Document:

exhibit.htm

    
      Execution
        Copy

       

      EMPLOYMENT
        AGREEMENT

       

      AGREEMENT,
        made and entered into as of December 19, 2007 (the “Effective Date”) by and
        between THE WARNACO GROUP, INC., a Delaware corporation (together with its
        successors and assigns, the “Company”), and JOSEPH R. GROMEK (the
“Executive”).

      

      W I T N E S S E T H
        :

       

      WHEREAS,
        the Company desires to continue to employ the Executive as its President
        and
        Chief Executive Officer and to amend and restate the Executive’s current
        employment agreement dated as of December 22, 2004 embodying the terms of
        such
        continued employment and the Executive desires to enter into this amended
        and
        restated agreement and to accept such continued employment, subject to the
        terms
        and provisions of this Agreement;

      

      NOW,
        THEREFORE, in consideration of the premises and mutual covenants contained
        herein and for other good and valuable consideration, the receipt of which
        is
        mutually acknowledged, the Company and the Executive (individually a “Party” and
        together the “Parties”) agree as follows:

      

      1.      
            Definitions.

       

      (a)           “Affiliate”
        of a specified person or entity shall mean a person or entity that directly
        or
        indirectly controls, is controlled by, or is under common control with, the
        person or entity specified.

       

      (b)           “Annual
        Bonus” shall have the meaning ascribed to such term in Section 5
        below.

       

      (c)           “Base
        Salary” shall mean the annualized salary provided for in Section 4
        below.

       

      (d)           “Board”
        shall mean the Board of Directors of the Company.

       

      (e)           “Bonus
        Plan” shall have the meaning ascribed to such term in Section 5
        below.

       

      (f)           “Cause”
        shall mean:

       

      (i)           willful
        misconduct by the Executive which causes material harm to the Company’s
        interests;

       

      (ii)           willful
        and material breach of duty by the Executive in the course of his employment,
        which, if curable, is not cured within 10 days after Executive’s receipt of
        written notice from the Company;

       

      
        
           

        

        
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      (iii)           willful
        failure by the Executive, after having been given written notice from the
        Company, to perform his duties other than a failure resulting from Executive’s
        incapacity due to physical or mental illness; or

       

      (iv)           indictment
        of the Executive for a felony, a crime involving moral turpitude or any other
        crime involving the business of the Company which, in the case of such crime
        involving the business of the Company, is injurious to the business of the
        Company.

       

      For
        purposes of this Cause definition, no act or failure to act, on the part
        of the
        Executive, shall be considered willful unless it is done, or omitted to be
        done,
        by him in bad faith and without reasonable belief that his action was in
        the
        best interests of the Company.  The determination to terminate the
        Executive’s employment for Cause shall be made by the Board and prior to such
        determination the Executive shall have the right to appear before the Board
        or a
        committee designated by the Board.

      

      (g)           “Change
        in Control” shall mean any of the following:

       

      (i)           any
        “person” (as such term is used in Sections 3(a)(9) and 13(d) of the Securities
        Exchange Act of 1934) or group of persons acting jointly or in concert, but
        excluding a person who owns more than 5% of the outstanding shares of the
        Company as of the date of this Agreement, becomes a “beneficial owner” (as such
        term is used in Rule 13d-3 promulgated under that Act), of 50% or more of
        the
        Voting Stock of the Company;

       

      (ii)           all
        or substantially all of the assets of the Company are disposed of pursuant
        to a
        merger, consolidation or other transaction (unless the shareholders of the
        Company immediately prior to such merger, consolidation or other transaction
        beneficially own, directly or indirectly, in substantially the same proportion
        as they owned the Voting Stock of the Company, all of the Voting Stock or
        other
        ownership interests of the entity or entities, if any, that succeed to the
        business of the Company); or

       

      (iii)           approval
        by the shareholders of the Company of a complete liquidation or dissolution
        of
        all or substantially all of the assets of the Company.

       

      For
        purposes of this Change in Control definition, “Voting Stock” shall mean the
        capital stock of any class or classes having general voting power, in the
        absence of specified contingencies, to elect the directors of the
        Company.

      

      (h)           “Date
        of Termination” shall mean:

       

      (i)           if
        the Executive’s employment is terminated by the Company, the date specified in
        the notice by the Company to the Executive that his

       

      
        
           

        

        
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      employment
        is so terminated;

       

      (ii)           if
        the Executive voluntarily resigns his employment (including upon Retirement),
        90
        days after receipt by the Company of written notice that the Executive is
        terminating his employment (provided, that in the case of a voluntary
        resignation (other than a Retirement) the Company may accelerate the Date
        of
        Termination to an earlier date by providing the Executive with written notice
        of
        such action (which notice shall not affect the status of such termination
        as a
        voluntary resignation by the Executive), or, alternatively, the Company may
        place the Executive on paid leave (covering only Base Salary) during such
        period);

       

      (iii)           if
        the Executive’s employment is terminated by reason of death, the date of
        death;

       

      (iv)           if
        the Executive’s employment is terminated for Disability, 30 days after written
        notice is given as specified in Section 1(i) below; or

       

      (v)           if
        the Executive resigns his employment for Good Reason, 30 days after receipt
        by
        the Company of timely written notice from the Executive in accordance with
        Section 1(j) below unless the Company cures the event or events giving rise
        to
        Good Reason within 30 days after receipt of such written notice.

       

      (i)           “Disability”
        shall mean the Executive’s inability, due to physical or mental incapacity, to
        substantially perform his duties and responsibilities for a period of 180
        consecutive days as determined by a medical doctor selected by the Company
        and
        reasonably acceptable to the Executive.  In no event shall any
        termination of the Executive’s employment for Disability occur until the Party
        terminating his employment gives written notice to the other Party in accordance
        with Section 25 below.

       

      (j)           “Good
        Reason” shall mean the occurrence of any of the following without the
        Executive’s prior written consent:

       

      (i)           a
        material diminution in the Executive’s authority, duties or responsibilities as
        Chief Executive Officer of the Company or the assignment to the Executive
        of any
        duties materially inconsistent with such position;

       

      (ii)           a
        reduction in (A) Base Salary or (B) Target Bonus opportunity (as a percentage
        of
        Base Salary) or the failure of the Company to grant (C) the annual equity
        award
        in accordance with Section 6(a) below or (D) the Supplemental Award as set
        forth
        in Section 6(b) below unless, in the case of (C), the Company provides a
        similar
        target opportunity pursuant to a successor plan or otherwise, and in the
        case of
        (D), the Company awards to the Executive an annual award or awards of equivalent
        value (and

       

      
        
           

        

        
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      vesting
        provisions) to the award in respect of which there was failure to make a
        grant,
        whether pursuant to a successor plan or otherwise;

       

      (iii)           a
        change in reporting structure so that the Executive reports to someone other
        than the Board, or the Chairman of the Board as the Board’s
        designee;

       

      (iv)           the
        failure by the Company to nominate or renominate the Executive as a member
        of
        the Board, or the removal by the Company of the Executive as President and
        Chief
        Executive Officer of the Company or the removal of the Executive from the
        Board
        (other than due to a failure of shareholders of the Company to elect
        him);

       

      (v)           requiring
        the Executive to be principally based at any office or location more than
        50
        miles from mid-town Manhattan; or

       

      (vi)           the
        failure of a successor to all or substantially all of the assets of the Company
        to assume the Company’s obligations under this Agreement either as a matter of
        law or in writing within 15 days after a merger, consolidation, sale or similar
        transaction.

       

      Anything
        herein to the contrary notwithstanding, the Executive shall not be entitled
        to
        resign for Good Reason (i) if the occurrence of the event otherwise constituting
        Good Reason is the result of death, Disability, a termination by the Company
        for
        which proper notification has been given (and, if for Cause, opportunity
        to
        cure, if applicable) or a voluntary resignation (including a Retirement)
        by the
        Executive other than for Good Reason and (ii) unless the Executive gives
        the
        Company written notice of the event constituting “Good Reason” within 90 days of
        the occurrence of such event and the Company fails to cure such event within
        30
        days after receipt of such notice.

      

      (k)           “Pro-rata
        Annual Bonus” shall mean the Annual Bonus the Executive would have received had
        his employment continued through the end of the fiscal year in which his
        termination of employment occurs multiplied by a fraction, the numerator
        of
        which is the number of days during such fiscal year that the Executive is
        employed by the Company and the denominator of which is 365.

       

      (l)           “Pro-rata
        Supplemental Award” shall mean an amount equal to 30% of the total cash
        compensation used to determine the amount of the Supplemental Award granted
        immediately prior to the Date of Termination multiplied by a fraction, the
        numerator of which is the number of days that the Executive is employed by
        the
        Company during the year in which the Date of Termination occurs and the
        denominator of which is 365.

       

      (m)           “Retirement”
        shall have the meaning ascribed to such term in Section 9(f) below.

       

      (n)           
        “Separation From Service” shall mean a termination of the
        Executive’s

       

      
        
           

        

        
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      employment
        in a manner consistent with Treasury Regulation Section
        1.409A-1(h).

       

      (o)           “Stock
        Incentive Plan” shall have the meaning ascribed to such term in Section 6(a)
        below.

       

      

      (p)           “Supplemental
        Award” shall have the meaning ascribed to such term in Section
        6(b).

       

      (q)           “Target
        Bonus” shall have the meaning ascribed to such term in Section 5
        below.

       

      (r)           “Term”
        shall have the meaning ascribed to such term in Section 2 below.

       

      2.           Term
        of Employment.

       

      The
        term of the Executive’s employment hereunder shall begin on the Effective Date
        and end at the close of business on March 1, 2011; provided, however, that
        the
        Term shall thereafter be automatically extended for additional one-year periods,
        unless either the Company or the Executive gives the other written notice
        at
        least 180 days prior to the then-scheduled expiration of the Term that such
        Party is electing not to so extend the Term (the initial term plus any extension
        thereof in accordance herewith being referred to herein as the
“Term”).  Notwithstanding the foregoing, the Term shall end on the
        date on which the Executive’s employment is terminated by either Party in
        accordance with the provisions herein.

      

      3.           Position;
        Duties and Responsibilities.

       

      During
        the Term, the Executive shall be employed as the President and Chief Executive
        Officer of the Company and shall be responsible for the general management
        of
        the affairs of the Company and shall perform such other duties and
        responsibilities as determined by the Board.  It is also the intention
        of the Parties that the Executive shall continue to be nominated as a member
        of
        the Board.  The Executive, in carrying out his duties under this
        Agreement, shall report to the Board or the Chairman of the Board as the
        Board’s
        designee.  The Executive shall devote substantially all of his
        business time and attention to the satisfactory performance of his
        duties.  Anything herein to the contrary notwithstanding, nothing
        shall preclude the Executive from (i) subject to the reasonable approval of
        the Board, serving on the boards of directors of trade associations and/or
        charitable organizations or other business corporations (provided such service
        is not prohibited under Section 11(a) below), (ii) engaging in charitable
        activities and community affairs and (iii) managing his personal
        investments and affairs, provided that the activities described in the preceding
        clauses (i) through (iii) do not materially interfere with the proper
        performance of his duties and responsibilities hereunder.

      

      4.           Base
        Salary.

       

      During
        the Term, the Executive shall be paid an annualized Base Salary of $1,000,000,
        payable in accordance with the regular payroll practices of the Company,
        subject
        to annual

       

      
        
           

        

        
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      review
        by the Board (or its designee, including the Compensation Committee of the
        Board) in its (or its designee’s) sole discretion.  During the Term
        the Base Salary may not be decreased without the Executive’s prior written
        consent.  After any increase in base salary approved by the Board or
        its designee, the term “Base Salary” as used in this Agreement shall thereafter
        refer to such increased amount.  The Executive shall not be entitled
        to any compensation for service as a member of the Board or for service as
        an
        officer or member of any board of directors of any Affiliate.

      

      5.           Annual
        Incentive Awards.

       

      During
        the Term (including for fiscal year 2007), the Executive shall be eligible
        to
        receive an annual incentive award (provided the Executive was employed
        continuously during the applicable fiscal year) pursuant to the Company’s
        Incentive Compensation Plan, as amended (or such other annual incentive plan
        as
        may be approved by the Company’s shareholders), in effect for the applicable
        fiscal year (“Bonus Plan”).  The Executive’s annual incentive award
        for fiscal year 2007 and thereafter shall have a target of 125% of Base Salary
        (“Target Bonus”) with a potential maximum award of up to two (2) times the
        Target Bonus, in all events based on the Executive’s achievement of annual
        performance and other targets approved by the committee administering the
        Bonus
        Plan.  The amount and payment of any Annual Bonus shall be determined
        in accordance with the Bonus Plan.  Any Annual Bonus shall be payable
        when bonuses for the applicable performance period are paid to other senior
        executives of the Company, but in all events no later than the 60th day
        following the end of the applicable fiscal year for which the Annual Bonus
        has
        been earned.  As used in this Agreement, “Annual Bonus” shall mean the
        annual incentive award earned by the Executive pursuant to the Bonus Plan
        for
        the applicable completed performance period.  After any increase in
        the Executive’s target annual bonus opportunity as a percentage of Base Salary
        as approved by the Board or its designee, the term “Target Bonus” as used in
        this Agreement shall thereafter refer to the increased target
        opportunity.

      

      6.           Long-Term
        Incentive Awards; Supplemental Award.

       

      (a)           During
        the Term for fiscal year 2008 and thereafter, provided the Executive is employed
        by the Company, the Executive shall be eligible to participate in the Company’s
        2003 and 2005 Stock Incentive Plans, as amended from time to time, or such
        other
        long-term incentive plan(s) as may be approved by the Company’s shareholders
        from time to time (“Stock Incentive Plan”), with grants under such plan(s)
        having an annual grant date target value, in the aggregate, equal to no less
        than 100% of total cash compensation (Base Salary plus Target
        Bonus).  For this purpose, Base Salary shall be the annualized rate of
        salary in effect on the date of the award and Target Bonus shall be the Target
        Bonus for the year in which the award is made.  Awards under any Stock
        Incentive Plan shall be made at such times as awards are generally made to
        the
        Company’s senior executives.  The Board shall have the discretion to
        decide the form of any equity award (whether it is awarded in restricted
        stock,
        stock options, other type of equity or a combination thereof).  Any
        stock option award shall be valued on the basis of Black-Scholes or the
        valuation formula used by the Company in reporting such compensation in its
        filings with the Securities and Exchange Commission.  Except as
        otherwise expressly provided herein, all equity grants shall be governed
        by the
        applicable Stock Incentive

       

      
        
           

        

        
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      Plan
        and/or award agreement.  The Executive shall be subject to the equity
        ownership, retention and other requirements applicable to senior executives
        of
        the Company.

       

      (b)           During
        the Term for fiscal year 2008 and thereafter, provided the Executive is employed
        by the Company, the Executive shall be entitled to an annual award with an
        aggregate grant date value equal to 30% of the total current cash compensation
        (Base Salary plus Annual Bonus) (“Supplemental Award”).  For this
        purpose, Base Salary shall be the Base Salary paid to the Executive for the
        prior fiscal year and Annual Bonus shall be the annual bonus awarded to the
        Executive by the Board for the prior fiscal year.  The Supplemental
        Award shall not be awarded to the Executive until after the determination
        by the
        Board of the Executive’s Annual Bonus for the prior fiscal year (but in no event
        later than 30 days thereafter) and shall be awarded in the form of restricted
        stock units (payable in shares of the Company’s common stock (“Shares”))
        pursuant to the Stock Incentive Plan (“Career Units”).  Any Career
        Units shall be governed by the applicable Stock Incentive Plan and, if
        applicable, any award agreement.  For purposes of this Section 6(b),
        each Career Unit shall be (i) equal to one Share and (ii) valued at the closing
        price of such Share on the date that the Supplemental Award is
        made.  Notwithstanding anything herein to the contrary, the Executive
        shall have the right to elect to receive up to 50% of any Supplemental Award
        in
        the form of a credit to a bookkeeping account maintained by the Company for
        the
        Executive’s account (the “Notional Account”) (and thus not have such amount
        awarded in the form of Career Units), provided the Executive delivers to
        the
        Company before the close of his taxable year preceding the year in which
        the
        Supplemental Award is earned a written election stating the percentage of
        the
        Supplemental Award (up to 50%) to be credited to the Notional
        Account.  If the Executive makes such an election, at the time the
        Supplemental Award for the year is made by the Company, the Company will
        credit
        the amount the Executive has elected to receive in accordance herewith to
        the
        Notional Account, the balance of which account shall periodically be credited
        (or debited) with the deemed positive (or negative) return based on returns
        of
        the investment alternative or alternatives under the Company’s 401(k) plan
        selected in advance (and in accordance with the applicable rules of such
        plan or
        investment alternative) by the Executive to apply to such Notional Account,
        with
        such deemed returns calculated in the same manner and at the same times as
        the
        return on such investment alternative(s).  The Company’s obligation to
        pay the amount credited to the Notional Account, including any return thereon
        provided for in this Section 6(b), and to deliver Shares in respect of the
        Career Units hereunder shall be an unfunded obligation to be satisfied from
        the
        general funds of the Company.  Except as otherwise provided in Section
        9 below, any Supplemental Award (whether in the form of Career Units or the
        Notional Account (as adjusted for any returns thereon) (“Adjusted Notional
        Account”)) granted prior to April 14, 2008 shall cliff vest 50% on April 14,
        2008 and 50% on the date the Executive reaches age 65 and any Supplemental
        Award
        (whether in the form of Career Units or the Adjusted Notional Account) made
        on
        or after April 14, 2008 shall cliff vest 100% on the date the Executive reaches
        age 65, provided that in both cases the Executive is employed by the Company
        on
        such vesting date.  In addition, provided that the Executive is
        employed by the Company on the relevant vesting date, any unvested Adjusted
        Notional Account shall vest upon a Change in Control as defined in Section
        1(g)(i) or (ii) and any unvested Career Units shall vest upon a “change in
        control event” within the meaning of Section 409A of the Internal Revenue Code
        of 1986, as amended from time to time (the “Code”) and the regulations
        promulgated thereunder (“Section 409A”) if

       

      
        
           

        

        
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      unvested
        restricted stock awards granted under the Stock Incentive Plan also vest
        on such
        event. Finally, in the Board’s sole discretion and upon its written consent,
        previously granted Supplemental Awards that remain unvested after the Executive
        reaches age 62 may also vest.  The vested Career Units and the vested
        balance in the Adjusted Notional Account, if any, shall not be distributed
        to
        the Executive until there has been a Separation From Service or, if earlier,
        there has been a Change in Control as defined in Section 1(g)(i) or (ii)
        hereof and, at such time, shall only be distributed at the
        earliest time that satisfies the requirements of this Section
        6(b).  Upon a Change in Control as defined in Section 1(g)(i) or (ii),
        the vested Supplemental Award shall be distributed in Shares for any vested
        Career Units and in a lump-sum cash payment for any vested balance in the
        Adjusted Notional Account to the Executive.  In addition, if the
        Executive’s employment is terminated for any reason, after taking into account
        Section 9 hereof, any unvested Supplemental Awards (whether in the form of
        Career Units or the Adjusted Notional Account) shall be forfeited and the
        vested
        Supplemental Award shall be distributed in Shares for any vested Career Units
        and in a lump-sum cash payment for any vested balance in the Adjusted Notional
        Account to the Executive in January of the year following the year in which
        the
        later of the Date of Termination or the Executive’s Separation From Service
        occurs; provided, however, that if the Executive is a “specified employee” as
        determined pursuant to Section 409A as of the date of the Executive’s Separation
        From Service, such distribution shall not be made before the first business
        day
        of the seventh calendar month following the month in which the Executive’s
        Separation From Service occurs.  For purposes of Section 409A, the
        vested balance in the Adjusted Notional Account shall be deemed to be a payment
        separate and distinct from the vested Career Units.  In addition, the
        Executive can elect to delay the time of any payment under this Section 6(b),
        or
        change the form of payment for the Adjusted Notional Account, provided such
        election is delivered to the Company in writing at least 12 months before
        the
        scheduled payment date for such payment and the new payment date for such
        payment is not earlier than (i) the Executive’s death, (ii)  the
        Executive’s “disability” which satisfies the requirements of Section
        409A(a)(2)(C) of the Code and its implementing regulations, or (iii) five
        (5)
        years from the originally scheduled payment date.  The Parties
        acknowledge that pursuant to the employment agreement between the Parties
        dated
        as of December 22, 2004 (the “Prior Employment Agreement”), the Executive was
        awarded Supplemental Awards pursuant to Section 6(b) of the Prior Employment
        Agreement and such Supplemental Awards (including any Career Units or Adjusted
        Notional Account) shall be treated in accordance with Section 6(b) and the
        applicable provisions of Section 9 of this Agreement as if they had been
        granted
        hereunder.  Upon the expiration or termination of the Term, the
        vesting and payment dates in this Section 6(b) (without regard to Section
        9,
        except as otherwise expressly provided in Section 9(d) of this Agreement)
        and
        the election right in this Section 6(b) shall continue to apply to any
        outstanding Supplemental Award.

       

      7.           Employee
        Benefit Programs.

       

      During
        the Term, subject to the Company’s right to amend, modify or terminate any
        benefit plan or program, the Executive shall be entitled to participate in
        all
        employee savings and welfare benefit plans and programs made available to
        the
        Company’s senior-level executives on a basis no less favorable than provided to
        other similarly-situated executives, as such plans or programs may be in
        effect
        from time to time, including, without limitation, savings and other retirement
        plans or programs, medical, dental, hospitalization, short-term and
        long-term

       

      
        
           

        

        
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      disability
        and life insurance plans, accidental death and dismemberment protection and
        travel accident insurance.  Notwithstanding the foregoing, the
        Executive’s eligibility for and/or participation in any supplemental retirement
        plan or program, including, but not limited to, any excess benefit plan,
        shall
        be at the sole discretion of the Board.  During the Term, the
        Executive shall also be entitled to an annual Company-paid physical medical
        exam
        and Company-paid term life insurance with a benefit equal to $2 million,
        provided the Company can obtain such insurance at commercially reasonable
        premium levels.

      

      8.           Reimbursement
        of Business and Other Expenses; Perquisites; Vacations.

       

      (a)           During
        the Term, the Executive is authorized to incur reasonable expenses in carrying
        out his duties and responsibilities under this Agreement and the Company
        shall
        promptly reimburse him for all business and entertainment expenses incurred
        in
        connection with carrying out the business of the Company, subject to
        documentation in accordance with the Company’s policy.  The Executive
        shall be entitled to first class air travel when traveling on Company
        business.

       

      (b)           The
        Executive shall be entitled to perquisites provided to other senior-level
        executives, including a monthly car allowance of up to a maximum of
        $1,500.

       

      (c)           The
        Executive shall be entitled to four weeks paid vacation per calendar
        year.

       

      Notwithstanding
        anything elsewhere to the contrary, except to the extent any reimbursement,
        payment or entitlement pursuant to Section 7 or Section 8 hereof does not
        constitute a “deferral of compensation” within the meaning of Section 409A, (i)
        the amount of expenses eligible for reimbursement or the provision of any
        in-kind benefit (as defined in Section 409A) to the Executive during any
        calendar year will not affect the amount of expenses eligible for reimbursement
        or provided as in-kind benefits to the Executive in any other calendar year,
        (ii) the reimbursements for expenses for which the Executive is entitled
        shall be made on or before the last day of the calendar year following the
        calendar year in which the applicable expense is incurred and (iii) the right
        to
        payment or reimbursement or in-kind benefits may not be liquidated or exchanged
        for any other benefit.

      

      9.           Termination
        of Employment.

       

      (a)           Termination
        Without Cause by the Company or Resignation for Good Reason by the
        Executive.  In the event that during the Term the Executive’s
        employment is terminated without Cause by the Company (other than upon death
        or
        due to Disability) or the Executive resigns for Good Reason (which, for the
        avoidance of doubt, shall not include a termination described in clause (i)
        of
        the last sentence of Section 1(j) above) and Section 9(d) below does not
        apply,
        the Executive shall be entitled to:

       

      (i)           an
        amount equal to one and a half (1.5) times the sum of (a) Base Salary plus
        (b)
        Target Bonus, payable in a cash lump sum as soon as practicable following
        the
        Date of Termination (but in no event later than

       

      
        
           

        

        
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      60
        days following such date);

       

      (ii)           a
        Pro-rata Annual Bonus, payable in a cash lump sum as soon as practicable
        following the Date of Termination but in no event earlier than January 1st or later
        than March
        15th of the
        Executive’s taxable year following the taxable year in which the Date of
        Termination occurs;

       

      (iii)           immediate
        vesting as of the Date of Termination of 50% of any restricted stock that
        remains unvested as of the Date of Termination and continued exercisability
        of
        any outstanding stock options that have vested as of the Date of Termination
        for
        two years following the Date of Termination or the remainder of the option
        term,
        if shorter;

       

      (iv)           immediate
        vesting as of the Date of Termination of 50% of any previously granted Career
        Units which would have vested on the next scheduled vesting date (i.e.,
        either on April 14, 2008 or when the Executive reaches age 65) if the Executive
        had remained employed by the Company through such vesting date, with any
        vested
        Career Units payable in accordance with Section 6(b) above;

      

      (v)           if
        the Date of Termination is prior to April 14, 2008, immediate vesting as
        of the
        Date of Termination of 25% of the account balance in the Adjusted Notional
        Account, and if the Date of Termination is on or after April 14, 2008 but
        before
        the Executive’s 65th birthday,
        immediate
        vesting as of the Date of Termination of a pro-rata portion of the unvested
        account balance in the Adjusted Notional Account (determined by multiplying
        the
        unvested adjusted balance by a fraction, the numerator of which is the number
        of
        days the Executive was employed by the Company from April 14, 2008 to the
        Date
        of Termination and the denominator of which is 1262), with any vested balance
        payable in accordance with Section 6(b) above; and

       

      (vi)           continued
        participation for the Executive and his eligible dependents in the Company’s
        welfare benefit plans in which he and his eligible dependents were participating
        immediately prior to the Date of Termination until the earlier of (a) the
        18th month
        anniversary of the Date of Termination or (b) the date, or dates, the Executive
        receives equivalent coverage under the plans and programs of a subsequent
        employer.

       

      (b)           Termination
        upon Death or due to Disability.  In the event that during the
        Term the Executive’s employment is terminated upon death or due to Disability,
        the Executive (or his estate or legal representative, as the case may be)
        shall
        be entitled to:

       

      (i)           a
        Pro-rata Annual Bonus, payable in a cash lump sum as soon as practicable
        following the Date of Termination but in no event earlier than January 1st or later
        than March
        15th of the
        Executive’s taxable year

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

      following
        the taxable year in which the Date of Termination occurs;

       

      (ii)           a
        Pro-rata Supplemental Award, payable in a cash lump sum as soon as practicable
        following the Date of Termination (but in no event later than 60 days following
        such date);

       

      (iii)           immediate
        vesting as of the Date of Termination of all outstanding equity awards (other
        than Career Units), with any vested stock options remaining exercisable for
        two
        years following the Date of Termination or the remainder of the option term,
        if
        shorter; and

       

      (iv)           immediate
        vesting as of the Date of Termination of any previously granted Supplemental
        Award, payable in accordance with Section 6(b) above.

       

      (c)           Termination
        by the Company for Cause or a Voluntary Resignation by the
        Executive.  In the event that during the Term the Company
        terminates the Executive’s employment for Cause or the Executive voluntarily
        resigns other than upon Retirement, the Executive shall be entitled to any
        vested Supplemental Award, payable in accordance with Section 6(b)
        above.  Any restricted stock, stock options, Career Units and other
        equity awards as well as any account balance in the Adjusted Notional Account
        that remain unvested as of the Date of Termination shall be
        forfeited.  A voluntary resignation by the Executive of his employment
        shall be effective upon 90 days prior written notice by the Executive to
        the
        Company, subject to earlier termination by the Company (without affecting
        the
        status of such termination as a voluntary resignation) as provided in Section
        1(h)(ii) above, and, provided such notice is given by the Executive, shall
        not
        be deemed a breach of this Agreement.

       

      (d)           Termination
        without Cause by the Company or Resignation for Good Reason by the Executive
        in
        Connection with a Change in Control.  In the event that during the
        Term, (i) the Executive’s employment is terminated without Cause by the Company
        (other than upon death or due to Disability) or the Executive resigns for
        Good
        Reason (which, for the avoidance of doubt, shall not include a termination
        described in clause (i) of the last sentence of Section 1(j) above), in both
        cases upon or within one year following a Change in Control (provided the
        Term
        is still in effect or has expired during this one-year period) or (ii) the
        Executive’s employment is terminated without Cause by the Company within 90 days
        prior to a Change in Control (provided the Term is still in effect or has
        expired during this 90-day period) and such termination is in connection
        with,
        or in anticipation of, the Change in Control, the Executive shall be entitled
        to:

       

      (i)           an
        amount equal to three (3) times the sum of (a) Base Salary plus (b) Target
        Bonus, payable in a cash lump sum as soon as practicable following the Date
        of
        Termination (but in no event later than 60 days following such
        date);

       

      (ii)           a
        Pro-rata Annual Bonus, payable in a cash lump sum as soon as practicable
        following the Date of Termination but in no event earlier than

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      January
        1st or later
        than March 15th
        of the Executive’s taxable year following the taxable year in which the Date of
        Termination occurs;

       

      (iii)           an
        amount equal to 90% of the total cash compensation used to determine the
        value
        of the Supplemental Award granted immediately prior to the Date of Termination,
        payable in a lump sum as soon as practicable following the Date of Termination
        (but in no event later than 60 days following such date);

       

      (iv)           immediate
        vesting as of the Date of Termination of all outstanding equity awards (other
        than Career Units), with vested stock options remaining exercisable for the
        remainder of their original terms;

       

      (v)           immediate
        vesting as of the Date of Termination of any previously granted Supplemental
        Award, payable in accordance with Section 6(b) above; and

       

      (vi)           continued
        participation for the Executive and his eligible dependents in the Company’s
        welfare benefit plans in which he and his eligible dependents were participating
        immediately prior to the Date of Termination until the earlier of (a) 36
        months
        following the Date of Termination, or (b) the date, or dates, the Executive
        receives substantially equivalent coverage under the plans and programs of
        a
        subsequent employer.

       

      For
        purposes of the payment date in clause (iii), and the vesting dates in clauses
        (iv) and (v), of this Section 9(d), the “Date of Termination” shall mean the
        actual Date of Termination or the date of the Change in Control, whichever
        is
        later.  In addition, if the Executive’s employment is terminated
        without Cause by the Company within 90 days prior to a Change in Control
        (provided the Term is still in effect or has expired during this 90-day period),
        such termination is in connection with, or in anticipation of, the Change
        in
        Control and the Date of Termination is prior to the date the Change in Control
        occurs, then: (1) the payments under clause (i) of this Section 9(d) shall
        be
        paid to the Executive as follows:  an amount equal to one and a half
        (1.5) times the sum of (a) Base Salary plus (b) Target Bonus, payable in
        a cash
        lump sum as soon as practicable following the Date of Termination (but in
        no
        event later than 60 days following such date) and an amount equal to one
        and a
        half (1.5) times the sum of (a) Base Salary plus (b) Target Bonus, payable
        in a
        cash lump sum on the later of the date the Change in Control occurs or the
        60th day
        following the Date of Termination; and (2) as of the Date of Termination,
        the
        Executive shall also be entitled to the treatment of his equity and Supplemental
        Awards in accordance with clauses (iii), (iv) and (v) of Section 9(a), with
        any
        additional vesting under clauses (iv) and (v) of this Section 9(d) occurring
        on
        the date of the Change in Control.

       

      (e)           Termination
        of the Executive’s Employment by the Company Upon the Expiration of the
        Term.  If the Company provides written notice to the Executive in
        accordance with Section 2 above that the Term shall not renew and upon such
        expiration of the Term the Company terminates the Executive’s employment under
        circumstances that during the Term

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      would
        constitute a termination of employment without Cause, the Executive shall
        be
        entitled to the same payments, benefits and entitlements as a Termination
        without Cause under Section 9(a) hereof; provided if such termination occurs
        on
        or within one year following a Change in Control, the Executive shall be
        entitled to the payments, benefits and entitlements under Section 9(d)
        hereof.

       

      (f)           Termination
        of the Executive’s Employment Upon Retirement.  In the event that
        during the Term the Executive’s employment terminates by reason of Retirement
        (as defined below), the Executive shall be entitled to:

       

      (i)           continued
        vesting for stock options granted to the Executive on or after the Effective
        Date as if the Executive had remained an active employee of the Company through
        the applicable vesting date, with any stock options granted after the Effective
        Date which are exercisable as of the Date of Termination remaining exercisable
        until the earlier of the one year anniversary of the Date of Termination
        or the
        original expiration date for such options and any stock options vesting pursuant
        to this clause (i) remaining exercisable until the earlier of the one year
        anniversary of the date such stock options vest or the original expiration
        date
        for such options; 

       

      (ii)           in
        the event that on the Date of Termination less than a majority of the members
        of
        the Board are members who were members of the Board on the Effective Date
        and
        provided that the Board has not already exercised its discretion to accelerate
        vesting of such Supplemental Awards and/or restricted stock, (1) the account
        balance in the Adjusted Notional Account shall immediately vest and be paid
        out
        in accordance with Section 6(b) above and (2) any outstanding restricted
        stock
        and any Career Units granted to the Executive on or after the Effective Date
        will immediately vest as of the Date of Termination, with the Career Units
        payable in accordance with Section 6(b) above, provided that except to the
        extent necessary to pay any taxes on the vesting of such shares or Career
        Units,
        the Executive shall be restricted from selling such shares until the date
        such
        restricted stock or Career Units would have vested absent the application
        of
        this Section 9(f)(ii); and

       

      (iii)           any
        Supplemental Award vested as of the Date of Termination, payable in accordance
        with Section 6(b) above.

       

      For
        purposes of this Agreement, Retirement shall be any voluntary termination
        of the
        Executive’s employment on or after he reaches age 63 (other than on account of
        Good Reason, death or Disability).  A Retirement by the Executive
        shall be effective upon 90 days prior written notice by the Executive to
        the
        Company.

       

      (g)           Other
        Entitlements Upon Termination of Employment.  In the event of any
        termination of the Executive’s employment, the Executive (or his estate or legal
        representative,

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      as
        the case may be) shall be entitled to:

       

      (i)           Base
        Salary through the Date of Termination, payable on the first regularly scheduled
        payroll date following the Date of Termination;

       

      (ii)           except
        for a termination of employment pursuant to Section 9(c) above, payment of
        any
        unpaid Annual Bonus for any fiscal year preceding the Date of Termination,
        payable when bonuses for such fiscal year are paid to other Company
        executives;

       

      (iii)           any
        amounts earned or owing to the Executive but not yet paid under Section 8
        above,
        payable in accordance with such section; and

       

      (iv)           except
        as otherwise provided in Section 9(h) below, additional entitlements, if
        any, in
        accordance with applicable plans and programs of the Company (provided that
        in
        no event shall the Executive be entitled to duplication of any payments or
        benefits).

       

      (h)           Exclusivity
        of Benefits; Releases of Claims.  Any payments provided pursuant
        to Section 9(a), Section 9(d) or Section 9(e) above shall be in lieu of any
        salary continuation arrangements under any other severance program of the
        Company.  In order to be entitled to the payments, rights and other
        entitlements in Section 9(a), Section 9(b) (but only in the event of a
        termination for Disability and, in this event, only as a condition for the
        Pro-rata Supplemental Award in Section 9(b)(ii) and the vesting of the
        Supplemental Award in Section 9(b)(iv)), Section 9(d), Section 9(e) or Section
        9(f) (but only in the case of clauses (i) and (ii) of such Section 9(f))
        above,
        the Executive shall be required to execute and deliver a release of claims
        against the Company in the form of Exhibit A attached hereto no later than
        45
        days following the Date of Termination and not revoke such release within
        the
        applicable revocation period.  Upon the execution by the Executive and
        delivery to the Company of such release of claims (provided the Executive
        does
        not revoke such release within the applicable revocation period), the Company
        agrees to execute a release of claims against the Executive in the form of
        Exhibit B attached hereto and to deliver such release to the Executive. 

       

      (i)           Nature
        of Payments.  Any amounts due under this Section 9 are in the
        nature of severance payments considered to be reasonable by the Company and
        are
        not in the nature of a penalty.

       

      (j)           No
        Mitigation; No Offset.  In the event of termination of his
        employment for any reason, the Executive shall be under no obligation to
        seek
        other employment and, except as specifically provided for in this Section
        9,
        there shall be no offset against amounts due to him on account of any
        remuneration or benefits provided by any subsequent employment he may
        obtain.

       

      (k)           Resignation.  Notwithstanding
        any other provision of this Agreement, upon the termination of the Executive’s
        employment for any reason, unless otherwise requested by the Board, he shall
        immediately resign from the Board, from all boards of directors of
        any

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      Affiliate
        of the Company of which he may be a member, and as a trustee of, or fiduciary
        to, any employee benefit plans of the Company or any Affiliate.  The
        Executive hereby agrees to execute any and all documentation of such
        resignations upon request by the Company, but he shall be treated for all
        purposes as having so resigned upon termination of his employment, regardless
        of
        when or whether he executes any such documentation.

       

      (l)           Section
        409A.  Notwithstanding anything to the contrary in this Agreement
        or elsewhere (except for Section 6(b) of this Agreement), if the Executive
        is a
“specified employee” as determined pursuant to Section 409A as of the date of
        the Separation From Service and if any payment, benefit or entitlement provided
        for in this Agreement or otherwise both (x) constitutes a “deferral of
        compensation” within the meaning of Section 409A and (y) cannot be paid or
        provided in a manner otherwise provided herein or otherwise without subjecting
        the Executive to additional tax, interest or penalties under Section 409A,
        then
        any such payment, benefit or entitlement that is payable during the first
        six
        months following the Executive’s Separation From Service shall be paid or
        provided to the Executive in a cash lump-sum on the earlier of the Executive’s
        death or the first business day of the seventh calendar month following the
        month in which the Executive’s Separation From Service occurs.  In
        addition, any payment, benefit or entitlement due upon a termination of the
        Executive’s employment that represents a “deferral of compensation” within the
        meaning of Section 409A (other than any payments due pursuant to Section
        6(b) of
        this Agreement) shall only be paid or provided to Executive upon a Separation
        From Service, in which case any reference to “Date of Termination” in connection
        with such payment, benefit or entitlement shall be deemed to be a reference
        to
“Separation From Service”, and the actual payment date within the time specified
        in the applicable provision of Section 9 shall be within the Company’s sole
        discretion.  Notwithstanding anything to the contrary in this Section
        9 or otherwise, any payment or benefit under this Section 9 or otherwise
        which
        is exempt from Section 409A pursuant to Treasury Regulation Section
        1.409A-1(b)(9)(v)(A) or (C) shall be paid or provided to the Executive only
        to
        the extent the expenses are not incurred or the benefits are not provided
        beyond
        the last day of the second taxable year of the Executive following the taxable
        year of the Executive in which the Separation From Service occurs; and provided
        further that the Company reimburses such expenses no later than the last
        day of
        the third taxable year following the taxable year of the Executive in which
        the
        Separation From Service occurs. Finally, to the extent
        that the provision of any benefit pursuant to Section 9(a)(vi) or Section
        9(d)(vi) hereof is taxable to the Executive, any such reimbursement shall
        be
        paid to the Executive on or before the last day of the Executive’s taxable year
        following the taxable year in which the expense is incurred and such
        reimbursement shall not be subject to liquidation or exchange for any other
        benefit.

       

      10.           Confidentiality;
        Assignment of Rights; Return of Company Property.

       

      (a)           During
        the Term and thereafter, other than in the ordinary course of performing
        his
        duties for the Company or as required in connection with providing any
        cooperation to the Company pursuant to Section 13 below, the Executive agrees
        that he shall not disclose to anyone or make use of any trade secret or
        proprietary or confidential information of the Company or any Affiliate of
        the
        Company, including such trade secret or proprietary or confidential information
        of any customer or other entity to which the Company owes an obligation not
        to
        disclose such information, which he acquires during the course of
        his

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

       

      employment
        (“Confidential Information”), including, but not limited to, records kept in the
        ordinary course of business, except when required to do so by a court of law, by
        any governmental agency having supervisory authority over the business of
        the
        Company or by any administrative or legislative body (including a committee
        thereof) with apparent or actual jurisdiction to order him to divulge, disclose
        or make accessible such information.  “Confidential Information” shall
        not include information that (i) was known to the public prior to its
        disclosure by the Executive; or (ii) becomes known to the public through no
        wrongful disclosure by or act of the Executive or any representative of the
        Executive.  In the event the Executive is requested by subpoena, court
        order, investigative demand, search warrant or other legal process to disclose
        any Confidential Information, the Executive agrees, unless prohibited by
        law or
        Securities and Exchange Commission regulation, to give the Company’s General
        Counsel prompt written notice of any request for disclosure in advance of
        the
        Executive’s making such disclosure and the Executive agrees not to disclose such
        information unless and until the Company has expressly authorized the Executive
        to do so in writing or the Company has had a reasonable opportunity to object
        to
        such request or to litigate the matter (of which the Company agrees to keep
        the
        Executive reasonably informed) and has failed to do so.

       

      (b)           The
        Executive hereby sells, assigns and transfers to the Company all of his right,
        title and interest in and to all inventions, discoveries, improvements and
        copyrightable subject matter (the “Rights”) which during the period of his
        employment are made or conceived by him, alone or with others, and which
        are
        within or arise out of any general field of the Company’s business or arise out
        of any work he performs, or information he receives regarding the business
        of
        the Company, while employed by the Company.  The Executive shall fully
        disclose to the Company as promptly as available all information known or
        possessed by him concerning any Rights, and upon request by the Company and
        without any further remuneration in any form to him by the Company, but at
        the
        expense of the Company, execute all applications for patents and for copyright
        registration, assignments thereof and other instruments and do all things
        which
        the Company may deem necessary to vest and maintain in it the entire right,
        title and interest in and to all such Rights.

       

      (c)           The
        Executive agrees that at the time of the termination of his employment (whether
        during or after the expiration of the Term), whether at the instance of the
        Executive or the Company, and regardless of the reasons therefor, he will
        promptly deliver to the Company’s General Counsel, and not keep or deliver to
        anyone else, any and all of the following which is in his possession or control:
        (i) Company property (including, without limitation, credit cards, computers,
        communication devices, home office equipment and other Company tangible
        property) and (ii) notes, files, memoranda, papers and, in general, any and
        all
        physical matter and computer files containing confidential or proprietary
        information of the Company or any of its Affiliates, including any and all
        documents relating to the conduct of the business of the Company or any of
        its
        Affiliates and any and all documents containing confidential or proprietary
        information of the customers of the Company or any of its Affiliates, except
        for
        (x) any documents for which the Company’s General Counsel has given written
        consent to removal at the time of termination of the Executive’s employment and
        (y) any information necessary for the Executive to retain for his tax purposes
        (provided the Executive maintains the confidentiality of such information
        in
        accordance with Section 10(a) above).

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

       

      11.           Non-Competition;
        Non-Solicitation; Non-Disparagement.

       

      (a)           The
        Executive acknowledges that in his capacity in management the Executive has
        had
        or will have a great deal of exposure and access to the Company’s trade secrets
        and confidential and proprietary information.  Therefore, during the
        Term and thereafter (provided the Executive is employed by the Company) and
        for
        12 months (24 months in the case of the Executive’s Retirement) following the
        Executive’s termination of employment (whether during or after the expiration of
        the Term) to protect the Company’s trade secrets and other confidential and
        proprietary information, the Executive agrees that he shall not, other than
        in
        the ordinary course of performing his duties hereunder or as agreed by the
        Company in writing, engage in a “Competitive Business,” directly or indirectly,
        as an individual, partner, shareholder, director, officer, principal, agent,
        employee, trustee, consultant, or in any relationship or capacity, in any
        geographic location in which the Company or any of its Affiliates is engaged
        in
        business.  The Executive shall not be deemed to be in violation of
        this Section 11(a) by reason of the fact that he owns or acquires, solely
        as an
        investment, up to two percent (2%) of the outstanding equity securities
        (measured by value) of any entity.  “Competitive Business” shall mean
        a business engaged in (x) apparel design and/or apparel wholesaling or (y)
        retailing in competition with any business that the Company is conducting
        at the
        time of the alleged violation.

       

      (b)           The
        Executive agrees that for a period of 18 months (24 months in the case of
        the
        Executive’s Retirement) following the Executive’s termination of employment
        (whether during or after the expiration of the Term), he will not, without
        the
        prior written consent of the Company, directly or indirectly, hire any employee
        of the Company or any of its Affiliates, or solicit or encourage any such
        employee to leave the employ of the Company or its Affiliates, as the case
        may
        be.

       

      (c)           The
        Executive agrees that for a period of 18 months (24 months in the case of
        the
        Executive’s Retirement) following the Executive’s termination of employment
        (whether during or after the expiration of the Term), he will not, without
        the
        prior written consent of the Company, directly or indirectly, solicit or
        encourage any customer of the Company or any of its Affiliates to reduce
        or
        cease its business with the Company or any such Affiliate or otherwise interfere
        with the relationship of the Company or any Affiliate with its
        customers.

       

      (d)           The
        Executive and the Company each agree to refrain from making any statements
        or
        comments, whether oral or written, of a defamatory or disparaging nature
        to
        third parties regarding each other (and, in the case of the Executive’s
        commitment hereunder, the “Company” shall include an Affiliate of the Company
        and the Company’s officers, directors, personnel and products).  The
        Executive and the Company each understand that either party should be entitled
        to respond truthfully and accurately to statements about such party made
        publicly by the Executive or the Company, as the case may be, provided that
        such
        response is consistent with the responding party’s obligations not to make any
        statements or comments of a defamatory or disparaging nature as set forth
        herein.

       

      12.           Injunctive
        and Other Relief.

       

      The
        Executive expressly agrees and acknowledges any breach or threatened breach
        of
        any

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

      obligation
        under Section 10 or Section 11 above will cause the Company immeasurable
        and
        irreparable harm for which there is no adequate remedy at law, and as a result
        of this the Company shall be entitled to seek the issuance by a court of
        competent jurisdiction of an injunction, restraining order or other equitable
        relief in favor of itself, without the necessity of posting a bond, restraining
        the Executive from committing or continuing to commit any such
        violation.  Any payment, benefit of entitlement due to the Executive
        under this Agreement shall be subject to forfeiture if the Executive materially
        breaches any provision of Section 10, Section 11 or Section 13 of this
        Agreement.

      

      13.           Cooperation.

       

      Following
        the Executive’s termination of employment (whether during or after the
        expiration of the Term), upon reasonable request by the Company, the Executive
        shall cooperate with the Company or any of its Affiliates with respect to
        any
        legal or investigatory proceeding, including any government or regulatory
        investigation, or any litigation or other dispute relating to any matter
        in
        which he was involved or had knowledge during his employment with the Company,
        subject to his reasonable personal and business schedules.  The
        Company shall reimburse the Executive for all reasonable out-of-pocket costs,
        such as travel, hotel and meal expenses and reasonable attorneys’ fees, incurred
        by the Executive in providing any cooperation pursuant to this Section 13;
        provided such expenses shall be paid to the Executive as soon as practicable
        but
        in no event later than the end of the calendar year following the calendar
        year
        in which the expenses are incurred, subject in all cases to the Executive
        providing appropriate documentation to the Company.  The Company shall
        also pay the Executive a reasonable per diem amount for the Executive’s time
        (other than for time spent preparing for or providing testimony) which shall
        be
        based upon the Executive’s Base Salary at the Date of Termination, with such per
        diem paid to the Executive in the calendar month following the month in which
        he
        provides such assistance.  Any reimbursement or payment under this
        Section 13 shall not affect the amount of the reimbursement or payment to
        the
        Executive in any other taxable year.  The right to payment or
        reimbursement pursuant to this Section 13 shall not be liquidated or exchanged
        for any other benefit.

      

      14.           Tax
        Matters.

       

      (a)           If
        any amount, entitlement, or benefit paid or payable to the Executive or provided
        for his benefit under this Agreement and under any other agreement, plan
        or
        program of the Company (such payments, entitlements and benefits referred
        to as
        a “Payment”) is subject to the excise tax imposed under Section 4999 of the Code
        or any similar federal or state law (an “Excise Tax”), then notwithstanding
        anything contained in this Agreement to the contrary, to the extent that
        any or
        all Payments would be subject to the imposition of an Excise Tax, the Payments
        shall be reduced (but not below zero) if and to the extent that such reduction
        would result in the Executive retaining a larger amount, on an after-tax
        basis
        (taking into account federal, state and local income taxes and the imposition
        of
        the Excise Tax), than if the Executive received all of the Payments (such
        reduced amount is hereinafter referred to as the “Limited Payment
        Amount”).  The Company shall reduce or eliminate the Payments, by
        first reducing or eliminating those payments or benefits which are payable
        in
        cash and then by reducing or eliminating non-cash payments, in each case
        in
        reverse order beginning with payments or

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

       

      benefits
        which are to be paid the farthest in time from the Determination (as defined
        below).  Any notice given by the Executive pursuant to the preceding
        sentence shall take precedence over the provisions of any other plan,
        arrangement or agreement, including, but not limited to, the other provisions
        of
        this Agreement, governing the Executive’s rights and entitlements to any
        compensation, entitlement or benefit.

       

      (b)           All
        calculations under this Section 14 shall be made by a nationally recognized
        accounting firm designated by the Company and reasonably acceptable to the
        Executive (other than the accounting firm that is regularly engaged by any
        party
        who has effectuated a Change in Control) (the “Accounting Firm”).  The
        Company shall pay all fees and expenses of such Accounting Firm.  The
        Accounting Firm shall provide its calculations, together with detailed
        supporting documentation, both to the Company and the Executive within 45
        days
        after the Change in Control or the Date of Termination, whichever is later
        (or
        such earlier time as is requested by the Company) and, with respect to the
        Limited Payment Amount, shall deliver its opinion to the Executive that he
        is
        not required to report any Excise Tax on his federal income tax return with
        respect to the Limited Payment Amount (collectively, the
“Determination”).  Within 5 days of the Executive’s receipt of the
        Determination, the Executive shall have the right to dispute the Determination
        (the “Dispute”).  The existence of the Dispute shall not in any way
        affect the right of the Executive to receive the Payments in accordance with
        the
        Determination.  If there is no Dispute, the Determination by the
        Accounting Firm shall be final binding and conclusive upon the Company and
        the
        Executive (except as provided in subsection (c) below).

       

      (c)           If,
        after the Payments have been made to the Executive, it is established that
        the
        Payments made to, or provided for the benefit of, the Executive exceed the
        limitations provided in subsection (a) above (an “Excess Payment”) or are less
        than such limitations (an “Underpayment”), as the case may be, then the
        provisions of this subsection (c) shall apply.  If it is established
        pursuant to a final determination of a court or an Internal Revenue Service
        (the
“IRS”) proceeding which has been finally and conclusively resolved, that an
        Excess Payment has been made, the Executive shall repay the Excess Payment
        to
        the Company within 20 days following the determination of such Excess
        Payment.  In the event that it is determined by (i) the Accounting
        Firm, the Company (which shall include the position taken by the Company,
        or
        together with its consolidated group, on its federal income tax return) or
        the
        IRS, (ii) pursuant to a determination by a court, or (iii) upon the resolution
        to the satisfaction of the Executive of the Dispute, that an Underpayment
        has
        occurred, the Company shall pay an amount equal to the Underpayment to the
        Executive within 10 days of such determination or resolution together with
        interest on such amount at the applicable federal short-term rate, as defined
        under Section 1274(d) of the Code and as in effect on the first date that
        such
        amount should have been paid to the Executive under this Agreement, from
        such
        date until the date that such Underpayment is made to the
        Executive.

       

      15.           Representations
        and Covenants.

       

      (a)           The
        Executive represents and warrants that he has the free and unfettered right
        to
        enter into this Agreement and to perform his obligations under it and that
        he
        knows of no agreement between him and any other person, firm or organization,
        or
        any law or regulation, that would be violated by the performance of his
        obligations under this Agreement.  The Executive

       

      
        
           

        

        
          19

          
            

          

        

        
           

        

      

       

      agrees
        that he will not use or disclose any confidential or proprietary information
        of
        any prior employer in the course of performing his duties for the Company
        or any
        of its Affiliates.

       

      (b)           The
        Company represents that (i) the execution of this Agreement and the granting
        of
        the benefits and awards hereunder have been authorized by the Company,
        including, where necessary, by the Board, (ii) the execution, delivery and
        performance of this Agreement does not violate any law, regulation, order,
        decree, agreement, plan or corporate governance document of the Company and
        (iii) upon the execution and delivery of this Agreement by the Parties, it
        shall
        be the valid and binding obligation of the Company enforceable against it
        in
        accordance with its terms, except to the extent that enforceability may be
        limited by applicable bankruptcy, insolvency or similar laws affecting the
        enforcement of creditors’ rights generally.

       

      16.           Assignability;
        Binding Nature.

       

      This
        Agreement shall be binding upon and inure to the benefit of the Parties and
        their respective successors, heirs (in the case of the Executive) and
        assigns.  For purposes of this Section 16, a successor to the Company
        shall be limited to an entity which shall have acquired all or substantially
        all
        of the business and/or assets of the Company and shall have assumed (whether
        by
        agreement or operation of law) the Company’s rights and obligations under this
        Agreement.  No rights or obligations of the Executive under this
        Agreement may be assigned or transferred by the Executive other than his
        rights
        to compensation and benefits, which may be transferred only by will, operation
        of law or in accordance with Section 22 below.

      

      17.           Entire
        Agreement.

       

      This
        Agreement contains the entire understanding and agreement between the Parties
        concerning the subject matter hereof and, as of the Effective Date, shall
        supersede all prior agreements, understandings, discussions, negotiations
        and
        undertakings, whether written or oral, between the Parties with respect thereto
        (including the Prior Employment Agreement as well as the employment agreement
        between the Parties dated as of April 14, 2003 but not including any equity
        awards or related equity agreements which remain outstanding as of the Effective
        Date).

      

      18.           Amendment
        or Waiver.

       

      No
        provision of this Agreement may be amended unless such amendment is agreed
        to in
        writing and signed by the Executive and an authorized officer of the
        Company.  Notwithstanding the foregoing, the Company agrees to
        cooperate and work in good faith to amend this Agreement prior to January
        1,
        2009 to comply with Section 409A if such amendment is in the reasonable opinion
        of the Executive’s counsel required to prevent the Executive from incurring any
        additional tax, interest or penalties under Section 409A.  No waiver
        by either Party of any breach by the other Party of any condition or provision
        contained in this Agreement to be performed by such other Party shall be
        deemed
        a waiver of a similar or dissimilar condition or provision at the same or
        any
        prior or subsequent time.  Any waiver must be in writing and signed by
        the Party against whom it is being enforced (either the Executive or an
        authorized officer of the Company, as the case may be).

      

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

       

      19.           Severability.

       

      In
        the event that any provision or portion of this Agreement shall be determined
        to
        be invalid or unenforceable by an arbitrator or court of competent jurisdiction
        for any reason, in whole or in part, the remaining provisions of this Agreement
        shall be unaffected thereby and shall remain in full force and effect to
        the
        fullest extent permitted by law.

      

      
        
           

        

        
          21

          
            

          

        

        
           

        

      

       

      20.           Survivorship.

       

      The
        respective rights and obligations of the Parties hereunder, including, without
        limitation, Section 6(b), Section 9 (termination of employment), Section
        10
        (confidentiality; assignment of rights; return of Company property), Section
        11
        (non-competition; non-solicitation; non-disparagement), Section 12 (injunctive
        and other relief), Section 13 (cooperation), Section 14 (tax matters), Section
        21 (indemnification and liability insurance) and Section 24 (resolution of
        disputes), shall survive any expiration of the Term, including expiration
        thereof upon the Executive’s termination of employment for whatever reason, to
        the extent necessary to the intended preservation of such rights and
        obligations.

      

      21.           Indemnification
        and Liability Insurance.

       

      The
        Company hereby agrees during, and after termination of, his employment to
        indemnify the Executive and hold him harmless, both during the Term and
        thereafter, to the fullest extent permitted by law and under the certificate
        of
        incorporation and by-laws of the Company against and in respect of any and
        all
        actions, suits, proceedings, claims, demands, judgments, costs, expenses
        (including reasonable attorneys’ fees), losses, amounts paid in settlement to
        the extent approved by the Company, and damages resulting from the Executive’s
        good faith performance of his duties as an officer or director of the Company
        or
        any Affiliate of the Company.  The Company shall reimburse the
        Executive for expenses incurred by him in connection with any proceeding
        hereunder upon written request from the Executive for such reimbursement
        and the
        submission by the Executive of the appropriate documentation associated with
        these expenses.  Such request shall include an undertaking by the
        Executive to repay the amount of such advance or reimbursement if it shall
        ultimately be determined that he is not entitled to be indemnified hereunder
        against such costs and expenses.  The Company shall use commercially
        reasonable efforts to obtain and maintain directors’ and officers’ liability
        insurance covering the Executive to the same extent as the Company covers
        its
        other officers and directors.

      

      22.           Beneficiaries/References.

       

      The
        Executive shall be entitled, to the extent permitted under applicable plans,
        agreements or law, to select and change a beneficiary or beneficiaries to
        receive any compensation or benefit payable hereunder following the Executive’s
        death by giving the Company written notice thereof.  In the event of
        the Executive’s death or a judicial determination of his incompetence, reference
        in this Agreement to the Executive shall be deemed, where appropriate, to
        refer
        to his beneficiary, estate or other legal representative.

      

      23.           Governing
        Law.

       

      This
        Agreement shall be governed by and construed and interpreted in accordance
        with
        the laws of New York without reference to principles of conflicts of law,
        provided, however, that Federal law shall apply to the interpretation or
        enforcement of Section 24 below.

      

      24.           Resolution
        of Disputes.

       

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

       

      Except
        as otherwise provided in Section 12 above, any controversy, dispute or claim
        arising under or relating to this Agreement, the Executive’s employment with the
        Company or any Affiliate or the termination thereof shall, at the election
        of
        the Executive or the Company (unless otherwise provided in an applicable
        Company
        plan, program or agreement), be resolved by confidential, binding and final
        arbitration, to be held in the borough of Manhattan in New York City in
        accordance with the rules and procedures of the Commercial Arbitration Rules
        of
        the American Arbitration Association.  Judgment upon the award
        rendered by the arbitrator may be entered in any court having jurisdiction
        thereof and shall be binding upon the Parties.  The Executive consents
        to the personal jurisdiction of the Courts of the State of New York (including
        the United States District Court for the Southern District of New York) in
        any
        proceedings for equitable relief.  The Executive further agrees not to
        interpose any objection for improper venue in any such
        proceeding.  Each Party shall be responsible for its own costs and
        expenses, including attorneys’ fees, and neither Party shall be liable for
        punitive or exemplary damages, provided that if the Executive substantially
        prevails with respect to all claims that are the subject matter of the dispute,
        his costs, including reasonable attorneys’ fees, shall be borne by the Company;
        provided that if such costs are not reimbursed in connection with a dispute
        exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(11)
        then such payment shall be made by the Company to the Executive in the year
        following the year in which the dispute is resolved.

      

      25.           Notices.

       

      Any
        notice given to a Party shall be in writing and shall be deemed to have been
        given (i) when delivered personally (provided that a written
        acknowledgement of receipt is obtained), (ii) three days after being sent
        by certified or registered mail, postage prepaid, return receipt requested
        or
        (iii) two days after being sent by overnight courier (provided that a written
        acknowledgement of receipt is obtained by the overnight courier), with any
        such
        notice duly addressed to the Party concerned at the address indicated below
        or
        to such other address as such Party may subsequently designate by written
        notice
        in accordance with this Section 25:

      

      
        	 	
                If
                  to the Company:

              	
                The
                  Warnaco Group, Inc.

              
	 	 	
                501
                  Seventh Avenue

              
	 	 	
                New
                  York, New York 10018

              
	 	 	
                Attention:  General
                  Counsel

              
	 	 	 
	 	
                If
                  to the Executive:

              	
                The
                  most recent address in the Company’s
                  records.

              

      

      

      26.           Withholdings.

       

      The
        Company may withhold from any amounts payable under this Agreement such Federal,
        state, local or other taxes as shall be required to be withheld pursuant
        to any
        applicable law or regulation.

      

      
        
           

        

        
          23

          
            

          

        

        
           

        

      

      

      27.           Headings.

       

      The
        headings of the sections contained in this Agreement are for convenience
        only
        and shall not be deemed to control or affect the meaning or construction
        of any
        provision of this Agreement.

      

      28.           Counterparts.

       

      This
        Agreement may be executed in two or more counterparts.

       

      
        
           

        

        
          24

          
            

          

        

        
           

        

      

       

      IN
        WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
        first written above.

      

      

      

      
        	 	
                THE
                  WARNACO GROUP, INC.

              	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                   /s/
                  Jay A. Galluzzo

              	 
	 	
                Name:

              	
                Jay
                  A. Galluzzo

              	 
	 	
                Title:

              	
                Senior
                  Vice President – Corporate Development,

              
	 	 	
                General
                  Counsel and Secretary

              	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
                THE
                  EXECUTIVE

              	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
                /s/
                  Joseph R. Gromek

              	 
	 	
                Joseph
                  R. Gromek

              	 

      

      

      

      
        
           

        

        
          25

          
            

          

        

        
           

        

      

      

      Exhibit
        A

      AGREEMENT
        AND RELEASE OF CLAIMS

      

       

      THIS
        AGREEMENT AND RELEASE is executed by JOSEPH R. GROMEK (the “Executive”) as of
        the date of this Agreement and Release.

      

      WHEREAS,
        the Executive and The Warnaco Group, Inc. (the “Company”) entered into an
        employment agreement dated December 19, 2007, as amended from time to time
        (the
“Employment Agreement”);

      

      WHEREAS,
        the Executive has certain entitlements pursuant to the Employment Agreement
        subject to the Executive’s executing this Agreement and Release.

      

      NOW,
        THEREFORE, in consideration of the ­payments set forth in Section 9 of the
        Employment Agreement and other good and valuable consideration, the Executive
        agrees as follows:

      The
        Executive, on behalf of himself and his dependents, heirs, administrators,
        agents, executors, successors and assigns (the “Executive Releasors”), hereby
        releases and forever discharges the Company and its affiliated companies
        and
        their past and present parents, subsidiaries, successors and assigns and
        all of
        the aforesaid companies’ past and present officers, directors, employees,
        trustees, shareholders, representatives and agents (the “Company Releasees”),
        from any and all claims, demands, obligations, liabilities and causes of
        action
        of any kind or description whatsoever, in law, equity or otherwise, whether
        known or unknown, that any Executive Releasor had, may have had or now has
        against the Company or any other Company Releasee as of the date of execution
        of
        this Agreement and Release arising out of or relating to the Executive’s
        employment relationship, or the termination of that relationship, with the
        Company (or any affiliate), including, but not limited to, any claim, demand,
        obligation, liability or cause of action arising under any Federal, state,
        or
        local employment law or ordinance (including, but not limited to, Title VII
        of
        the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay
        Act,
        the Americans With Disabilities Act of 1991, the Workers Adjustment and
        Retraining Notification Act, the Employee Retirement Income Security Act
        (other
        than any claim for vested benefits), the Family and Medical Leave Act, and
        the
        Age Discrimination in Employment Act, as amended by the Older Workers’ Benefit
        Protection Act), tort, contract, or alleged violation of any other legal
        obligation (collectively “Released Executive Claims”).  Anything to
        the contrary notwithstanding in this Agreement and Release or the Employment
        Agreement, nothing herein shall release any Company Releasee from any claims
        or
        damages based on (i) any right the Executive may have to enforce this Agreement
        and Release or any right provided pursuant to Section 9 or Section 20 of
        the
        Employment Agreement, or (ii) any right or claim that arises after the date
        of
        this Agreement and Release.

      

      The
        Executive acknowledges that he has been provided a period of at least 21
        calendar days in which to consider and execute this Agreement and
        Release.  The Executive further acknowledges and understands that he
        has seven calendar days from the date on which he executes this Agreement
        and
        Release to revoke his acceptance by delivering to the Company

       

      
        
           

        

        
          26

          
            

          

        

        
           

        

      

       

      written
        notification of his intention to revoke this Agreement and
        Release.  This Agreement and Release becomes effective when signed
        unless revoked in writing and in accordance with this seven-day
        provision.  To the extent that the Executive has not otherwise done
        so, the Executive is advised to consult with an attorney prior to executing
        this
        Agreement and Release.

      

      This
        Agreement and Release shall be
        governed by and construed and interpreted in accordance with the laws of
        New
        York without reference to principles of conflicts of law.

      

      IN
        WITNESS WHEREOF, the Executive has
        executed this Agreement and Release as of the date written below.

      

      

      

      
        	 	 	 
	 	
                Joseph
                  R. Gromek

              	 
	 	 	 
	 	 	 
	 	 	 
	 	
                Date:____________________________

              	 

      

       

      
 

      
        
           

        

        
          27

          
            

          

        

        
           

        

      

       

      Exhibit
        B

      AGREEMENT
        AND RELEASE OF CLAIMS

      

       

      THIS
        AGREEMENT AND RELEASE is executed by THE WARNACO GROUP, INC. (the “Company”) as
        of the date of this Agreement and Release.

      

      WHEREAS,
        the Company and Joseph R. Gromek (the “Executive”) entered into an employment
        agreement dated December 19, 2007, as amended from time to time (the “Employment
        Agreement”);

      

      WHEREAS,
        the Executive has certain entitlements pursuant to the Employment Agreement
        subject to the Executive’s executing a release of claims against the Company in
        the form of Exhibit A to the Employment Agreement (“Executive
        Release”);

      

      WHEREAS,
        the Executive has executed and delivered the Executive Release to the Company
        and has not revoked such release within the applicable revocation
        period;

      

      NOW,
        THEREFORE, in consideration of the mutual promises contained in the Employment
        Agreement and other good and valuable consideration, the Company agrees as
        follows:

      The
        Company, on behalf of itself and its affiliated companies and their past
        and
        present parents, subsidiaries, officers, directors and successors and assigns
        but excluding the Executive (the “Company Releasors”), hereby releases and
        forever discharges the Executive from any and all claims, demands, obligations,
        liabilities and causes of action of any kind or description whatsoever, in
        law,
        equity or otherwise, that any Company Releasor has, may have had or now has
        against the Executive as of the date of execution of this Agreement and Release
        arising out of or relating to the Executive’s employment relationship, or the
        termination of that relationship, with the Company (or any affiliate),
        including, but not limited to, any claim, demand, obligation, liability or
        cause
        of action arising under any Federal, state, or local statute, regulation,
        ordinance or order or any claim based on tort or contract law, other than
        any
        claim, demand, obligation, liability or cause of action that is based on
        any
        fraudulent act or on facts unknown to the Company or any Company Releasor
        on or
        prior to the date of this Agreement and Release.  Anything to the
        contrary notwithstanding in this Agreement and Release or the Employment
        Agreement, nothing herein shall release the Executive or any other person
        released herein from any claims or damages based on (i) any right the Company
        or
        any of its affiliates may have to enforce this Agreement and Release or any
        right as provided pursuant to Section 20 of the Employment Agreement or
        (ii) any right or claim that arises after the date of this Agreement and
        Release.

      

      This
        Agreement and Release shall be
        governed by and construed and interpreted in accordance with the laws of
        New
        York without reference to principles of conflicts of law.

       

      
        
           

        

        
          28

          
            

          

        

        
           

        

      

       

      IN
        WITNESS WHEREOF, the Company has
        executed this Agreement and Release as of the date written below.

      

      
        	 	
                THE
                  WARNACO GROUP, INC.

              	 
	 	 	 	 
	 	
                By:

              	 	 
	 	 	 	 
	 	
                Name:

              	 	 
	 	 	 	 
	 	
                Title:

              	 	 
	 	 	 	 
	 	
                Date:

              	 	 

      

      
 

       

      29ex10-1.htm

    

      
        
          
            

          

        

        

        Exhibit
          10.1

         

        EXECUTION
          VERSION

         

         

        PARTICIPATION
          AGREEMENT

         

         

        among

        

         

         

        HEALTH
          NET FUNDING, INC.

        

         

         

        HEALTH
          NET, INC.

        

         

         

        LODGEMORE
          HOLDINGS INC.

         

        

         

         

        ING
          BANK N.V.

         

         

        and

         

         

        HEALTH
          NET FINANCING, L.P.

         

         

        

      

      
        dated
          as of December 19, 2007

         

        

         
          
            

          

        

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      TABLE
        OF CONTENTS

      Page

      

      
        	
                ARTICLE
                  I

              	
                DEFINITIONS
                  AND RULES OF INTERPRETATION

              	
                2

                 

              
	
                Section
                  1.01.

              	
                Definitions.

              	
                2

                 

              
	
                Section
                  1.02.

              	
                Rules
                  of Interpretation.

              	
                2

                 

              
	
                ARTICLE
                  II

              	
                ENTRY
                  INTO THE TRANSACTION DOCUMENTS

              	
                2

                 

              
	
                Section
                  2.01.

              	
                Closing.

              	
                2

                 

              
	
                ARTICLE
                  III

              	
                REPRESENTATIONS
                  AND WARRANTIES OF U.S. INVESTOR AND U.S. PARENT

              	
                3

                 

              
	
                Section
                  3.01.

              	
                Representations
                  and Warranties of U.S. Investor.

              	
                3

                 

              
	
                Section
                  3.02.

              	
                Representations
                  and Warranties of U.S. Parent

              	
                6

                 

              
	
                ARTICLE
                  IV

              	
                REPRESENTATIONS
                  AND WARRANTIES OF CANADIAN INVESTOR

              	
                8

                 

              
	
                Section
                  4.01.

              	
                Due
                  Organization; Good Standing and Power.

              	
                9

                 

              
	
                Section
                  4.02.

              	
                Authorization.

              	
                9

                 

              
	
                Section
                  4.03.

              	
                Binding
                  Obligation.

              	
                9

                 

              
	
                Section
                  4.04.

              	
                Violations
                  or Defaults.

              	
                9

                 

              
	
                Section
                  4.05.

              	
                Consents.

              	
                9

                 

              
	
                Section
                  4.06.

              	
                No
                  Default.

              	
                9

                 

              
	
                Section
                  4.07.

              	
                Taxes.

              	
                10

                 

              
	
                Section
                  4.08.

              	
                No
                  Violation or Conflict.

              	
                10

                 

              
	
                Section
                  4.09.

              	
                Absence
                  of Litigation.

              	
                10

                 

              
	
                Section
                  4.10.

              	
                Eligible
                  Contract Participant.

              	
                10

                 

              
	
                Section
                  4.11.

              	
                No
                  Distribution.

              	
                10

                 

              
	
                ARTICLE
                  V

              	
                REPRESENTATIONS
                  AND WARRANTIES OF CREDIT RISK BANK

              	
                10

                 

              
	
                Section
                  5.01.

              	
                Due
                  Organization; Good Standing and Power.

              	
                11

                 

              
	
                Section
                  5.02.

              	
                Authorization.

              	
                11

                 

              
	
                Section
                  5.03.

              	
                Binding
                  Obligation.

              	
                11

                 

              
	
                Section
                  5.04.

              	
                Violations
                  or Defaults.

              	
                11

                 

              
	
                Section
                  5.05.

              	
                Consents.

              	
                11

                 

              
	
                Section
                  5.06.

              	
                No
                  Violation or Conflict.

              	
                12

                 

              
	
                Section
                  5.07.

              	
                Absence
                  of Litigation.

              	
                12

                 

              
	
                Section
                  5.08.

              	
                Eligible
                  Contract Participant.

              	
                12

                 

              
	
                ARTICLE
                  VI

              	
                COVENANTS
                  OF U.S. INVESTOR

              	
                12

                 

              
	
                Section
                  6.01.

              	
                Corporate
                  Existence.

              	
                12

                 

              
	
                Section
                  6.02.

              	
                Compliance
                  with Law.

              	
                12

                 

              

      

       

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

      
 

      
        	
                Section
                  6.03.

              	
                Authorizations.

              	
                13

                 

              
	
                Section
                  6.04.

              	
                Compliance
                  with Transaction Documents.

              	
                13

                 

              
	
                Section
                  6.05.

              	
                Notice
                  of Put Option Early Termination Event.

              	
                13

                 

              
	
                Section
                  6.06.

              	
                Merger.

              	
                13

                 

              
	
                Section
                  6.07.

              	
                Payment
                  of Cumulative Class A Limited Partner Shortfall.

              	
                13

                 

              
	
                ARTICLE
                  VII

              	
                COVENANTS
                  OF U.S. PARENT

              	
                14

                 

              
	
                Section
                  7.01.

              	
                Corporate
                  Existence.

              	
                14

                 

              
	
                Section
                  7.02.

              	
                Compliance
                  with Law.

              	
                14

                 

              
	
                Section
                  7.03.

              	
                Authorizations.

              	
                14

                 

              
	
                Section
                  7.04.

              	
                Financial
                  Information

              	
                14

                 

              
	
                Section
                  7.05.

              	
                Financial
                  Covenants

              	
                16

                 

              
	
                Section
                  7.06.

              	
                Subsidiary
                  Indebtedness

              	
                16

                 

              
	
                Section
                  7.07.

              	
                Liens

              	
                17

                 

              
	
                Section
                  7.08.

              	
                Fundamental
                  Changes

              	
                19

                 

              
	
                Section
                  7.09.

              	
                Transactions
                  with Affiliates

              	
                19

                 

              
	
                Section
                  7.10.

              	
                Restrictive
                  Agreements

              	
                20

                 

              
	
                Section
                  7.11.

              	
                Nature
                  of Business

              	
                20

                 

              
	
                Section
                  7.12.

              	
                Advances,
                  Investments and Loans

              	
                20

                 

              
	
                Section
                  7.13.

              	
                Restricted
                  Payments

              	
                20

                 

              
	
                Section
                  7.14.

              	
                Minimum
                  Availability

              	
                21

                 

              
	
                Section
                  7.15.

              	
                Compliance
                  with Nonconsolidation Opinions

              	
                21

                 

              
	
                ARTICLE
                  VIII

              	
                COVENANTS
                  OF CANADIAN INVESTOR

              	
                22

                 

              
	
                Section
                  8.01.

              	
                Corporate
                  Existence.

              	
                22

                 

              
	
                Section
                  8.02.

              	
                Compliance
                  with Law.

              	
                22

                 

              
	
                Section
                  8.03.

              	
                Authorizations.

              	
                22

                 

              
	
                Section
                  8.04.

              	
                Compliance
                  with Transaction Documents.

              	
                22

                 

              
	
                Section
                  8.05.

              	
                Notice
                  of Call Option Early Termination Event.

              	
                22

                 

              
	
                Section
                  8.06.

              	
                Merger.

              	
                23

                 

              
	
                ARTICLE
                  IX

              	
                COVENANTS
                  OF CREDIT RISK BANK

              	
                23

                 

              
	
                Section
                  9.01.

              	
                Existence.

              	
                23

                 

              
	
                Section
                  9.02.

              	
                Compliance
                  with Law.

              	
                23

                 

              
	
                Section
                  9.03.

              	
                Authorizations.

              	
                24

                 

              
	
                Section
                  9.04.

              	
                Compliance
                  with Transaction Documents.

              	
                24

                 

              
	
                Section
                  9.05.

              	
                Merger.

              	
                24

                 

              
	
                ARTICLE
                  X

              	
                CONDITIONS
                  PRECEDENT OF U.S. INVESTOR

              	
                24

                 

              
	
                Section
                  10.01.

              	
                Representations
                  and Warranties; Compliance with Undertakings.

              	
                24

                 

              

      

       

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

       

      
        	
                Section
                  10.02.

              	
                Compliance
                  with Law; Litigation.

              	
                25

                 

              
	
                Section
                  10.03.

              	
                Legal
                  Opinions.

              	
                25

                 

              
	
                Section
                  10.04.

              	
                Executed
                  Agreements.

              	
                25

                 

              
	
                Section
                  10.05.

              	
                Resolutions;
                  Secretary's Certificates; U.S. Tax Forms.

              	
                25

                 

              
	
                Section
                  10.06.

              	
                Approvals;
                  Evidence Thereof.

              	
                26

                 

              
	
                Section
                  10.07.

              	
                Compliance
                  with Transaction Documents.

              	
                26

                 

              
	
                Section
                  10.08.

              	
                Perfection
                  of Security Interests.

              	
                26

                 

              
	
                ARTICLE
                  XI

              	
                CONDITIONS
                  PRECEDENT OF CANADIAN INVESTOR

              	
                26

                 

              
	
                Section
                  11.01.

              	
                Representation
                  and Warranties; Compliance with Undertakings.

              	
                26

                 

              
	
                Section
                  11.02.

              	
                Compliance
                  with Law; Litigation.

              	
                27

                 

              
	
                Section
                  11.03.

              	
                Legal
                  Opinions.

              	
                27

                 

              
	
                Section
                  11.04.

              	
                Executed
                  Agreements.

              	
                27

                 

              
	
                Section
                  11.05.

              	
                Resolutions;
                  Secretary's Certificates.

              	
                27

                 

              
	
                Section
                  11.06.

              	
                Approvals;
                  Evidence Thereof.

              	
                28

                 

              
	
                Section
                  11.07.

              	
                Compliance
                  with Transaction Documents.

              	
                28

                 

              
	
                Section
                  11.08.

              	
                Perfection
                  of Security Interests.

              	
                28

                 

              
	
                ARTICLE
                  XII

              	
                CONDITIONS
                  PRECEDENT OF CREDIT RISK BANK

              	
                28

                 

              
	
                Section
                  12.01.

              	
                Representation
                  and Warranties; Compliance with Undertakings.

              	
                28

                 

              
	
                Section
                  12.02.

              	
                Compliance
                  with Law; Litigation.

              	
                29

                 

              
	
                Section
                  12.03.

              	
                Legal
                  Opinions.

              	
                29

                 

              
	
                Section
                  12.04.

              	
                Executed
                  Agreements.

              	
                29

                 

              
	
                Section
                  12.05.

              	
                Resolutions;
                  Secretary's Certificates.

              	
                29

                 

              
	
                Section
                  12.06.

              	
                Approvals;
                  Evidence Thereof.

              	
                30

                 

              
	
                Section
                  12.07.

              	
                Compliance
                  with Transaction Documents.

              	
                30

                 

              
	
                Section
                  12.08.

              	
                Perfection
                  of Security Interests.

              	
                30

                 

              
	
                Section
                  12.09.

              	
                Know
                  Your Customer Deliverables.

              	
                30

                 

              
	
                ARTICLE
                  XIII

              	
                ACKNOWLEDGMENTS

              	
                31

                 

              
	
                ARTICLE
                  XIV

              	
                PAYMENTS
                  AND SET OFF

              	
                31

                 

              
	
                Section
                  14.01.

              	
                Payment
                  Mechanics.

              	
                31

                 

              
	
                Section
                  14.02.

              	
                Business
                  Day.

              	
                32

                 

              
	
                ARTICLE
                  XV

              	
                ASSIGNMENT

              	
                32

                 

              
	
                Section
                  15.01.

              	
                Assignment

              	
                32

                 

              
	
                Section
                  15.02.

              	
                Successors
                  and Assigns.

              	
                33

                 

              

      

       

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      
 

      
        	
                ARTICLE
                  XVI

              	
                NOTICES

              	
                33

                 

              
	
                ARTICLE
                  XVII

              	
                REPLACEMENT
                  OF CREDIT RISK BANK

              	
                35

                 

              
	
                Section
                  17.01.

              	
                Voluntary
                  Election to Replace Credit Risk Bank

              	
                35

                 

              
	
                Section
                  17.02.

              	
                Credit
                  Risk Bank Acceleration Event.

              	
                36

                 

              
	
                ARTICLE
                  XVIII

              	
                MISCELLANEOUS

              	
                36

                 

              
	
                Section
                  18.01.

              	
                Counterparts.

              	
                36

                 

              
	
                Section
                  18.02.

              	
                Further
                  Assurances.

              	
                36

                 

              
	
                Section
                  18.03.

              	
                Amendments.

              	
                37

                 

              
	
                Section
                  18.04.

              	
                Governing
                  Law.

              	
                37

                 

              
	
                Section
                  18.05.

              	
                Submission
                  to Jurisdiction and Service of Process.

              	
                37

                 

              
	
                Section
                  18.06.

              	
                Expenses;
                  Default Rate.

              	
                37

                 

              
	
                Section
                  18.07.

              	
                Entire
                  Agreement.

              	
                38

                 

              
	
                Section
                  18.08.

              	
                Severability.

              	
                38

                 

              
	
                Section
                  18.09.

              	
                Waiver
                  of Trial by Jury.

              	
                38

                 

              
	
                Section
                  18.10.

              	
                Waiver.

              	
                38

              

      

      

      
        	
                APPENDIX
                  A

              	
                DEFINITIONS

                 

              
	
                SCHEDULE
                  A-1

              	
                EQUALIZATION
                  FACTOR (CLASS A LIMITED PARTNER EARLY TERMINATION EVENT)

                 

              
	
                SCHEDULE
                  A-2

              	
                EQUALIZATION
                  FACTOR (GENERAL PARTNER EARLY TERMINATION EVENT)

                 

              
	
                SCHEDULE
                  A-3

              	
                EQUALIZATION
                  FACTOR (ACCELERATION EVENT)

                 

              
	
                SCHEDULE
                  B

              	
                CALCULATION
                  OF FIXED PRICE IN CONNECTION WITH AN EXERCISE DATE

                 

              
	
                SCHEDULE
                  C

              	
                WEBSITE
                  ADDRESS OF U.S. PARENT

                 

              
	
                SCHEDULE
                  7.06

              	
                INDEBTEDNESS

                 

              
	
                SCHEDULE
                  7.07

              	
                PERMITTED
                  LIENS

                 

              
	
                SCHEDULE
                  7.10

              	
                RESTRICTIVE
                  AGREEMENTS

                 

              

      

      

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

      THIS
        PARTICIPATION AGREEMENT dated as of December 19, 2007 (as such agreement
        may
        from time to time be amended, supplemented or otherwise modified in accordance
        with the terms hereof, this "Agreement") is by
        and
        among HEALTH NET FUNDING, INC., a Delaware corporation (together with its
        successors and permitted assigns, "U.S. Investor"),
        HEALTH NET, INC., a Delaware corporation (together with its successors and
        permitted assigns, "U.S. Parent"),
        LODGEMORE HOLDINGS INC., a Canadian corporation (together with its successors
        and permitted assigns, "Canadian Investor"),
        ING BANK N.V., a public company (naamloze vennootschap)
        organized under
        the laws of the Netherlands (together with its successors and permitted assigns,
        "Credit Risk
        Bank"), and HEALTH NET FINANCING, L.P., a Delaware limited partnership
        (together with its successors and permitted assigns, the "Partnership").

       

      W
        I T N E S S E T H:

       

      WHEREAS,
        U.S. Investor and Health Net Investments, LLC, a Delaware limited liability
        company ("Transaction
        LLC") have entered into the Original Limited Partnership Agreement of
        the
        Partnership, pursuant to which U.S. Investor is the sole general partner
        and
        Transaction LLC is the sole limited partner;

       

      WHEREAS,
        Transaction LLC, U.S. Investor and the Partnership have entered into the
        Subscription Agreement pursuant to which Transaction LLC has agreed to subscribe
        for the Class A Limited Partnership Interest on December 19, 2007 and to
        make a
        Capital Contribution of US$732,895,299.00 with respect thereto, all of which
        is
        to occur under the Partnership Agreement;

       

      WHEREAS,
        Canadian Investor has entered into the Assignment of Subscription Agreement
        with
        Transaction LLC, U.S. Investor and the Partnership, whereby Canadian Investor
        has acquired Transaction LLC's rights, title and interest, and has assumed
        Transaction LLC's obligations under the Subscription Agreement; and

       

      WHEREAS,
        each of U.S. Investor, U.S. Parent, Canadian Investor, the Partnership and
        Credit Risk Bank desires to enter into, among other things, (x) certain
        arrangements whereby (i) U.S. Investor will have a call option with respect
        to
        the Class A Limited Partnership Interest and (ii) Canadian Investor will
        have a
        put option with respect thereto and (y) the other Transaction Documents to
        which
        it is a party.

       

      NOW,
        THEREFORE, in consideration of the premises, representations, warranties
        and
        agreements contained herein and other good and valuable consideration, the
        receipt and sufficiency of which are hereby acknowledged, the parties hereto
        hereby agree as follows:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        I

       

      DEFINITIONS
        AND RULES OF
        INTERPRETATION

       

      Section
        1.01.  Definitions.

       

      All
        capitalized terms used herein shall, unless defined herein, have the respective
        meanings set forth in Appendix A
        hereto.

       

      Section
        1.02.  Rules
        of
        Interpretation.

       

      In
        this Agreement, unless the context shall otherwise require:

       

      (a)  all
        references to sections, exhibits, schedules, annexes or appendices are
        references to sections, exhibits, schedules, annexes or appendices of this
        Agreement unless otherwise stated;

       

      (b)  a
        reference to a law includes any amendment or modification to such law and
        any
        rules or regulations issued thereunder or any law enacted in substitution
        or
        replacement therefor;

       

      (c)  the
        headings are inserted for convenience only and shall not define or limit,
        nor
        affect the interpretation of, the provisions hereof;

       

      (d)  words
        denoting the singular only shall include the plural and vice versa;

       

      (e)  "include"
        and "including" are not limiting; and

       

      (f)  all
        references to documents are to those documents as amended, modified and
        supplemented from time to time.

       

       

      ARTICLE
        II

       

      ENTRY
        INTO THE TRANSACTION
        DOCUMENTS

       

      Section
        2.01.  Closing.

       

      (a)  The
        entry into the Transaction Documents (other than the Subscription Agreement,
        the
        Assignment of Subscription Agreement and the Original Limited Partnership
        Agreement, which shall have been previously executed) and the other transactions
        contemplated hereby to occur on the Closing Date shall be held at the offices
        of
        Dewey & LeBoeuf LLP, 1301 Avenue of the Americas, New York, New York, at
        10:00 a.m. New York time, on the Closing Date.

       

      (b)  On
        the Closing Date, subject to the satisfaction of the conditions set forth
        in
        Article XI, (i) Canadian Investor shall make the Capital Contribution to
        the
        Partnership required by the Subscription Agreement and the Assignment of
        Subscription Agreement (as set

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      forth
        in the Partnership Agreement) and (ii) upon payment of such Capital
        Contribution, the Partnership shall admit Canadian Investor as the Class
        A
        Limited Partner of the Partnership.

       

       

      ARTICLE
        III

       

      REPRESENTATIONS
        AND WARRANTIES OF
        U.S. INVESTOR AND U.S. PARENT

       

      Section
        3.01.  Representations
        and Warranties of
        U.S. Investor.

       

      U.S.
        Investor represents and warrants to Canadian Investor and Credit Risk Bank
        (it
        being understood that each of Canadian Investor and Credit Risk Bank is relying
        on these representations and warranties in entering into the Transaction
        Documents) that, as of the date hereof:

       

      (a)  Due
        Organization; Good Standing and Power.

       

      U.S.
        Investor is a corporation duly organized, validly existing and in good standing
        under the laws of Delaware.

       

      (b)  Authorization.

       

      U.S.
        Investor has full legal power and authority to enter into, execute, deliver
        and
        perform the terms of each of the Transaction Documents to which it is a party
        and to incur the obligations provided for therein, all of which have been
        duly
        authorized by all proper and necessary action.

       

      (c)  Binding
        Obligation.

       

      Each
        of the Transaction Documents to which U.S. Investor is a party has been duly
        executed and delivered by U.S. Investor and constitutes the valid and legally
        binding obligation of U.S. Investor, enforceable in accordance with its
        respective terms, except as such enforceability may be limited by applicable
        bankruptcy, insolvency, reorganization or other similar laws affecting the
        enforcement of creditors' rights generally and by general equity
        principles.

       

      (d)  Violations
        or Defaults.

       

      U.S.
        Investor is not in default with respect to any judgment, order, writ,
        injunction, decree or decision of any Governmental Authority which default
        would
        have a material adverse effect on U.S. Investor's ability to perform its
        obligations under the Transaction Documents.  U.S. Investor is in
        compliance with all statutes, regulations, rules and orders applicable to
        it of
        all Governmental Authorities, a violation of which would have a material
        adverse
        effect on U.S. Investor's ability to perform its obligations under the
        Transaction Documents.  U.S. Investor is not in breach or violation of
        its Organizational Documents.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      (e)  Consents.

       

      No
        consent, authorization or approval of, filing with, notice to, or exemption
        by,
        any Governmental Authority (x) is required to authorize, or is required in
        connection with the execution, delivery and performance by U.S. Investor
        of, any
        Transaction Document to which it is a party, or (y) is required as a condition
        to the validity or enforceability against U.S. Investor of such Transaction
        Document.

       

      (f)  No
        Default.

       

      No
        Put Option Early Termination Event (or event which, with the giving of notice,
        lapse of time, or both, would constitute a Put Option Early Termination Event)
        has occurred and is continuing.  To the actual knowledge of U.S.
        Investor, no Call Option Event is continuing.

       

      (g)  Taxes.

       

      U.S.
        Investor has filed or caused to be filed all tax returns required to be filed
        and has paid, or has made adequate provision for the payment of, all Taxes
        shown
        to be due and payable on said returns or in any assessments made against
        it
        (other than those being contested in a Good Faith Contest) which, if unpaid,
        would have a material adverse effect on U.S. Investor's ability to perform
        its
        obligations under the Transaction Documents.

       

      (h)  No
        Violation or Conflict.

       

      The
        execution, delivery and performance by U.S. Investor of the Transaction
        Documents to which it is a party do not violate or conflict with any law
        or
        regulation applicable to it, any provision of its Organizational Documents,
        any
        order or judgment of any court or other agency of government applicable to
        it or
        any of its assets or any contractual restriction binding on it or any of
        its
        assets.

       

      (i)  Absence
        of Litigation.

       

      There
        is not pending or, to its knowledge, threatened against U.S. Investor any
        action, suit or proceeding at law or in equity or before any court, tribunal,
        governmental body, agency or official or any arbitrator that is reasonably
        likely to affect the legality, validity or enforceability against U.S. Investor
        of any Transaction Document to which it is a party or its ability to perform
        its
        obligations under such Transaction Documents.

       

      (j)  Eligible
        Contract Participant.

       

      U.S.
        Investor is an "eligible contract participant" as defined in the Commodity
        Exchange Act, as amended, and the terms of each Transaction Document have
        been
        individually tailored and negotiated.  Each of U.S. Investor and
        Transaction LLC is an indirect wholly-owned subsidiary of U.S.
        Parent.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      (k)  Partnership
        Matters.

       

      (i)  The
        Partnership has been duly formed as a limited partnership, is validly existing
        and in good standing under the laws of Delaware.  The Partnership has
        the power and authority to own its assets and carry on its contemplated business
        and activities as a limited partnership with full partnership power and
        authority to enter into and perform its obligations under the Transaction
        Documents to which it is a party.

       

      (ii)  The
        Partnership maintains its own bank account and keeps its own proper and adequate
        books and account and has filed and will file all material forms and statements
        (including tax returns) required by law in those jurisdictions where it conducts
        its business and activities.

       

      (iii)  The
        Partnership has not engaged in the conduct of a trade or business in Canada
        or
        any trade or business unrelated to the Transaction or matters incidental
        thereto
        and does not have a fixed place of business in Canada.

       

      (iv)  The
        Partnership has not (i) sold, offered for sale, solicited offers to buy or
        otherwise negotiated in respect of any security the offering and sale of
        which
        is or will be integrated with the sale of the Class A Limited Partnership
        Interest or (ii) engaged in any form of general solicitation or general
        advertising in connection with the offering of the Class A Limited Partnership
        Interest or in any manner engaged in any activity constituting a public offering
        of the Class A Limited Partnership Interest within the meaning of Section
        4(2)
        of the Securities Act.

       

      (l)  Debts
        of U.S. Investor.

       

      (i)  The
        sum of  U.S. Investor's debts (including its obligations under the
        Transaction Documents) is less than the value of the U.S. Investor's property
        (calculated at the lesser of fair valuation and present fair saleable
        value).

       

      (ii)  The
        capital of U.S. Investor is not unreasonably small to conduct its business
        as
        currently conducted or as proposed to be conducted.

       

      (iii)  U.S.
        Investor has not incurred, does not intend to incur and does not believe
        it will
        incur debts beyond its ability to pay as they mature.

       

      (iv)  U.S.
        Investor has not made a transfer or incurred an obligation under the Transaction
        Documents with the intent to hinder, delay or defraud any of its present
        or
        future creditors.

       

      (v)  For
        purposes of this clause (l):

       

      (A)   "debt"
        means any liability on a claim;

       

      (B)   "claim"
        means:

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      (1)   any
        right to payment, whether or not that right is reduced to judgment,

       liquidated, unliquidated,
        fixed, contingent, matured, unmatured, disputed, 

       undisputed,
        legal, equitable, secured or unsecured; or

       

      (2)   any
        right to an equitable remedy for breach of performance if that 

      breach gives
        rise to a right to payment, whether or not the right to an equitable

      remedy is
        reduced to judgment, fixed, contingent, matured, unmatured,

      disputed,
        undisputed, secured
        or unsecured; and

       

      (C)   terms
        used in this clause (l) shall be construed in accordance with the applicable
        

       United
        States bankruptcy and New York fraudulent conveyance statutes and the
        related

       case law.

       

      Section
        3.02.  Representations
        and Warranties of
        U.S. Parent.

       

      U.S.
        Parent represents and warrants to Canadian Investor and Credit Risk Bank
        (it
        being understood that each of Canadian Investor and Credit Risk Bank is relying
        on these representations and warranties in entering into the Transaction
        Documents) that, as of the date hereof:

       

      (a)  Due
        Organization; Good Standing and Power.

       

      U.S.
        Parent is a corporation duly organized, validly existing and in good standing
        under the laws of Delaware.

       

      (b)  Authorization.

       

      U.S.
        Parent has full legal power and authority to enter into, execute, deliver
        and
        perform the terms of each of the Transaction Documents to which it is a party
        and to incur the obligations provided for therein, all of which have been
        duly
        authorized by all proper and necessary action.

       

      (c)  Binding
        Obligation.

       

      Each
        of the Transaction Documents to which U.S. Parent is a party has been duly
        executed and delivered by U.S. Parent and constitutes the valid and legally
        binding obligations of U.S. Parent, enforceable in accordance with its
        respective terms, except as such enforceability may be limited by applicable
        bankruptcy, insolvency, reorganization or other similar laws affecting the
        enforcement of creditors' rights generally and by general equity
        principles.

       

      (d)  Violations
        or Defaults.

       

      U.S.
        Parent is not in default with respect to any judgment, order, writ, injunction,
        decree or decision of any Governmental Authority which default could reasonably
        be expected to have a material adverse effect on U.S. Parent's ability to
        perform its obligations under the Transaction

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      Documents.  U.S.
        Parent is in compliance with all statutes, regulations, rules and orders
        applicable to it of all Governmental Authorities, a violation of which could
        reasonably be expected to have a material adverse effect on U.S. Parent's
        ability to perform its obligations under the Transaction Documents and is
        in
        full compliance with its Organizational Documents.

      

      (e)  Consents.

       

      No
        consent, authorization or approval of, filing with, notice to, or exemption
        by,
        any Governmental Authority (x) is required to authorize, or is required in
        connection with the execution, delivery and performance by U.S. Parent of,
        any
        Transaction Document to which it is a party, or (y) is required as a condition
        to the validity or enforceability of such Transaction Document.

       

      (f)  U.S.
        Parent has filed or caused to be filed all tax returns required to be filed
        and
        has paid, or has made adequate provision for the payment of all taxes shown
        to
        be due and payable on said returns or in any assessments made against it
        (other
        than those being contested in a Good Faith contest) which, if unpaid, could
        reasonably be expected to have a material adverse effect on U.S. Investor’s
        ability to perform its obligations under the Transaction Documents.

       

      (g)  No
        Violation or Conflict.

       

      The
        execution, delivery and performance by U.S. Parent of the Transaction Documents
        to which it is a party do not violate or conflict with any law or regulation
        applicable to it, any provision of its Organizational Documents, any order
        or
        judgment of any court or other agency of government applicable to it or any
        of
        its assets or any contractual restriction binding on or affecting it or any
        of
        its assets.

       

      (h)  Absence
        of Litigation.

       

      There
        is not pending or, to its knowledge, threatened against U.S. Parent any action,
        suit or proceeding at law or in equity or before any court, tribunal,
        governmental body, agency or official or any arbitrator that is likely to
        affect
        the legality, validity or enforceability against U.S. Parent of any Transaction
        Document to which it is a party or its ability to perform its obligations
        under
        such Transaction Documents.

       

      (i)  Status.

       

      None
        of U.S. Parent or any of its Affiliates that is counterparty to a Permitted
        Asset is a corporation that (i) is a bank or credit union, (ii) an insurance
        corporation that carries on business in Canada, (iii) is authorized under
        the
        laws of Canada or any province to offer trustee services, to accept deposits
        or
        to trade in securities as a broker-dealer, (iv) was incorporated in Canada,
        or
        (v) owns shares or debt of any other corporation described in any of (i)
        to (iv)
        herein that, in aggregate, represent 90% or more of its assets.

       

      (j)  Debts
        of U.S. Investor.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      (i)  The
        sum of  U.S. Investor's debts (including its obligations under the
        Transaction Documents) is less than the value of the U.S. Investor's property
        (calculated at the lesser of fair valuation and present fair saleable
        value).

       

      (ii)  The
        capital of U.S. Investor is not unreasonably small to conduct its business
        as
        currently conducted or as proposed to be conducted.

       

      (iii)  U.S.
        Investor has not incurred, does not intend to incur and does not believe
        it will
        incur debts beyond its ability to pay as they mature.

       

      (iv)  U.S.
        Investor has not made a transfer or incurred an obligation under the Transaction
        Documents with the intent to hinder, delay or defraud any of its present
        or
        future creditors.

       

      (v)  For
        purposes of this clause (j):

       

      (A)   "debt"
        means any liability on a claim;

       

      (B)   "claim"
        means:

       

      (1)   any
        right to payment, whether or not that right is reduced to judgment,

      liquidated,
        unliquidated, fixed, contingent, matured, unmatured, disputed, 

      undisputed,
        legal,
        equitable, secured or unsecured; or

       

      (2)   any
        right to an equitable remedy for breach of performance if that

      breach
        gives rise
        to a right to payment, whether or not the right to an 

      equitable
        remedy is reduced to judgment,
        fixed, contingent, matured, 

      unmatured,
        disputed, undisputed, secured or unsecured;
        and

       

      (C)   terms
        used in this clause (j) shall be construed in accordance with the
        applicable

       United States
        bankruptcy and New York fraudulent conveyance statutes and the 

       related
        case law.

       

       

      ARTICLE
        IV 

       

      REPRESENTATIONS
        AND WARRANTIES OF
        CANADIAN INVESTOR

       

      Canadian
        Investor represents and warrants to U.S. Investor, U.S. Parent and Credit
        Risk
        Bank (it being understood that each of U.S. Investor, U.S. Parent and Credit
        Risk Bank is relying on these representations in entering into the Transaction
        Documents) that as of the date hereof:

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      Section
        4.01.  Due
        Organization; Good Standing and
        Power.

       

      Canadian
        Investor is duly organized as a corporation, validly existing and in good
        standing under the laws of Canada.

       

      Section
        4.02.  Authorization.

       

      Canadian
        Investor has full legal power and authority to enter into, execute, deliver
        and
        perform the terms of each of the Transaction Documents to which it is a party
        and to incur the obligations provided for therein, all of which have been
        duly
        authorized by all proper and necessary action and is in full compliance with
        its
        Organizational Documents.

       

      Section
        4.03.  Binding
        Obligation.

       

      Each
        of the Transaction Documents to which Canadian Investor is a party has been
        duly
        executed and delivered by Canadian Investor and constitutes the valid and
        legally binding obligation of Canadian Investor, enforceable in accordance
        with
        its respective terms, except as such enforceability may be limited by applicable
        bankruptcy, insolvency, reorganization or other similar laws affecting the
        enforcement of creditors' rights generally and by general equity
        principles.

       

      Section
        4.04.  Violations
        or
        Defaults.

       

      Canadian
        Investor is not in default with respect to any judgment, order, writ,
        injunction, decree or decision of any Governmental Authority which default
        could
        reasonably be expected to have a material adverse effect on Canadian Investor's
        ability to perform its obligations under the Transaction
        Documents.  Canadian Investor is in compliance with all statutes,
        regulations, rules and orders applicable to it of all Governmental Authorities,
        a violation of which could reasonably be expected to have a material adverse
        effect on Canadian Investor's ability to perform its obligations under the
        Transaction Documents.

       

      Section
        4.05.  Consents.

       

      No
        consent, authorization or approval of, filing with, notice to, or exemption
        by,
        any Governmental Authority (x) is required to authorize, or is required in
        connection with the execution, delivery and performance by Canadian Investor
        of,
        any Transaction Document to which it is a party, or (y) is required as a
        condition to the validity or enforceability against Canadian Investor of
        such
        Transaction Document, save and except for the requirement to obtain the approval
        of the Superintendent of Financial Institutions (Canada) if Canadian Investor
        holds the Class A Limited Partnership Interest for a period of more than
        two
        years.

       

      Section
        4.06.  No
        Default.

       

      No
        Call Option Early Termination Event (or event which, with the giving of notice,
        lapse of time, or both, would constitute a Call Option Early Termination
        Event)
        has occurred and is continuing. To the actual knowledge of Canadian Investor,
        no
        Put Option Event is continuing.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

      Section
        4.07.  Taxes.

       

      Canadian
        Investor has filed or caused to be filed all tax returns required to be filed
        and has paid, or has made adequate provision for the payment of, all Taxes
        shown
        to be due and payable on said returns or in any assessments made against
        it
        (other than those being contested in a Good Faith Contest) which, if unpaid,
        could reasonably be expected to have a material adverse effect on Canadian
        Investor's ability to perform its obligations under the Transaction
        Documents.

       

      Section
        4.08.  No
        Violation or
        Conflict.

       

      The
        execution, delivery and performance by Canadian Investor of the Transaction
        Documents to which it is a party do not violate or conflict with any law
        or
        regulation applicable to it, any provision of its Organizational Documents,
        any
        order or judgment of any court or other agency of government applicable to
        it or
        any of its assets or any contractual restriction binding on it or any of
        its
        assets.

       

      Section
        4.09.  Absence
        of
        Litigation.

       

      There
        is not pending or, to its knowledge, threatened against Canadian Investor
        any
        action, suit or proceeding at law or in equity or before any court, tribunal,
        governmental body, agency or official or any arbitrator that is reasonably
        likely to affect the legality, validity or enforceability against Canadian
        Investor of any Transaction Document to which it is a party or its ability
        to
        perform its obligations under such Transaction Documents.

       

      Section
        4.10.  Eligible
        Contract
        Participant.

       

      Canadian
        Investor is an "eligible contract participant" as defined in the Commodity
        Exchange Act, as amended, and the terms of each Transaction Document have
        been
        individually tailored and negotiated.

       

      Section
        4.11.  No
        Distribution.

       

      Canadian
        Investor is not acquiring the Class A Limited Partnership Interest with a
        view
        to distribution, sale or transfer of the interest or with any present intention
        of offering or selling the Class A Limited Partnership Interest except as
        contemplated by the Transaction Documents.

       

       

      ARTICLE
        V

       

      REPRESENTATIONS
        AND WARRANTIES OF
        CREDIT RISK BANK

       

      Credit
        Risk Bank represents and warrants to U.S. Investor, U.S. Parent and Canadian
        Investor (it being understood that (x) each of U.S. Investor, U.S. Parent
        and
        Canadian Investor is relying on these representations in entering into the
        Transaction Documents, (y) references in this Article 5 to Canadian law and
        Governmental Authorities are references to the laws and Governmental Authorities
        of Canada and each of the provinces and territories thereof, and (z)
        no

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

      representations
        or warranties are made as to any United States federal or state securities
        or
        tax laws, regulations, rules or orders) that as of the date hereof:

       

      Section
        5.01.  Due
        Organization; Good Standing and
        Power.

       

      Credit
        Risk Bank is duly organized as a public company (naamloze vennootschap),
        validly
        existing under the laws of the Netherlands.

       

      Section
        5.02.  Authorization.

       

      Credit
        Risk Bank has full legal power and authority to enter into, execute, deliver
        and
        perform the terms of each of the Transaction Documents to which it is a party
        and to incur the obligations provided for therein, all of which have been
        duly
        authorized by all proper and necessary action and is in full compliance with
        its
        Organizational Documents.

       

      Section
        5.03.  Binding
        Obligation.

       

      Each
        of the Transaction Documents to which Credit Risk Bank is a party has been
        duly
        executed and delivered by Credit Risk Bank and (assuming that as a matter
        of
        Canadian law the Option Collateral Fixed Rate CD Agreement and the Security
        and
        Pledge Agreement (Credit Risk Bank - Canadian Investor) are legal, valid
        and
        binding documents enforceable in accordance with their terms) constitutes
        the
        valid and legally binding obligation of Credit Risk Bank, enforceable in
        accordance with its respective terms, except as such enforceability may be
        limited by applicable bankruptcy, insolvency, reorganization or other similar
        laws affecting the enforcement of creditors' rights generally and by general
        equity principles.

       

      Section
        5.04.  Violations
        or
        Defaults.

       

      Credit
        Risk Bank is not in default with respect to any judgment, order, writ,
        injunction, decree or decision of any Governmental Authority which default
        could
        reasonably be expected to have a material adverse effect on Credit Risk Bank's
        ability to perform its obligations under the Transaction
        Documents.  Credit Risk Bank is in compliance with all statutes,
        regulations, rules and orders applicable to it of all Governmental Authorities
        (excluding, in relation only to the Transaction and any matters connected
        with
        or arising out of it, Canadian Governmental Authorities), a violation of
        which
        could reasonably be expected to have a material adverse effect on Credit
        Risk
        Bank's ability to perform its obligations under the Transaction
        Documents.

       

      Section
        5.05.  Consents.

       

      No
        consent, authorization or approval of, filing with, notice to, or exemption
        by,
        any Governmental Authority (excluding Canadian Governmental Authorities)
        (x) is
        required to authorize, or is required in connection with the execution, delivery
        and performance by Credit Risk Bank of, any Transaction Document to which
        it is
        a party, or (y) is required as a condition to the validity or enforceability
        against Credit Risk Bank of such Transaction Document.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      Section
        5.06.  No
        Violation or
        Conflict.

       

      The
        execution, delivery and performance by Credit Risk Bank of the Transaction
        Documents to which it is a party do not violate or conflict with any law
        or
        regulation applicable to it, any provision of its Organizational Documents,
        any
        order or judgment of any court or other agency of government applicable to
        it or
        any of its assets or any contractual restriction binding on it or any of
        its
        assets.

       

      Section
        5.07.  Absence
        of
        Litigation.

       

      There
        is not pending or, to its knowledge, threatened against Credit Risk Bank
        any
        action, suit or proceeding at law or in equity or before any court, tribunal,
        governmental body, agency or official or any arbitrator that is reasonably
        likely to affect the legality, validity or enforceability against Credit
        Risk
        Bank of any Transaction Document to which it is a party or its ability to
        perform its obligations under such Transaction Documents.

       

      Section
        5.08.  Eligible
        Contract
        Participant.

       

      Credit
        Risk Bank is an “eligible contract participant” as defined in the Commodity
        Exchange Act, as amended, and the terms of each Transaction Document have
        been
        individually tailored and negotiated.

       

       

      ARTICLE
        VI 

       

      COVENANTS
        OF U.S.
        INVESTOR

       

      U.S.
        Investor hereby covenants and agrees with each of U.S. Parent, Canadian Investor
        and Credit Risk Bank that until the Completion Date (or until such later
        date as
        all obligations of U.S. Investor and U.S. Parent to be performed on or prior
        to
        the Completion Date have been satisfied):

       

      Section
        6.01.  Corporate
        Existence.

       

      Subject
        to U.S. Investor's rights under Section 6.06, U.S. Investor shall maintain
        its
        existence as a corporation in good standing and qualify and remain qualified
        to
        do business in each jurisdiction in which the character of the properties
        owned
        or leased by it therein or in which the transaction of its business is such
        that
        the failure to qualify, individually or in the aggregate, could reasonably
        be
        expected to have a material adverse effect on U.S. Investor's ability to
        perform
        its obligations under the Transaction Documents.  U.S. Investor shall
        not engage in any business except in connection with the Transaction or matters
        incidental thereto.

       

      Section
        6.02.  Compliance
        with
        Law.

       

      U.S.
        Investor shall comply with all Governmental Requirements of any Governmental
        Authority having jurisdiction over it or its property (such compliance to
        include paying before the same become delinquent all Taxes and assessments
        imposed upon it or upon any of its

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      property,
        except to the extent they are the subject of a Good Faith Contest), in each
        case
        if the failure to so comply could reasonably be expected, as determined by
        U.S.
        Investor, to have a material adverse effect on U.S. Investor's ability to
        perform its obligations under the Transaction Documents.

       

      Section
        6.03.  Authorizations.

       

      U.S.
        Investor shall obtain, make and keep in full force and effect all material
        Governmental Authorizations and all Governmental Filings with Governmental
        Authorities required to be made by U.S. Investor for the validity or
        enforceability of any of the Transaction Documents against it.

       

      Section
        6.04.  Compliance
        with Transaction
        Documents.

       

      U.S.
        Investor shall comply with its covenants under, and timely perform its
        obligations under, the Transaction Documents to which it is a
        party.

       

      Section
        6.05.  Notice
        of Put Option Early
        Termination Event.

       

      U.S.
        Investor shall deliver to Canadian Investor, immediately upon U.S. Investor
        learning of any Put Option Early Termination Event (or any event which with
        the
        passage of time or the giving of notice or both would constitute a Put Option
        Early Termination Event), a certificate of a Responsible Officer of U.S.
        Investor stating that such certificate is a "Notice of Put Option Early
        Termination Event" and setting forth the details thereof and the action which
        U.S. Investor is taking or proposes to take to cure such event.

       

      Section
        6.06.  Merger.

       

      U.S.
        Investor shall not enter into any merger, consolidation, share exchange or
        similar transaction or sell or otherwise dispose of all or substantially
        all of
        its assets to any Person unless (1) the succeeding entity is U.S. Parent
        or any
        Affiliate thereof, (2) the succeeding entity (x) irrevocably and unconditionally
        assumes (unless effected by operation of law) all obligations of U.S. Investor
        under the Transaction Documents pursuant to an agreement executed and delivered
        to Canadian Investor and (y) delivers an opinion to Canadian Investor as
        to the
        due authorization, execution and delivery of any such agreement, in each
        case,
        in form and substance reasonably satisfactory to Canadian Investor, and (3)
        such
        merger, consolidation, share exchange, similar transaction, sale or disposal
        would not result in a Call Option Event or Put Option Early Termination
        Event.

       

      Section
        6.07.  Payment
        of Cumulative Class A
        Limited Partner Shortfall.

       

      U.S.
        Investor, shall pay Canadian Investor, as holder of the Class A Limited
        Partnership Interest, on the Exercise Date, the Cumulative Class A Limited
        Partner Shortfall as of such Exercise Date, after giving effect to all
        Allocations on the Exercise Date pursuant to Article IV of the Partnership
        Agreement.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        VII

       

      COVENANTS
        OF U.S.
        PARENT

       

      U.S.
        Parent hereby covenants and agrees with each of U.S. Investor, Canadian Investor
        and Credit Risk Bank that until the Completion Date (or such later date as
        all
        obligations of U.S. Parent to be performed on or prior to the Completion
        Date
        have been satisfied):

       

      Section
        7.01.  Corporate
        Existence.

       

      U.S.
        Parent shall qualify and remain qualified to do business in each jurisdiction
        in
        which the character of the properties owned or leased by it therein or in
        which
        the transaction of its business is such that the failure to qualify,
        individually or in the aggregate, could reasonably be expected to have a
        material adverse effect on U.S. Parent's ability to perform its obligations
        under the Transaction Documents to which it is a party.

       

      Section
        7.02.  Compliance
        with
        Law.

       

      U.S.
        Parent shall comply with all Governmental Requirements of any Governmental
        Authority having jurisdiction over it or its property (such compliance to
        include paying before the same become delinquent all Taxes and assessments
        imposed upon it or upon any of its property, except to the extent they are
        the
        subject of a Good Faith Contest), in each case if the failure to so comply
        could
        reasonably be expected, as determined by U.S. Parent, to have a material
        adverse effect on U.S. Parent's ability to perform its obligations under
        the
        Transaction Documents to which it is a party.

       

      Section
        7.03.  Authorizations.

       

      U.S.
        Parent shall obtain, make and keep in full force and effect all Governmental
        Authorizations and all Governmental Filings with Governmental Authorities
        necessary for the validity or enforceability of the Transaction Documents
        to
        which it is a party.

       

      Section
        7.04.  Financial
        Information.

       

      U.S.
        Parent will furnish to Canadian Investor and Credit Risk Bank:

       

      (a)  as
        soon as available and in any event within 95 days (or within fifteen days
        after
        such other time period required by the SEC) after the end of each fiscal
        year of
        U.S. Parent, its audited consolidated balance sheet and related statements
        of
        operations, shareholders' equity and cash flows as of the end of and for
        such
        year, setting forth in each case in comparative form the figures for the
        previous fiscal year, all reported on by Deloitte & Touche LLP or other
        independent public accountants of recognized national standing (without a
        "going
        concern" or like qualification or exception and without any qualification
        or
        exception as to the scope of such audit) to the effect that such consolidated
        financial statements present fairly in all material respects the financial
        condition and results of operations of U.S. Parent and its consolidated
        Subsidiaries on a consolidated basis in accordance with GAAP (Canadian Investor
        and Credit Risk Bank agree that U.S. Parent's obligations under this paragraph
        (a) will be satisfied in respect

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      of
        any fiscal year by delivery to Canadian Investor within 95 days (or within
        five
        days of such other time period required by the SEC) after the end of such
        fiscal
        year of its annual report for such fiscal year on Form 10-K as filed with
        the
        SEC);

       

      (b)  as
        soon as available and in any event within 50 days (or within fifteen days
        after
        such other time period required by the SEC) after the end of each of the
        first
        three fiscal quarters of each fiscal year of U.S. Parent (beginning with
        the
        fiscal quarter ending on March 31, 2007), its consolidated balance sheet
        and
        related statements of operations and cash flows as of the end of and for
        such
        fiscal quarter and the then elapsed portion of the fiscal year, setting forth
        in
        each case in comparative form the figures for the corresponding period or
        periods of (or, in the case of the balance sheet, as of the end of) the previous
        fiscal year, all certified by one of its Responsible Officers as presenting
        fairly in all material respects the financial condition and results of
        operations of U.S. Parent and its consolidated Subsidiaries on a consolidated
        basis in accordance with GAAP, subject to normal year-end audit adjustments
        and
        the absence of footnotes (Canadian Investor and Credit Risk Bank agree that
        U.S.
        Parent's obligations under this paragraph (b) will be satisfied in respect
        of
        any fiscal quarter by delivering to the Canadian Investor within 50 days
        (or
        within five days after such other time period required by the SEC) after
        the end
        of such fiscal quarter of its quarterly report for such fiscal quarter on
        Form
        10-Q as filed with the SEC);

       

      (c)  concurrently
        with any delivery of financial statements under clause (a) or (b) above,
        a
        certificate of a Responsible Officer of U.S. Parent (i) certifying as to
        whether
        a Put Option Early Termination Event (or any event which with the passage
        of
        time or the giving of notice or both would constitute a Put Option Early
        Termination Event) has occurred, (ii) setting forth reasonably detailed
        calculations demonstrating compliance with Section 7.05, as applicable and
        (iii)
        stating whether any change in GAAP or in the application thereof has occurred
        since the date of the audited financial statements referred to in Section
        7.04(a) and, if any such change has occurred, specifying the effect of such
        change on the financial statements accompanying such certificate;

       

      (d)  concurrently
        with any delivery of financial statements under clause (a) above, a certificate
        of the accounting firm that reported on such financial statements stating
        whether they obtained knowledge during the course of their examination of
        such
        financial statements of any Put Option Early Termination Event (or any event
        which with the passage of time or the giving of notice or both would constitute
        a Put Option Early Termination Event) (which certificate may be limited to
        the
        extent required by accounting rules or guidelines);

       

      (e)  within
        30 days after the filing for each fiscal year, copies of financial reports
        of
        the Significant Subsidiaries prepared in accordance with statutory accounting
        principles; provided, however, during any period in which any Ratings Downgrade
        has occurred and is continuing, U.S. Parent shall, within 30 days after the
        filing for each fiscal quarter following such Ratings Downgrade, furnish
        to
        Canadian Investor and Credit Risk Bank copies of financial reports of the
        Significant Subsidiaries prepared in accordance with statutory accounting
        principles;

       

      (f)  promptly
        after the same become publicly available or upon transmission or receipt
        thereof, (i) copies of all periodic and other reports, proxy statements and
        other materials

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      filed
        by U.S. Parent or any Subsidiary thereof with the SEC, or any Governmental
        Authority succeeding to any or all of the functions of the SEC, or with any
        national securities exchange, or distributed by U.S. Parent to its shareholders
        generally, as the case may be, provided that, with respect to materials filed
        with any national securities exchange, only material filings shall be required
        to be delivered pursuant to this clause (f) and (ii) upon the request of
        Canadian Investor, all material reports and other annual statements that
        U.S.
        Parent or any Subsidiary thereof may render to or file with any Governmental
        Authority, including without limitation, the Department of Health and Human
        Services Office of Inspector General; and

       

      (g)  promptly
        following any request therefore, such other information regarding the
        operations, business affairs and financial condition of U.S. Parent or any
        Subsidiary thereof, or compliance with the terms of this Agreement as Canadian
        Investor may reasonably request.

       

      Documents
        required to be delivered pursuant to Sections (a), (b) or (f) (to the extent
        any
        such documents are included in materials otherwise filed with the SEC) may
        be
        delivered electronically and if so delivered, shall be deemed to have been
        delivered on the date (i) on which U.S. Parent posts such documents, or provides
        a link thereto on U.S. Parent's website on the Internet at the website address
        listed in Schedule C; or (ii) on which such documents are posted on U.S.
        Parent's behalf on an internet or intranet website, if any, to which Canadian
        Investor has access; provided that: (i) if Canadian Investor so requests,
        U.S.
        Parent shall deliver paper copies of such documents to Canadian Investor
        until a
        written request to cease delivering paper copies is given by Canadian Investor
        and (ii) U.S. Parent shall notify Canadian Investor (by telecopier or electronic
        mail) of the posting of any such documents and provide to the Canadian Investor
        by electronic mail electronic versions (i.e., soft copies) of such
        documents.  Notwithstanding anything contained herein, in every
        instance U.S. Parent shall be required to provide paper copies of the
        certificates required by Section 7.04(c) to Canadian Investor.

       

      Section
        7.05.  Financial
        Covenants.

       

      U.S.
        Parent agrees that:

       

      (a)  Consolidated
        Leverage
        Ratio.  The Consolidated Leverage Ratio as of the last day of
        any period of four consecutive fiscal quarters shall be less than or equal
        to
        3.00 to 1.00.

       

      (b)  Consolidated
        Fixed Charge
        Coverage Ratio .  The Consolidated Fixed Charge Coverage Ratio
        for any period of four consecutive fiscal quarters (calculated as of the
        end of
        each fiscal quarter) shall be greater than or equal to 1.50 to
        1.00.

       

      Section
        7.06.  Subsidiary
        Indebtedness.

       

      U.S.
        Parent will not permit any of its Subsidiaries to create, incur, assume or
        permit to exist any Indebtedness, except:

       

      (a)  Indebtedness
        existing on the date hereof and set forth in Schedule 7.06 and
        refinancings, extensions, renewals and replacements of any such Indebtedness
        that do not increase the outstanding principal amount thereof beyond
        the

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

      then
        outstanding principal amount thereof, plus all fees, premiums and interest
        payable in respect of such Indebtedness or such refinancing, extension, renewal
        or replacement;

       

      (b)  Indebtedness
        to U.S. Parent or any other Subsidiary thereof;

       

      (c)  Guarantees
        of Indebtedness of any other Subsidiary thereof;

       

      (d)  Indebtedness
        incurred to finance the acquisition, construction, improvement or repair
        of any
        fixed or capital asset, including obligations under Capital Leases, mortgage
        financings, purchase money Indebtedness and any Indebtedness assumed in
        connection with the acquisition of any such asset or secured by a Lien on
        any
        such asset prior to the acquisition thereof, and refinancings, extensions,
        renewals and replacements of any such Indebtedness that do not increase the
        outstanding principal amount thereof beyond the then outstanding principal
        amount thereof, plus all fees, premiums and interest payable in respect of
        such
        Indebtedness or such refinancing, extension, renewal or replacement; provided that (i)
        such Indebtedness is incurred prior to or within 360 days after such acquisition
        or the completion of such construction, improvement or repair (or incurred
        in
        connection with such refinancing, extension, renewal or replacement) and
        (ii)
        the aggregate principal amount of Indebtedness permitted by this clause (d)
        shall not exceed $75,000,000 in the aggregate at any time
        outstanding;

       

      (e)  Indebtedness
        of any Subsidiary thereof as an account party in respect of trade letters
        of
        credit;

       

      (f)  Indebtedness
        (i) in respect of performance, bid, surety or appeal bonds and completion
        guarantees provided in the ordinary course of business and (ii) under Swap
        Contracts entered into to protect against fluctuations in exchange and interest
        rates and not for speculative purposes;

       

      (g)  the
        Permitted Financing;

       

      (h)  other
        Indebtedness in an aggregate principal amount not exceeding $100,000,000
        at any
        time outstanding; and

       

      (i)  to
        the extent required thereunder, Guarantees of Obligations (as defined in
        the
        Revolving Credit Agreement) under the Revolving Credit Agreement; provided that
        obligations of U.S. Parent under the Transaction Documents shall be subject
        to
        substantially similar Guarantees on terms reasonably satisfactory to Canadian
        Investor.

       

      Section
        7.07.  Liens.

       

      U.S.
        Parent will not, and will not permit any of its Subsidiaries to, create,
        incur,
        assume or permit to exist any Lien on any property or asset now owned or
        hereafter acquired by it, except:

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

      (a)  Permitted
        Liens;

       

      (b)  any
        Lien on any property or asset of U.S. Parent or any of its Subsidiaries existing
        on the date hereof and set forth in Schedule 7.07; provided that (i) such
        Lien
        shall not apply to any other property or asset of U.S. Parent or any Subsidiary
        thereof, and (ii) such Lien shall secure only those obligations which it
        secures
        on the date hereof and refinancings, extensions, renewals and replacements
        thereof that do not increase the outstanding principal amount thereof beyond
        the
        then outstanding principal amount thereof, plus all fees, premiums and interest
        payable in respect of such Indebtedness or such refinancing, extension, renewal
        or replacement;

       

      (c)  any
        Lien existing on any property or asset prior to the acquisition thereof by
        U.S.
        Parent or any Subsidiary thereof or existing on any property or asset of
        any
        Person that becomes a Subsidiary after the date hereof prior to the time
        such
        Person becomes a Subsidiary; provided that (i) such Lien is not created in
        contemplation of or in connection with such acquisition or such Person becoming
        a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other
        property or assets of U.S. Parent or any Subsidiary thereof and (iii) such
        Lien
        shall secure only those obligations which it secures on the date of such
        acquisition or the date such Person becomes a Subsidiary, as the case may
        be,
        and refinancings, extensions, renewals and replacements thereof that do not
        increase the outstanding principal amount thereof beyond the then outstanding
        principal amount thereof, plus all fees, premiums and interest payable in
        respect of such Indebtedness or such refinancing, extension, renewal or
        replacement;

       

      (d)  Liens
        attributable to sale-leaseback transactions and obligations under Capital
        Leases
        not otherwise prohibited by this Agreement;

       

      (e)  Liens
        in favor of U.S. Parent or any Subsidiary thereof;

       

      (f)  Liens
        on any fixed or capital asset acquired, constructed, repaired or improved
        by
        U.S. Parent or any Subsidiary thereof; provided that (i) such Liens secure
        Indebtedness not prohibited by Section 7.06(d), (ii) such Liens and the
        Indebtedness secured thereby are incurred prior to or within 360 days after
        such
        acquisition or the completion of such construction, repair or improvement
        (or in
        connection with refinancings, extensions, renewals and replacements thereof
        permitted under Section 7.06(d)) and (iii) such Liens shall not apply to
        any
        other property or assets of U.S. Parent or any other Subsidiary except
        additions, expansions or accessions thereto and proceeds thereof;

       

      (g)  Liens
        not otherwise permitted under this Section securing obligations in an aggregate
        amount not exceeding at any time ten percent (10%) of Consolidated Net Tangible
        Assets determined as of the end of the immediately preceding fiscal quarter
        of
        U.S. Parent for which financial statements have been delivered under Section
        7.04 at the time the initial obligation to grant such Lien is entered
        into;

       

      
        
          
          

        

        
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      (h)  to
        the extent required thereunder, Liens in favor of the administrative agent
        under
        the Revolving Credit Agreement with respect to the Obligations (as defined
        thereunder ); provided that any
        such Liens shall secure the obligations of U.S. Parent under the Transaction
        Documents on terms reasonably satisfactory to Canadian Investor;

       

      (i)  Liens
        arising in connection with the Permitted Financing; and

       

      (j)  any
        refinancing, extension, renewal or replacement (or successive extensions,
        renewals or replacements) of Liens, in whole or in part, referred to in clauses
        (a) through (h) above; provided that any
        such refinancing, extension, renewal or replacement Lien shall be limited
        to the
        property covered by the Lien refinanced, extended, renewed or
        replaced.

       

      Section
        7.08.  Fundamental
        Changes.

       

      U.S.
        Parent will not, and will not permit any Subsidiary thereof to, merge into
        or
        consolidate with any other Person, or permit any other Person to merge into
        or
        consolidate with it, or sell, transfer, lease or otherwise dispose of (in
        one
        transaction or in a series of transactions) all or substantially all of the
        assets of U.S. Parent and its Subsidiaries (on a consolidated basis), or
        liquidate or dissolve, except that, if at the time thereof and immediately
        after
        giving effect thereto, no Put Option Early Termination Event shall have occurred
        and be continuing and after giving effect to such transaction on a pro forma
        basis, U.S. Parent shall be in compliance with each of the applicable covenants
        set forth in Section 7.05 (a) any Person may merge into U.S. Parent in a
        transaction in which U.S. Parent is the surviving corporation, (b) any Person,
        including any Affiliate may merge into any Subsidiary of U.S. Parent, (c)
        any
        Subsidiary of U.S. Parent or U.S. Parent may sell, transfer, lease or otherwise
        dispose of its assets to U.S. Parent or to another Subsidiary thereof, (d)
        any
        Subsidiary of U.S. Parent may merge into or consolidate with any other person,
        liquidate or dissolve or U.S. Parent or any Subsidiary thereof may sell,
        transfer, lease or otherwise dispose of the assets or stock of any Subsidiary
        of
        U.S. Parent, if, in each case, U.S. Parent determines in good faith that
        such
        merger, consolidation, liquidation, dissolution, sale, transfer, lease or
        other
        disposition is in the best interests of Canadian Investor and (e) U.S. Parent
        may sell, transfer, contribute or otherwise dispose of all or substantially
        all
        the assets of a Subsidiary in connection with an investment made pursuant
        to
        clause (o) or (p) of the definition of "Permitted Investments" (as defined
        in
        the Revolving Credit Agreement) and Section 7.12.

       

      Section
        7.09.  Transactions
        with
        Affiliates.

       

      U.S.
        Parent will not, and will not permit any of its Subsidiaries to, sell, lease
        or
        otherwise transfer any property or assets to, or purchase, lease or otherwise
        acquire any property or assets from, or otherwise engage in any other
        transactions with, any of its Affiliates, except (a) on terms and conditions
        not
        less favorable to U.S. Parent or such Subsidiary than could be obtained on
        an
        arm's-length basis (considering such transaction and all other related
        transactions as a whole), (b) transactions between or among U.S. Parent and
        its
        Subsidiaries or between or among its Subsidiaries or (c) as otherwise permitted
        by this Agreement.

       

      
        
          
          

        

        
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      Section
        7.10.  Restrictive
        Agreements.

       

      U.S.
        Parent will not, and will not permit any of its Subsidiaries to, directly
        or
        indirectly, enter into, incur or permit to exist any agreement or other
        arrangement that prohibits, restricts or imposes any condition upon: (a)
        the
        ability of any such Subsidiary to pay dividends or other distributions with
        respect to any shares of its capital stock or (b) the ability of any such
        Subsidiary to make or repay loans or advances to U.S. Parent or any other
        such
        Subsidiary; provided that the
        foregoing shall not apply to (i) restrictions and conditions imposed by law,
        rule, regulation or regulatory administrative agreement or determination
        (including those imposed by HMO Regulations and Insurance Regulations) or
        by
        this Agreement, (ii) restrictions and conditions existing on the date hereof
        identified on Schedule
        7.10 and all refinancings, extensions, renewals and replacements thereof,
        (iii) restrictions and conditions contained in agreements entered into in
        the
        ordinary course of business of U.S. Parent and its Subsidiaries; provided that such
        restrictions and conditions are not materially more restrictive as a whole
        than
        those imposed by HMO Regulations and Insurance Regulations or those identified
        on Schedule
        7.10, (iv) customary restrictions and conditions contained in agreements
        relating to the sale of a Subsidiary pending such sale; provided such
        restrictions and conditions apply only to the Subsidiary that is to be sold
        and
        such sale is permitted hereunder, (v) any Lien permitted under Section 7.07
        (including the assets or property subject to such Lien), (vi) restrictions
        contained in documents or agreements evidencing Indebtedness or Liens incurred
        by U.S. Parent or any Subsidiary of U.S. Parent which is outstanding on the
        Closing Date and restrictions contained in documents evidencing any replacement,
        refinancing, renewal or extension thereof (provided such restrictions contained
        in documents evidencing any replacement, refinancing, renewal or extension
        are
        not materially more restrictive than those in effect on the Closing Date),
        (vii)
        restrictions binding on a Person at the time such Subsidiary becomes a
        Subsidiary of U.S. Parent, so long as such restrictions were not entered
        into in
        contemplation of such Person becoming a Subsidiary, (viii) restrictions arising
        in connection with the Permitted Financing, (ix) restrictions binding on
        joint
        ventures or the equity interests in joint ventures and (x) restrictions
        preventing the assignment or transfer of licenses, leases or other
        contracts.

       

      Section
        7.11.  Nature
        of
        Business.

       

      U.S.
        Parent will not, and will not permit it and any of its Significant Subsidiaries,
        taken as a whole to, substantially alter the character of the business conducted
        by U.S. Parent and its Significant Subsidiaries, taken as a whole, as of
        the
        Closing Date.

       

      Section
        7.12.  Advances,
        Investments and
        Loans.

       

      U.S.
        Parent will not, and will not permit any of its Subsidiaries to, make an
        Investment in any Person except for Permitted Investments (as defined in
        the
        Revolving Credit Agreement).

       

      Section
        7.13.  Restricted
        Payments.

       

      U.S.
        Parent will not, nor will it permit any of its Subsidiaries to, directly
        or
        indirectly, declare, order, make or set apart any sum for or pay any Restricted
        Payment, except (a) to make dividends payable solely in the same class of
        capital stock of such Person, (b) to make dividends or other distributions
        payable to U.S. Parent (directly or indirectly through Subsidiaries)
        and

       

      
        
          
          

        

        
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      ratably
        to minority holders of Capital Stock of a Subsidiary of U.S. Parent or to
        make
        dividends or other distributions payable to a Subsidiary of U.S. Parent by
        another Subsidiary of U.S. Parent (and ratably to other shareholders or minority
        holders of Capital Stock of a Subsidiary), (c) Restricted Payments constituting
        Investments in a Subsidiary of U.S. Parent or otherwise payable to U.S. Parent
        or a Subsidiary thereof or constituting redemptions or repurchases of Capital
        Stock of a Subsidiary, (d) Restricted Payments constituting payments made
        in
        respect of Indebtedness convertible into Capital Stock, conversions of
        convertible Indebtedness into Capital Stock and payments in respect of
        fractional shares arising in connection with such conversions, (e) payments
        in
        respect of fractional shares in connection with any dividend, split or
        combination or any exercise of warrants or options, (f) repurchases of Capital
        Stock deemed to occur upon exercise of options or warrants or other rights
        to
        acquire Capital Stock in connection with ‘cashless” exercises or where such
        Capital Stock constitutes all or a portion of the exercise price, (g) to
        the
        extent such Restricted Payments are in an amount equal to the sum of the
        proceeds received by U.S. Parent from the exercise of stock options held
        by
        employees, management or directors of U.S. Parent, plus any tax benefit to
        U.S.
        Parent related to such exercise, (h) other Restricted Payments to the extent
        that (i) no Put Option Early Termination Event (or event which, with the
        giving
        of notice or the lapse of time, or both, would constitute a Put Option Early
        Termination Event) has occurred and is continuing or would result from such
        action and (ii) the Consolidated Pro Forma Leverage Ratio as of such date
        (A) is
        less than or equal to 1.50 to 1.0, in which case the aggregate amount of
        such
        Restricted Payments shall be unlimited, (B) is greater than 1.50 to 1.0,
        but
        less than or equal to 2.25 to 1.0, in which case the aggregate amount of
        such
        Restricted Payments shall be unlimited to the extent that immediately prior
        to
        and after giving effect to any such Restricted Payment U.S. Parent shall
        have
        unutilized Commitments under the Revolving Credit Agreement in an amount
        not
        less than $250,000,000 or (C) is greater than 2.25 to 1.0 in which case the
        aggregate amount of such Restricted Payments pursuant to this clause (C)
        shall
        not exceed $100,000,000 for any consecutive four quarter period (exclusive
        of
        Restricted Payments made pursuant to other provisions of this Section 7.13
        other
        than clause (C)) to the extent that prior to and after giving effect to any
        such
        Restricted Payment, U.S. Parent shall have unutilized Commitments under the
        Revolving Credit Agreement in an amount not less than $250,000,000; provided,
        however, notwithstanding clause (ii) above, the aggregate amount of such
        Restricted Payments shall be unlimited to the extent that U.S. Parent has
        two
        Investment Grade Ratings, and (i) distributions and redemptions made in
        accordance with the Partnership Agreement.

       

      Section
        7.14.  Minimum
        Availability.

       

      U.S.
        Parent shall not permit the excess of the Aggregate Commitments over the
        Total
        Outstanding (each as defined in the Revolving Credit Agreement) as of any
        date of determination to be less than the Special Capital Distribution as
        of
        such date of determination (calculated in accordance with Section 5.3(a)(y)
        of
        the Partnership Agreement).

       

      Section
        7.15.  Compliance
        with Nonconsolidation
        Opinions.

       

      U.S.
        Parent shall comply with and cause to be true and correct (and shall cause
        its
        direct and indirect subsidiaries, as applicable, to comply with and cause
        to be
        true and correct) each of the numbered assumptions of fact contained in the
        sections captioned "Assumptions of Fact" of

       

      
        
          
          

        

        
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      the
        substantive nonconsolidation opinions of Skadden, Arps, Slate, Meagher &
Flom LLP dated as of the Closing Date.

       

       

      ARTICLE
        VIII

       

      COVENANTS
        OF CANADIAN
        INVESTOR

       

      Canadian
        Investor hereby covenants and agrees with each of U.S. Investor, U.S. Parent
        and
        Credit Risk Bank that until the Completion Date (or until such later date
        as all
        obligations of Canadian Investor to be performed on or prior to the Completion
        Date have been satisfied):

       

      Section
        8.01.  Corporate
        Existence.

       

      Subject
        to Canadian Investor's rights under Section 8.06, Canadian Investor shall
        maintain its existence as a corporation in good standing and qualify and
        remain
        qualified to do business in each jurisdiction in which the character of the
        properties owned or leased by it therein or in which the transaction of its
        business is such that the failure to qualify, individually or in the aggregate,
        could reasonably be expected to have a material adverse effect on Canadian
        Investor's ability to perform its obligations under the Transaction
        Documents.

       

      Section
        8.02.  Compliance
        with
        Law.

       

      Canadian
        Investor shall comply with all Governmental Requirements of any Governmental
        Authority having jurisdiction over it or its property (such compliance to
        include paying before the same become delinquent all Taxes and assessments
        imposed upon it or upon any of its property, except to the extent they are
        the
        subject of a Good Faith Contest), in each case if the failure to so comply
        could
        reasonably be expected, as determined by Canadian Investor, to have a material
        adverse effect on Canadian Investor's ability to perform its obligations
        under
        the Transaction Documents.

       

      Section
        8.03.  Authorizations.

       

      Canadian
        Investor shall obtain, make and keep in full force and effect all Governmental
        Authorizations and all Governmental Filings with Governmental Authorities
        required for the validity or enforceability of any of the Transaction Documents
        against it.

       

      Section
        8.04.  Compliance
        with Transaction
        Documents.

       

      Canadian
        Investor shall comply with its covenants under, and timely perform its
        obligations in, the Transaction Documents.

       

      Section
        8.05.  Notice
        of Call Option Early
        Termination Event.

       

      Canadian
        Investor shall deliver to U.S. Investor and Credit Risk Bank, immediately
        upon
        Canadian Investor learning of any Call Option Early Termination Event, a
        certificate of a Responsible Officer of Canadian Investor stating that such
        certificate is a "Notice of Call Option

       

      
        
          
          

        

        
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      Early
        Termination Event" and setting forth the details thereof and, (in the case
        of a
        Call Option Event described in Article IV(a), (b), (c) or (d) of the Call
        Option
        Agreement (to the extent relating to Canadian Investor)) the action which
        Canadian Investor is taking or proposes to take to cure such event.

       

      Section
        8.06.  Merger.

       

      Canadian
        Investor shall not enter into any merger, consolidation, share exchange or
        similar transaction or sell or otherwise dispose of all or substantially
        all of
        its assets to any Person unless (1) the succeeding entity is an Affiliate
        of
        Canadian Parent which is not licensed as a bank or registered as a bank in
        any
        jurisdiction or that accepts deposits from unrelated parties, offers trustee
        services, or a conduit or nominee for any entity licensed as a bank, (2)
        the
        succeeding entity (x) irrevocably and unconditionally assumes (unless such
        assumption is effected by operation of law) all obligations of Canadian Investor
        under the Transaction Documents pursuant to an agreement executed and delivered
        to U.S. Investor and Credit Risk Bank and (y) delivers an opinion to U.S.
        Investor and Credit Risk Bank as to the due authorization, execution and
        delivery of any such agreement, in each case, in form and substance reasonably
        satisfactory to U.S. Investor and Credit Risk Bank and (3) such merger,
        consolidation, share exchange, similar transaction, sale or disposal will
        not
        result in a Put Option Event or a Call Option Early Termination
        Event.

       

       

      ARTICLE
        IX

       

      COVENANTS
        OF CREDIT RISK
        BANK

       

      Credit
        Risk Bank hereby covenants and agrees with each of U.S. Investor, U.S. Parent
        and Canadian Investor that until the Completion Date (or until such later
        date
        as all obligations of Credit Risk Bank to be performed on or prior to the
        Completion Date have been satisfied):

       

      Section
        9.01.  Existence.

       

      Subject
        to Credit Risk Bank's rights under Section 9.05, Credit Risk Bank shall maintain
        its existence as a public company (naamloze vennootschap)
        and qualify and
        remain qualified to do business in each jurisdiction in which the character
        of
        the properties owned or leased by it therein or in which the transaction
        of its
        business is such that the failure to qualify, individually or in the aggregate,
        could reasonably be expected to have a material adverse effect on Credit
        Risk
        Bank's ability to perform its obligations under the Transaction
        Documents.

       

      Section
        9.02.  Compliance
        with
        Law.

       

      Credit
        Risk Bank shall comply with all Governmental Requirements of any Governmental
        Authority having jurisdiction over it or its property (such compliance to
        include paying before the same become delinquent all Taxes and assessments
        imposed upon it or upon any of its property, except to the extent they are
        the
        subject of a Good Faith Contest), in each case if the failure to so comply
        could
        reasonably be expected, as determined by Credit Risk

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

      Bank,
        to have a material adverse effect on Credit Risk Bank's ability to perform
        its
        obligations under the Transaction Documents.

       

      Section
        9.03.  Authorizations.

       

      Credit
        Risk Bank shall obtain, make and keep in full force and effect all material
        Governmental Authorizations and all Governmental Filings with Governmental
        Authorities required for the validity or enforceability of any of the
        Transaction Documents against it.

       

      Section
        9.04.  Compliance
        with Transaction
        Documents.

       

      Credit
        Risk Bank shall comply with its covenants under, and timely perform its
        obligations in, the Transaction Documents.

       

      Section
        9.05.  Merger.

       

      Credit
        Risk Bank shall not enter into any merger (fusie), consolidation,
        share
        exchange or similar transaction or sell or otherwise dispose of (including
        by
        way of demerger (splitsing)) all or
        substantially all of its assets to any Person unless the succeeding entity
        irrevocably and unconditionally assumes all obligations of Credit Risk Bank
        under the Transaction Documents and (x) unless such assumption is effected
        by
        operation of law, delivers an agreement effecting such assumption to U.S.
        Investor and Canadian Investor and (y) delivers an opinion to U.S. Investor
        and
        Canadian Investor as to the effectiveness of any such assumption, in each
        case,
        in form and substance reasonably satisfactory to U.S. Investor and Canadian
        Investor.

       

       

      ARTICLE
        X

       

      CONDITIONS
        PRECEDENT OF U.S.
        INVESTOR

       

      The
        obligation of U.S. Investor to perform its obligations under the Transaction
        Documents on the Closing Date is subject to the satisfaction (or written
        waiver
        by U.S. Investor) of each of the following conditions by or on the Closing
        Date:

       

      Section
        10.01.  Representations
        and Warranties;
        Compliance with Undertakings.

       

      (i)
        The representations and warranties of each of Canadian Investor, Canadian
        Parent
        and Credit Risk Bank contained in the Transaction Documents shall be true
        and
        correct in all material respects as of the Closing Date and (ii) each of
        Canadian Investor, Canadian Parent and Credit Risk Bank shall have performed
        and
        complied in all material respects with all covenants, undertakings and
        agreements required by any Transaction Document to be performed or complied
        with
        by each of Canadian Investor, Canadian Parent and Credit
        Risk
        Bank prior to or on the Closing Date.

       

      
        
          
          

        

        
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      Section
        10.02.  Compliance
        with Law;
        Litigation.

       

      No
        Governmental Requirement of any Governmental Authority of competent jurisdiction
        shall be in effect which prohibits or invalidates the consummation of the
        transactions contemplated by the Transaction Documents, and no litigation
        or
        proceeding seeking damages from U.S. Investor or any Affiliate thereof if
        the
        transactions contemplated by the Transaction Documents are consummated, shall
        be
        pending or overtly threatened.

       

      Section
        10.03.  Legal
        Opinions.

       

      U.S.
        Investor shall have received opinions dated the Closing Date, in form and
        substance reasonably satisfactory to U.S. Investor, of (i) internal and external
        counsel to Canadian Investor and Canadian Parent, (ii) Dewey & LeBoeuf LLP,
        special New York counsel to Canadian Investor and Canadian Parent, (iii) Allen
& Overy, special New York counsel to Credit Risk Bank, (iv) internal counsel
        to Credit Risk Bank and (v) Potter Anderson & Corroon LLP, special Delaware
        counsel to Canadian Investor.

       

      Section
        10.04.  Executed
        Agreements.

       

      U.S.
        Investor shall have been delivered a copy of each Transaction Document, each
        duly executed by or on behalf of the respective parties thereto (other than
        U.S.
        Investor or an Affiliate thereof) and each such Transaction Document shall
        be in
        full force and effect.

       

      Section
        10.05.  Resolutions;
        Secretary's
        Certificates; U.S. Tax Forms.

       

      (a)  Canadian
        Investor shall have delivered to U.S. Investor (A) copies of resolutions
        by
        which the corporate action on the part of Canadian Investor necessary to
        approve
        the applicable Transaction Documents and the transactions contemplated thereby
        was taken, (B) a certificate of the secretary or an assistant secretary or
        director of Canadian Investor dated the Closing Date certifying (i) that
        such
        copies are true, correct and complete copies of such resolutions and that
        such
        resolutions were duly adopted and have not been amended or rescinded and
        are in
        full force and effect, (ii) the signature and office of each officer executing
        each Transaction Document executed by or on behalf of Canadian Investor and
        (iii) that attached thereto are true and complete copies of each Organizational
        Document of Canadian Investor and that such Organizational Documents constitute
        the only instruments and agreements under which Canadian Investor is organized
        or operating and (C) a certificate of compliance dated as of a recent date
        for
        Canadian Investor issued by Industry Canada.

       

      (b)  Credit
        Risk Bank shall have delivered to U.S. Investor (A) copies of the excerpt
        from
        the Trade Register and the articles of association (Statuten) of Credit Risk
        Bank, (B) the procuration regulation (procuratie regeling) of
        Credit Risk Bank which includes the signature of those authorized to execute
        each Transaction Document dated as of a recent date and (C) a certificate
        of
        internal counsel to Credit Risk Bank certifying that such copies of the excerpt
        from the Trade Register and the articles of association (Statuten) and the procuration
        regulation are true, correct and complete copies.

       

      (c)  Canadian
        Investor shall have delivered to U.S. Investor an IRS Form W-8BEN (or any
        successor form thereto), including its United States taxpayer identification
        number and stating

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      that
        Canadian Investor is a foreign person, is the beneficial owner of any payments
        made to it pursuant to the Transaction Documents, is a qualified resident
        of
        Canada for purposes of the income tax treaty between Canada and the United
        States and satisfies any limitation on benefits provision of that
        treaty.

       

      Section
        10.06.  Approvals;
        Evidence
        Thereof.

       

      (a)  U.S.
        Investor and each applicable Affiliate thereof shall have received each and
        every necessary Governmental Authorization required to be obtained by U.S.
        Investor and each such Affiliate from any Governmental Authority in connection
        with the transactions contemplated by the Transaction Documents and the
        consummation thereof, which shall be in full force and effect.

       

      (b)  Each
        of Canadian Investor, Canadian Parent and Credit Risk Bank shall have received
        each and every necessary Governmental Authorization required to be obtained
        by
        each of Canadian Investor, Canadian Parent and Credit Risk Bank from any
        Governmental Authority in connection with the transactions contemplated by
        the
        Transaction Documents and the consummation thereof (including the execution
        and
        delivery of the Transaction Documents and the transactions contemplated
        thereby), which shall be in full force and effect.

       

      Section
        10.07.  Compliance
        with Transaction
        Documents.

       

      Any
        action or undertaking required to be taken on or before the Closing Date
        under
        the terms of the Transaction Documents by Canadian Investor or Credit Risk
        Bank
        shall have been taken.

       

      Section
        10.08.  Perfection
        of Security
        Interests.

       

      All
        actions or undertakings necessary to establish, preserve, protect and perfect
        the various security interests granted pursuant to the Transaction Documents
        shall have been taken.

       

       

      ARTICLE
        XI

       

      CONDITIONS
        PRECEDENT OF CANADIAN
        INVESTOR

       

      The
        obligation of Canadian Investor to perform its obligations under the Transaction
        Documents on the Closing Date is subject to the satisfaction (or written
        waiver
        by Canadian Investor) of each of the following conditions by or on the Closing
        Date:

       

      Section
        11.01.  Representation
        and Warranties;
        Compliance with Undertakings.

       

      (i)
        The representations and warranties of each of U.S. Investor, U.S. Parent
        and
        Credit Risk Bank contained in the Transaction Documents shall be true and
        correct in all material respects as of the Closing Date and (ii) each of
        U.S.
        Investor, U.S. Parent and Credit Risk Bank shall have performed and complied
        in
        all material respects with all covenants, undertakings and

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

      agreements
        required by any Transaction Document to be performed or complied with by
        each of
        U.S. Investor, U.S. Parent and Credit Risk Bank prior to or on the Closing
        Date.

       

      Section
        11.02.  Compliance
        with Law;
        Litigation.

       

      No
        Governmental Requirement of any Governmental Authority of competent jurisdiction
        shall be in effect which prohibits or invalidates the consummation of the
        transactions contemplated by the Transaction Documents, and no litigation
        or
        proceeding seeking damages from Canadian Investor or an Affiliate thereof
        if the
        transactions contemplated by the Transaction Documents are consummated, shall
        be
        pending or overtly threatened.

       

      Section
        11.03.  Legal
        Opinions.

       

      Canadian
        Investor shall have received opinions dated the Closing Date, in form and
        substance reasonably satisfactory to Canadian Investor, of (i) external counsel
        to U.S. Investor, U.S. Parent and the Partnership, (ii) internal counsel
        to U.S.
        Parent, (iii) Potter Anderson & Corroon LLP, special Delaware counsel to
        Canadian Investor, (iv) Allen & Overy, special New York counsel to Credit
        Risk Bank, (v) internal counsel to Credit Risk Bank, (vi) NautaDutilh, special
        Dutch counsel to Canadian Investor and (vii) Stikeman Elliott LLP, special
        Canadian counsel to Canadian Investor.

       

      Section
        11.04.  Executed
        Agreements.

       

      Canadian
        Investor shall have been delivered a copy of each Transaction Document, each
        duly executed by or on behalf of the respective parties thereto (other than
        Canadian Investor or an Affiliate thereof) and each such Transaction Document
        shall be in full force and effect.

       

      Section
        11.05.  Resolutions;
        Secretary's
        Certificates.

       

      (a)  U.S.
        Investor and U.S. Parent shall have delivered to Canadian Investor (A) copies
        of
        resolutions by which the corporate action on the part of U.S. Investor and
        U.S.
        Parent necessary to approve the applicable Transaction Documents and the
        transactions contemplated thereby was taken, (B) a certificate of the secretary
        or an assistant secretary of U.S. Investor and U.S. Parent dated the Closing
        Date certifying (i) that such copies are true, correct and complete copies
        of
        such resolutions and that such resolutions were duly adopted and have not
        been
        amended or rescinded and are in full force and effect, (ii) the signature
        and
        office of each officer executing each Transaction Document executed by or
        on
        behalf of U.S. Investor and U.S. Parent and (iii) that attached thereto are
        true
        and complete copies of each Organizational Document of U.S. Investor and
        U.S.
        Parent and that such Organizational Documents constitute the only instruments
        and agreements under which each of U.S. Investor and U.S. Parent is organized
        or
        operating and (C) a long form good standing certificate dated as of a recent
        date for each of U.S. Investor and U.S. Parent and the Partnership issued
        by the
        Secretary of State of the state of Delaware, and, with respect to the
        Partnership, the certificate of limited partnership with respect
        thereto.

       

      (b)  Credit
        Risk Bank shall have delivered to Canadian Investor (A) copies of the excerpt
        from the Trade Register and the articles of association (Statuten) of Credit Risk
        Bank, (B) the procuration regulation (procuratie regeling) of
        Credit Risk Bank which includes

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

      the
        signature of those authorized to execute each Transaction Document dated
        as of
        recent date and (C) a certificate of internal counsel to Credit Risk Bank
        certifying that such copies of the excerpt from the Trade Register, articles
        of
        association (Statuten)
        and the procuration regulation are true, correct and complete
        copies.

       

      Section
        11.06.  Approvals;
        Evidence
        Thereof.

       

      (a)  Canadian
        Investor and each applicable Affiliate thereof shall have received each and
        every necessary Governmental Authorization required to be obtained by Canadian
        Investor and each such Affiliate from any Governmental Authority in connection
        with the transactions contemplated by the Transaction Documents and the
        consummation thereof, which shall be in full force and effect.

       

      (b)  Each
        of U.S. Parent, U.S. Investor, the Partnership and Credit Risk Bank shall
        have
        received each and every necessary Governmental Authorization required to
        be
        obtained by each of U.S. Parent, U.S. Investor, the Partnership and Credit
        Risk
        Bank from any Governmental Authority in connection with the transactions
        contemplated by the Transaction Documents and the consummation thereof
        (including the execution and delivery of the Transaction Documents and the
        transactions contemplated thereby), which shall be in full force and
        effect.

       

      Section
        11.07.  Compliance
        with Transaction
        Documents.

       

      Any
        action or undertaking required to be taken on or before the Closing Date
        under
        the terms of the Transaction Documents by U.S. Investor or Credit Risk Bank
        shall have been taken.

       

      Section
        11.08.  Perfection
        of Security
        Interests.

       

      All
        actions or undertakings necessary to establish, preserve, protect and perfect
        the various security interests granted pursuant to the Transaction Documents
        shall have been taken.

       

       

      ARTICLE
        XII

       

      CONDITIONS
        PRECEDENT OF CREDIT RISK
        BANK

       

      The
        obligation of Credit Risk Bank to perform all of its obligations on the Closing
        Date under the Transaction Documents to which it is a party is subject to
        the
        satisfaction (or written waiver by Credit Risk Bank) of each of the following
        conditions by or on the Closing Date:

       

      Section
        12.01.  Representation
        and Warranties;
        Compliance with Undertakings.

       

      (i)
        The representations and warranties of each of U.S. Investor, U.S. Parent,
        Canadian Parent and Canadian Investor contained in the Transaction Documents
        shall be true and correct in all material respects as of the  Closing
        Date and (ii) each of U.S. Investor, U.S. Parent, Canadian Parent and Canadian
        Investor shall have performed and complied in all material respects with
        all
        covenants, undertakings and agreements required by any Transaction
        Document

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      to
        be performed or complied with by each of U.S. Investor, U.S. Parent, Canadian
        Parent and Canadian Investor prior to or on the Closing Date.

       

      Section
        12.02.  Compliance
        with Law;
        Litigation.

       

      No
        Governmental Requirement of any Governmental Authority of competent jurisdiction
        shall be in effect which prohibits or invalidates the consummation of the
        transactions contemplated by the Transaction Documents, and no litigation
        or
        proceeding seeking damages from Credit Risk Bank or an Affiliate thereof
        if the
        transactions contemplated by the Transaction Documents are consummated, shall
        be
        pending or overtly threatened.

       

      Section
        12.03.  Legal
        Opinions.

       

      Credit
        Risk Bank shall have received:  (a) opinions dated the Closing Date,
        in form and substance reasonably satisfactory to Credit Risk Bank, of (i)
        external counsel to U.S. Investor, U.S. Parent and the Partnership, (ii)
        internal counsel to U.S. Parent, (iii) internal counsel
        to
        Canadian Investor and Canadian Parent, (iv) Dewey & Leboeuf LLP, special New
        York counsel to Canadian Investor and Canadian Parent, (v) Potter Anderson
&
Corroon LLP, special Delaware counsel to Canadian Investor and (vi) Stikeman
        Elliott LLP, special Canadian counsel to Canadian Investor; and (b) a
        non-consolidation opinion, dated the Closing Date, in form and substance
        reasonably satisfactory to Credit Risk Bank, of external counsel to U.S.
        Investor.

       

      Section
        12.04.  Executed
        Agreements.

       

      Credit
        Risk Bank shall have been delivered a copy of each Transaction Document (other
        than the Swap Agreement), each duly executed by or on behalf of the respective
        parties thereto (other than Credit Risk Bank) and each such Transaction Document
        shall be in full force and effect.

       

      Section
        12.05.  Resolutions;
        Secretary's
        Certificates.

       

      U.S.
        Investor, U.S. Parent and Canadian Investor each shall have delivered to
        Credit
        Risk Bank (A) copies of resolutions by which the corporate action on the
        part of
        each of U.S. Investor, U.S. Parent and Canadian Investor necessary to approve
        the applicable Transaction Documents and the transactions contemplated thereby
        was taken, (B) a certificate of the secretary or an assistant secretary or
        director of each of U.S. Investor, U.S. Parent and Canadian Investor each
        dated
        the Closing Date certifying (i) that such copies are true, correct and complete
        copies of such resolutions and that such resolutions were duly adopted and
        have
        not been amended or rescinded and are in full force and effect, (ii) the
        signature and office of each officer executing each Transaction Document
        executed by or on behalf of each of U.S. Investor, U.S. Parent and Canadian
        Investor and (iii) that attached thereto are true and complete copies of
        each
        Organizational Document of each of U.S. Investor, U.S. Parent and Canadian
        Investor, as the case may be, and that such Organizational Documents constitute
        the only instruments and agreements under which each of U.S. Investor, U.S.
        Parent and Canadian Investor is organized or operating and (C) a long form
        good
        standing certificate dated as of a recent date for each of U.S. Investor,
        U.S.
        Parent and the Partnership issued by the Secretary of State of the state
        of
        Delaware, a certificate of compliance dated as of a recent date for Canadian
        Investor issued by

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

      Industry
        Canada and, with respect to the Partnership, the certificate of limited
        partnership with respect thereto.

       

      Section
        12.06.  Approvals;
        Evidence
        Thereof.

       

      (a)  Credit
        Risk Bank shall have received each and every necessary Governmental
        Authorization required to be obtained by Credit Risk Bank from any Governmental
        Authority in connection with the transactions contemplated by the Transaction
        Documents and the consummation thereof, which shall be in full force and
        effect.

       

      (b)  Each
        of U.S. Investor, U.S. Parent, the Partnership, Canadian Parent and Canadian
        Investor shall have received each and every necessary Governmental Authorization
        required to be obtained by each of U.S. Investor, U.S. Parent,  the
        Partnership, Canadian Parent or Canadian Investor from any Governmental
        Authority in connection with the transactions contemplated by the Transaction
        Documents and the consummation thereof (including the execution and delivery
        of
        the Transaction Documents and the transactions contemplated thereby), which
        shall be in full force and effect.

       

      Section
        12.07.  Compliance
        with Transaction
        Documents.

       

      Any
        action or undertaking required to be taken on or before the Closing Date
        under
        the terms of the Transaction Documents by U.S. Investor or Canadian Investor
        shall have been taken.

       

      Section
        12.08.  Perfection
        of Security
        Interests.

       

      All
        actions or undertakings necessary to establish, preserve, protect and perfect
        the various security interests granted pursuant to the Transaction Documents
        shall have been taken.

       

      Section
        12.09.  Know
        Your Customer
        Deliverables.

       

      Each
        of U.S. Parent, U.S. Investor, Canadian Investor and the Partnership shall
        have
        delivered the following “know-your-customer” information:

       

      (a)  certified
        copies of the Articles of Incorporation/Certificate of Formation/Certificate
        of
        the Limited Partnership and other constitutive documents;

       

      (b)  certified
        copies of the passports of the Responsible Officers who will be executing
        the
        various Transaction Documents;

       

      (c)  an
        ownership chart showing the immediate and ultimate parent companies of each
        entity;

       

      (d)  excerpts
        from the relevant commercial register for each entity; and

       

       

      (e)    
        copies of the list of Responsible Officers for each entity, including specimen
        signatures.

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      ARTICLE
        XIII

       

      ACKNOWLEDGMENTS

       

      Each
        of Canadian Investor, Credit Risk Bank, U.S. Parent and U.S. Investor
        understands, agrees and acknowledges the following:

       

      (a)  it
        has sufficient knowledge, experience and professional advice to make its
        own
        evaluation of the merits and risks of investment in the General Partnership
        Interest and/or the Class A Limited Partnership Interest, as the case may
        be,
        and the merits and risks of the Transaction Documents (except to the extent
        otherwise specified herein) and is not relying, in any respect, on the views
        or
        advice of the Partnership or the other parties hereto or any Affiliate
        thereof;

       

      (b)  none
        of the parties hereto and any of such party's Affiliates shall be treated
        or
        regarded as its agent for the purposes of the Transaction
        Documents;

       

      (c)  without
        limiting any legal opinions delivered pursuant to, or any representations,
        warranties, covenants or undertakings contained in, any Transaction Document,
        it
        has not relied and will not at any time rely in any respect on the views,
        advice
        or opinions of the Partnership or the other parties hereto or any Affiliate
        thereof in relation to any Tax, accounting or regulatory matters including,
        without limitation, any Governmental Requirements; and

       

      (d)  the
        Class A Limited Partnership Interest (including the related rights under
        the
        Transaction Documents) has not been and will not be registered under the
        Securities Act and the Class A Limited Partnership Interest may not be offered
        or sold except pursuant to an available exemption from the registration
        requirements of, and that it will not offer or sell the Class A Limited
        Partnership Interest in violation of, the Securities Act or any other applicable
        law governing the issuance of securities (and in all cases in accordance
        with
        the provisions of the Partnership Agreement).

       

       

      ARTICLE
        XIV

       

      PAYMENTS
        AND
        SET-OFF

       

      Section
        14.01.  Payment
        Mechanics.

       

      All
        payments to be made under this Agreement and the other Transaction Documents
        shall be made without set off (except to the extent expressly set forth in
        any
        Transaction Document) in US$ in immediately available funds, for value on
        the
        due date, and to an account previously specified in writing by the
        recipient.  Notwithstanding the foregoing, payment of the Put Option
        Price and the Repurchase Price may be made as set forth in Section 2.03 of
        the
        Put Option Agreement and Section 2.03 of the Call Option Agreement.

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

      Section
        14.02.  Business
        Day.

       

      If
        any payment under any Transaction Document falls due on a date which would
        not
        otherwise be a Business Day, payment shall be due on the next following Business
        Day unless such day falls into the following calendar month in which case
        it
        shall fall due on the immediately preceding Business Day.

       

       

      ARTICLE
        XV

       

      ASSIGNMENT

       

      Section
        15.01.  Assignment.

       

      (a)  Except
        for such assignments, sales, transfers, pledges, redemptions and other
        dispositions expressly contemplated by the Transaction Documents, Canadian
        Investor may not assign, sell, transfer or otherwise dispose of all or any
        of
        the Class A Limited Partnership Interest held by it (or any beneficial interest
        therein) and no party hereof may assign, sell, transfer or otherwise dispose
        of
        all or any part of its rights and obligations under any of the Transaction
        Documents (other than, with respect to U.S. Investor, U.S. Parent, Canadian
        Investor and Credit Risk Bank, a transfer in connection with a transaction
        permitted by Section 6.06, Section 7.08, Section 8.06 and Section 9.05,
        respectively) unless the other parties hereto, in their sole discretion,
        shall
        have consented in writing thereto.

       

      (b)  The
        Partnership hereby consents to any transfer, assignment or pledge of the
        Class A
        Limited Partnership Interest specifically contemplated by the Transaction
        Documents.

       

      (c)  Each
        of the parties hereto acknowledges that it has received a copy of, and consents
        to, the terms and conditions of the Security Documents.

       

      (d)  The
        Partnership hereby agrees that all Distributions and other amounts payable
        under
        the Partnership Agreement to the Class A Limited Partner (other than items
        comprising Pledged Collateral (as defined in the Security and Pledge Agreement
        (Canadian Investor-U.S. Investor)) shall be paid to the Class A Limited Partner
        and all Distributions and other amounts payable under the Partnership Agreement
        to the Class A Limited Partner comprising Pledged Collateral shall be paid
        to
        U.S. Investor.

       

      (e)  The
        Partnership hereby agrees that, following an Event of Default (as defined
        in the
        Security and Pledge Agreement (Canadian Investor-U.S. Investor), U.S. Investor
        shall be entitled to give all notices under the Security and Pledge Agreement
        (Canadian Investor-U.S. Investor) with the same effect as any notice that
        Canadian Investor is entitled to give thereunder, and, to the extent U.S.
        Investor elects to give such notices, Canadian Investor shall have no right
        to
        give such notices.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

      Section
        15.02.  Successors
        and
        Assigns.

       

      This
        Agreement shall be binding upon and inure to the benefit of each party hereto
        and its respective successors and transferees pursuant to Section
        15.01.

       

       

      ARTICLE
        XVI

       

      NOTICES

       

      Any
        notice, request, demand or other communication under this Agreement or any
        other
        Transaction Documents shall be in writing or by facsimile transmission (provided
        that in the case of facsimile transmission it shall be confirmed in writing
        simultaneously dispatched) addressed to the relevant party for the attention
        of
        the appropriate person and once given or made shall (except as otherwise
        specified herein) be irrevocable. Without prejudice to any other effective
        mode
        of service, the same shall be deemed to have been sufficiently
        served:

       

      in
        the case of notice to Canadian Investor if sent to it at:

       

      Lodgemore
        Holdings Inc.

      3300,
        421-7th Avenue S.W.

      Calgary,
        Alberta, Canada

      T2P
        4K9

      Attn:  Raj
        Kandoi or Betty DeSouza

      Phone:  +1-416-933-1522

      Fax:  +1-416-350-5529

       

      with
        a copy to:

       

      [intentionally
        omitted]

       

      In
        the case of a notice to U.S. Parent if sent to it c/o:

       

      Health
        Net, Inc.

      21650
        Oxnard Street

      Woodland
        Hills, CA  91367

      Attention:  General
        Counsel

      Tel:  (818)
        676-6000

      Fax:  (818)
        676-7503

      

      or
        to
        such other address and/or marked for the attention of such other person as
        U.S.
        Parent may from time to time notify in writing to the parties
        hereto;

       

      in
        the case of a notice to U.S. Investor if sent to it c/o:

      

      Health
        Net Funding, Inc.

      c/o
        Health Net, Inc.

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

      21650
        Oxnard Street

      Woodland
        Hills, CA  91367

      Attention:  General
        Counsel

      Tel:  (818)
        676-6000

      Fax:  (818)
        676-7503

      

      with
        a copy to:

       

      Health
        Net, Inc.

      21650
        Oxnard Street

      Woodland
        Hills, CA  91367

      Attention:  General
        Counsel

      Tel:  (818)
        676-6000

      Fax:  (818)
        676-7503

      

      or
        to such other address and/or marked for the attention of such other person
        as
        U.S. Investor may from time to time notify in writing to the parties
        hereto;

       

      in
        the case of a notice to the Partnership if sent to it c/o:

      

      Health
        Net Financing, L.P.

      c/o
        Health Net, Inc.

      21650
        Oxnard Street

      Woodland
        Hills, CA  91367

      Attention:  General
        Counsel

      Tel:  (818)
        676-6000

      Fax:  (818)
        676-7503

      

      with
        a
        copy to:

       

      Health
        Net, Inc.

      21650
        Oxnard Street

      Woodland
        Hills, CA  91367

      Attention:  General
        Counsel

      Tel:  (818)
        676-6000

      Fax:  (818)
        676-7503

      

      or
        to such other address and/or marked for the attention of such other person
        as
        the Partnership may from time to time notify in writing to the other parties
        hereto;

       

      
        in
          the case of a notice to Credit Risk Bank if sent to it
          at: 

      

       

      ING
        Bank N.V.

      Structured
        Finance / Financial Engineering

      Bijlmerplein
        888

      Location
        code AMP E06 007

      1102
        MG Amsterdam

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

      The
        Netherlands

      Attn:
        Mohammed Zemouri / Beatrice Petit

      Fax:
        +31.20.565.8206

      

      or
        to such other address and/or marked for the attention of such other person
        as
        Credit Risk Bank may from time to time notify in writing to the other parties
        hereto; and

       

      any
        facsimile transmission (in respect of which sender obtains a facsimile
        transmission report indicating successful transmission or receipt has been
        acknowledged by telephone or facsimile transmission) shall be deemed to have
        been received at the time of dispatch provided that dispatch occurred between
        9.00 a.m. and 5.00 p.m. on a Business Day in the place of receipt of the
        relevant notice, failing which it shall be deemed to have been received if
        dispatched prior to 9.00 a.m. on a Business Day at the commencement of business
        on that Business Day, and if dispatched after 5.00 p.m. on a Business Day
        or at
        any time on a day that is not a Business Day, at the commencement of business
        on
        the next Business Day in the place of receipt of the relevant notice. A written
        notice other than a fax shall be treated as received when actually received
        (without reference to time of receipt of any copies, provided such copies
        have
        been sent).

       

      Each
        party hereto agrees that it shall provide a copy of any notice delivered
        to any
        other party under any Transaction Document to each other party
        hereto.

       

       

      ARTICLE
        XVII

       

      REPLACEMENT
        OF CREDIT RISK
        BANK

       

      Section
        17.01.  Voluntary
        Election to Replace Credit
        Risk Bank.

       

      Each
        of U.S. Investor and Canadian Investor may at any time (with the consent
        of the
        other party, provided that, (x) if a Credit Risk Bank Acceleration Event
        has
        occurred and is continuing or if the long-term senior unsecured debt obligations
        of Credit Risk Bank shall cease to be rated by both Moody's and S&P or if
        such rating shall cease to be at least A3 or A-, respectively, no such consent
        shall be required, and (y) if an Event of Default is continuing under the
        Security and Pledge Agreement (Credit Risk Bank-Canadian Investor) or if
        the
        Lien thereof shall fail to constitute a first priority security interest
        in the
        Pledged Collateral (as defined in the Security and Pledge Agreement (Credit
        Risk
        Bank-Canadian Investor), the consent of U.S. Investor shall not be required),
        including during the continuance of a Credit Risk Bank Acceleration Event,
        elect
        to replace Credit Risk Bank with, and Credit Risk Bank shall agree to be
        replaced by, another bank acceptable to U.S. Investor and Canadian Investor
        (such bank, a "Replacement Credit
        Risk
        Bank").  If U.S. Investor or Canadian Investor wishes to make
        such election, it shall provide notice thereof to the other
        party.  Promptly after receipt of such notice, U.S. Investor and
        Canadian Investor shall agree as to the selection of the Replacement Credit
        Risk
        Bank and promptly thereafter shall jointly provide notice of such election
        to
        Credit Risk Bank no less than 5 days prior to the
        proposed replacement date (the date such replacement is effected, the "Replacement
        Date").  Each of U.S. Investor and Canadian Investor agrees not
        to unreasonably object to a Replacement Credit Risk Bank proposed by either
        party to the other

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      party.  On
        the Replacement Date, Credit Risk Bank shall (pursuant to an assignment and
        assumption agreement, in form and substance reasonably acceptable to the
        parties
        hereto) assign to the Replacement Credit Risk Bank all of Credit Risk Bank's
        right, title and interest in and to the Option Collateral Fixed Rate Deposit,
        the Option Collateral Fixed Rate CD Agreement and each other Transaction
        Document to which Credit Risk Bank is a party (the "Transferred Rights
        and
        Documents"), and Replacement Credit Risk Bank shall assume from Credit
        Risk Bank all of the Transferred Rights and Documents from Credit Risk Bank
        and
        shall agree to be bound by all of the provisions of the Transferred Rights
        and
        Documents binding on Credit Risk Bank, in each case from and after the
        Replacement Date.  Credit Risk Bank hereby acknowledges that it shall
        have no right to object to its being replaced.

       

      Section
        17.02.  Credit
        Risk Bank Acceleration
        Event.

       

      Upon
        the occurrence of a Credit Risk Bank Acceleration Event, Credit Risk Bank
        shall
        provide prompt written notice thereof to the other parties hereto, and at
        any
        time following such occurrence may elect to deliver a Credit Risk Bank Early
        Termination Notice which shall be deemed to be a Put Option Notice as provided
        in Section 2.02(b) of the Put Option Agreement.  Credit Risk Bank
        agrees that it will, if requested by U.S. Investor or Canadian Investor,
        take
        such steps as it, in its absolute discretion, deems appropriate to designate
        a
        different Lending Office (which Lending Office shall be reasonably satisfactory
        to Canadian Investor and U.S. Investor) if such designation may avoid such
        Credit Risk Bank Acceleration Event and will not, in the reasonable opinion
        of
        Credit Risk Bank, result in any economic, legal, operational or regulatory
        disadvantage to Credit Risk Bank, and under those circumstances it may revoke
        by
        written notice any Credit Risk Bank Early Termination Notice delivered pursuant
        to the previous sentence.  If Credit Risk Bank is unable or unwilling
        so to avoid such Credit Risk Bank Acceleration Event through the designation
        of
        a different Lending Office, Credit Risk Bank shall so notify U.S. Investor
        and
        Canadian Investor; provided that failure to give such notice shall not render
        ineffective or otherwise interfere with any Credit Risk Bank Early Termination
        Notice delivered and not revoked pursuant to this
        Section 17.02.

       

       

      ARTICLE
        XVIII

       

      MISCELLANEOUS

       

      Section
        18.01.  Counterparts.

       

      This
        Agreement may be executed in one or more counterparts, each of which shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        agreement.

       

      Section
        18.02.  Further
        Assurances.

       

      Each
        of the parties hereto (other than Credit Risk Bank) agrees to cooperate and
        take
        such further action and to execute and deliver such additional instruments
        and
        documents as any other party hereto may from time to time reasonably request
        for
        the purposes of giving effect to the terms of this Agreement or any other
        Transaction Document at the cost of the requesting party.

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

      Section
        18.03.  Amendments.

       

      This
        Agreement may only be amended or varied with the consent in writing of each
        of
        the parties hereto and no party hereto shall have any right (whether
        contractual, in common law or in equity) to rely on an amendment to or variation
        of this Agreement unless such amendment or variation has been so consented
        to.

       

      Section
        18.04.  Governing
        Law.

       

      THIS
        AGREEMENT IS GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE
        LAWS OF
        THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS WITH
        THE
        EXCEPTION OF SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF
        NEW
        YORK.

       

      Section
        18.05.  Submission
        to Jurisdiction and
        Service of Process.

       

      (a)  Each
        of the parties irrevocably agrees that the United States District Court for
        the
        Southern District of New York, and to the extent such court does not have
        jurisdiction, the competent court of the State of New York in Manhattan,
        are to
        have non-exclusive in personam jurisdiction to settle any disputes which
        may
        arise out of or in connection with any Transaction Document and that accordingly
        any actions, suits, litigation or proceedings (any of the foregoing, a "Proceeding") arising
        out of or in connection with any Transaction Document may be brought in such
        courts and each of the parties hereto irrevocably submits to the jurisdiction
        of
        such courts.

       

      (b)  Each
        of the parties irrevocably waives any objection which it may have now or
        hereafter to the laying of the venue of any Proceedings in any such court
        as is
        referred to in this Section 18.05 and any claim that any such Proceedings
        have
        been brought in an inconvenient forum and further irrevocably agrees that,
        to
        the extent permitted by applicable law, a judgment in any Proceedings brought
        in
        such courts shall be conclusive and binding upon it and enforcement thereof
        may
        be sought in the courts of any other jurisdiction.

       

      (c)  Each
        party hereto hereby agrees that service of process by prepaid recorded delivery
        or registered mail, or any other form equivalent thereto (or, in the
        alternative, by any other means sufficient under applicable law) at the
        addresses set forth in Article XVI shall be valid and sufficient for all
        purposes and each party hereto hereby waives to the fullest extent it may
        effectively do so any challenges to the validity of service of process if
        service is given in accordance herewith.

       

      Section
        18.06.  Expenses;
        Default
        Rate.

       

      Any
        payments payable pursuant to this Agreement or any other Transaction Document
        which are overdue shall accrue interest at the Default Rate from (and including)
        the date when due to (but excluding) the date on which paid, and such interests
        shall be calculated on the basis of a 360 day year and the actual number
        of days
        elapsed.

       

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

      Section
        18.07.  Entire
        Agreement.

       

      This
        Agreement and the other Transaction Documents contain the entire understanding
        of the parties hereto with respect to the subject matter contained herein
        and
        therein, and supersede and cancel all prior agreements, negotiations,
        correspondence, undertakings and communications of the parties, oral or written,
        regarding such subject matter.

       

      Section
        18.08.  Severability.

       

      If
        any term, provision, covenant, or condition of this Agreement, or the
        application thereof to any party or circumstance, is held to be invalid or
        unenforceable (in whole or in part) for any reason, the remaining terms,
        provisions, covenants and conditions hereof will continue in full force and
        effect as if this Agreement had been executed with the invalid or unenforceable
        portion eliminated, so long as this Agreement as so modified continues to
        express, without material change, the original intentions of each party hereto
        as to the subject matter of this Agreement and the deletion of such portion
        of
        this Agreement will not substantially impair the respective benefits or
        expectations of the parties hereto.  Each party hereto shall endeavor
        in good faith negotiations to replace the prohibited or unenforceable provision
        with a valid provision, the economic effect of which comes as close as possible
        to the prohibited or unenforceable provision.

       

      Section
        18.09.  Waiver
        of Trial by
        Jury.

       

      EACH
        OF THE PARTIES HERETO HEREBY
        IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
        TRIAL
        BY JURY IN ANY LEGAL PROCEEDING (WHETHER SOUNDING IN CONTRACT, TORT OR
        OTHERWISE) ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION
        DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
        THEREBY.

       

      Section
        18.10.  Waiver.

       

      Any
        of the conditions set forth in Articles X, XI and XII may be waived in writing
        at any time prior to or on the Closing Date by the party entitled to the
        benefit
        thereof.  The failure of any party hereto to enforce at any time any
        of the provisions of this Agreement shall in no way be construed to be a
        waiver
        of any such provision, nor in any way to affect the validity of this Agreement
        or any part hereof or the right of such party thereafter to enforce each
        and
        every such provisions.  No waiver of any breach hereof or
        non-compliance herewith shall be held to be a waiver of any other or subsequent
        breach hereof or non-compliance herewith.

       

      

       

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF this Agreement has been duly executed and delivered by the
        duly
        authorized representatives of the undersigned as of the date first above
        written.

       

      
        	 	
                HEALTH
                  NET FUNDING, INC.

              
	 	 
	 	 
	 	
                By:

              	 /s/
                Linda V. Tiano
	 	 	
                Name:
                  Linda V. Tiano

              
	 	 	
                Title:
                  General Counsel and Secretary

              
	 	 
	 	 
	 	
                HEALTH
                  NET, INC.

              
	 	 
	 	 
	 	
                By:

              	 /s/
                Linda V. Tiano
	 	 	
                Name:
                  Linda V. Tiano

              
	 	 	
                Title:
                  General Counsel and Secretary

              
	 	 
	 	 
	 	
                LODGEMORE
                  HOLDINGS INC.

              
	 	 
	 	 
	 	
                By:

              	 /s/
                Kieran O’Donnell
	 	 	
                Name:
                  Kieran O’Donnell

              
	 	 	
                Title:
                  Director

              
	 	 	 
	 	 
	 	
                ING
                  BANK N.V.

              
	 	 
	 	 
	 	
                By:

              	 /s/
                Albert Jan Visser
	 	 	
                Name:
                  Albert Jan Visser

              
	 	 	
                Title:
                  Managing Director

              
	 	 	 
	 	 	 
	 	
                By:

              	 /s/
                Beatrice Petit-Yvelin
	 	 	
                Name:
                  Beatrice Petit-Yvelin

              
	 	 	
                Title:
                  Director

              

      

      

       

      
        
                

                    Signature
              Page to Participation
              Agreement      
      

                    
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	 	
                HEALTH
                  NET FINANCING, L.P.

              
	 	 
	 	 
	 	
                By:

              	
                Health
                  Net Funding, Inc.,

                        as
                  General Partner

              
	 	 	 
	 	 	 
	 	
                By:

              	 /s/
                Bret Morris
	 	 	
                Name:
                  Bret Morris

              
	 	 	
                Title:
                  Director

              

      

      

      

      

      
        
                

                    Signature
              Page to Participation
              Agreement      
      

                    
      
      

                    
      
      

                    
      
    

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      APPENDIX
        A

       

      
        DEFINITIONS

      [See
        Attached]

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      APPENDIX
        A

       

      DEFINITIONS

       

      Except
        as otherwise provided herein, all references to any agreement defined in
        this
        Appendix A shall be deemed to include such agreement as the same may from
        time
        to time be amended, supplemented or otherwise modified in accordance with
        its
        terms and, where applicable, the terms of the other Transaction
        Documents.  All references to statutes, rules and regulations shall be
        deemed to include such statutes, rules and regulations as the same may be
        from
        time to time amended, supplemented or otherwise modified, in each case unless
        otherwise specified herein.  Except as the context may require, all
        references to any Person shall be deemed to include such Person's successors
        and
        permitted assigns.

       

      "Acceleration
        Event"
        means the exercise or deemed exercise of the Call Option or the Put Option
        other
        than as a result of a General Partner Early Termination Event or a Class
        A
        Limited Partner Early Termination Event.

       

      "Acquisition,"
        by any
        Person, means the acquisition by such Person, in a single transaction or
        in a
        series of related transactions, of all or any substantial portion of the
        Property of another Person or all or substantially all of the voting stock
        of
        another Person, in each case whether or not involving a merger or consolidation
        with such other Person and whether for cash, property, services, assumption
        of
        Indebtedness, securities or otherwise.

       

      "Act"
        means the
        Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§17-101,
        etseq.,
        as amended from
        time to time.

       

      "Actual
        Transaction
        Period" means the period that begins on the Closing Date and ends on an
        Exercise Date.

       

      "Affiliate"
        means, at
        any time, with respect to a specified Person, another Person that directly,
        or
        indirectly through one or more intermediaries, Controls, is Controlled by,
        or is
        under common Control with, the Person specified.

       

      "After-Tax
        Basis"
        means a basis such that the relevant payment received by or credited to a
        party
        shall be supplemented by a further payment to such party so that the sum
        of the
        two payments, after the subtraction of all Canadian, Dutch or United States
        federal, national, state or local income and withholding taxes resulting
        from
        the receipt or accrual of such payments, and taking into account any reduction
        (by way of credit or otherwise) in taxes resulting from such increased Canadian,
        Dutch or United States federal, national, state or local income and withholding
        taxes, shall be equal to the relevant payment first referred to
        above.

       

      "Allocated
        Tax
        Liability" has the meaning set forth in Section 5.2 of the Partnership
        Agreement.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      "Allocation"
        means an
        allocation of Profits, Losses, Taxes or other items among the Partners in
        accordance with Article IV of the Partnership Agreement.  "Allocate" shall
        have
        correlative meaning.

       

      "Allocation
        Date"
        means a date on which an Allocation is made in respect of an Allocation Period,
        being June 15 (for all Allocation Periods that end on March 31)
        December 15 (for all Allocation Periods that end on September 30) and an
        Exercise Date (for all Allocation Periods ending on an Exercise
        Date).  The "Final Allocation
        Date" in respect of the final Allocation Period shall be the Liquidation
        Date.

       

      "Allocation
        Period"
        means (a) the period commencing on the Initial Contribution Date and ending
        on
        March 31, 2008 and (b) any subsequent period commencing on the day immediately
        after the end of the prior Allocation Period and ending on the earliest to
        occur
        of the next September 30, the next March 31, an Exercise Date and the
        Liquidation Date.

       

      "Assignment"
        means a
        sale, assignment, transfer, conveyance, gift, encumbrance, pledge,
        hypothecation, exchange or other disposition, whether voluntary, involuntary
        or
        by operation of law.  "Assignor," "Assignee,"
        and "Assign" shall
        have
        correlative meanings.

       

      "Assignment
        of Subscription
        Agreement" means the Assignment of Subscription Agreement, dated as of
        December 19, 2007, among Canadian Investor, U.S. Investor, Transaction LLC
        and
        the Partnership.

       

      "Assumed
        Allocated Tax
        Liability" has the meaning set forth in Section 4.4(a) of the Partnership
        Agreement.

       

      "Assumed
        Taxable Rate"
        means, for any Allocation Period, the rate reasonably determined by the General
        Partner to be the United States federal, state and local income tax rate
        applicable to the Partnership for the taxable year of the Partnership in
        which
        such Allocation Period occurs (it being agreed that it shall be reasonable
        for
        (x) the General Partner to use any rate which does not exceed the highest
        United
        States federal and applicable state and local corporate income tax rate in
        effect as of the end of such Allocation Period (calculated after giving effect
        to the deductibility of state and local taxes in calculating United States
        federal taxable income) and (y) the General Partner to adjust the Assumed
        Taxable Rate from time to time in order to minimize any Negative Tax True
        Up and
        Positive Tax True Up).

       

      "Attributable
        Indebtedness" means, on any date, (a) in respect of any Capital Lease of
        any Person, the capitalized amount thereof that would appear on a balance
        sheet
        of such Person prepared as of such date in accordance with GAAP and (b) in
        respect of any Synthetic Lease, the capitalized amount of the remaining lease
        payments under the relevant lease that would appear on a balance sheet of
        such
        Person prepared as of such date in accordance with GAAP if such lease were
        accounted for as a Capital Lease.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       "Available
        Cash"
        means, as of any date of determination, the aggregate amount of all of U.S.
        Parent’s (on an unconsolidated basis) (a) unrestricted cash, (b) cash
        equivalents and (c) short-term investments held for sale and accounted for
        as
“current assets” on the balance sheet of U.S. Parent, which in each case are
        readily marketable and available for the immediate payment or repayment of
        Indebtedness as of such date of determination.

       

      "Bridge
        Loan Facility"
        means that certain $200,000,000 Bridge Loan Agreement dated as of June 23,
        2006,
        as amended, waived or otherwise modified, among U.S. Parent, the lenders
        party
        thereto and the Bank of Nova Scotia, as administrative agent.

       

      "Business
        Day" means
        any day that is not (i) a Saturday or Sunday or (ii) a day on which banking
        institutions in Amsterdam, the Netherlands (for purposes of the definition
        of
        Call Exercise Date and Put Exercise Date), New York, New York or Toronto,
        Canada
        or, for purposes of the definition of LIBOR, London, England, are authorized
        or
        obligated by law, regulation or executive order to close.

       

      "Call
        Exercise Date"
        means the date (which must be a Business Day) specified (or deemed specified)
        as
        such in a Call Option Notice, which unless the parties otherwise agree, shall
        not be earlier than the day which may be specified (or deemed specified)
        as the
        Call Exercise Date in accordance with the Call Option Agreement.

       

      "Call
        Option" has the
        meaning set forth in Section 2.01 of the Call Option Agreement.

       

      "Call
        Option
        Agreement" means the Call Option Agreement dated as of December 19, 2007,
        between U.S. Investor and Canadian Investor.

       

      "Call
        Option Early
        Termination Event" has the
        meaning set
        forth in Article IV of the Call Option Agreement.

       

      "Call
        Option Event"
        has the meaning set forth in Section 3.01 of the Call Option
        Agreement.

       

      "Call
        Option Notice"
        has the meaning set forth in Section 2.02(a) of the Call Option
        Agreement.

       

      "Canadian
        Investor"
        means Lodgemore Holdings Inc., a Canadian corporation.

       

      "Canadian
        Parent"
        means The Bank of Nova Scotia, a Canadian chartered bank.

       

      "Capital
        Account"
        means, with respect to any Partner, a capital account maintained by the General
        Partner for such Partner in accordance with the following
        provisions:

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (a)           to
        each Partner's Capital Account there shall be credited the amount of cash
        and
        the Gross Asset Value (net of liabilities) of any property contributed by
        such
        Partner, such Partner's Allocable share of Partnership Profits and any items
        in
        the nature of income or gain Allocated to such Partner pursuant to Article
        IV of
        the Partnership Agreement; and

       

      (b)           to
        each Partner's Capital Account there shall be debited the amount of cash
        and the
        Gross Asset Value (net of liabilities) of any Partnership Property distributed
        to such Partner pursuant to any provision of the Partnership Agreement, such
        Partner's Allocable share of Partnership Losses and any items in the nature
        of
        Losses, expenses or Special Allocation Taxes Allocated to such Partner pursuant
        to Article IV of the Partnership Agreement.

       

      "Capital
        Contribution"
        means any contribution by a Partner to the capital of the
        Partnership.

       

      "Capital
        Lease" means,
        as applied to any Person, any lease of any Property by that Person as lessee
        which, in accordance with GAAP, is required to be accounted for as a capital
        lease on the balance sheet of that Person.

       

      "Capital
        Lease
        Obligation" means, as applied to any Person, the obligations of such
        Person to pay rent or other amounts under any Capital Lease.

       

      "Capital
        Stock" means
        (i) in the case of a corporation, capital stock, (ii) in the case of an
        association or business entity, any and all shares, interests, participations,
        rights or other equivalents (however designated) of capital stock, (iii)
        in the
        case of a partnership, partnership interests (whether general or limited),
        (iv)
        in the case of a limited liability company, membership interests and (v)
        any
        other interest or participation that confers on a Person the right to receive
        a
        share of the profits and losses of, or distributions of assets of, the issuing
        Person.

       

      "Cash
        Collateralized
        Debt" means Indebtedness of U.S. Parent or any of its Subsidiaries that
        is cash collateralized through the deposit of cash or other assets into a
        trust
        or securities account, with the understanding that, upon receipt of certain
        ratings with respect to such Indebtedness, such cash or assets be utilized
        to
        make redemption payments (which will include payment of outstanding principal,
        accrued interest and premium) on such Indebtedness, and otherwise acceptable
        to
        the Administrative Agent (as defined in the Revolving Credit
        Agreement).

       

      "Cash
        Equivalents"
        means any of the following: (a) cash and readily marketable direct obligations
        (which obligations shall have a maturity date of less than one year) of the
        government of the United States or any agency or instrumentality thereof,
        (b)
        obligations unconditionally and explicitly guaranteed by the full faith and
        credit of the government of the United States or (c) Money Market
        Instruments.

       

      "Certificates"
        means
        certificates, substantially in the form of Exhibit D-1, D-2 or D-3, as
        applicable, to the Partnership Agreement, evidencing the various Partnership
        Interests.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      "Change
        of Control"
        means an event or series of events by which:

       

      (a)           any
        "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
        the
        Securities Exchange Act of 1934, but excluding any employee benefit plan
        of such
        person or its subsidiaries, and any person or entity acting in its capacity
        as
        trustee, agent or other fiduciary or administrator of any such plan) becomes
        the
        "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Securities
        Exchange Act of 1934, except that a person or group shall be deemed to have
        "beneficial ownership" of all Capital Stock that such person or group has
        the
        right to acquire (such right, an "option right"), whether such right is
        exercisable immediately or only after the passage of time), directly or
        indirectly, of twenty-five percent (25%) of the Capital Stock of U.S. Parent
        entitled to vote for members of the board of directors or equivalent governing
        body of U.S. Parent on a fully diluted basis (and taking into account all
        such
        securities that such person or group has the right to acquire pursuant to
        any
        option right); or

       

      (b)           during
        any period of 24 consecutive months, a majority of the members of the board
        of
        directors or other equivalent governing body of U.S. Parent cease to be composed
        of individuals (i) who were members of that board or equivalent governing
        body
        on the first day of such period (ii) whose election or nomination to that
        board
        or equivalent governing body was approved by individuals referred to in clause
        (i) above constituting at the time of such election or nomination at least
        a
        majority of that board or equivalent governing body or (iii) whose election
        or
        nomination to that board or other equivalent governing body was approved
        by
        individuals referred to in clauses (i) and (ii) above constituting at the
        time
        of such election or nomination at least a majority of that board or equivalent
        governing body (excluding, in the case of both clauses (ii) and (iii), any
        individual whose initial nomination for, or assumption of office as, a member
        of
        that board or equivalent governing body occurs as a result of an actual or
        threatened solicitation of proxies or consents for the election or removal
        of
        one or more directors by any person or group other than a solicitation for
        the
        election of one or more directors by or on behalf of the board of
        directors).

       

      "Class
        A Capital
        Contribution" has the meaning set forth in the Preliminary Statements to
        the Partnership Agreement.

       

      "Class
        A Limited
        Partner" means the holder of the Class A Limited Partnership Interest
        that has been admitted to the Partnership as a limited partner of the
        Partnership, as set forth in Exhibit A to the Partnership Agreement, so long
        as
        such Person continues as a limited partner of the Partnership.

       

      "Class
        A Limited Partner
        Capital Account" means the Capital Account of the Partnership maintained
        for the Class A Limited Partner.

       

      "Class
        A Limited Partner
        Early Termination Event" means (i) the exercise of the Put Option
        pursuant to Section 2.02(a)(y) (but not 2.02(a)(x) or 2.02(b)) of the Put
        Option
        Agreement or the deemed exercise of the Call Option as a result of such exercise
        of such Put Option or (ii) the exercise of the Put Option pursuant to Section
        2.02(b) of the

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Put
        Option Agreement as a result of the occurrence of the Credit Risk Bank
        Acceleration Event set forth in clause (v) or (vi) of the definition thereof
        or
        the deemed exercise of the Call Option as a result of such exercise of such
        Put
        Option or (iii) the exercise of the Call Option pursuant to Section 2.02(a)(x)
        of the Call Option Agreement as a result of the Call Option Early Termination
        Event set forth in Article IV(a)(y) of the Call Option Agreement or the deemed
        exercise of the Put Option as a result of such exercise of such Call Option
        or
        (iv) the exercise or deemed exercise of the Put Option as a result of the
        occurrence of the Put Option Early Termination Event under Article IV(m) of
        the Put Option Agreement or the deemed exercise of the Call Option as a result
        of such exercise of such Put Option.

       

      "Class
        A Limited Partner
        Fixed Profits Allocation" means, for any Allocation Period, the Profits
        Allocated to the Class A Limited Partner for such Allocation Period pursuant
        to
        Section 4.2(a)(iii) of the Partnership Agreement.

       

      "Class
        A Limited Partner
        Profits Allocation" means (a) for any Allocation Period ending on or
        prior to the Completion Date, the sum of the Class A Limited Partner Shortfall
        Allocation, the Class A Limited Partner Variable Profits Allocation and the
        Class A Limited Partner Fixed Profits Allocation for such Allocation Period
        and
        (b) for any Allocation Period commencing after the Completion Date, the Profits
        Allocated pursuant to Section 4.2(b) of the Partnership Agreement to the
        Class A
        Limited Partner.

       

      "Class
        A Limited Partner
        Shortfall" means, for any Allocation Period, the amount by which the
        Specified Amount for such Allocation Period exceeds the Profits Allocated
        to the
        Class A Limited Partner for such Allocation Period pursuant to Section
        4.2(a)(iii) of the Partnership Agreement.

       

      "Class
        A Limited Partner
        Shortfall Allocation" means, for any Allocation Period, the Profits
        Allocated to the Class A Limited Partner for such Allocation Period pursuant
        to
        Section 4.2(a)(ii) of the Partnership Agreement.

       

      "Class
        A Limited Partner
        Variable Profits Allocation" means, for any Allocation Period, the
        Profits Allocated to the Class A Limited Partner for such Allocation Period
        pursuant to Sections 4.2(a)(vii)-(xiii) of the Partnership
        Agreement.

       

      "Class
        A Limited Partnership
        Interest" means the Class A limited partner interest in the
        Partnership.

       

      "Class
        B Limited
        Partner" means the holder of the Class B Limited Partnership Interest
        that has been admitted to the Partnership as a limited partner of the
        Partnership, as set forth in Exhibit A to the Partnership Agreement, so
        long as such Person continues as a limited partner of the
        Partnership.

       

      "Class
        B Limited Partnership
        Interest" means the Class B limited partner interest in the
        Partnership.

       

      "Closing
        Date" means
        December 20, 2007.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      "Code"
        means the
        United States Internal Revenue Code of 1986, as amended.

       

      "Completion
        Date"
        means the earlier to occur of (x) December 20, 2012, and (y) an Exercise
        Date.

       

      "Consolidated
        Capital
        Expenditures" means, for any period, all cash payments for capital
        expenditures of U.S. Parent and its Subsidiaries on a consolidated basis
        for
        such period, as determined in accordance with GAAP; provided, however,
        that
        Consolidated Capital Expenditures shall not include (a) expenditures which
        constitute the reinvestment of the net cash proceeds of asset dispositions
        not
        prohibited under the Revolving Credit Agreement, (b) amounts financed other
        than
        by loans made under the Revolving Credit Agreement (but including principal
        amounts paid in respect of any such financed amounts) and (c) expenditures
        which
        constitute Permitted Acquisitions.

       

      "Consolidated
        EBITDA"
        means, for any period, for U.S. Parent and its Subsidiaries on a consolidated
        basis, an amount equal to Consolidated Net Income for such period plus (a) the
        following to the extent deducted in calculating such Consolidated Net
        Income:  (i) Consolidated Interest Charges for such period and any
        other interest or financing fee, charge, cost or expense for such period,
        (ii) the provision for federal, state, local and foreign income taxes
        payable by U.S. Parent and its Subsidiaries for such period, (iii) the
        amount of depreciation and amortization expense deducted in determining such
        Consolidated Net Income, (iv) other costs and expenses of U.S. Parent and
        its Subsidiaries reducing such Consolidated Net Income which do not represent
        a
        cash item in such period or any future period (including, without limitation,
        the granting of stock options and the write down or impairment of assets
        or
        intangibles (including any write down of goodwill or other assets pursuant
        to
        FASB 141 or 142 or write offs or write downs relating to discontinued operations
        pursuant to FASB 144) (v) other costs or expenses related to (A) severance
        and contract terminations in an aggregate amount not to exceed $10,000,000
        during any four consecutive fiscal quarter periods, (B) premiums paid for
        the
        redemption of Indebtedness in an aggregate amount not to exceed $50,000,000
        and
        (C) the Revolving Credit Agreement, U.S. Parent’s $400,000,000 6 3/8% Senior
        Notes due 2017 and the Permitted Financing in an aggregate amount not to
        exceed
        $25,000,000 and (vi) additional costs or expenses related to (A) any actual
        or
        proposed incurrence of Indebtedness, issuance of Capital Stock, investment,
        acquisition or disposal of assets and (B) net losses arising from the
        termination of Swap Contracts in an aggregate for clauses (A) and (B) above
        in
        amount not to exceed $25,000,000 during any four consecutive fiscal quarter
        period and minus (b) all non-recurring, non-cash items increasing Consolidated
        Net Income for such period.

       

      "Consolidated
        Fixed Charge
        Coverage Ratio" means, for any period of four consecutive fiscal
        quarters, the ratio of (a) Consolidated EBITDA for such period minus
        Consolidated Capital Expenditures for such period to (b) Consolidated Scheduled
        Funded Debt Payments plus all Restricted Payments made pursuant to Section
        7.13
        of the Participation Agreement for such period.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      "Consolidated
        Funded
        Indebtedness" means, without duplication, Funded Indebtedness of U.S.
        Parent and its Subsidiaries on a consolidated basis minus an amount equal
        to the
        Swap Termination Value with respect to any Swap Contract, to the extent such
        Swap Termination Value is deemed an asset and not a liability.

       

      "Consolidated
        Interest
        Charges" means, for any period, the consolidated interest charges of U.S.
        Parent and its Subsidiaries for such period with respect to all outstanding
        Indebtedness of U.S. Parent and the Subsidiaries, as determined in accordance
        with GAAP (including (subject to clause (x) below) all net costs or net
        benefits, as the case may be, under Swap Contracts in respect of interest
        rates
        to the extent such net costs are allocable to such period in accordance with
        GAAP, but excluding (x) expenses associated with termination of any Swap
        Contract and (y) any premium paid in connection with the repayment of
        Indebtedness pursuant to any public debt issuance).

       

      "Consolidated
        Leverage
        Ratio" means, as of any date of determination, the ratio of (a)
        Consolidated Funded Indebtedness as of such date to (b) Consolidated EBITDA
        for
        the period of the four fiscal quarters most recently ended for which U.S.
        Parent
        has delivered financial statements pursuant to Section 7.04 of the Participation
        Agreement.

       

      "Consolidated
        Net
        Income" means, for any period, for U.S. Parent and its Subsidiaries on a
        consolidated basis, the net income (or loss) of U.S. Parent and its Subsidiaries
        (excluding extraordinary gains and extraordinary losses) for that
        period.

       

      "Consolidated
        Net Tangible
        Assets" means the Consolidated Total Assets less: (i) all current
        liabilities and minority interests and (ii) goodwill and other intangibles
        (other than patents, trademarks, licenses, copyrights and other intellectual
        property and prepaid assets).

       

      "Consolidated
        Net
        Worth" means, as of any date of determination, consolidated shareholders'
        equity of U.S. Parent and its Subsidiaries as determined in accordance with
        GAAP.

       

       "Consolidated
        Pro Forma
        Leverage Ratio" means, as of any date of determination, the ratio of (a)
        Consolidated Funded Indebtedness (calculated to give pro forma effect to
        any
        incurrence or any repayments of Funded Indebtedness occurring on or prior
        to the
        relevant date of determination) as of such date minus Available Cash in excess
        of $100,000,000 as of such date to (b) Consolidated EBITDA for the period
        of the
        four fiscal quarters most recently ended for which U.S. Parent has delivered
        financial statements pursuant to Section 7.04 of the Participation
        Agreement.

       

      "Consolidated
        Rental
        Expense" means, for any period, with respect to U.S. Parent and its
        Subsidiaries, on a consolidated basis, all rental expense attributable to
        Operating Lease Obligations (whether a lease of real property, personal property
        or mixed) for such period, as determined in accordance with GAAP.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      "Consolidated
        Scheduled
        Funded Debt Payments" means, for any period, the sum of (a) all
        scheduled payments of principal on Consolidated Funded Indebtedness of U.S.
        Parent and its Subsidiaries (including, without duplication, the principal
        component of payments due on Capital Lease Obligations during such period,
        but
        excluding payments of principal with respect to the Bridge Loan Facility
        and
        payments of Indebtedness due at maturity of such Indebtedness or constituting
        a
        "balloon" or "bullet" payment with respect thereto) for such period plus
        (b) Consolidated Interest Charges for such period.

       

      "Consolidated
        Total
        Assets" means, as of any date of determination, for U.S. Parent and its
        Subsidiaries on a consolidated basis, the value of all properties and all
        right,
        title and interest in such properties which would be classified as assets
        of
        U.S. Parent and its Subsidiaries, as determined in accordance with
        GAAP.

       

      "Contingent
        Put Option
        Price" means, as of any Exercise Date, an amount equal to the Special
        Capital Distribution as of such Exercise Date.

       

      "Contingent
        Repurchase
        Price" means, as of any Exercise Date, an amount equal to the Special
        Capital Distribution as of such Exercise Date.

       

      "Control"
        means,
        directly or indirectly, the power to direct or cause the direction of the
        management and policies of a Person whether by ownership of voting securities,
        by contract or otherwise, and the words "controlling" and "controlled by"
        shall
        have correlative meanings.

       

      "Corporate
        Rating"
        means, as of any date of determination, the "Issuer Credit Rating" from S&P,
        the "Long Term Issuer Rating" from Moody’s and the "Long Term Issuer Default
        Rating" from Fitch (or, if no such rating is available from a Ratings Agency,
        a
        rating of that Ratings Agency based on the long-term senior unsecured debt
        or
        credit rating of U.S. Parent reasonably acceptable to Canadian
        Investor).

       

      "Credit
        Risk Bank"
        means ING Bank N.V., a public company ("naamloze vennootschap")
        organized under the laws of the Netherlands.

       

      "Credit
        Risk Bank
        Acceleration Event" means one or more of any of the following
        events:

       

       (i)           Credit
        Risk Bank has determined that, due to a change in law, the performance or
        compliance by Credit Risk Bank of or with any material obligation under any
        Transaction Document has or will become unlawful, or that the participation
        of
        Credit Risk Bank or any of its Affiliates in the transactions contemplated
        by
        the Transaction Documents has been made unlawful or will become unlawful
        due to
        the enactment of such change in law when it takes effect (which determination
        shall, absent manifest error, be final and conclusive and binding upon all
        parties hereto and such determination hereinafter, a "Determination
        of
        Illegality"); or

       

       (ii)           unless
        Credit Risk Bank has, in the opinion of Credit Risk Bank, been fully and
        satisfactorily indemnified therefor pursuant to the Memorandum of

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      Understanding,
        the imposition of costs on Credit Risk Bank with respect to the Option
        Collateral Fixed Rate Deposit due to any Regulatory Change which has or is
        likely to:

       

      (a)           impose,
        modify or increase any reserve, special deposit, capital adequacy, risk
        weighting, solvency or similar requirements relating to any extensions of
        credit
        or other assets of, or any deposits with or other liabilities of, Credit
        Risk
        Bank; or

       

      (b)           change
        the assumed capital weighting or the accounting treatment of the relevant
        loan
        evidenced by the Option Collateral Fixed Rate Deposit; or

       

      (c)           subject
        Credit Risk Bank to restrictions on the amount of any category of deposits
        or
        other liabilities or assets that it may hold; or

       

      (d)           impose
        or modify any capital adequacy or similar requirement which affects the manner
        in which Credit Risk Bank maintains capital in respect of the Option Collateral
        Fixed Rate Deposit; or

       

      (e)           impose
        any other condition affecting the Option Collateral Fixed Rate Deposit;
        or

       

      (iii)           the
        occurrence of an Event of Bankruptcy in respect of U.S. Parent and/or U.S.
        Investor and/or Canadian Investor and/or Canadian Parent; or

       

      (iv)           Credit
        Risk Bank shall be liable (A) for any Canadian or United States Taxes for
        which
        it is not indemnified, or (B) for any Dutch Taxes due to a change in law
        after
        the Closing Date, or (C) for any other Taxes imposed solely as a result of
        its
        participation in the Transaction for which it is not indemnified (other than
        any
        Dutch income taxes imposed on the Distribution Amount paid to Credit Risk
        Bank
        pursuant to Section 3 of the Option Collateral Fixed Rate Deposit);
        or

       

      (v)           Canadian
        Parent shall have failed to pay the Distribution Amount payable to Credit
        Risk
        Bank pursuant to Section 3 of the Option Collateral Fixed Rate Deposit within
        three Business Days after delivery of notice of such failure to Canadian
        Parent;
        or

       

      (vi)           Canadian
        Investor or Canadian Parent shall have failed to pay any amount due and owing
        by
        Canadian Investor or Canadian Parent to Credit Risk Bank within five Business
        Days after delivery of notice of such failure to Canadian Investor and Canadian
        Parent; or

       

      (vii)           U.S.
        Investor or U.S. Parent shall have failed to pay an amount due and owing
        by U.S.
        Investor or U.S. Parent to Credit Risk Bank within five Business Days after
        delivery of notice of such failure to U.S. Investor and U.S. Parent;
        or

       

      (viii)          the
        Memorandum of Understanding shall become invalid or unenforceable for any
        reason.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      "Credit
        Risk Bank Early
        Termination Notice" has the meaning set forth in Section 2.02(b) of the
        Put Option Agreement.

       

      "Cumulative
        Class A Limited
        Partner Shortfall" means, as of any Allocation Date for any Allocation
        Period, the excess of (x) the aggregate amount of all Class A Limited Partner
        Shortfalls for all prior Allocation Periods over (y) the cumulative amount
        of
        Profits Allocated to the Class A Limited Partner pursuant to Section 4.2(a)(ii)
        of the Partnership Agreement for all prior Allocation Periods.  To the
        extent the Cumulative Class A Limited Partner Shortfall is a positive number
        as
        of any date, such Cumulative Class A Limited Partner Shortfall shall accrue
        interest at the Default Rate from such date until such date as such Cumulative
        Class A Limited Partnership Shortfall is reduced to zero.  Any
        reference to the Cumulative Class A Limited Partner Shortfall shall include
        such
        accrued interest.

       

      "Debt"
        means, at any
        date, without duplication, (i) all obligations of such Person for borrowed
        money, (ii) all obligations of such Person evidenced by bonds, debentures,
        notes
        or other similar instruments, (iii) all obligations of such Person to pay
        the
        deferred purchase price of property or services, except trade accounts payable
        arising in the ordinary course of business, (iv) all obligations of such
        Person
        as lessee which are capitalized in accordance with GAAP, (v) all non-contingent
        obligations of such Person to reimburse any bank or other Person in respect
        of
        amounts which, at such date, have been paid under a letter of credit or similar
        instrument, (vi) all Debt secured by a Lien on any asset of such Person,
        whether
        or not such Debt is otherwise an obligation of such Person and (vii) all
        Debt of
        others guaranteed by such Person.

       

      "Debt
        Rating" means,
        as of any date of determination, the rating as determined by either S&P or
        Moody's (collectively, the "Debt Ratings") of
        U.S. Parent's non-credit-enhanced, senior unsecured long-term debt.

       

      "Default
        Rate" means,
        as of any day, one month LIBOR for such day plus 2%.

       

      "Designated
        Capital
        Contribution" means any capital contribution from U.S. Parent to a
        regulated Subsidiary the proceeds of which are derived from the sale, transfer,
        lease or other disposition of U.S. Parent’s assets.

       

      "Determination
        of
        Illegality" has the meaning specified in the definition of Credit Risk
        Bank Acceleration Event.

       

      "Distribution"
        means
        any distribution of Partnership Property made by the Partnership to any Partner
        under the Partnership Agreement or otherwise.

       

      "Distribution
        Amount"
        has the meaning set forth in the Option Collateral Fixed Rate
        Deposit.

       

      "Distribution
        Date"
        means, for any Allocation Period, the Allocation Date for such Allocation
        Period.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      "Dutch
        Deed of Pledge"
        means the Dutch Law Supplemental Deed of Pledge, dated December 19, 2007,
        by and
        among Credit Risk Bank, Canadian Investor and Canadian Parent.

       

      "Earn
        Out Obligations"
        means, with respect to an Acquisition, all obligations of the U.S. Parent
        or any
        Subsidiary to make earn out or other contingency payments pursuant to the
        documentation relating to such Acquisition.  The amount of any Earn
        Out Obligation shall be deemed to be the aggregate liability in respect thereof
        on the balance sheet of the U.S. Parent and its Subsidiaries in accordance
        with
        GAAP.

       

      "Eligible
        Accounting
        Firm" means Deloitte Touche Tohmatsu, KPMG LLP, Ernst & Young LLP or
        PricewaterhouseCoopers LLP.

       

      "Equalization
        Factor"
        means, as of any Exercise Date, the percentage set forth under the column
        heading "Equalization Factor" opposite the Quarterly Period during which
        such
        Exercise Date occurs on (i) if the Special Capital Distribution is calculated
        pursuant to clause (x) of Section 5.3(a) of the Partnership Agreement, Schedule
        A-1 to the Participation Agreement, (ii) if the Special Capital Distribution
        is
        calculated pursuant to clause (y) of Section 5.3(a) of the Partnership
        Agreement, Schedule A-2 to the Participation Agreement, or (iii) if the Special
        Capital Distribution is calculated pursuant to clause (z) of Section 5.3(a)
        of
        the Partnership Agreement, Schedule A-3 to the Participation Agreement; provided
        that, if such Exercise Date occurs on a date other than the last date of
        such
        Quarterly Period, the percentage set forth in such Schedule A-1, A-2 or A-3,
        as
        applicable, shall be adjusted pursuant to the footnote to such
        Schedule.

       

      "Equity
        Interests"
        means shares of capital stock, partnership interests, membership interests
        in a
        limited liability company, beneficial interests in a trust or other equity
        ownership interests in a Person, and any warrants, options or other rights
        entitling the holder thereof to purchase or acquire any such equity
        interests.

       

      "Equity
        Issuance"
        means any issuance by U.S. Parent or any Subsidiary thereof to any Person
        (other
        than to U.S. Parent or a Subsidiary thereof) of (a) any shares of its
        capital stock, (b) any shares of its capital stock pursuant to the exercise
        of options or warrants or (c) any shares of its capital stock pursuant to
        the conversion of any debt securities to equity.

       

      "ERISA"
        means the
        Employee Retirement Income Security Act of 1974.

       

      "ERISA
        Affiliate"
        means any trade or business (whether or not incorporated) under common control
        with U.S. Parent within the meaning of Section 414(b) or (c) of the Internal
        Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for
        purposes of provisions relating to Section 412 of the Internal Revenue
        Code).

       

      "ERISA
        Event" means
        (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by
        U.S.
        Parent or any ERISA Affiliate from a Pension Plan subject to Section 4063
        of
        ERISA during a plan year in which it was a substantial employer (as

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      defined
        in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated
        as
        such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial
        withdrawal by U.S. Parent or any ERISA Affiliate from a Multiemployer Plan
        or
        notification that a Multiemployer Plan is in reorganization; (d) the filing
        of a
        notice of intent to terminate, the treatment of a Plan amendment as a
        termination under Sections 4041 or 4041A of ERISA, or the commencement of
        proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
        (e)
        an event or condition which constitutes grounds under Section 4042 of ERISA
        for
        the termination of, or the appointment of a trustee to administer, any Pension
        Plan or Multiemployer Plan; or (f) the imposition of any liability under
        Title
        IV of ERISA, other than for PBGC premiums due but not delinquent under Section
        4007 of ERISA, upon U.S. Parent or any ERISA Affiliate.

       

      "Event
        of Bankruptcy"
        means, with respect to any Person, the occurrence of any of the following
        events, conditions or circumstances:  (1) such Person is dissolved,
        wound up or liquidated (other than pursuant to a consolidation, amalgamation
        or
        merger or, with respect to Credit Risk Bank, a demerger ("splitsing")); (2) such Person
        becomes insolvent or is unable to pay its debts or fails or admits in writing
        its inability generally to pay its debts as they become due; (3) such Person
        makes a general assignment, arrangement or composition with or for the benefit
        of its creditors; (4) such Person institutes or has instituted against it
        a
        proceeding seeking a judgment of insolvency or bankruptcy or any other relief
        under any bankruptcy or insolvency law or other similar law affecting creditors'
        rights, or a petition is presented for its winding-up or liquidation, and,
        in
        the case of any such proceeding or petition instituted or presented against
        it,
        such proceeding or petition (A) results in a finding of insolvency or bankruptcy
        or the entry of an order for relief or the making of an order for its
        reorganization, conservation, winding-up or liquidation or (B) is not dismissed
        within 30 days of the institution or presentation thereof; (5) such Person
        has a
        resolution passed for its winding-up, official management or liquidation
        (other
        than pursuant to a consolidation, amalgamation or merger or, with respect
        to
        Credit Risk Bank, a division ("splitsing")); (6) such Person
        seeks or becomes subject to the appointment of an administrator, provisional
        liquidator, conservator, receiver, trustee, custodian or other similar official
        for it or for all or substantially all its assets; (7) such Person has a
        secured
        party take possession of all or substantially all its assets or has a distress,
        execution, attachment, sequestration or other legal process levied, enforced
        or
        sued on or against all or substantially all its assets and such secured party
        maintains possession, or any such process is not dismissed, discharged, stayed
        or restrained, in each case within thirty (30) days thereafter; (8) such
        Person
        causes or is subject to any event with respect to it which, under the applicable
        laws of any jurisdiction has an analogous effect to any of the events specified
        in clauses (1) to (7) (inclusive); or (9) such Person takes any action in
        furtherance of, or indicating its consent to, approval of, or acquiescence
        in,
        any of the foregoing acts.

       

      "Excluded
        Rights"
        means any of Credit Risk Bank's rights under Section 2.02(b) of the Put Option
        Agreement.

       

      "Exercise
        Date" means a
        Call Exercise
        Date or a Put Exercise Date.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      "Federal
        Reserve
        Board" means the Board of Governors of the United States Federal Reserve
        System (or any Governmental Authority that succeeds to the bank regulatory
        authority thereof).

       

      "Final
        Allocation
        Date" has the meaning set forth in the definition of Allocation
        Date.

       

      "Financial
        Institution" means a corporation that is a "financial institution" as
        defined in subsection 181(1) of the Income Tax Act (Canada),
        R.S.C. 1985 5th Supplement c. 1, as amended.

       

      "Financial
        Year" means
        (a) the fiscal year of the Partnership commencing on the date the Partnership
        was formed and ending on December 31, 2007, and (b) any subsequent fiscal
        year
        of the Partnership commencing on January 1 of each calendar year (starting
        January 1, 2008) and ending on the earlier to occur of the next December
        31 or
        the Liquidation Date.

       

      "Fitch"
        means Fitch,
        Inc.

       

      "Fixed
        Price" means,
        as of any Exercise Date, the excess of (x) the amount set forth on Schedule
        B to the Participation Agreement corresponding to the Quarterly Period in
        which
        such Exercise Date occurs (provided that, if such Exercise Date occurs on
        a date
        other than the last date of such Quarterly Period, the amount set forth in
        such
        Schedule B shall be adjusted pursuant to the footnote on such Schedule) over
        the
        product of (i) the Special Capital Distribution calculated as of such Exercise
        Date (irrespective of whether actually paid) and (ii) the Equalization Factor
        as
        of such Exercise Date.

       

      "Forward
        Purchase
        Agreement" means the Forward Purchase Agreement, dated as of December 19,
        2007, between U.S. Investor and Credit Risk Bank.

       

      "Forward
        Purchase
        Deposit" has the meaning set forth in the Forward Purchase Deposit and
        Security Agreement.

       

      "Forward
        Purchase Deposit and
        Security Agreement" means the Forward Purchase Deposit and Security
        Agreement, dated as of December 19, 2007, between U.S. Investor and Credit
        Risk
        Bank.

       

      "Funded
        Indebtedness"
        means, as to any Person at a particular time, without duplication, all of
        the
        following, whether or not included as indebtedness or liabilities in accordance
        with GAAP.

       

      (a)           all
        obligations for borrowed money, whether current or long-term and all obligations
        of such Person evidenced by bonds (excluding surety bonds and similar
        instruments), debentures, notes, loan agreements or other similar
        instruments;

       

      (b)           all
        purchase money Indebtedness;

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (c)           all
        obligations arising under unreimbursed obligations (to the extent outstanding
        for more than 1 day) arising under letters of credit, bankers' acceptances,
        bank
        guaranties, surety bonds and similar instruments that are or should be reflected
        at such date on the U.S. Parent’s consolidated balance sheet in accordance with
        GAAP;

       

      (d)           all
        obligations in respect of the deferred purchase price of property or services
        (other than trade accounts payable in the ordinary course of business); provided
        that only such portion of Earn Out Obligations that have matured or have
        been
        actually earned shall be considered Funded Indebtedness hereunder;

       

      (e)           the
        Attributable Indebtedness of Capital Leases and Synthetic Leases;

       

      (f)           all
        preferred stock or other equity interests providing for mandatory redemptions,
        sinking fund or like payments prior to June 25, 2012 (provided that any such
        stock or equity interests which provide for such redemptions, sinking fund
        or
        like payments upon the occurrence of a contingency shall not constitute Funded
        Indebtedness until such contingency has occurred and the amount of equity
        interests required to be redeemed or subject to a sinking fund or like payment
        shall be determined on a net basis, after giving effect to deposits, prepayments
        and forward purchases made in partial or full satisfaction
        thereof);

       

      (g)           all
        Guarantees with respect to Indebtedness of the types specified in clauses
        (a)
        through (f) above of another Person; and

       

      (h)           all
        Indebtedness of the types referred to in clauses (a) through (g) above of
        any
        partnership or joint venture (other than a joint venture that is itself a
        corporation or limited liability company) in which such Person is a general
        partner or joint venturer, except to the extent such Indebtedness is nonrecourse
        to such Person.

       

      For
        purposes hereof, (x) the amount of any Guarantee shall be the amount of the
        Indebtedness subject to such Guarantee and (y) the amount of any limited
        recourse debt shall be equal to the principal amount of such limited recourse
        debt for which such Person provides credit support of any kind is liable
        as a
        guarantor or otherwise.  Notwithstanding the foregoing, Funded
        Indebtedness shall not include (i) indebtedness or liabilities of U.S.
        Parent to any Subsidiary thereof or of any such Subsidiary to U.S. Parent
        or any
        such Subsidiary and (ii) Cash Collateralized Debt.

       

      "GAAP"
        means, with
        respect to any Person, generally accepted accounting principles in the
        jurisdiction in which such Person is organized.

       

      "General
        Partner"
        means U.S. Investor, and any Person that subsequently is admitted as a general
        partner of the Partnership pursuant to the terms of the Partnership Agreement,
        so long as such Person continues as a general partner of the
        Partnership.

       

      "General
        Partner Capital
        Account" means the Capital Account of the Partnership maintained for the
        General Partner.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      "General
        Partner Early
        Termination Event" means (i) the exercise of the Call Option pursuant to
        Section 2.02(a)(y) (but not 2.02(a)(x) or 2.02(b)) of the Call Option Agreement
        or the deemed exercise of the Put Option as a result of such exercise of
        such
        Call Option or (ii) the exercise of the Put Option pursuant to Section 2.02(b)
        of the Put Option Agreement as a result of the occurrence of the Credit Risk
        Bank Acceleration Event set forth in clause (vii) of the definition thereof
        or
        the deemed exercise of the Call Option as a result of such exercise of such
        Put
        Option or (iii) the exercise of the Put Option pursuant to Section 2.02(a)(x)
        of
        the Put Option Agreement as a result of the occurrence of a Put Option Early
        Termination Event under Article IV(a)(z) of the Put Option Agreement or the
        deemed exercise of the Call Option as a result of such exercise of such Put
        Option or (iv) the exercise of the Put Option pursuant to Section 2.02(a)(x)
        of
        the Put Option Agreement as a result of the occurrence of the Put Option
        Event
        set forth in Section 3.01(f) of the Put Option Agreement, which event shall
        have
        been triggered by the General Partner directing the dissolution of the
        Partnership in accordance with the General Partner’s right to direct the same
        pursuant to Section 9.1(b)(i) of the Partnership Agreement.

       

      "General
        Partner Variable
        Profits Allocation" means, for any Allocation Period, the Profits
        Allocated to the General Partner for such Allocation Period pursuant to Sections
        4.2(a)(vii)-(xiv) of the Partnership Agreement.

       

      "General
        Partnership
        Interest" means the general partner interest in the
        Partnership.

       

      "Good
        Faith Contest"
        means the contest of an item if:  (1) the item is diligently contested
        in good faith, and, if appropriate, by proceedings timely instituted; (2)
        adequate reserves in accordance with GAAP are established with respect to
        the
        contested item; (3) during the period of such contest, the enforcement of
        any
        contested item is effectively stayed; and (4) the failure to pay or comply
        with
        the contested item during the period of the contest is not likely to result
        in a
        material adverse effect with respect to the applicable Person.

       

      "Governmental
        Authority" means any national, federal, state, provincial, local or
        foreign governmental or regulatory body, authority, bureau, agency, division,
        branch, department, office or instrumentality or court or other judicial
        body,
        or any other entity exercising executive, legislative, judicial, regulatory
        or
        administrative functions of a government, of competent
        jurisdiction.  For greater certainty, any reference to a nation's
        Governmental Authority (e.g., a Canadian Governmental Authority) includes
        all of
        the above in respect of that nation.

       

      "Governmental
        Authorization" means any consent, authorization, approval, license,
        exemption, permit or franchise of any Governmental Authority.

       

      "Governmental
        Filing"
        means any filing, application, registration or notice to or with any
        Governmental Authority.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      "Governmental
        Requirement" means any judgment, proclamation, decree, edict, injunction,
        order, ruling, code, statute, act, rule, regulation, ordinance or other law,
        or
        any requirement having the effect of any of the foregoing, of any Governmental
        Authority.

       

      "Gross
        Asset Value"
        means, with respect to any asset, the fair market value of such property
        as
        determined by the General Partner, which such value shall be consented to
        by the
        other Partners (such consent not to be unreasonably withheld).

       

      "Guarantee"
        means, as
        to any Person, any (a) obligation, contingent or otherwise, of such Person
        guaranteeing or having the economic effect of guaranteeing any Indebtedness
        or
        other obligation payable or performable by another Person (the "primary
        obligor") in any manner, whether directly or indirectly, and including any
        obligation of such Person, direct or indirect, (i) to purchase or pay (or
        advance or supply funds for the purchase or payment of) such Indebtedness
        or
        other obligation, (ii) to purchase or lease property, securities or services
        for
        the purpose of assuring the obligee in respect of such Indebtedness or other
        obligation of the payment or performance of such Indebtedness or other
        obligation, (ii) to maintain working capital, equity capital or any other
        financial statement condition or liquidity or level of income or cash flow
        of
        the primary obligor so as to enable the primary obligor to pay such Indebtedness
        or other obligation, or (iv) entered into for the purpose of assuring in
        any
        other manner the obligee in respect of such Indebtedness or other obligation
        of
        the payment or performance thereof or to protect such obligee against loss
        in
        respect thereof (in whole or in part), or (b) any Lien on any assets of such
        Person securing any Indebtedness or other obligation of any other Person,
        whether or not such Indebtedness or other obligation is assumed by such
        Person.  The amount of any Guarantee shall be deemed to be an amount
        equal to the stated or determinable amount of the related primary obligation,
        or
        portion thereof, in respect of which such Guarantee is made, or, if not stated
        or determinable, the maximum reasonably anticipated liability in respect
        thereof
        as determined by the guaranteeing Person in good faith.  The term
        "Guarantee" as a verb has a corresponding meaning.

       

      "Health
        Net Trust" has
        the meaning set forth in the definition of the Receivables Purchase
        Agreement.

       

      "HMO"
        means a health
        maintenance organization doing business as such (or required to qualify or
        to be
        licensed as such) under HMO Regulations.

       

      "HMO
        Regulation" means
        any law, regulation or administrative order applicable under federal or state
        law to HMOs and any regulation or order promulgated or issued pursuant
        thereto.

       

      "Indebtedness"
        means,
        as to any Person at a particular time, without duplication, all of the
        following, whether or not included as indebtedness or liabilities in accordance
        with GAAP.

       

      (a)           all
        Funded Indebtedness;

       

      (b)           net
        obligations under any Swap Contract;

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (c)           all
        Guarantees with respect to outstanding Indebtedness of the types specified
        in
        clauses (a) and (b) above of any other Person;

       

      (d)           all
        Indebtedness of the types referred to in clauses (a) through (c) above of
        any
        partnership or joint venture (other than a joint venture that is itself a
        corporation or limited liability company) in which U.S. Parent or a Subsidiary
        is a general partner or joint venturer, unless such Indebtedness is nonrecourse
        to U.S. Parent or such Subsidiary; and

       

      (e)           all
        obligations arising under letters of credit (including standby and commercial),
        bankers' acceptances, bank guaranties, surety bonds and similar
        instruments.

       

      For
        purposes hereof (x) the amount of any net obligation under any Swap Contract
        on
        any date shall be deemed to be the Swap Termination Value thereof as of such
        date, (y) the amount of any Guarantee shall be the amount of the Indebtedness
        subject to such Guarantee and (z) the amount of any limited recourse debt
        shall
        be equal to the principal amount of such limited recourse debt for which
        such
        Person provides credit support of any kind is liable as a guarantor or
        otherwise.  Notwithstanding the foregoing, Indebtedness shall not
        include indebtedness or liabilities of U.S. Parent to any Subsidiary thereof
        or
        of any such Subsidiary to U.S. Parent or any such Subsidiary.

       

      "Initial
        Contribution
        Date" means December 20, 2007.

       

      "Insurance
        Regulation"
        means any law, regulation, rule or order applicable to an insurance
        company.

       

      "Interest
        Period" has
        the meaning set forth in the Option Collateral Fixed Rate Deposit.

       

      "Investment"
        means all
        investments, in cash or by delivery of property made, directly or indirectly
        in,
        to or from any Person, constituting an acquisition of shares of capital stock,
        other equity interests, indebtedness or other securities or a loan, advance
        or
        capital contribution.

       

      "Investment
        Grade
        Rating" means (i) with respect to S&P, a Corporate Rating of BBB- or
        better, (ii) with respect to Moody’s, a Corporate Rating of Baa3 or better and
        in respect to Fitch, a Corporate Rating of BBB- or better.

       

      "IRS"
        means the United
        States Internal Revenue Service, or any successor Governmental Authority
        thereto.

       

      "Lending
        Office"
        means, as at any date of determination, the office from which Credit Risk
        Bank
        is booking the loan evidenced by the Option Collateral Fixed Rate
        Deposit.

       

      "LIBOR"
        means, as of
        any day, the rate per annum (calculated on the basis of a 360-day year and
        the
        actual number of days elapsed) at which Dollar deposits

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      are
        offered in the London interbank market on such day (or if such day is not
        a
        Business Day, the preceding Business Day) for a period equal to 30 days as
        such
        rate is displayed on Telerate Page 3750 at approximately 11:00 a.m., London
        time
        (or as soon thereafter as practicable), or if such service does not display
        any
        such quote, the arithmetic mean (rounded upwards, if necessary, to the nearest
        1/16th of 1%) of such rates as displayed on Reuters Page LIBO at approximately
        11:00 a.m., London time (or as soon thereafter as practicable).

       

      "Lien"
        means any
        mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
        lien (statutory or other), charge, or preference, priority or other security
        interest or preferential arrangement in the nature of a security interest
        of any
        kind or nature whatsoever (including any conditional sale or other title
        retention agreement) and any financing lease having substantially the same
        economic effect as any of the foregoing.

       

      "Limited
        Partner"
        means the Class A Limited Partner or the Class B Limited Partner.

       

      "Liquidating
        Event"
        has the meaning set forth in Section 9.1 of the Partnership
        Agreement.

       

      "Liquidation"
        has the
        meaning set forth in Section 9.2(a) of the Partnership Agreement.

       

      "Liquidation
        Date" has
        the meaning set forth in Section 9.2(a) of the Partnership
        Agreement.

       

      "Liquidator"
        has the
        meaning set forth in Section 9.2(a) of the Partnership Agreement.

       

      "Local
        Business Day"
        has the meaning set forth in the Swap Agreement.

       

      "Losses"
        means, (i)
        with respect to the Partnership Agreement, for each Allocation Period an
        amount
        equal to the Partnership's taxable loss for such Allocation Period, determined,
        to the extent possible, in accordance with the principles set forth in the
        Code
        and determined in the case of any Allocation Period not ending on the last
        day
        of the taxable year of the Partnership as if the taxable year of the Partnership
        ended on the last day of such Allocation Period and (ii) with respect to
        all
        other Transaction Documents and to any Person, any and all losses, costs,
        damages, expenses (including reasonable attorneys' fees), actions, suits,
        proceedings, judgments, claims and liabilities of any nature whatsoever that
        such Person shall incur or suffer.

       

      "Managers"
        has the
        meaning set forth in Section 6.2 of the Partnership Agreement.

       

      "Material
        Adverse
        Effect" means (a) a material adverse change in, or a material adverse
        effect upon, the operations, business, properties, liabilities (actual or
        contingent) or condition (financial or otherwise) of U.S. Parent and its
        Subsidiaries taken

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      as
        a whole; (b) a material impairment of the ability of U.S. Parent to perform
        its
        material obligations under any Transaction Document to which it is a party,
        or
        (c) a material adverse effect upon the material legal rights or remedies
        available to Canadian Investor under the Transaction Documents.

       

      "Memorandum
        of
        Understanding" means the Memorandum of Understanding dated as of December
        19, 2007 among U.S. Investor, U.S. Parent, Canadian Investor, Canadian Parent,
        the Partnership and Credit Risk Bank.

       

      "Minimum
        General Partner
        Capital Account" means US$100,000,000.00.

       

      "Minimum
        Rating" means
        with respect to (x) S&P or Fitch, BB and (y) Moody's, Ba2.

       

      "Money
        Market
        Instruments" means any of the following:  certificates of
        deposit, Eurodollars, repurchase agreements, Treasury bills, short-term
        municipal securities, commercial paper and  bankers acceptances, each
        having a term  not exceeding six months.

       

      "Moody's"
        means
        Moody's Investors Service, Inc.

       

      "Multiemployer
        Plan"
        means any employee benefit plan of the type described in Section 4001(a)(3)
        of
        ERISA, to which U.S. Parent or any ERISA Affiliate makes or is obligated
        to make
        contributions, or during the preceding five plan years, has made or been
        obligated to make contributions.

       

      "Negative
        Tax True Up"
        has the meaning set forth in Section 4.4(c) of the Partnership
        Agreement.

       

      "Officer's
        Certificate" with respect to any Person, means a certificate signed by a
        Responsible Officer on behalf of such Person.

       

      "Operating
        Lease
        Obligations" of any Person means the obligations of such Person under any
        lease (including, without limitation, leases which may be terminated by the
        lessee at any time) of any real or personal property, or a combination thereof
        which would constitute a Capital Lease Obligation other than any such lease
        in
        which that Person is the lessor.

       

      "Option
        Collateral Fixed Rate
        Deposit" has the meaning set forth in Section 2 of the Option
        Collateral
        Fixed Rate CD Agreement.

       

      "Option
        Collateral Fixed Rate
        CD Agreement" means the Option Collateral Fixed Rate CD Agreement, dated
        as of December 19, 2007, between Credit Risk Bank, Canadian Investor and
        Canadian Parent.

       

      "Option
        Notice" means
        a Call Option Notice or Put Option Notice.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      "Organizational
        Documents" means, (i) with respect to the Partnership, the Partnership
        Agreement, (ii) with respect to any corporation, its bylaws and articles
        or
        certificate of incorporation, (iii) with respect to any limited liability
        company or limited partnership (other than the Partnership), its certificate
        of
        formation or certificate of limited partnership and/or its limited liability
        company agreement or partnership agreement(s), and (iv) with respect to any
        other Person, all instruments and agreements under which it is duly operating
        or
        organized.

       

      "Original
        Limited Partnership
        Agreement" means the Limited Partnership Agreement of Health Net
        Financing, L.P. among U.S. Investor and Transaction LLC, dated as of November
        9,
        2007.

       

      "Participation
        Agreement" means the Participation Agreement, dated as of December 19,
        2007, among U.S. Investor, U.S. Parent, Canadian Investor, Credit Risk Bank
        and
        the Partnership.

       

      "Partner"
        means the
        General Partner or any Limited Partner in the Partnership, and "Partners" means
        the
        General Partner and all Limited Partners, but such terms do not include any
        Person who has ceased to be a partner in the Partnership.

       

      "Partnership"
        means
        the limited partnership formed under the Act pursuant to the Original Limited
        Partnership Agreement and the Certificate of Limited Partnership and continued
        pursuant to the Partnership Agreement, namely, Health Net Financing,
        L.P.

       

      "Partnership
        Agreement" means the Amended and Restated Agreement of Limited
        Partnership of Health Net Financing, L.P., dated as of December 19, 2007,
        among
        U.S. Investor, Canadian Investor and Transaction LLC.

       

      "Partnership
        Interest"
        means an interest in the Partnership, including the right to receive
        Distributions and the right to receive Allocations, if and solely to the
        extent
        provided in the Partnership Agreement.

       

      "Partnership
        Property"
        means all properties, rights and assets of any nature (real, personal or
        mixed,
        tangible or intangible), including cash, owned by the Partnership.

       

      "Partnership
        Purpose"
        has the meaning set forth in Section 2.5 of the Partnership
        Agreement.

       

      "PBGC"
        means the
        Pension Benefit Guaranty Corporation or any entity succeeding to any or all
        of
        its functions under ERISA.

       

      "Pension
        Plan" means
        any "employee pension benefit plan" (as such term is defined in Section 3(2)
        of
        ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
        and is sponsored or maintained by U.S. Parent or any ERISA Affiliate or to
        which
        U.S. Parent or any ERISA Affiliate contributes or has an obligation to
        contribute, or in the case of a multiple employer or other plan described
        in
        Section

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      4064(a)
        of ERISA, has made contributions at any time during the immediately preceding
        five plan years.

       

       "Permitted
        Acquisition" means an Acquisition by U.S. Parent or any Subsidiary of
        U.S. Parent, provided that (a) the capital stock, other equity interests,
        Property, line or segment of business or division acquired in such Acquisition
        relates to a line of business similar to the business that U.S. Parent or
        any
        Subsidiary of U.S. Parent is engaged in on the Closing Date; (b) in the case
        of
        an Acquisition of the capital stock or other equity interests of another
        Person,
        (i) the board of directors (or other comparable governing body) of such other
        Person shall have duly approved such Acquisition and (ii) such Person shall
        become a direct or indirect Subsidiary of U.S. Parent or such Person shall
        be
        merged into, or consolidated or combined with, U.S. Parent or any Subsidiary
        of
        U.S. Parent; provided that if U.S. Parent is party to such merger or
        consolidation, U.S. Parent shall be the surviving person, (c) no Put Option
        Early Termination Event (or event which, with the giving of any notice, the
        passage of time, or both, would constitute a Put Option Early Termination
        Event)
        shall exist as of the date of such Acquisition (prior to and immediately
        after
        giving effect thereto); and (d) if the aggregate consideration for any such
        Acquisition exceeds $250,000,000, U.S. Parent shall have delivered to Canadian
        Investor, not less than 5 days prior to the consummation of such Acquisition,
        a
        pro forma certificate from a Responsible Officer demonstrating that, upon
        giving
        effect to such Acquisition on a Pro Forma Basis, U.S. Parent shall be in
        compliance with each of the applicable covenants set forth in Section 7.05
        of
        the Participation Agreement.

       

      "Permitted
        Assets"
        means:

       

      (a)           Permitted
        Investments;

       

      (b)           Permitted
        Receivables Investments;

       

      (c)           Cash
        Equivalents;

       

      (d)           equipment,
        office space, office leases, and other similar items held or used in the
        ordinary course of the Partnership's business;

       

      (e)           the
        Transaction Documents to which the Partnership is a party and any assets
        created
        thereby (including rights to receive swap or similar payments);

       

      (f)           any
        "swaps," "caps," "floors," " collars" or other interest rate hedging contracts
        or similar arrangements or combinations thereof;

       

      (g)           proceeds
        from any of the foregoing;

       

      (h)           other
        assets similar in kind or use or incidental to the above; and

       

      (i)           "forward
        rate agreements";

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      provided,
however,
        that (i) any
        asset described in paragraphs (a), (b), (c), (g), (h) or (i) shall be a
        Permitted Asset only if such asset is treated as indebtedness for U.S. federal
        income tax purposes and (ii) at all times:  (x) Permitted Assets shall
        consist of at least US$10,000,000 of Money Market Instruments; and (y) Permitted
        Assets shall consist of at least US$200,000,000 of Permitted Receivable
        Investments (as defined in clause (y) of the definition thereof) that have
        a
        maturity of 12 months or less.

       

      "Permitted
        Financing"
        means the net financing provided to U.S. Parent pursuant to transactions
        contemplated by the Transaction Documents.

       

       "Permitted
        Investments" means loans or advances to, or bonds, debentures, notes,
        mortgages or similar obligations (but excluding commercial paper) of, another
        corporation that is U.S. Parent or a Specified Affiliate.

       

      
        "Permitted
          Liabilities" means:

      

       

      (a)           all
        liabilities under "swaps," "caps," "floors," "collars," "forward rate
        agreements" or other interest rate hedging contracts or similar arrangements
        or
        combinations thereof;

       

      (b)           all
        lease obligations to the extent incurred in the ordinary course of
        business;

       

      (c)           any
        obligations or liabilities incurred in connection with the hiring of employees
        in connection with the business of the Partnership; and

       

      (d)           any
        other liabilities incurred in, or related or incidental to the operation,
        management and control of the business of the Partnership;

       

      provided,
however,
        that the
        Partnership shall not directly or indirectly create, incur, assume or suffer
        to
        exist any obligation (whether present or future, contingent or otherwise,
        as
        principal or surety or otherwise) in respect of borrowed money.

       

      "Permitted
        Liens"
        means:

       

      (a)           Liens
        imposed by law for taxes, fees, assessments and other governmental charges
        or
        claims that are not yet due or that remain payable without penalty or where
        (a) the validity or amount thereof is being contested in good faith by
        appropriate proceedings, (b) U.S. Parent or its Subsidiary has set aside on
        its books adequate reserves with respect thereto in accordance with GAAP
        and
        (c) the failure to make payment pending such contest could not reasonably
        be expected to result in a Material Adverse Effect;

       

      (b)           carriers',
        warehousemen's, mechanics', materialmen's, repairmen's, landlords' and other
        like Liens imposed by law, arising in the ordinary course of business and
        securing obligations that are not overdue by more than 60 days or that remain
        payable without penalty or where (a) the validity or amount thereof is
        being contested in

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      good
        faith by appropriate proceedings, (b) U.S. Parent or its Subsidiary has set
        aside on its books adequate reserves with respect thereto in accordance with
        GAAP and (c) the failure to make payment pending such contest could not
        reasonably be expected to result in a Material Adverse Effect;

       

      (c)           Liens
        incurred or pledges or deposits made in the ordinary course of business in
        compliance with HMO Regulations, Insurance Regulations, workers' compensation,
        unemployment insurance or other social security laws or
        regulations;

       

      (d)           Liens
        incurred or deposits made to secure the performance of bids, trade contracts,
        leases, statutory obligations, surety and appeal bonds, performance bonds
        and
        other obligations of a like nature, in each case in the ordinary course of
        business;

       

      (e)           easements,
        zoning restrictions, rights-of-way and similar encumbrances on real property
        imposed by law or arising in the ordinary course of business that do not
        secure
        any monetary obligations and do not materially detract from the value of
        the
        affected property or materially interfere with the ordinary conduct of business
        of U.S. Parent and its Subsidiaries taken as a whole;

       

      (f)           Liens
        arising solely by virtue of any statutory or common law provision or granted
        to
        banks in the ordinary course of business relating to bankers' Liens, rights
        of
        setoff or similar rights and remedies as to deposit accounts or other funds
        maintained with a creditor depository institution;

       

      (g)           Liens
        arising from the rendering of a judgment that is not a final judgment or
        order
        against U.S. Parent or any Subsidiary thereof with respect to which U.S.
        Parent
        or such Subsidiary is then proceeding with an appeal or other proceeding
        for
        review or in connection with surety or appeal bonds in connection with such
        attachment or judgment, and Liens arising from a judgment or order that does
        not
        constitute a Put Option Early Termination Event under clause (f) of Article
        IV
        of the Put Option Agreement;

       

      (h)           Liens
        in favor of the L/C Issuer (as defined in the Revolving Credit Agreement)
        arising from the cash collateralization of all or any portion of any letters
        of
        credit issued in connection with Section 2.04(a)(iii)(D) of the Revolving
        Credit
        Agreement; and

       

      (i)           Liens
        arising under or in connection to claims administration;

       

      provided
        that the term "Permitted Liens" shall not include any Lien securing
        Indebtedness.

       

      "Permitted
        Receivables
        Investments" means (x) the beneficial interest in the Health Net Trust
        and (y) the accounts receivable purchased by the Health Net Trust under the
        Receivables Purchase Agreement.

       

      "Person"
        means any
        individual, trustee, receiver, conservator, administrator, liquidator,
        custodian, corporation, limited liability company, partnership,

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      association,
        company, joint-stock company, trust, business or statutory trust, estate,
        joint
        venture or any other entity or any Governmental Authority.

       

      "Positive
        Tax True Up"
        has the meaning set forth in Section 4.4(b) of the Partnership
        Agreement.

       

      "Principal
        Amount" has
        the meaning set forth in the Option Collateral Fixed Rate Deposit.

       

      "Proceeding"
        has the
        meaning ascribed to such term in Section 18.05 of the Participation
        Agreement.

       

      "Profits"
        means for
        each Allocation Period an amount equal to the Partnership's taxable profit
        for
        such Allocation Period, determined, to the extent possible, in accordance
        with
        the principles set forth in the Code and determined in the case of any
        Allocation Period not ending on the last day of the taxable year of the
        Partnership as if the taxable year of the Partnership ended on the last day
        of
        such Allocation Period.

       

       "Pro
        Forma Basis"
        means, for purposes of calculating the financial covenants set forth in Section
        7.05 of the Participation Agreement, that any Acquisition for consideration
        in
        excess of $100,000,000.00 (a “Material Acquisition”) shall be deemed to have
        occurred as of the first day of the most recent four fiscal quarter period
        preceding the date of such transaction for which U.S. Parent has delivered
        financial statements pursuant to Section 7.04 of the Participation Agreement.
        In
        connection with the foregoing, with respect to any Material Acquisition (i)
        income statement items (whether positive or negative) attributable to the
        Person
        or Property acquired shall be included to the extent relating to any period
        applicable in such calculations to the extent such items are not otherwise
        included in such income statement items for U.S. Parent and its Subsidiaries
        in
        accordance with GAAP or in accordance with any defined terms set forth in
        this
        Appendix A, (ii) any Indebtedness incurred or assumed by U.S. Parent or any
        Subsidiary of U.S. Parent (including the Person or Property acquired) in
        connection with such transaction and any Indebtedness of the Person or Property
        acquired which is not retired in connection with such transaction (A) shall
        be
        deemed to have been incurred as of the first day of the applicable period
        and
        (B) if such Indebtedness has a floating or formula rate, shall have an implied
        rate of interest for the applicable period for purposes of this definition
        determined by utilizing the rate which is or would be in effect with respect
        to
        such Indebtedness as at the relevant date of determination and (iii) any
        other
        factually supportable and identifiable prforma adjustments which would be
        permitted or required by Regulation S-K or S-X under the Securities Act shall
        be
        taken into account.

       

      "Property"
        means any
        interest of any kind in any property or asset, whether real, personal or
        mixed,
        or tangible or intangible.

       

      "Put
        Exercise Date"
        means the date (which must be a Business Day) specified (or deemed specified)
        as
        such in a Put Option Notice, which unless the parties otherwise agree, shall
        not
        be earlier than the day which may be specified (or deemed specified) as the
        Put
        Exercise Date in accordance with the Put Option Agreement.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      "Put
        Option" has the
        meaning set forth in Section 2.01 of the Put Option Agreement.

       

      "Put
        Option Agreement"
        means that Put Option Agreement, dated as December 19, 2007, among Canadian
        Investor, U.S. Investor and Credit Risk Bank.

       

      "Put
        Option Early Termination
        Event" has the meaning set forth in Article IV of the Put Option
        Agreement.

       

      "Put
        Option Event" has
        the meaning set forth in Section 3.01 of the Put Option Agreement.

       

      "Put
        Option Notice"
        has the meaning set forth in Section 2.02(a) of the Put Option
        Agreement.

       

      "Put
        Option Price"
        means, as of any Exercise Date, the Fixed Price as of such Exercise Date.

       

      "Quarterly
        Period"
        means any quarterly period set forth on Schedule B-1 to the Partnership
        Agreement, Schedule B-2 to the Partnership Agreement, Schedule B-3 to the
        Partnership Agreement, Schedule A-1 to the Participation Agreement, Schedule
        A-2
        to the Participation Agreement or Schedule A-3 to the Participation Agreement,
        as applicable.

       

      "Rating
        Agencies"
        means Moody's, S&P, and Fitch.

       

      "Ratings
        Downgrade"
        means the date on which the Debt Ratings announced by S&P or Moody's shall
        be less than BBB- or Baa3, respectively.

       

      "Receivables
        Purchase
        Agreement" means the Receivables Purchase Agreement, dated as of December
        20, 2007, between Health Net Federal Services, LLC, a Delaware limited liability
        company, and Wells Fargo Delaware
        Trust Company, as trustee of Health Net Receivables Trust, a statutory
        trust organized and existing under the laws of the State of Delaware (the
        "Health Net Trust"),
        the beneficial interest in which is held by the Partnership.

       

      "Regulations"
        means
        the income tax regulations, including temporary regulations, promulgated
        under
        the Code.

       

      "Regulatory
        Change"
        means any change in or any official introduction of or interpretation after
        the
        Closing Date in any Governmental Requirement or any official regulations,
        policies, directives or guidelines issued by any governmental body, monetary
        authority or accounting authority (including requirements of any central
        bank or
        other fiscal or monetary authority) having jurisdiction, whether or not having
        the force of law or the failure to comply therewith would be unlawful, which
        purport to regulate or which affect the treatment of loans or other investments
        similar to the Option Collateral Fixed Rate Deposit held or issued by banks
        or
        financial institutions in the Netherlands or any other jurisdiction in which
        Credit Risk Bank is organized or has its principal office or its

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      Lending
        Office (not including any determination that Credit Risk Bank failed to comply
        with any Governmental Requirement or such regulations, policies, directives
        or
        guidelines as in effect on the Purchase Date).

       

      "Re-invested
        Interest
        Amount" has the meaning set forth in the Option Collateral Fixed Rate
        Deposit.

       

      "Replacement
        Credit Risk
        Bank" has the meaning specified in Section 17.01 of the Participation
        Agreement.

       

      "Replacement
        Date" has
        the meaning specified in Section 17.01 of the Participation
        Agreement.

       

      "Replacement
        Failure"
        means that either U.S. Investor or Canadian Investor shall have elected to
        replace Credit Risk Bank pursuant to Section 17.01 of the Participation
        Agreement under circumstances not requiring the consent of the other party
        and
        U.S. Investor and Canadian Investor shall have failed to agree on a replacement
        Credit Risk Bank within 14 days of such election.

       

      "Reportable
        Event"
        means any of the events set forth in Section 4043(c) of ERISA, other than
        events
        for which the thirty-day notice period has been waived.

       

      "Repurchase
        Price"
        means, as of any Exercise Date, the Put Option Price as of such Exercise
        Date.

       

      "Responsible
        Officer"
        means, with respect to any Person, the chief executive officer, president,
        chief
        financial officer or treasurer of such Person. Unless otherwise specified,
        all
        references to a "Responsible Officer" shall refer to a Responsible Officer
        of
        U.S. Parent.  Any document delivered hereunder that is signed by a
        Responsible Officer of U.S. Parent shall be conclusively presumed to have
        been
        authorized by all necessary corporate, partnership and/or other action on
        the
        part of U.S. Parent and such Responsible Officer shall be conclusively presumed
        to have acted on behalf of U.S. Parent.

       

      "Restricted
        Payment"
        means (a) any dividend or other distribution, direct or indirect, on account
        of
        any shares of any class of capital stock of U.S. Parent or any Subsidiary
        thereof, now or hereafter outstanding, (b) any redemption, retirement, sinking
        fund or similar payment, purchase or other acquisition for value, direct
        or
        indirect, of any shares of any class of capital stock of U.S. Parent or any
        Subsidiary thereof, now or hereafter outstanding, and (c) any payment made
        to
        retire, or to obtain the surrender of, any outstanding warrants, options
        or
        other rights to acquire shares of any class of capital stock of U.S. Parent
        or
        any Subsidiary thereof, now or hereafter outstanding.

       

      "Revolving
        Credit
        Agreement" means that certain Credit Agreement dated as of June 25,
        2007, among U.S. Parent, the lenders party thereto, Bank of America, N.A.,
        as
        administrative agent and other parties thereto.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      "S&P"
        means
        Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies,
        Inc.

       

      "SEC"
        means the
        Securities and Exchange Commission, or any Governmental Authority succeeding
        to
        any of its principal functions.

       

      "Securities
        Act" means
        the Securities Act of 1933, as amended, and the rules and regulations
        promulgated thereunder, and any successor statute of similar import of the
        United States.

       

      "Security
        and Pledge
        Agreement (Canadian Investor-U.S. Investor)" means the
        Security and
        Pledge Agreement (Canadian Investor-U.S. Investor), dated as of December
        19,
        2007, between Canadian Investor and U.S. Investor.

       

      "Security
        and Pledge
        Agreement (Credit Risk Bank-Canadian Investor)" means the Security and
        Pledge Agreement (Credit Risk Bank-Canadian Investor), dated as of December
        19,
        2007, between Credit Risk Bank and Canadian Investor.

       

      "Security
        Deposit" has
        the meaning set forth in the Forward Purchase Deposit and Security
        Agreement.

       

      "Security
        Documents"
        means the Security and Pledge Agreement (Canadian Investor-U.S. Investor),
        the
        Security and Pledge Agreement (Credit Risk Bank-Canadian Investor) and the
        Dutch
        Deed of Pledge.

       

      "Significant
        Subsidiary" means, at any particular time, any Subsidiary of U.S. Parent
        (or such Subsidiary and its subsidiaries taken together) that would be a
        "significant subsidiary" of U.S. Parent within the meaning of Rule 1-02 under
        Regulation S-X promulgated by the SEC.

       

      "Special
        Capital
        Distribution" has the meaning set forth in Section 5.3(a) of the
        Partnership Agreement.

       

      "Special
        Allocation
        Taxes" has the meaning set forth in Section 4.4 of the Partnership
        Agreement.

       

      "Specified
        Affiliate"
        means (i) any Affiliate of U.S. Parent listed on Schedule A hereto, provided
        that (x) if such Person shall be a Financial Institution and (y) the General
        Partner shall have received notice from the Class A Limited Partner that
        such
        Person is a Financial Institution, such Person shall cease to be a Specified
        Affiliate five Business Days following receipt of such notice and (ii) any
        other
        Affiliate of U.S. Parent indicated by U.S. Parent from time to time, provided
        that such Person is not a Financial Institution and the Class A Limited Partner
        has confirmed the same in writing to the General Partner.

       

      "Specified
        Amount"
        means, for any Allocation Period, the amount set forth on Schedule A to the
        Partnership Agreement for such Allocation Period.  For any Allocation
        Period that ends on a date other than December 31 or June 30 the
        Specified

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      Amount
        set forth on Schedule A to the Partnership Agreement shall be prorated based
        on
        the actual number of days during such Allocation Period.

       

      "Subscription
        Agreement" means the Subscription Agreement dated as of December 19,
        2007, among U.S. Investor, Transaction LLC and the Partnership.

       

      "Subsidiary"
        means as
        to any Person, any corporation, association, partnership, limited liability
        company, joint venture or other business entity of which such Person or any
        Subsidiary of such Person, directly or indirectly, owns or Controls more
        than
        50% of the outstanding ownership interests having ordinary voting power to
        elect
        a majority of the board of directors or similar managing body.

       

      "Swap
        Agreement" means that
        certain
        confirmation dated as of December 19, 2007, between U.S. Parent and Canadian
        Parent.

       

      "Swap
        Contract" means
        (a) any and all rate swap transaction, basis swaps, credit derivative
        transactions, forward rate transactions, commodity swaps, commodity options,
        forward commodity contracts, equity or equity index swaps or options, bond
        or
        bond price or bond index swaps or options or forward bond or forward bond
        price
        or forward bond index transactions, interest rate options, forward foreign
        exchange transactions, cap transactions, floor transactions, collar
        transactions, currency swap transactions, cross-currency rate swap transactions,
        currency options, spot contracts, or any other similar transactions or any
        combination of any of the foregoing (including any options to enter into
        any of
        the foregoing), whether or not any such transaction is governed by or subject
        to
        any master agreement, and (b) any and all transactions of any kind, and the
        related confirmations, which are subject to the terms and conditions of,
        or
        governed by, any form of master agreement (any such master agreement, together
        with any related schedules, a "Master Agreement"), including any such
        obligations or liabilities under any Master Agreement.

       

      "Swap
        Termination
        Value" means, in respect of any one or more Swap Contracts, after taking
        into account the effect of any legally enforceable netting agreement relating
        to
        such Swap Contracts, (a) for any date on or after the date such Swap Contracts
        have been closed out and termination value(s) determined in accordance
        therewith, such termination value(s), and (b) for any date prior to the date
        referenced in clause (a), the amount(s) determined as the market-to-market
        value(s) for such Swap Contracts, as determined based upon one or more
        mid-market or other readily available quotations provided by any recognized
        dealer in such Swap Contracts.

       

      "Synthetic
        Lease"
        means any synthetic lease, tax retention operating lease, off-balance sheet
        loan
        or similar off-balance sheet financing arrangement whereby the arrangement
        is
        considered borrowed money indebtedness for tax purposes but is classified
        as an
        operating lease or does not otherwise appear on the balance sheet under
        GAAP.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      "Tax
        Authorities"
        means any Governmental Authorities exercising executive, legislative, judicial,
        regulatory or administrative functions of or pertaining to Taxes.

       

      "Taxes"
        means any and
        all taxes, levies, imposts and other governmental charges imposed by any
        federal, state, local or foreign government, or any taxing authority thereof
        (together with any and all interest, penalties, additions to tax and other
        liabilities with respect thereto) including, without limitation, any taxes
        or
        other charges on or with respect to income, franchises, windfall or other
        profits, gross receipts, property, capital, sales, use, capital stock, payroll,
        employment, social security, workers' compensation, unemployment compensation
        or
        net worth; taxes or other charges in the nature of excise, withholding, ad
        valorem, stamp, transfer, value added, or gains taxes; and license, registration
        and documentation fees, to the extent that any such tax or other amount is
        related to or arises as a result of the transactions contemplated by the
        Transaction Documents or a payment made pursuant to the Transaction
        Documents.

       

      "Threshold
        Rating"
        means (x) that U.S. Parent's unsecured and unsubordinated long-term debt
        (not
        supported by third-party enhancement) is rated by at least two of the Rating
        Agencies and (y) (i) if such debt is rated by all three Rating Agencies,
        such
        debt has a Minimum Rating from at least two of the three Rating Agencies
        and
        (ii) if such debt is rated by two of the three Rating Agencies, such debt
        has a
        Minimum Rating from both such Rating Agencies.

       

      "Transaction"
        means
        the transactions contemplated by the Transaction Documents.

       

      "Transaction
        Documents" means, collectively, the Participation Agreement, the Put
        Option Agreement, the Call Option Agreement, the Forward Purchase Agreement,
        the
        Partnership Agreement, the Swap Agreement, the Forward Purchase Deposit and
        Security Agreement, the Security and Pledge Agreement (Canadian Investor-U.S.
        Investor), the Security and Pledge Agreement (Credit Risk Bank-Canadian
        Investor), the Option Collateral Fixed Rate CD Agreement, the Option Collateral
        Fixed Rate Deposit, the Memorandum of Understanding, the Subscription Agreement,
        the Dutch Deed of Pledge, the U.S. Parent Guarantee, and the Assignment of
        Subscription Agreement.

       

      "Transaction
        LLC"
        means Health Net Investments, LLC, a Delaware limited liability
        company.

       

      "Transferred
        Rights and
        Documents" has the meaning specified in Section 17.01 of the
        Participation Agreement.

       

      "United
        States" means
        the United States of America.

       

      "United
        States Withholding
        Tax" means
        any Tax imposed under sections 1441-46 of the Code, and any Regulations
        thereunder, and required to be withheld at the source of payment.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      "USD", "US$"
        or "$" means
        the lawful
        currency for the time being in the United States.

       

      "U.S.
        Investor" means
        Health Net Funding, Inc. a Delaware corporation.

       

      "U.S.
        Parent" means
        Health Net, Inc., a Delaware corporation.

       

      "U.S.
        Parent
        Guarantee" means the Guaranty dated as of December 19, 2007, by U.S.
        Parent in favor of Canadian Investor and Credit Risk Bank.

       

       

       

      31

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