisions, if any, contained in the Plan or Option agreement. The
Committee shall not be bound to any standards of uniformity or similarity of action, interpretation or conduct in the discharge of its duties hereunder, regardless of the apparent similarity of the matters coming before it. The determination, action
or conclusion of the Committee in connection with the foregoing shall be final, conclusive and binding on all parties. 
  
 (b) Advisors. The Committee may designate the Secretary of the Company, other employees of the Company or competent professional advisors to assist
the Committee in the administration of the Plan, and may grant authority to such persons (other than professional advisors) to grant an Option or to execute Option agreements or other documents on behalf of the Committee, provided that no
Participant may grant an Option or execute any Option agreement granting Options to such Participant. The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan, and may rely upon
any opinion received from any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred by the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company.

  
 (c) Indemnification. To the maximum extent permitted by
law, no officer, member or former officer or member of the Committee or the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it. To the maximum extent permitted by
applicable law or the Certificate of Incorporation or By-Laws of the Company and to the extent not covered by insurance, each officer, member or former officer 

  

 3 

 
or member of the Committee or of the Board shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of
counsel reasonably acceptable to the Company) or liability (including any sum paid in settlement of a claim with the approval of the Company), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent
permitted, arising out of any act or omission to act in connection with the Plan, except to the extent arising out of such officer’s, member’s or former officer’s or member’s own fraud or bad faith. Such indemnification shall be
in addition to any rights of indemnification the officers, members or former officers or members may have as directors under applicable law or under the Certificate of Incorporation or By-Laws of the Company or otherwise. 
  
 (d) Meetings of the Committee. The Committee shall select one of its
members as a Chairman and shall adopt such rules and regulations, as it shall deem appropriate, concerning the holding of its meetings and the transaction of its business. Any member of the Committee may be removed at any time either with or without
cause by resolution adopted by the Board, and any vacancy on the Committee may at any time be filled by resolution adopted by the Board. All determinations by the Committee shall be made by the affirmative vote of a majority of its members. Any such
determination may be made at a meeting duly called and held at which a majority of the members of the Committee were in attendance in person or through telephonic communication. Any determination set forth in writing and signed by all of the members
of the Committee shall be as fully effective as if it had been made by a vote of such members at a meeting duly called and held. 
  
 5. Shares; Adjustment Upon Certain Events. 
  
 (a) Shares to be Delivered; Fractional Shares. Shares to be issued under the Plan shall be made available, at the discretion of the Board, either
from authorized but unissued Shares or from issued Shares reacquired by the Company and held in treasury. No fractional Shares will be issued or transferred upon the exercise of any Option. In lieu thereof, the Company shall pay a cash adjustment
equal to the same fraction of the Fair Market Value of one Share on the date of exercise. 
  
 (b) Number of Shares. Subject to adjustment as provided in this Section 5, the maximum aggregate number of Shares authorized for issuance under the Plan shall be 75,000 Shares. If an Option is for any reason
canceled, or expires or terminates unexercised, the Shares covered by such Option shall again be available for the grant of Options, within the limits provided by the preceding sentence. In addition, if Common Stock has been exchanged by a
Participant as full or partial payment to the Company of the Purchase Price or if the number of shares of Common Stock otherwise deliverable has been reduced for full or partial payment to the Company of the Purchase Price, the number of shares of
Common Stock exchanged or reduced shall again be available under the Plan. 
  
 (c) Adjustments; Recapitalization, etc. The existence of the Plan and the Options granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks
ahead of or 

  

 4 

 
affecting Common Stock, the dissolution or liquidation of the Company or any sale or transfer of all or part of its assets or business or any other corporate
act or proceeding. If and whenever the Company takes any such action, however, the following provisions, to the extent applicable, shall govern: 
  
 (i) If and whenever the Company shall effect a stock split, stock dividend, subdivision, recapitalization or combination of Shares or
other changes in the Company’s Common Stock, (x) the Purchase Price (as defined herein) per Share and the number and class of Shares and/or other securities with respect to which outstanding Options thereafter may be exercised, and (y) the
total number and class of Shares and/or other securities that may be issued under this Plan, shall be proportionately adjusted by the Committee. The Committee may also make such other adjustments as it deems necessary to take into consideration any
other event (including, without limitation, accounting changes) if the Committee determines that such adjustment is appropriate to avoid distortion in the operation of the Plan. 
  
 (ii) Subject to Section 5(c)(iii), if the Company merges or consolidates with one or more corporations, then
from and after the effective date of such merger or consolidation, upon exercise of an Option theretofore granted, the Participant shall be entitled to purchase under such Option, in lieu of the number of Shares as to which such Option shall then be
exercisable but on the same terms and conditions of exercise set forth in such Option, the number and class of Shares and/or other securities or property (including cash) to which the Participant would have been entitled pursuant to the terms of the
agreement of merger or consolidation if, immediately prior to such merger or consolidation, the Participant had been the holder of record of the total number of Shares receivable upon exercise of such Option (whether or not then exercisable). In
connection with any event described in this paragraph, the Committee may provide, in its sole discretion, for the cancellation of any outstanding Options and payment in cash or other property in exchange therefor. 
  
 (iii) In the event of an Acquisition Event, the Committee
may, in its discretion, and without any liability to any Participant, terminate all outstanding Options as of the consummation of the Acquisition Event by delivering notice of termination to each Participant at least 20 days prior to the date of
consummation of the Acquisition Event; provided that, during the period from the date on which such notice of termination is delivered to the consummation of the Acquisition Event, each Participant shall have the right to exercise in full all of the
Options that are then outstanding (without regard to limitations on exercise otherwise contained in the Options) but any such exercise shall be contingent upon and subject to the occurrence of the Acquisition Event, provided that if the Acquisition
Event does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall be null and void. If the Acquisition Event does take place after giving such notice, any Option
not exercised prior to the date of the consummation of such Acquisition Event shall be forfeited simultaneous with the consummation of the Acquisition Event. If an Acquisition Event occurs and the Committee does not terminate the outstanding Options
pursuant to the foregoing provisions, then the provisions of Section 5(c)(ii) shall apply. 
  

 5 

 (iv) If, as a result of any adjustment made pursuant to the preceding paragraphs of this
Section 5, any Participant shall become entitled upon exercise of an Option to receive any securities other than Common Stock, then the number and class of securities so receivable thereafter shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock set forth in this Section 5, as determined by the Committee in its discretion. 
  
 (v) Except as hereinbefore expressly provided, the issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to the number and class of Shares and/or other securities or property subject to Options theretofore granted of the Purchase Price per
Share. 
  
 6. Awards and Terms of Options. 
  
 (a) Grant. Without further action by the Board or the stockholders
(except as provided in Section 11) of the Company, each year, as of the date of the annual meeting of the stockholders of the Company (each such date, an “Annual Date of Grant”), each Participant shall be automatically granted an Option to
purchase 3,000 Shares (subject to any increase or decrease pursuant to Section 5(c)), subject to the terms of the Plan, provided that no such Option shall be granted if on the date of grant the Company has liquidated, dissolved or merged or
consolidated with another entity in such a manner that it is not the surviving entity (unless the Plan has been assumed by such surviving entity with regard to future grants). 
  
 (b) Purchase Price. The Purchase Price deliverable upon the exercise of an Option shall equal 100% of the Fair Market
Value on the last business day preceding the Annual Date of Grant. Notwithstanding the foregoing, the Purchase Price for all Options granted under the Plan will be $10 per Share until the termination of the Company’s initial public offering.

  
 (c) Exercisability. Except as otherwise provided
herein, any Option granted to a Participant shall vest and become exercisable on the second anniversary of the date of grant, subject to the Participant’s continued service as a Non-Employee Director through such date. No Option shall be
exercisable after the expiration of ten (10) years from the date of grant. 
  
 (d) Acceleration of Exercisability on Change of Control. All Options granted and not previously exercisable shall become exercisable immediately upon a Change of Control (as defined herein). For this purpose, a
“Change of Control” shall be deemed to have occurred upon: 
  
 (i) an acquisition by any Person of beneficial ownership (within the meaning of Rule l3d-3 promulgated under the Act) of 33% or more of either (A) the then outstanding Shares or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Company Voting Securities”); excluding, however, the following: (w) any acquisition 

  

 6 

 
directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself
acquired directly from the Company, (x) any acquisition by the Company, (y) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or (z) any acquisition by any corporation pursuant to a reorganization,
merger, consolidation or similar corporate transaction (in each case, a “Corporate Transaction”), if, pursuant to such Corporate Transaction, the conditions described in clauses (A), (B) and (C) of paragraph (iii) of this
Section are satisfied; or 
  
 (ii) a change in
the composition of the Board such that the individuals who, as of the Effective Date hereof, constitute the Board (the Board as of the date hereof shall be hereinafter referred to as the “Incumbent Board”) cease for any
reason to constitute at least a majority of the Board; provided that for purposes of this subsection any individual who becomes a member of the Board subsequent to the date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who are also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or 
  
 (iii) the approval by the stockholders of the Company of a
Corporate Transaction or, if consummation of such Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly
by consummation); excluding, however, such a Corporate Transaction pursuant to which (A) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the outstanding Shares and Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction and the combined
voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors, in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the
outstanding Shares and Company Voting Securities, as the case may be, (B) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or the corporation resulting from such Corporate Transaction and any Person
beneficially owning, immediately prior to such Corporate Transaction, directly or indirectly, 33% or more of the outstanding Shares or Company Voting Securities, as the case may be) will beneficially own, directly or indirectly, 33% or more of,
respectively, the outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding securities of such corporation entitled to vote generally in the election of
directors and (C) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation 
  

 7 

 
resulting from such Corporate Transaction; notwithstanding the foregoing, no Change of Control will occur if two-thirds (2/3) of the
Incumbent Board approves the Corporate Transaction; or 
  
 (iv) the approval of the stockholders of the Company of (A) a complete liquidation or dissolution of the Company or (B) the sale or other disposition of all or substantially all of the assets of the Company; excluding; however, such a sale
or other disposition to a corporation with respect to which, following such sale or other disposition, (x) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote generally in the election of directors will be then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial
owners respectively, of the outstanding Shares and Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the
outstanding Shares and Company Voting Securities, as the case may be, (y) no Person (other than the Company and any employee benefit plan (or related trust) of the Company or such corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 33% or more of the outstanding Shares or Company Voting Securities, as the case may be) will beneficially own, directly or indirectly, 33% or more of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (z) individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of directors of such corporation. 
  
 (e) Exercise of Options. 
  
 (i) A Participant may elect to exercise an Option by giving written notice to the Committee of such election and of the number of Shares such Participant has elected to purchase pursuant to the Option, accompanied by
payment in full of the aggregate Purchase Price for the number of Shares for which the Option is being exercised. 
  
 (ii) Shares purchased pursuant to the exercise of an Option shall be paid for at the time of exercise as follows: 
  
 (A) in cash or by check, bank draft or money order payable
to the order of the Company; 
  
 (B) if so
permitted by the Committee: (x) through the delivery of unencumbered Shares (including Shares being acquired pursuant to the Option then being exercised), provided such Shares (or such Option) have been owned by the Participant for such period as
may be required by applicable accounting standards to avoid a charge to earnings or (y) through a combination of Shares and cash as provided above, provided, that, if the Shares delivered upon exercise of the Option is an original issue of
authorized Shares, at least so much of the Purchase Price as represents the par value of such Shares shall be paid in cash or by a combination of cash and Shares; 
  

 8 

 (C) if the Common Stock is traded on a national securities exchange, the Nasdaq Stock
Market, Inc. or quoted on a national quotation system sponsored by the National Association of Securities Dealers, through the delivery of irrevocable instructions to a broker to deliver promptly to the Company an amount equal to the aggregate
Purchase Price; or 
  
 (D) on such other terms
and conditions as may be acceptable to the Committee and in accordance with applicable law. As soon as practicable after receipt of payment, the Company shall deliver to the Participant a certificate or certificates for the Shares then purchased.

  
 (iii) REIT Status. Notwithstanding
anything herein to the contrary, no Option granted under this Plan may be exercised if such exercise would jeopardize the Company’s status as a “real estate investment trust” as defined under the Code. 
  
 7. Effect of Termination of Service. 
  
 (a) Death, Disability, or Retirement. Except as otherwise provided in
the Participant’s Option agreement or in this Plan, upon a Termination of Service, all outstanding Options then exercisable and not exercised by the Participant prior to such Termination of Service shall remain exercisable by the Participant to
the extent not theretofore exercised for the following time periods (subject to Section 6(c)): 
  
 (i) in the event of the Participant’s death, such Options shall remain exercisable (by the Participant’s estate or by the person
given authority to exercise such Options by the Participant’s will or by operation of law) for a period of one (1) year from the date of the Participant’s death; and 
  
 (ii) in the event the Participant retires at or after age 65 (or, with the consent of the Committee, before
age 65), or, if the Participant’s services terminate due to Disability, such Options shall remain exercisable for one (1) year from the date of the Participant’s Termination of Service. 
  
 (b) Cause. Upon the Termination of Service of a Participant for Cause
(as defined herein) or if it is discovered after a Termination of Service that such Participant had engaged in conduct that would have justified a Termination of Service for Cause, all outstanding Options (whether vested or unvested) shall
immediately be canceled, provided that upon any such termination the Committee may, in its discretion, require the Participant to promptly pay to the Company (and the Company shall have the right to recover) any gain the Participant realized as a
result of the exercise of any Option that occurred within one (1) year prior to such Termination of Service or the discovery of conduct that would have justified a Termination of Service for Cause. Termination of Service shall be deemed to be for
“Cause” for purposes of this Section 7(b) if the Participant shall have committed fraud or any felony in connection with the Participant’s duties as a director of the Company or willful misconduct or any act of disloyalty, dishonesty,
fraud or breach of trust, confidentiality or fiduciary duties as to the Company or the 

  

 9 

 
commission of any other act which causes or may reasonably be expected to cause economic or reputational injury to the Company or any other act or failure to
act that constitutes “cause” for removal of a director under applicable Maryland law. 
  
 (c) Other Termination. In the event of a Termination of Service for any reason other than as provided in Sections 7(a) and 7(b), all outstanding
Options then exercisable and not exercised by the Participant prior to such Termination of Service shall remain exercisable (to the extent exercisable by such Participant immediately before such termination) for a period of three (3) months after
such termination, but not beyond the original stated term of the Option. 
  
 8.
Nontransferability of Options. 
  
 No Option shall be
transferable by the Participant otherwise than by will or under applicable laws of descent and distribution, and during the lifetime of the holder may be exercised only by the holder or his or her guardian or legal representative. In addition, no
Option shall be assigned, negotiated, pledged or hypothecated in any way (whether by operation of law or otherwise), and no Option shall be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, negotiate, pledge
or hypothecate any Option, or in the event of any levy upon any Option by reason of any execution, attachment or similar process contrary to the provisions hereof, such Option shall immediately be cancelled. Notwithstanding the foregoing, the
Committee may determine at the time of grant or thereafter, that an Option that is otherwise non transferable is transferable in whole or in part and in such circumstances, and under such conditions, as specified by the Committee. 
  
 9. Rights as a Stockholder. 
  
 A holder of an Option shall have no rights as a stockholder with respect to
any Shares covered by such holder’s Option until such holder shall have become the holder of record of such Shares, and no adjustments shall be made for dividends in cash or other property or distributions or other rights in respect to any such
Shares, except as otherwise specifically provided for in this Plan. 
  
 10.
Determinations. 
  
 Each determination, interpretation or
other action made or taken pursuant to the provisions of this Plan by the Committee shall be final, conclusive and binding for all purposes and upon all persons, including, without limitation, the holders of any Options and Non-Employee Directors
and their respective heirs, executors, administrators, personal representatives and other successors in interest. 
  
 11. Termination, Amendment and Modification. 
  
 Notwithstanding any other provision of this Plan, the Board or the Committee may at any time, and from time to time, amend, in whole or in part, any or
all of the provisions of this Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to Options
granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant; provided further, that no amendment may be made, 

  

 10 

 
without stockholder approval if stockholder approval is required under applicable law. 
  
 The Committee may amend the terms of any Option theretofore granted, prospectively or retroactively, but, subject to Section
5 above or as otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without the holder’s consent. 
  
 12. Non-Exclusivity. 
  
 Neither the adoption of the Plan by the Board shall be construed as creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the granting or issuance of Options, Shares and/or other incentives otherwise than under the Plan, and such arrangements may be either generally applicable or limited in
application. 
  
 13. Use of Proceeds. 
  
 The proceeds of the sale of Shares subject to Options under the Plan are to
be added to the general funds of the Company and used for its general corporate purposes as the Board shall determine. 
  
 14. General Provisions. 
  
 (a) Right to Terminate Services. Neither the adoption of the Plan nor the grant of Options shall impose any obligations on the Company to retain
any Participant as a director nor shall it impose any obligation on the part of any Participant to remain a director. 
  
 (b) Purchase for Investment. If the Board determines that the law so requires, the holder of an Option granted hereunder shall, upon any exercise
or conversion thereof, execute and deliver to the Company a written statement, in form satisfactory to the Company, representing and warranting that such Participant is purchasing or accepting the Shares then acquired for such Participant’s own
account and not with a view to the resale or distribution thereof, that any subsequent offer for sale or sale of any such Shares shall be made either pursuant to (i) a registration statement on in appropriate form under the Securities Act, which
registration statement shall have become effective and shall be current with respect to the Shares being offered and sold, or (ii) a specific exemption from the registration requirements of the Securities Act, and that in claiming such exemption the
holder will, prior to any offer for sale or sale of such Shares, obtain a favorable written opinion, satisfactory in form and substance to the Company, from counsel approved by the Company as to the availability of such exception. 
  
 (c) Trusts, etc. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option thereunder) shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and any Participant or the executor, administrator
or other personal representative or designated beneficiary of such Participant, or any other persons. Any reserves that may be established by 

  

 11 

 
the Company in connection with the Plan shall continue to be part of the general funds of the Company, and no individual or entity other than the Company
shall have any interest in such funds until paid to a Participant. If and to the extent that any Participant or such Participant’s executor, administrator, or other personal representative, as the case may be, acquires a right to receive any
payment from the Company pursuant to the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. 
  
 (d) Notices. Each Participant shall be responsible for furnishing the Committee with the current and proper address for the mailing to such
Participant of notices and the delivery to such Participant of agreements, Shares and payments. Any notices required or permitted to be given shall be deemed given if directed to the person to whom addressed at such address and mailed by regular
United States mail, first class and prepaid. If any item mailed to such address is returned as undeliverable to the addressee, mailing will be suspended until the Participant furnishes the proper address. 
  
 (e) Severability of Provisions. If any provisions of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions of the Plan, and the Plan shall be construed and enforced as if such provisions had not been included. 
  
 (f) Payment to Minors, Etc. Any benefit payable to or for the benefit
of a minor, an incompetent person or other person incapable of receipting therefor shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such
payment shall fully discharge the Committee, the Company and their employees, agents and representatives with respect thereto. 
  
 (g) Readings and Captions. The headings and captions herein are provided for reference and convenience only. They shall not be considered part of
the Plan and shall not be employed in the construction of the Plan. 
  
 (h) Other Benefits. No award under this Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its subsidiaries nor affect any benefits under any other benefit plan now or
subsequently in effect under which the availability or amount of benefits is related to the level of compensation. 
  
 (i) 409A. To the extent applicable, the Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be
limited, construed and interpreted in a manner so as to comply therewith. Notwithstanding anything herein to the contrary, any provision in the plan that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with
Section 409A and to the extent such provision cannot be amended to comply therewith, such provision shall be null and void. 
  
 15. Issuance of Stock Certificates; Legends and Payment of Expenses. 
  
 (a) Stock Certificates. Upon any exercise of an Option and payment of the exercise price as provided in such Option, a certificate or certificates
for the Shares as to which such Option has been exercised shall be issued by the Company in the name of the person or persons exercising such Option and shall be delivered to or upon the order of such person or persons. 
  
 (b) Legends. Certificates for Shares issued upon exercise of an Option
shall bear such legend or legends as the Committee, in its discretion, determines to be necessary or appropriate to prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act or to implement the
provisions of any agreements between the Company and the Participant with respect to such Shares. 
  

 12 

 (c) Payment of Expenses. The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses necessarily incurred by the Company in connection with such issuance or transfer and with the administration of the Plan. 
  
 (d) Section 16(b) of the Act. All elections and transactions under the Plan by persons subject to Section 16 of the
Act involving Shares are intended to comply with any applicable condition under Rule 16b-3, provided, however, noncompliance with the requirements of Rule 16b-3 shall not affect the validity of an Option granted under this Plan. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void. The Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Act, as it
may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder. 
  
 16. Listing of Shares and Related Matters. 
  
 If at any time the Board shall determine in its sole discretion that the listing, registration or qualification of the Shares covered by the, Plan upon
any national securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the award or sale of Shares under the Plan, no
Shares will be delivered unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Board. 
  
 17. Governing Law. 
  
 This Plan shall be governed and construed in accordance with the laws of the State of Maryland (regardless of the law that
might otherwise govern under applicable principles of conflict of laws). 
  

 13

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