Document:

EX-10.1

 

Exhibit 10.1

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (the “Agreement”) is made as of February 5, 2007, between
GREAT SENECA FINANCIAL CORPORATION, PLATINUM FINANCIAL SERVICES CORPORATION, MONARCH CAPITAL
CORPORATION, COLONIAL CREDIT CORPORATION, CENTURION CAPITAL CORPORATION, SAGE FINANCIAL CORPORATION
and HAWKER FINANCIAL CORPORATION (collectively, the “Sellers,” and each a “Seller”), corporations
under the laws of the State of Maryland, located at 700 King Farm Blvd., Rockville, Maryland 20850
and PALISADES ACQUISITION XV, LLC (“Buyer”), a Delaware limited liability company organized under
the laws of the State of Delaware with its headquarters/principal place of business at 210 Sylvan
Avenue, Englewood Cliffs, New Jersey 07632.

     WHEREAS, the Sellers desire to sell and Buyer desires to purchase certain of the Accounts
on the terms and conditions hereinafter provided:

     NOW, THEREFORE, in consideration of the mutual promises herein, Buyer and Sellers agree as
follows:

	1.	 	DEFINITIONS

	1.1	 	“Account Document(s)” means, with respect to any Account, any application,
agreement, billing statement, notice, correspondence or other information in the Sellers’
possession that relates to an Account. An Account Document may include, without limitation,
original documents or copies thereof, whether by photocopy, microfiche, microfilm or other
reproduction process.
	 
	1.2	 	“Account(s)” means those credit card and other consumer installment credit agreement
accounts and receivables (including, without limitation, judgments) listed on the Asset
Schedule (attached hereto as Exhibit 1) with outstanding balances of $6,912,428,982.00 which
are subject to adjustment as of the Cutoff Date (as defined below) in accordance with Section
2.2.
	 
	1.3	 	“Affiliate” means, when used with reference to a specified Person, any other Person
who directly controls, is controlled by, or is under common control with, the specified
Person. For purposes of this definition, “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of a
Person that is a corporation, limited liability company, partnership, trust, or other entity,
whether through ownership of voting securities or interests, by contract, or otherwise..
	 
	1.4	 	“Closing Date” means Friday, February 16, 2007, or such other date mutually agreed to
by Buyer and the Sellers provided that Buyer shall have the continuing right to postpone the
Closing Date until a date on or before March 31, 2007.

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	1.5	 	“Cutoff Date” means 8 PM Friday, February 2, 2007, provided that if the Closing does
not occur until after March 5, 2007 as a result of Buyer’s decision to postpone the Closing
Date and due to no fault of Seller, the Cutoff Date shall be deemed to be the Closing Date.
	 
	1.6	 	“Cutoff File” means the electronic file containing the file of the Accounts actually
purchased by Buyer on the Closing Date reflecting activity as of the Cutoff Date.
	 
	1.7	 	“Debtor” means the person or persons in whose name(s) an Account was established.
	 
	1.8	 	“Diligence File” means the electronic file containing information relating to
Seller’s accounts delivered by, or on behalf of, Sellers to Buyer on, or about, January 25,
2007.
	 
	1.9	 	“Litigation” means any action, proceeding, claim, lawsuit, arbitration, audit,
hearing, or investigation commenced, brought, conducted, or threatened by or before, or
otherwise involving, any governmental authority or any third party, other than any routine
collection action instituted by, or on behalf of, a Seller or any action instituted to execute
a lien against the assets of a Debtor.
	 
	1.10	 	“Person” means any individual, corporation, partnership, joint venture, limited
liability company, trust, governmental authority, or other entity.
	 
	1.11	 	“Purchase Price” means $300,000,000.00, subject to Pre-Closing Adjustment
pursuant to Section 2.2.
	 
	1.12	 	“Purchase Price Percentage” means that percentage obtained when the Purchase Price is
divided by the total outstanding Account balances as of the Cutoff Date.
	 
	1.13	 	“Sellers’ Knowledge” means the actual knowledge, without investigation, of any
Seller, its Affiliates, agents or representatives.
	 
	2.	 	PURCHASE AND SALE OF ACCOUNTS
	 
	2.1	 	Purchase and Sale. On the basis of, and subject to, the representations,
warranties and covenants of the Buyer contained in this Agreement, the Sellers agree to sell,
assign and transfer to Buyer, and Buyer agrees to purchase from the Sellers, on the Closing
Date all right, title and interest of Sellers in the Accounts. Buyer has made an independent
investigation, as it deems necessary, as to the nature, validity, collectibility,
enforceability and value of the Accounts, and as to all other facts that Buyer deems material
to Buyer’s purchase. Buyer enters into this Agreement solely on the basis of that
investigation and Buyer’s own judgment. Buyer has made an independent determination that the
Purchase Price represents the Accounts’ fair and reasonable value. Buyer acknowledges that
the sale and assignment are without warranty of any kind; including, without limitation,
warranties pertaining to validity, collectibility, accuracy or sufficiency of information,
except as stated in Article 3 below; and is without recourse to the Sellers except as

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	 	 	specifically set forth within the Agreement. Buyer further acknowledges that it is not
acting in reliance on any representation by the Sellers, except as set forth in Article 3
below.

	2.2	 	Pre-Closing Adjustment. The Purchase Price amount stated in Section 1.6 shall be
adjusted as follows:

The Sellers shall prepare a final statement of Accounts as of the Cut Off Date ( the
“Closing Statement”). The Sellers may retain any Account if (i) the Sellers
determine, in their sole discretion, that as of the Cut Off Date the representations
set forth in Section 3.3 are not true and correct with respect to such Account; or
(ii) the Sellers determine, in their sole discretion, that there is a pending or
threatened suit, arbitration, bankruptcy proceeding or other legal proceeding or
investigation relating to such Account, or the Debtor of such Account, naming the
Sellers or otherwise involving the Sellers’ interest therein in a manner
unacceptable to the Sellers, or the Sellers otherwise determine, in their sole
discretion, that such matter cannot be resolved and/or that the Sellers’ interest
therein cannot be adequately protected without the Sellers owning such Account,
provided that in either case the Sellers shall, if requested by Buyer, in writing
describe such suit or investigation in detail reasonably acceptable to Buyer. The
Purchase Price will be decreased by an amount equal to the product of (i)
outstanding balance as of the Cut Off Date of any such retained Account and (ii) the
Purchase Price Percentage. The Sellers will notify the Buyer of the adjusted
Purchase Price on or prior to the Closing Date. Sellers shall have a right to
provide replacement accounts for those retained as Pre-Closing Adjustments of
comparable value.

	2.3	 	Payment.

	 	(a)	 	On the date hereof Buyer shall, by wire transfer of immediately available
funds, make a deposit of $60,000,000.00 (the “Deposit”) to Sellers, jointly, which
shall be held by Sellers as a deposit subject to the terms and conditions of this
Agreement and shall be refundable only as provided in section 13.1 of this Agreement.
To the extent, if any, that Sellers are required to return the Deposit to Buyer,
Sellers shall be jointly and severally liable for the return of the Deposit. If
Closing has not occurred by February 16, 2007 at 1pm, Buyer shall make an additional
deposit of $15,000,000.00 to be held by Sellers subject to the terms and conditions of
this Agreement and shall be refundable only as provided in section 13.1 of this
Agreement.
	 
	 	(b)	 	Subject to satisfaction or waiver of the conditions precedent set forth
in Article 5 of this Agreement, on or before 3:00 P.M., Eastern Time on the Closing
Date, Buyer shall pay, by wire transfer of immediately available funds to an
account, or accounts, specified by the Sellers, an amount equal to the Purchase
Price minus the Deposit. The Sellers will be deemed to have simultaneously
transferred, and

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	 	 	 	shall simultaneously transfer title to the Accounts to Buyer in accordance with
Section 2.4 below.

	 	(c)	 	After Buyer has received Net Payments from the Accounts equal to 150%
of the Purchase Price, Seller shall be entitled to 20% of future Net Payments.
Buyer shall provide monthly reports in a form and content reasonably satisfactory
to the Seller and remit to Seller, on a monthly basis, Seller’s 20% of Net Payments
earned during the prior month. Seller may, at its sole expense, audit Buyer upon
reasonable notice and during normal business hours, to determine Buyer’s
compliance. For purposes of this clause, “Net Payments” shall mean all
collections and proceeds on Accounts received by Buyer from any source, less any
costs and fees of collection or sales, disgoregments and amounts equal to the cost
of funds to Buyer and its Affiliates in financing the Purchase Price To the extent
that Buyer pays a brokerage fee in excess of 10% for the sale of accounts, said
excess shall not be counted against the above Net Payment calculation.

	2.4	 	Transfer. Simultaneously with payment of the Purchase Price, the Sellers and Buyer
will execute and deliver to each other a Bill of Sale substantially in the form of Exhibit 2.
The Sellers will provide to Buyer, on the Closing Date, or at such other time as is mutually
agreed to by the Buyer and Sellers, a computer printout or magnetic tape (the “Closing
Tape”) listing the Accounts as of the Cutoff Date that were purchased by the Buyer
containing the information set forth on the attached Exhibit 4. On the Closing Date, Sellers
will, by means of the aforesaid Bill of Sale and this Agreement, transfer all Sellers’ right,
title and interest in the Accounts and Buyer will accept same and assume, with respect to each
Account, all of Sellers’ rights, responsibilities, liabilities and obligations with respect to
such Accounts. Sellers shall also deliver executed Powers of Attorney in the form attached as
Exhibit 5 and such other transfer documents as Buyer shall reasonably require on at least 48
hours notice prior to the Closing.. If the Sellers receive any payments of principal and/or
interest by or on behalf of any Debtor with respect to an Account between the Cutoff Date and
the Closing Date, Sellers shall hold such amounts in trust for Buyer and pay over such amounts
to Buyer, without interest thereon, within seven (7) days after the Closing Date. If payments
are received by the Sellers from a Debtor on or after Closing Date, the Sellers shall forward
such payments, without interest thereon, to Buyer within seven (7) days from date of receipt.
Buyer may, at its sole expense audit Sellers and their Affiliates and agents upon reasonable
notice during normal business hours to determine Sellers’ compliance.
	 
	2.5	 	Notices, Regulatory Filings and Fees, Sales, Use or Transfer Taxes. If any notices,
regulatory filings or fees, sales, use, transfer or other tax is required or assessed or
otherwise is or becomes required or payable as a result of the transactions contemplated
hereby, Buyer shall assume the obligation to provide such notices, make such regulatory
filings and pay such filing fees and tax, to the extent such taxes relate to, or accrue on or
after the Closing Date.
	 
	3.	 	REPRESENTATIONS AND WARRANTIES OF THE SELLERS

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3.1 Due Organization; Authorization; Litigation. Each Seller makes the following
representations and warranties as of the date hereof and as of the Closing Date:

(a) The Sellers are duly organized, existing and in good standing under the laws of the
State of Maryland and the Seller’s execution, delivery, and performance of this Agreement
are within the Seller’s corporate powers and have been duly authorized by all necessary
corporate action. The execution and delivery of this Agreement by Seller and the
performance of its obligations hereunder will not (i) conflict with or violate (A) the
organizational documents of Seller, or (B) any provision of any law or regulation to which
Seller is subject, or (ii) conflict with or result in a breach of or constitute a default
(or any event which, with notice or lapse of time, or both, would constitute a default)
under any of the terms, conditions or provisions of any agreement or instrument to which
Seller is a party or by which it is bound or any order or decree applicable to Seller or
result in the creation or imposition of any lien on any of its assets or property. Seller
has obtained all consents, approvals, authorizations or orders of any court or governmental
agency or body, if any, required for the execution, delivery and performance by Seller of
this Agreement.

(b) No Litigation is pending or to Seller’s Knowledge threatened involving (i) any Seller
that relates to any Accounts or (ii) any Seller or its assets that, if adversely determined,
could have an adverse effect on this transaction or the value of Accounts having an
aggregate face amount of $5,000,000 or more or a material adverse effect on any Seller’s
financial condition.

(c) Sellers have not utilized any investment banker or finder in connection with the
transaction contemplated hereby who might be entitled to a fee or commission upon
consummation of the transactions contemplated in this Agreement which might in any way or
amount be the responsibility of the Buyer or be a claim against, or with respect to, any
Accounts.

     3.2 Representation As To Ownership and Assignability.

     Each Seller makes the following representations and warranties as to its
Accounts as of the date hereof and as of the Closing Date:

(a) Seller has good and marketable title to the Accounts, is the sole owner thereof and has
full right to transfer and sell the Account free and clear of any encumbrance, equity, lien,
pledge, charge, claim, security interest, obligation to third party collection agencies or
attorneys.

(b) Seller has the right to assign the Accounts without the consent of any Person and
subject to no continuing duties or restrictions under any purchase agreement to which a
Seller or any predecessor in interest is a party, except for any obligation specifically set
forth in this Agreement.

(c) The Accounts have been originated, and have been maintained, collected and serviced by a
Seller and its predecessors in interest and their respective agents and

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Affiliates, in full compliance with applicable state and federal laws including, without
limitation and where applicable, without limitation, the Truth in Lending Act, the Equal
Credit Opportunity Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting
Act, and the Fair Credit Billing Act.

(d) The cashflow reports delivered by Seller to Purchaser for the period of twelve months
prior to the Cutoff Date accurately reflect the gross cash flow and collection activity with
respect to the Accounts.

(e) All collection agents, servicers, attorneys and other persons who have any claims with
respect to efforts to collect on any Accounts have been paid in full and no such claims,
disputed or undisputed, are outstanding, and no collection agents, servicers, attorneys and
other persons have any right to refuse to release the Accounts to Purchaser free of any lien
or claim, immediately upon Seller’s request.

(f) The Accounts listed in the Diligence File in the “pre-litigation”, “pre-judgment” and
“judgment” categories, respectively, were properly listed in those categories as of the date
of the Diligence File.

(g) That as of the date of the Diligence File, the “statute of limitations models” used by
Sellers in the ordinary course of business indicate that the applicable statute of
limitations period for instituting litigation has not expired for the Accounts listed in the
“pre-litigation”, “pre-judgment” and “judgment” categories of the Diligence File.
Notwithstanding this representation, Buyer agrees that it shall be responsible to determine
the applicable Statute of Limitations for all accounts in the sale.

(h) Seller’s inability to obtain agreements, applications or other media with respect to any
Accounts that are listed in the “pre-litigation” and “pre-judgment” categories of the Asset
Schedule will not have a material adverse affect on Buyer’s ability to collect the portfolio
of Accounts purchased from a Seller.

(i) All Accounts are closed and there are no requirements for future advances of credit or
other performance by Seller.

3.3 Representations Concerning Accounts. With respect to each of its Accounts,
except for those Accounts listed as “Specials”, “Bankrupt” and “Deceased in the Diligence
and Cutoff Files and the file used to calculate and prepare the Closing Statement, each
Seller represents and warrants that to the best of Seller’s Knowledge, as of the Cutoff
Date:

	 	(a)	 	the balance of the Accounts as will be reflected on the Closing Tape is
correct;
	 
	 	(b)	 	the Accounts are valid and duly enforceable in accordance with their
terms;
	 
	 	(c)	 	the debt represented by the Account has not been satisfied and/or the
stated balance on such Account has not been paid;
	 
	 	(d)	 	the Accounts were not created as a result of fraud or forgery such that
all of the Debtors have no liability for such Account;
	 
	 	(e)	 	the Debtor has not been released from liability on the Account;
	 
	 	(f)	 	except as noted in the Diligence File and the Cutoff File used to
calculate and prepare the Closing Statement, the Debtor has not filed bankruptcy
nor have all of the Debtors’ liability relating to the Account been discharged in
bankruptcy; and

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	 	(g)	 	except as noted in the Diligence File and the Cutoff File used to
calculate and prepare the Closing Statement, all of the Debtors are not deceased.

No Seller makes any representations or warranties, express or implied, with respect to any of the
other Accounts other than as specifically set forth in this Section 3.3 and Section 3.2, including
specifically, but not by way of limitation, any representation or warranty regarding any
information in any due diligence file given to and reviewed by Buyer regarding Sellers’ analysis of
whether or not any Account is within any applicable statute of limitation such that legal action to
collect same would be permitted by law.

3.4 Solvency. Each Seller represents and warrants that its sale of Accounts to Buyer and
its obligations under this Agreement:

(a) were not made in contemplation of its insolvency of any Seller;

(b) were not made with the intent to hinder, delay or defraud the respective creditors of
any Seller;

(c) will be recorded in the records of such Seller and such records will be continuously
maintained by that party; and

(d) represents a bona fide and arm’s length transaction undertaken for adequate
consideration in the ordinary course of business.

	3.5	 	Remedies for Breach of Representations Concerning Accounts.

	 	(a)	 	Time Period. Buyer’s sole remedy against Sellers for a breach of any of
the representations listed in Section 3.3 (individually, a “Breach” and
collectively, “Breaches”) shall be as set forth in this Section 3.5(a). Buyer
shall have no remedy for any Breaches to the extent Breaches have occurred that
relate to Accounts having aggregate outstanding balances of $30,000,000.00 (“Breach
Threshold”). Buyer must notify the Seller of Breaches in excess of the Breach
Threshold (any such Breaches being referred to as “Compensable Breaches”) no later
than 120 days from the Closing Date. Seller shall have, at its option, the right
to (i) cure such Compensable Breach in all material respects, (ii) repurchase the
affected Account(s) by paying Buyer the Purchase Price Percentage multiplied by the
outstanding balance of such Account(s) as shown on the Closing Tape. A Notice of
Claim under this Section 3.5 must be delivered by the Buyer to the Seller in
writing and accompanied by the documentation required under Section 3.5(b).
Notwithstanding anything in this Agreement to the contrary, the Buyer’s failure to
provide a Notice of Claim within the applicable time period in accordance with this
Section 3.5(a) and 3.5(b) with respect to any claimed Compensable Breach of Seller
shall terminate and waive any rights Buyer may have to any remedy for such
Compensable Breach under this Agreement. Notwithstanding anything in this
Agreement to the contrary, this Section is not intended to limit Buyer’s rights and
remedies under Section 10.2 with respect to claims and other matters asserted by
third parties.
	 
	 	(b)	 	Form of Notice Required. Buyer shall notify Seller in writing of each Account
that Buyer claims to be a Compensable Breach by Seller as set forth above
(“Notice(s)”). All Notices shall contain the customer’s name and applicable Seller’s
account number and shall be accompanied with at least the following applicable
documentary evidence reasonably satisfactory to the Seller:

Bankruptcies:                               Credit Bureau with non-dismissed bankruptcies, or

Attorney name, case number, and date of filing, or

Copy of actual court papers, or approved third party service

(Banko, Inc.; Experian; Trans Union; or Equifax)

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Deceased:                                    Copy of death certificate, or

Credit bureau indicating date of death, or

Executor or attorney letter with date of death, or

approved third party service (Banko, Inc.; Experian; Trans

Union; or Equifax)

Settled or

Paid in Full:                                    Copy of Seller letter verifying action

Copy of the canceled, final check (front and back)

Fraud:                                              Letter from or to Seller or Seller’s agent

Complaint in writing explaining event

Seller shall make a determination within thirty (30) business days after receipt of
Buyer’s Notice, unless Seller’s delay in responding is caused by or related to
Buyer’s failure to provide Seller with necessary information and documentation
required under this Section 3.4.

	 	(c)	 	Repurchase Price. If the Seller elects to either repurchase the Accounts
or reimburse the Buyer in the amount of the Purchase Price Adjustment as set forth in
Section 3.4(a)(ii), the Seller shall not be obligated to make payment on an Account by
Account basis, but may elect to provide such adjustment in a single payment within 30
days of notification, at Seller’s option. The Seller makes no representation as to the
number of Accounts that may be subject to repurchase pursuant to this section.

	4.	 	REPRESENTATIONS AND WARRANTIES OF BUYER

          Buyer makes the following representations and warranties as of the date hereof and as of
the Closing Date:

	4.1	 	Due Organization; Authorization. Buyer is duly organized, existing and in good
standing as a limited liability company under the laws of the State of Delaware. Buyer has
full authority to execute, deliver and perform this Agreement according to its terms.
	 
	4.2	 	No Conflict. Buyer’s review of Account and Debtor information will not represent a
conflict of interest on the part of Buyer or Buyer’s officers or employees. The execution and
delivery of this Agreement by Buyer and the performance of its obligations hereunder will not
(i) conflict with or violate (A) the organizational documents of Buyer, or (B) any provision
of any law or regulation to which Buyer is subject, or (ii) conflict with or result in a
breach of or constitute a default (or any event which, with notice or lapse of time, or both,
would constitute a default) under any of the terms, conditions or provisions of any agreement
or instrument to which Buyer is a party or by which it is bound or any order or decree
applicable to Buyer or result in the creation or imposition of any lien on any of its assets
or property. Buyer has obtained all consents, approvals, authorizations or orders of any
court or governmental agency or body, if any, required for the execution, delivery and
performance by Buyer of this Agreement.

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	4.3	 	Investigation of Accounts. Buyer is a sophisticated investor and its bid and
decision to purchase the Accounts are based upon its own independent expert evaluations of the
nature, validity, collectibility, enforceability and value of the Accounts. The Buyer has had
sufficient opportunity to complete the independent investigation and examination into the
Accounts that Buyer deems necessary. Buyer enters into this Agreement solely on the basis of
that investigation and Buyer’s own judgment. Buyer has made an independent determination that
the Purchase Price represents the Accounts’ fair and reasonable value. Buyer is not acting in
reliance on any representation by the Sellers, except those representations and warranties
specifically given in Section 3.3.
	 
	4.4	 	Accounts Sold As Is. Buyer acknowledges and agrees that except for the warranties
and representations set forth in Section 3.3 of this Agreement, Sellers have not and do not
represent, warrant or covenant the nature, accuracy, completeness, enforceability or validity
of any of the Accounts and any supporting documentation to the extent provided by Sellers to
Buyer either before or after the date of this Agreement; specifically including, but not by
way of limitation, any information in any due diligence file given to or reviewed by Buyer
regarding Sellers analysis of whether or not any Account is within any applicable statute of
limitation such that legal action to collect same would be permitted by law] and, subject to
the terms of this Agreement, all documentation, information, analysis and/or correspondence,
if any, which is or may be sold, transferred, assigned and conveyed to Buyer with respect to
any and all Accounts are sold, transferred, assigned and conveyed to Buyer on an “AS IS, WHERE
IS” basis, WITH ALL FAULTS.
	 
	4.5	 	No Finders. Buyer has not utilized any investment banker or finder in connection
with the transaction contemplated hereby who might be entitled to a fee or commission upon
consummation of the transactions contemplated in this Agreement which might in any way or
amount be the responsibility of the Sellers.
	 
	5.	 	CONDITIONS PRECEDENT TO PURCHASE AND SALE OF ACCOUNTS
	 
	5.1	 	Representations and Warranties. The representations and warranties of the Sellers
and Buyer in this Agreement will be true and correct in all material respects as of the
Closing Date.
	 
	5.2	 	Compliance with Covenants and Agreements. Buyer and the Sellers will have complied
in all material respects with each of their respective covenants and agreements in this
Agreement on or before the Closing Date.
	 
	5.3	 	No Violation of Law. Consummation by Buyer and the Sellers of the transactions
contemplated by this Agreement and performance of this Agreement will not violate any order of
any court or governmental body having competent jurisdiction or any law or regulation that
applies to Buyer or the Sellers.

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	5.4	 	Approvals and Notices. All required approvals, consents and other actions by, and
notices to and filings with, any governmental authority or any other person or entity will
have been obtained or made. If Buyer is a corporation, Buyer will have delivered to the
Sellers a certificate from Buyer’s corporate secretary, or other documentation satisfactory to
the Sellers and its counsel, certifying that Buyer’s board of directors has resolved or
consented to Buyer entering into this Agreement and consummating the transactions contemplated
hereby. Seller shall have delivered secretary’s certificates together with certified charter
documents, resolutions and lists of incumbent officers as well as an opinion of outside
counsel, all in form and substance satisfactory to Buyer.
	 
	5.5	 	Material Change In Financing Market. No Material Adverse Change or Force Majeur has
occurred prior to February 24, 2007 which would cause Buyer to be unable to pay the remaining
amounts owed at the time of Closing. For purposes of this paragraph, “Material Adverse
Change” means any closing of the United States securities markets or banks, or any banking
moratorium, or any change, effect, event, occurrence or development which individually or in
the aggregate would reasonably be expected to be materially adverse to the United States
banking, financial or securities markets including but not limited to any change, effect,
event, occurrence or development (1) related to or arising from the commencement, occurrence,
continuation or intensification of any war, armed hostilities or acts of terrorism, or (2)
related to or arising from changes in laws, rules or regulations of general applicability or
applicable to the industry in which the parties operate or interpretations thereof by any
governmental entity. Force Majeure means acts of God or of the public enemy, fire, flood,
storm, explosion, earthquake, riots, wars, hostilities, civil commotion, strikes,
interruption of supply, inability to obtain fuel, power, raw materials or freight or
transportation services, equipment or transmission failure or damage reasonably beyond Buyer’s
control, or other cause reasonably beyond Buyer’s control.
	 
	5.6	 	Closing Scrub. Sellers shall have performed a “Banco” or similar bankruptcy “scrub”
with respect to the Accounts within seven (7) days of the Cutoff Date and shall have properly
classified on the Cutoff File all Accounts that are reported to have Debtors that are subject
to bankruptcy proceedings.
	 
	6.	 	RIGHTS AND OBLIGATIONS OF THE SELLERS AND BUYER
	 
	6.1	 	Notice to Debtors, Etc. At Buyer’s reasonable request, the Sellers will provide a
form letter, in form and substance satisfactory to Buyer, that Buyer may, at Buyers sole
expense, reproduce, address and send to a Debtor to confirm that the Sellers sold the Debtor’s
Account to Buyer. The Sellers shall have the right to review and approve, which approval will
not be unreasonably withheld, all written notices sent by the Buyer to the Debtor informing
the Debtor of the transfer of the Debtor’s Account to the Buyer. Seller shall also, promptly
upon Buyer’s request, send notices to each attorney, collection company servicer or other
person collecting any Account of the transfer of the Debtor’s Account to Buyer. The Buyer
shall not discredit or impugn the reputation of any Seller

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	 	 	in any correspondence sent to the Debtor in connection with the Accounts purchased by the
Buyer.

	6.2	 	Retrieval of Account Documents. After the Closing Date, the Sellers will furnish
Buyer at no charge with any Account Documents in Sellers’ possession that Buyer reasonably
requests within three (3) years of the Closing Date. Sellers will also use commercially
reasonable efforts to obtain from prior owners and/or the credit originator directly any
Account Documents that Buyer requests and which Sellers are entitled to obtain, at Buyer’s
sole expense which will be equal to the actual out of pocket cost(s) incurred by the Sellers
in obtaining the Account Documents. Except in instances of litigation unrelated to collection
activity or accounts that are within the statute of limitation at the time requested, the
Sellers will have no obligation to provide Buyer with or cooperate with the Buyer in obtaining
Account Documents after three (3) years after the Closing Date.. Buyer’s request for an
Account Document must be presented to Sellers on a form provided by Sellers and must be made
with sufficient specificity to enable the Sellers to locate the Account Document. The Sellers
will use reasonable diligence to provide the Account Document. Notwithstanding any other
provision of this Agreement, the failure of the Sellers to provide an Account Document
requested by Buyer will not be a breach of this Agreement.
	 
	 	 	Buyer may, in addition or in the alternative to its request for Account Documents, request
an Affidavit from Sellers, in the form shown in Exhibit 3, indicating the date the Account
was opened or acquired, the Account number and the balance existing as of a specified date
to the extent that said information is available to the Sellers. The Sellers will provide a
total number of affidavits equal to ten percent (10%) of the total accounts purchased.
Sellers shall have three (3) weeks to complete the affidavits requested unless the requests
exceed 10,000 affidavits in such case Sellers shall have a reasonable period of time to
complete the request. Sellers shall agree to cooperate with Buyer to complete affidavit
requests in a shorter time on an occasional basis. Requests shall contain sufficient
information about the relevant accounts to allow Sellers or its representatives to locate
the Account information to complete the affidavits.
	 
	6.3	 	Credit Bureau Reporting. The Buyer may report its ownership of the Accounts to any
of the credit reporting agencies provided that the Buyer agrees to and does comply with the
Fair Credit Reporting Act (FCRA) and any other laws or regulations governing credit agency
reporting. Sellers warrant and represent that the information provided to Buyer regarding
charge-off and last payment date information is accurate, true and correct to the best of each
Sellers Knowledge based upon information provided to each such Seller at the time of their
purchase.
	 
	6.4	 	Compliance with Law. With respect to any Account, Buyer or Buyer’s agent will at all
times: (a) comply with all state and federal laws applicable to debt collection, including,
without limitation, the Consumer Credit Protection Act, the Fair Credit Reporting Act and the
Fair Debt Collection Practices Act, and (b) for any Account where the statute of limitations
has run, not falsely represent that a lawsuit will be filed if the Debtor does not pay.

11

 

	6.5	 	Post Closing Account Review. Prior to initiating any contact, whether verbal,
written or electronic, with a Debtor, Buyer shall review the portfolio through a competent
third party vendor (e.g., Banko, Inc.) or other process to discover whether any Accounts
included are involved in an open bankruptcy case or have been discharged in bankruptcy. Buyer
shall immediately cease any collection efforts upon receiving notice, whether from the Debtor,
the Sellers, or a third party on behalf of the Debtor, that a Debtor has discharged the debt
in bankruptcy, and shall not re-commence collection activity until Buyer has conducted a
reasonable investigation into the Debtor’s claim and determined, based upon reasonable
evidence, that the Debtor’s claim is unfounded.
	 
	6.6	 	Notice of Claims. Buyer will use its reasonable efforts to notify the Sellers
promptly of any claim or threatened claim against the Sellers or any claim or threatened claim
that may affect the Sellers, that is discovered by Buyer. Each Seller will use its reasonable
efforts to promptly notify the Buyer of (i) any notice it receives that an Account is subject
to Bankruptcy protection and (ii) any claim or threatened claim against Buyer, or that relates
to any Account or any claim or threatened claim that may affect Buyer or relate to any
Account.
	 
	6.7	 	Seller As Witness. If Buyer, upon reasonable written notice to a Seller, requests or
subpoenas an officer or employee of Seller or its predecessors in interest, Affiliates or
their respective agents to appear at a trial, hearing or deposition concerning an Account to
testify about the Account, Seller shall use commercially reasonable efforts to ensure the
requested employee appears at such hearing or deposition and will be available for
consultation with Buyer. Buyer will pay Seller for the officer’s or employee’s time in
traveling to, attending and testifying at the trial, hearing or deposition, whether or not the
officer or employee is called as a witness, at the hourly rate equivalent of such officer or
employee. Buyer will also reimburse Seller for the officer’s or employee’s reasonable
out-of-pocket, travel-related expenses.
	 
	6.8	 	File UCC-1. Upon Closing, Buyer shall be permitted to file UCC-1 financing
statements in appropriate jurisdictions against Seller describing this transaction relating to
this transfer of any Accounts.
	 
	6.9	 	Prior Purchase Agreements If requested by Buyer, Sellers shall promptly deliver to
Buyer all prior purchase and sale agreements relating to any Accounts (“Prior Purchase
Agreements”), bills of sale, UCC-1s and other transfer documents that relate to any Accounts..
Sellers shall retain all of those documents that are in a Seller’s possession or control for
at least seven (7) years from the Closing. Sellers hereby assign to Buyer all rights to be
indemnified, be defended and be held harmless, and all rights to obtain documents, media and
other information, with respect to any Accounts under any Prior Purchase Agreement to which
any Seller is a party or has rights, provided however that any such right is assignable and
Buyer may only exercise any such right if Sellers fail to exercise such right after reasonable
request from Buyer.

12

 

	7.	 	USE OF SELLERS’ OR PREDECESSOR’S NAME
	 
	7.1	 	Use of Names. The Buyer will not use or refer to the Sellers’ names, the name of any
prior owner of the Account or of the original creditor of the Account, except to reference
same for purposes of identifying an Account in communications with the Account’s Debtor, in
collecting amounts outstanding on the Account, and in conducting litigation or participating
in a bankruptcy proceeding with respect to the Account. Buyer shall not represent that there
is an affiliation or agency relationship between Buyer and any Seller, nor shall Buyer state
or represent in any way that it is acting for or on behalf of any Seller. Buyer shall not
misrepresent, mislead or otherwise fail to adequately disclose its ownership of the Accounts.
	 
	7.2	 	Breach. Buyer’s breach of this Article 7 will result in actual and substantial
damages to the Sellers, the amount of which will be difficult to ascertain with precision.
Therefore, if Buyer breaches this Article 7, Buyer will pay the Sellers any actual damages and
attorney’s fees incurred by Sellers caused by Buyer’s breach of this provision.
	 
	8.	 	THE SELLERS’ RIGHT TO REPURCHASE ACCOUNTS
	 
	8.1	 	Accounts Affected. Sellers shall have the right to repurchase any Accounts that
have not been paid in full, released or compromised by Buyer, if the Sellers determine that
there is a pending or threatened suit, arbitration, bankruptcy proceeding or other legal
proceeding or investigation relating to an Account or a Debtor naming any one or more of the
Sellers or otherwise involving the Sellers’ interest therein in a manner unacceptable to the
Sellers, or the Sellers otherwise determine, in its/their sole discretion, that such matter
cannot be resolved and/or that the Sellers’ interest therein cannot be adequately protected
without the Sellers owning such Account.
	 
	8.2	 	Right to Repurchase.

	 	(a)	 	Upon notice to Buyer, a Seller may repurchase any Account described in Section
8.1 by repaying to Buyer an amount equal to the product of the outstanding balance of
such Account and the Purchase Price Percentage and, if requested by Buyer, Sellers
shall promptly provide to Buyer a detailed written explanation of Sellers’ reason for
any such repurchase..
	 
	 	(b)	 	Upon delivering to the Seller a full accounting of the Account, Buyer may
retain any money or value that Buyer collected or received on the Account before
Buyer’s receipt of the Seller’s notice electing to repurchase the Account; provided
that, after Buyer has received the Seller’s notice, Buyer will immediately cease
releasing or compromising the Account.

	9.	 	RIGHT OF RESALE

13

 

	9.1	 	Sale or Transfer to a Third Party. Buyer may resell or transfer the ownership of any
Account to any third party, including the transfer of Debtor information (such as names and
addresses) to any third party, (each referred to as “Third Party Buyer”); provided, however,
that Buyer must conduct commercially reasonable and prudent due diligence of the Third Party
Buyer to assure with reasonable certainty that said Third Party Buyer will be able to and has
agreed to comply with the relevant terms and conditions of this Agreement. Buyer shall
defend, indemnify and hold harmless Sellers from any and all causes of action, claims,
expenses or judgments incurred by Sellers for which Buyer’s Third Party Buyer or any buyer of
Third Party Buyer (collectively referred to herein as “Downstream Buyer”) is solely or
partially responsible. Buyer shall require all Downstream Buyers to agree to be bound to all
of the Buyer’s obligations and limitations or remedies, and to acknowledge all of Sellers’
rights set forth in this Agreement. All Downstream Buyers’ requests for documentation pursuant
to Section 6.2 must be made to Sellers through Buyer, unless Sellers otherwise agree in
writing. Nothing in this Section 9.1 shall modify the indemnification provisions between
Sellers and Buyer as set forth in Article 10 of this Agreement.
	 
	9.2	 	Exceptions. Notwithstanding the terms and conditions of Sections 9.1 and 12.5,
Buyer may pledge the Accounts and its rights under this Agreement as collateral for a loan and
for the purpose of obtaining financing secured by such Accounts as long as Buyer remains bound
by, and any purchaser remains subject to, the relevant obligations, terms and conditions of
this Agreement. Buyer shall remain obligated under, and shall retain all liabilities related
to, this Agreement if it transfers, hypothecates or pledges all or any of the Assets or its
rights hereunder.
	 
	10.	 	INDEMNIFICATION
	 
	10.1	 	Indemnification by Buyer. Buyer hereby agrees to indemnify, defend, and hold
harmless the Sellers, and their respective shareholders, subsidiaries and Affiliates, and all
of their respective officers, directors and employees, attorneys and collection agencies, from
and against any and all claims, damages, losses, costs or expenses (including any and all
reasonable attorneys’ and experts’ fees), asserted by a third party (collectively, “Losses”)
that Sellers might suffer, incur or be subjected to by reason of any legal action, proceeding,
arbitration or other claim, whether commenced or threatened, whether or not well grounded and
by whomsoever concerned, based upon any breach of this Agreement, or any other act or omission
by Buyer and its Affiliates, and their respective its officers, directors, agents, employees,
representatives or any Downstream Buyers with respect to any Account or any party obligated on
an Account after the Closing Date; provided, however, that, (i) the Sellers notify Buyer
within a reasonable period of time of any such Losses (provided that any failure to notify the
Buyer within such reasonable period of time shall not affect the obligations of the Buyer to
indemnify the Sellers hereunder unless the Buyer is prejudiced by such failure), (ii) such
Losses are not primarily attributable to any negligent act or omission by any Sellers, their
parent, Affiliates or subsidiaries, predecessors in interest or any of the employees or agents
of any of the

14

 

	 	 	following, and (iii) the Sellers provides Buyer with information that is available to the
Sellers and is reasonably necessary for Buyer to prosecute its defense of the action.
	 
	 	 	Buyer shall bear all expenses in connection with the defense and/or settlement of any
such claim or suit. The Sellers shall have the right, at its own expense, to participate in
the defense of any claim against which it is indemnified and which as been assumed by the
obligation or indemnity hereunder; Buyer, in the defense of any such claim, except with the
written consent of the Sellers, shall not consent to entry of any judgment or enter into any
settlement that either: (a) does not include, as an unconditional term, the grant by the
claimant to the Sellers of a release of all liabilities in respect of such claims, or (b)
otherwise adversely affects the rights of the Sellers.

	10.2	 	Indemnification by Seller. Subject to the provisions of Section 3.5, Sellers
jointly and severally hereby agree to indemnify, defend, and hold harmless the Buyer, its
parents, subsidiaries and Affiliates and predecessors in interest, and their respective
officers, directors and employees, from and against any and all Losses, whether asserted by a
third party or otherwise that Buyer might suffer, incur or be subjected to by reason of any
legal action, proceeding, arbitration or other claim, whether commenced or threatened, whether
or not well grounded and by whomsoever concerned, based upon any breach of this Agreement, or
any other act or omission by any Sellers, its Affiliates and predecessors in interest and
their respective officers, directors, agents, employees, or representatives with respect to
any Account or any party obligated on an Account prior to the Closing Date, provided, however,
that (i) the Buyer notifies Sellers within a reasonable time of any such Losses (provided that
any failure to notify the Sellers within such reasonable period of time shall not affect the
obligations of the Sellers to indemnify the Buyer hereunder unless the Sellers are prejudiced
by such failure), (ii) such Losses are not primarily attributable to any negligent act or
omission by the Buyer, its parent, Affiliates, subsidiaries, transferees, contractors, agents
or any of their employees or agent and (iii) the Buyer provides Sellers with information that
is available to the Buyer and is reasonably necessary for Sellers to prosecute its defense of
the action. Notwithstanding the foregoing, Sellers are not responsible for any breach of the
representation in Section 3.2(c) with respect to the origination or predecessors in interest
of any Account, except to the extent that a Seller has any right to be indemnified, defended
or held harmless for such matters.
	 
	 	 	Sellers shall bear all expenses in connection with the defense and/or settlement of any such
claim or suit. The Buyer shall have the right, at its own expense, to participate in the
defense of any claim against which it is indemnified and the defense of which has been
assumed by the Sellers’ obligation or indemnity hereunder. Sellers, in the defense of any
such claim, except with the written consent of the Buyer, shall not consent to entry of any
judgment or enter into any settlement that either, (a) does not include, as an unconditional
term, the grant by the claimant to the Buyer of a release of all liabilities in respect of
such claims, or (b) otherwise adversely affects the rights of the Buyer.
	 
	10.3	 	Survival. The representations and warranties of the Sellers set forth in Section 3.3
shall survive the Closing Date for a period of 120 days thereafter, and all other
representations and warranties of the Buyer and the Sellers shall survive the Closing Date
until expiration of the applicable statute of limitations. The covenants and agreements of
each party

15

 

	 	 	hereunder shall survive in accordance with their terms, or, if not specified, until
expiration of the applicable statute of limitations.

	10.4	 	Limitation of Liability. Notwithstanding anything to the contrary herein, Sellers
shall not be liable in respect of any Losses arising from any breach of the representations
and warranties set forth in this Agreement unless and until the aggregate cumulative amount of
Losses claimed hereunder exceeds $100,000.00 (the “Deductible”), in which case Sellers shall
be liable only for such excess over the Deductible.
	 
	10.5	 	Continuing Insurance. Sellers agree to maintain insurance after Closing for a period
of 3 years at Seller’s current insurance levels as of the Cutoff date and will specifically
identify Buyer and its affiliates and successors and assigns as a “Loss Payee” and provide
evidence of compliance with this provision as and when Buyer shall reasonably request..
	 
	10.6	 	Further Assurances. On and after the Closing Date, Sellers shall (i) give such
further assurances to Buyer and shall execute, acknowledge and deliver all such
acknowledgments, assignments, instruments, pleadings and notices, and take such further
action, as Buyer may reasonably request to effectively vest in Purchaser the full legal and
equitable title to, and the right to collect and otherwise have control of, the Accounts and
the proceeds thereof (including without limitation, judgments and collections), free, clear
and unencumbered of liens, claims and other restrictions, and to effectuate the purposes of
this Agreement; and (ii) use its best efforts to assist Buyer in the orderly transition of the
Accounts. Should any Seller fail to take any such action after reasonable notice from Buyer,
(without limiting any other rights and remedies available to Buyer) Buyer shall have the right
to take such action whether in Buyer’s own name or in a Seller’s name pursuant to the Power of
Attorney provided by such Seller to Buyer.
	 
	10.7	 	Post-Closing Assurance. For two years after the Closing Date, Sellers shall (i)
continue their existence, solvency and good standing and (ii) cause Great Seneca Financial
Corporation, Platinum Financial Services Corporation and Centurion Capital Corporation, on a
combined basis, to maintain a net worth of at least $10,000,000, provided that to the extent
the net worth is less than $10,000,000 Sellers may provide a letter of credit in the amount of
that deficiency from a bank and in form and substance reasonably acceptable to Buyer to secure
all obligations of Sellers under this Agreement or a guaranty from another entity reasonably
acceptable to Buyer. Sellers shall upon request of Buyers provide evidence of compliance with
this covenant in form reasonably acceptable to Buyer.

16

 

	11.	 	CONFIDENTIALITY
	 
	11.1	 	Confidential Information. From and after the execution of this Agreement, and
except as required by applicable law, Buyer hereto shall keep confidential, and shall use
reasonable efforts to cause their respective officers, directors, employees and agents to keep
confidential, any and all information obtained from the Sellers concerning the assets,
properties and business of the Sellers, and shall not use such confidential information for
any purpose other than those contemplated by this Agreement; provided, however, that Buyer
shall not be subject to the obligations set forth in the preceding sentence with respect to
any such information provided to it by the Sellers which either (i) was in Buyer’s possession
at the time of the Sellers’ disclosure, (ii) was in the public domain at the time of the
Sellers’ disclosure, or subsequently enters the public domain through no act or failure to act
on the part of the Sellers, or (iii) is lawfully obtained by Buyer from a third party.
Nothing in this Agreement shall be construed to limit Buyer’s obligations under any other
confidentiality agreement entered into between Buyer and the Sellers.
	 
	11.2	 	Public Announcement. Neither Buyer nor the Sellers shall make any public
announcement of this Agreement or provide any information concerning this Agreement or the
subject matter hereof to any representative of the news media without the prior written
approval of the other party. Except as required by law, the parties will not respond to any
inquiry from public, governmental, or administrative authorities concerning this Agreement
without prior consultation and coordination with each other.
	 
	12.	 	GENERAL PROVISIONS
	 
	12.1	 	Applicable Law. The laws of the State of Delaware shall govern the enforcement
and interpretation of this Agreement and the rights, duties and obligations of the parties
hereto.
	 
	12.2	 	WAIVER OF JURY TRIAL. NOTWITHSTANDING ANYTHING STATED HEREIN, IF EITHER PARTY BRINGS
ANY ACTION AGAINST THE OTHER PARTY, WHETHER AT LAW OR EQUITY, REGARDING THE OTHER PARTY’S
PERFORMANCE UNDER THIS AGREEMENT OR BRINGS ANY ACTION CONNECTED IN ANY WAY WITH THIS
AGREEMENT, THE PARTIES AGREE TO WAIVE TRIAL BY JURY.
	 
	12.3	 	Notices. All notices or other documents required to be given pursuant to this
Agreement shall be effective when received and shall be sufficient if given in writing, hand
delivered, sent by overnight air courier or certified United States mail, return receipt
requested, addressed as follows:

	 	 	 	 	 
	 

	 	If to Sellers:
	 	Thomas A. Henning, Esq.
	 

	 	 	 	General Counsel
	 

	 	 	 	Personal & Confidential

17

 

	 	 	 	 	 
	 

	 	 	 	702 King Farm Blvd. 5th Floor
	 

	 	 	 	Rockville, Maryland 20850

	 	 	 	 	 
	 

	 	If to Buyer:
	 	PALISADES ACQUISITION XV, LLC
	 

	 	 	 	210 Sylvan Avenue
	 

	 	 	 	Englewood Cliffs, New Jersey 07068

	 	 	 	 	 
	 

	 	With a copy to:
	 	Lowenstein Sandler PC
	 

	 	 	 	65 Livingston Avenue
	 

	 	 	 	Roseland, New Jersey 07068
	 

	 	 	 	Attention: Daniel J. Barkin, Esq.

The parties hereto may at any time change the name and addresses of persons to whom
must be sent all notices or other documents required to be given under this Agreement by
giving written notice to the other party.

	12.4	 	Binding Nature of Agreement. This Agreement is and shall be binding upon and
inure to the benefit of the parties hereto, and their respective legal representatives,
successors and permitted assigns.
	 
	12.5	 	Assignment. Neither party may assign this Agreement or any of its rights in this
Agreement without the other’s prior written consent, except as provided in Article 9 above.
Notwithstanding the foregoing sentence, Sellers may assign its rights and obligations under
this Agreement to any of its affiliates, subsidiaries, or parent corporations without
obtaining Buyer’s permission or consent.
	 
	12.6	 	Expenses. Except as otherwise expressly provided in this Agreement, Buyer and the
Sellers will each bear its own out-of-pocket expenses in connection with the transaction
contemplated by this Agreement.
	 
	12.7	 	Entire Agreement. This Agreement and the Exhibits hereto embody the entire agreement
and understanding between the parties with respect to the subject matter hereof and supersede
all prior agreements and understandings relating to such subject matter. The parties make no
representations or warranties to each other, except as contained in this Agreement or in the
accompanying Exhibit or the certificates or other closing documents delivered in accordance
with this Agreement. All prior representations and statements made by any party or its
representatives, whether orally or in writing, are deemed to have been merged into this
Agreement, except as otherwise stated in this Agreement.
	 
	12.8	 	Amendment. Neither this Agreement nor any of its provisions may be changed, waived,
discharged or terminated orally. Any change, waiver, discharge or termination may be effected
only by a writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
	 
	12.9	 	Severability. If any one or more of the provisions of this Agreement, for any
reason, is held to be invalid, illegal or unenforceability, the invalidity, illegality or
unenforceability

18

 

	 	 	will not affect any other provision of this Agreement, and this Agreement will be construed
without the invalid, illegal or unenforceable provision.

	12.10	 	Waiver. Except as required under Section 3.4, no failure of any party to take any
action or assert any right hereunder shall be deemed a waiver of such right in the event of
the continuation or repetition of the circumstances giving rise to such right.
	 
	12.11	 	Headings and Sections. Headings are for reference only, and will not affect the
interpretation or meaning of any provision of this Agreement. All references to Section
numbers herein shall refer to Sections of this Agreement.
	 
	12.12	 	Counterparts. This Agreement may be signed in one or more counterparts, all of
which taken together will be deemed one original.
	 
	12.13	 	Joint and Several Liability. SELLERS SHALL BE JOINTLY AND SEVERALLY LIABLE FOR ALL
OF ANY OBLIGATIONS OF ANY SELLER(S) UNDER THIS AGREEMENT.
	 
	13.	 	TERMINATION AND DEFAULT
	 
	13.1.	 	Termination. If Sellers are in default hereunder for a material breach of one or more of
the material terms or conditions of this Agreement and such failure continues for more than
ten (10) business days after receipt of written notice, Buyer may, provided that it is not
itself in material breach of one or more of the material terms of this Agreement, (i)
terminate this Agreement by written notice delivered to Sellers, in which event Buyer shall be
entitled to full return of the Deposit, or (ii) waive such defaults and proceed to Closing.
If Buyer defaults hereunder, and such default is not cured within ten (10) days after written
notice thereof from Sellers, then Sellers shall may terminate this Agreement and retain the
Deposit as damages; however, Buyer acknowledges that Sellers’ actual damages resulting from
such breach would be uncertain and not readily ascertainable and agrees that the amount of the
Deposit is a reasonable estimate of the lower end of such damages and that nothing in this
Section 13.1 shall prevent the Sellers from seeking damages in excess of the Deposit. In the
event of a termination of this Agreement as provided in Section 13.1, this Agreement will be
of no further force or effect and there will be no liability on the part of any party with
respect thereto, except that the provisions of Sections 10, 11, 12 and 13 will survive any
such termination and nothing herein shall relieve any party from liability for any breach of
this Agreement occurring prior to such termination.

19

 

     IN WITNESS WHEREOF, the parties have executed this Agreement by their duly authorized
officers as of the date first written above.

BUYER:

PALISADES ACQUISITION XV, LLC

	 	 	 	 	 
	By:

	 	/s/ Mitchell Cohen	 	 
	 

	 	 

                    (Signature)
	 	 
	Name:

	 	Mitchell Cohen	 	 
	Title:

	 	Manager	 	 

SELLERS:

GREAT SENECA FINANCIAL CORPORATION,

PLATINUM FINANCIAL SERVICES

CORPORATION, MONARCH CAPITAL

CORPORATION, COLONIAL CREDIT

CORPORATION, CENTURION CAPITAL

CORPORATION, SAGE FINANCIAL

CORPORATION and HAWKER FINANCIAL

CORPORATION

	 	 	 	 	 
	By:

	 	/s/ Daniel J. Varner	 	 
	 

	 	 

                    (Signature)
	 	 
	Name:

	 	Daniel J. Varner	 	 
	Title:

	 	President	 	 

20exv10w1

 

Exhibit 10.1

STEELCASE INC.

EXECUTIVE SEVERANCE PLAN

          The Company hereby adopts, as of the Effective Date, the Steelcase Inc. Executive Severance
Plan for the benefit of certain employees of the Company and its Affiliates, on the terms and
conditions stated herein. All capitalized terms used herein are defined in Section 1 hereof. The
Plan, as set forth herein, is intended to help retain qualified employees, maintain a stable work
environment and provide economic security to certain employees of the Company and its Affiliates in
the event of certain terminations of employment, including terminations following a Change in
Control. The Plan is intended to constitute a plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly compensated employees
for purposes of ERISA.

SECTION 1. DEFINITIONS. As used herein:

          SECTION 1.1 “Act” shall mean the Securities Exchange Act of 1934, as amended.

          SECTION 1.2 “Affiliate” shall have the meaning set forth in Rule 12b-2 of the General
Rules and Regulations of the Act.

          SECTION 1.3 “Auditor” means the Company’s independent registered public accounting
firm immediately prior to the Change in Control.

          SECTION 1.4 “Base Salary” means the annual base salary or wages (excluding bonuses,
commissions, premium pay, and similar compensation) immediately prior to the Severance Date
(without regard to any reduction therein which constitutes Good Reason, if applicable).

          SECTION 1.5 “Beneficial Owner” or “Beneficial Ownership” shall have the
meaning set forth in Rule 13d-3 of the General Rules and Regulations of the Act.

          SECTION 1.6 “Board” means the Board of Directors of the Company, or any successor
thereto.

          SECTION 1.7 “Cause” means (i) the willful and continued failure of the Eligible
Employee to perform substantially the Eligible Employee’s duties with the Company or the Affiliate
then employing the Eligible Employee (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance is delivered to the
Eligible Employee by the Company or the Affiliate that specifically identifies the alleged manner
in which the Eligible Employee has not substantially performed the Eligible Employee’s duties, or
(ii) the willful engaging by the Eligible Employee in illegal conduct or gross misconduct that is
materially and demonstrably injurious to the Company. For purposes of this provision, no act or
failure to act, on the part of the Eligible Employee, shall be considered “willful”

1

 

unless it is done, or omitted to be done, by the Eligible Employee in bad faith or without
reasonable belief that the Eligible Employee’s action or omission was in the best interests of the
Company or the Affiliate then employing the Eligible Employee.

          SECTION 1.8 “Change in Control” of the Company shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:

	 	(a)	 	any Person (other than any Initial Holder or Permitted
Transferee) (i) is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing thirty percent (30%) or more of the
combined voting power of the Company’s then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in connection with a
transaction described in clause (i) of paragraph (c) below, and (ii) the
combined voting power of the securities of the Company that are Beneficially
Owned by such Person exceeds the combined voting power of the securities of
the Company that are Beneficially Owned by all Initial Holders and Permitted
Transferees at the time of such acquisition by such Person or at any time
thereafter; or
	 
	 	(b)	 	the following individuals cease for any reason to constitute
a majority of the number of Directors then serving: individuals who, on the
date hereof, constitute the Board and any new Director (other than a Director
whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of Directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company’s shareholders was approved or recommended by a vote of at least
two-thirds (2/3) of the Directors then still in office who either were
Directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
	 
	 	(c)	 	there is consummated a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with or involving any
other corporation, other than (i) a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or any parent thereto), at
least fifty-five percent (55%) of the combined voting power of the securities
of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person (other than an Initial Holder or

2

 

	 	 	 	Permitted Transferee) is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly from
the Company or its Affiliates) representing thirty percent (30%) or more
of the combined voting power of the Company’s then outstanding securities;
or
	 
	 	(d)	 	the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or substantially all of the
Company’s assets, other than a sale or disposition by the Company of all or
substantially all of the Company’s assets to an entity, at least fifty-five
percent (55%) of the combined voting power of the voting securities of which
are owned by shareholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.

However, in no event shall a Change in Control be deemed to have occurred, with respect to
an Eligible Employee, if the Eligible Employee is part of a purchasing group which
consummates the Change in Control transaction. An Eligible Employee shall be deemed “part
of a purchasing group” for purposes of the preceding sentence if the Eligible Employee is
an equity participant in the purchasing company or group (except for: (i) passive ownership
of less than three percent (3%) of the stock of the purchasing company; or (ii) ownership
of equity participant in the purchasing company or group which is otherwise not
significant, as determined prior to the Change in Control by a majority of the non-employee
continuing Directors).

Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated transactions
immediately following which the record holders of the common stock of the Company
immediately prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership, directly or indirectly, in an entity which
owns all or substantially all of the assets of the Company immediately following such
transaction or series of transactions.

          SECTION 1.9 “CIC LT Bonus” shall be the amount equal to the Eligible Employee’s bonus
at target under the long-term component of the MIP (or any successor plan thereto) with respect to
the Company’s performance during the fiscal year in which the Severance Date occurs, pro-rated for
the period of the Eligible Employee’s employment with the Company or an Affiliate during the fiscal
year in which the Severance Date occurs; provided, that the CIC LT Bonus will be reduced by
an amount relating to the bonus that has already been paid for the fiscal year in which the
Severance Date occurs under the long-term component of the MIP, or any successor plan thereto.

3

 

          SECTION 1.10 “CIC Pro Rata Bonus” shall be the amount equal to the Eligible Employee’s
Target Bonus, pro-rated for the period of the Eligible Employee’s employment with the Company or an
Affiliate during the fiscal year in which the Severance Date occurs; provided, that the CIC
Pro Rata Bonus will be reduced by an amount relating to the bonus that has already been paid for
the fiscal year in which the Severance Date occurs under the annual component of the MIP, or any
successor plan thereto.

          SECTION 1.11 “CIC SERP Benefit” means the present value of a Severed Employee’s
benefit determined under the terms of the SERP, as if the Severed Employee had met the conditions
for Normal Retirement (as such term is defined in the SERP) or Early Retirement (as such term is
defined in the SERP), with the following modifications:

(a) the Severed Employee’s “Vested Percentage” (as such term is used in Section 5 of
the SERP) shall be 100%;

(b) such benefit, as modified by clause (a) above, multiplied by the following
fraction:

(1) the numerator of which is the Severed Employee’s sum of age and years of
service (as determined for purposes of the Steelcase Inc. Retirement Plan and
hereinafter referred to as “Points”) at the Severance Date after adjustment under
clause (c) below; and

(2) the denominator of which is the lesser of (A) 80 or (B) the number of Points
the Severed Employee would have accumulated by continuing in the employment of
the Company to age 65.

Notwithstanding subclauses (1) and (2) above, the fraction will be set to 1 for any
Severed Employee who has either attained age 65 or accumulated 80 Points as of the
Severance Date (inclusive of the adjustment in clause (c) below);

(c) the calculation of the Severed Employees’ Points shall be adjusted by adding six
(6) Points to the total Points as of the Severance Date of a Level 1 Employee and by
adding four (4) Points as of the Severance Date of a Level 2 Employee;

and assuming no pre-retirement mortality and using an interest rate equal to the pre-Change in
Control financial accounting discount rate (Financial Accounting Standard No 87, and its
successors) for the SERP effective for the fiscal year in which the Change in Control occurs and
such discount rate shall be based on the cash-flow matching model utilizing the Citigroup Above
Median Pension Curve.

          SECTION 1.12 “CIC Severance” means the termination of an Eligible Employee’s
employment with the Company or an Affiliate on or within two years

4

 

following the date of a Change in Control (i) by the Company or an Affiliate other than for
Cause or (ii) by the Eligible Employee for Good Reason. Notwithstanding the foregoing, an Eligible
Employee will not be considered to have incurred a CIC Severance if his employment is discontinued
by reason of the Eligible Employee’s death or a physical or mental condition causing such Eligible
Employee’s inability to substantially perform his duties with the Company or the Affiliate then
employing the Eligible Employee, if such condition entitles him to benefits under any long-term
disability income policy or program of the Company or an Affiliate.

          SECTION 1.13 “CIC Severance Multiplier” means (i) with respect to each Level 1
Employee, 3 and (ii) with respect to each Level 2 Employee, 2.

          SECTION 1.14 “CIC Severance Pay” means the payment determined pursuant to Section 2.2
hereof.

          SECTION 1.15 “Code” means the Internal Revenue Code of 1986, as it may be amended from
time to time.

          SECTION 1.16 “Company” means Steelcase Inc. and (except for determining whether a
Change in Control has occurred) any successors thereto.

          SECTION 1.17 “Compensation Committee” means the compensation committee of the Board,
or any successor thereto.

          SECTION 1.18 “Director” means any individual who is a member of the Board.

          SECTION 1.19 “Effective Date” means March 1, 2007.

          SECTION 1.20 “Eligible Employee” means any Level 1 Employee or Level 2 Employee, as
designated by the Plan Administrator from time to time.

          SECTION 1.21 “ERISA” means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.

          SECTION 1.22 “Excise Tax” means any excise tax imposed under section 4999 of the Code.

          SECTION 1.23 “Good Reason” means the occurrence, on or after the date of a Change in
Control and without the affected Eligible Employee’s written consent, of (i) a material reduction
in the Eligible Employee’s Base Salary and annual bonus opportunity, (ii) a material adverse
alteration in the nature or status of the Eligible Employee’s responsibilities, duties or title
from those in effect immediately prior to the Change in Control, including without limitation, if
the Eligible Employee was, immediately prior to the Change in Control, an executive officer of a
public company, the Eligible Employee ceasing to be an executive officer of a public company, (iii)
a relocation of the Eligible Employee’s principal place of employment to a location more than fifty
(50) miles from the Eligible Employee’s principal place of employment

5

 

immediately prior to the Change in Control or (iv) the failure of a successor to assume and
agree to perform the obligations under this Plan.

          SECTION 1.24 “Gross-Up Payment” shall have the meaning set forth in Section 3.1.

          SECTION 1.25 “Initial Holder” shall have the meaning set forth in the Second Restated
Articles of Incorporation of the Company.

          SECTION 1.26 “Key Employee” means any Eligible Employee described in section
409A(a)(2)(B)(i) of the Code.

          SECTION 1.27 “Level 1 Employee” shall mean the Chief Executive Officer of the Company
and each individual designated by the Plan Administrator from time to time as a Level 1 Employee.
The Plan Administrator has designated the individuals set forth in Attachment 1 hereto as Level 1
Employees.

          SECTION 1.28 “Level 2 Employee” shall mean each individual designated by the Plan
Administrator from time to time as a Level 2 Employee. The Plan Administrator has designated the
individuals set forth in Attachment 2 hereto as Level 2 Employees.

          SECTION 1.29 “LT Balance” shall mean the payout of the balance, if any, in the Severed
Employee’s long-term incentive compensation account under the MIP (or any successor plan thereto)
as of the Severance Date, after appropriate crediting or debiting for such period has occurred.

          SECTION 1.30 “MIP” shall mean the Steelcase Inc. Management Incentive Plan.

          SECTION 1.31 “Permitted Transferee” shall have the meaning set forth in the Second
Restated Articles of Incorporation of the Company and include a Permitted Trustee solely in its
capacity as a trustee of a Permitted Trust.

          SECTION 1.32 “Permitted Trust” shall have the meaning set forth in the Second Restated
Articles of Incorporation of the Company.

          SECTION 1.33 “Permitted Trustee” shall have the meaning set forth in the Second
Restated Articles of Incorporation of the Company.

          SECTION 1.34 “Person” shall have the meaning ascribed to such term in Section 3(a)(9)
of the Act, as modified and used in Sections 13(d) and 14(d) thereof, including a “group” as
defined in Section 13(d) thereof, except that such term shall not include (i) the Company or any of
its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their ownership of stock
of the Company.

6

 

          SECTION 1.35 “Plan” means the Steelcase Inc. Executive Severance Plan, as set forth
herein, as it may be amended from time to time.

          SECTION 1.36 “Plan Administrator” means the Compensation Committee, or any successor
thereto.

          SECTION 1.37 “Pro Rata Bonus” shall be the amount equal to the Eligible Employee’s
Target Bonus, pro-rated for the period of the Eligible Employee’s employment with the Company or an
Affiliate during the fiscal year in which the Severance Date occurs.

          SECTION 1.38 “Restricted Period” means twenty-four (24) months immediately following
the Severance Date.

          SECTION 1.39 “SERP” means the Steelcase Inc. Executive Supplemental Retirement Plan,
or any successor thereto.

          SECTION 1.40 “Severance” means the termination of an Eligible Employee’s employment
prior to a Change in Control by the Company or an Affiliate other than for Cause. Notwithstanding
the foregoing, an Eligible Employee will not be considered to have incurred a Severance if his
employment is discontinued by reason of the Eligible Employee’s death or a physical or mental
condition causing such Eligible Employee’s inability to substantially perform his duties with the
Company or the Affiliate then employing the Eligible Employee, if such condition entitles him to
benefits under any long-term disability income policy or program of the Company or an Affiliate.

          SECTION 1.41 “Severance Date” means the date on which an Eligible Employee incurs a
Severance or CIC Severance.

          SECTION 1.42 “Severance Multiplier” means (i) with respect to each Level 1 Employee, 2
and (ii) with respect to each Level 2 Employee, 1.

          SECTION 1.43 “Severance Pay” means the payment determined pursuant to Section 2.1
hereof.

          SECTION 1.44 “Severed Employee” is an Eligible Employee (including any Key Employee)
who incurs a Severance or CIC Severance.

          SECTION 1.45 “Target Bonus” means an Eligible Employee’s target annual bonus
(excluding any bonuses relating to the long-term component under the MIP or any successor plan
thereto) for the year in which the Severance or CIC Severance occurs.

          SECTION 1.46 “Tax Counsel” means tax counsel reasonably acceptable to the Eligible
Employee and selected by the Auditor (which Tax Counsel may be the Company’s internal legal
department).

7

 

          SECTION 1.47 “Total Payments” means any payment or benefit (other than the Gross-Up
Payment) received in connection with a Change in Control or the termination of an Eligible
Employee’s employment, whether pursuant to the terms of the Plan or any other plan, arrangement or
agreement.

SECTION 2. SEVERANCE PAYMENTS AND BENEFITS.

          SECTION 2.1 (a) Upon a Severance, each Severed Employee shall be entitled, subject to Section
2.6 hereof, to receive a total amount equal to (i) Severance Pay in an amount equal to the
applicable Severance Multiplier times the sum of the Base Salary and Target Bonus (the “Severance
Pay”); (ii) the Pro Rata Bonus; and (iii) the LT Balance. Subject to any required delay in payment
in accordance with Section 409A of the Code pursuant to Section 7.6 hereof, the Severance Pay, Pro
Rata Bonus and the LT Balance shall be paid to an eligible Severed Employee in the following
manner: (x) the Pro Rata Bonus, the LT Balance and 67% of the total amount of Severance Pay shall
be paid as soon as practicable following the Severance Date, but in no event later than ten (10)
business days immediately following the expiration of the revocation period, if any, applicable to
such Severed Employee’s written release and (y) the remaining 33% of the Severance Pay shall be
paid at the expiration of the Restricted Period.

          (b) If the Company’s financial results are materially restated, the Compensation Committee
may review the circumstances surrounding the restatement and determine whether and which Eligible
Employees of the Plan will be required to forfeit the right to receive any future payments
described in Section 2.1(a) and/or repay any prior payments described in Section 2.1(a) determined
by the Compensation Committee to have been inappropriately received by the Eligible Employee. If
the Company’s financial results are restated due to fraud, any Eligible Employee who the
Compensation Committee determines participated in or is responsible for the fraud causing the need
for the restatement forfeits the right to receive any future payments described in Section 2.1(a)
and will be required to repay any amounts described in Section 2.1(a) paid in excess of the amounts
that would have been paid based on the restated financial results. Any repayments required under
Section 2.1(b) must be made by the Eligible Employee within ten (10) days following written demand
from the Company.

          SECTION 2.2 Upon a CIC Severance, each Severed Employee shall be entitled, subject to Section
2.6 hereof, to receive (i) CIC Severance Pay in an amount equal to the applicable CIC Severance
Multiplier times the sum of the Base Salary and Target Bonus (the “CIC Severance Pay”); (ii) the
CIC Pro Rata Bonus; (iii) the CIC LT Bonus; (iv) the LT Balance; and (v) the CIC SERP Benefit.
Subject to any required delay in payment in accordance with Section 409A of the Code pursuant to
Section 7.6 hereof, the CIC Severance Pay, the CIC Pro Rata Bonus, the CIC LT Bonus, the LT Balance
and the CIC SERP Benefit shall be paid to an eligible Severed Employee in a cash lump sum, as soon
as practicable following the Severance Date, but in no event later than ten (10) business days
immediately following the expiration of the revocation period, if any, applicable to such Severed
Employee’s written release. For the avoidance of doubt, the CIC SERP Benefit shall be paid in lieu
of payments that may otherwise become payable under the SERP.

8

 

          SECTION 2.3 Subject to any required delay in payment in accordance with Section 409A of the
Code pursuant to Section 7.6 hereof, the Company shall pay, subject to Section 2.6 hereof, the
Severed Employee in a cash lump sum, as soon as practicable following the Severance Date, but in no
event later than ten (10) business days immediately following the expiration of the revocation
period, if any, applicable to such Severed Employee’s written release, a lump sum amount equal to
eighteen (18) multiplied by the monthly premium such Severed Employee would be charged in order to
continue his (and his beneficiaries’) health plan coverage as in effect immediately prior to
Severance Date under Title X of the Consolidated Budget Reconciliation Act of 1985, as amended.

          SECTION 2.4 Each Severed Employee shall be entitled, subject to Section 2.6 hereof, to receive
outplacement assistance through a company selected at the sole discretion of the Company. The
Company shall pay for outplacement services up to a period of eighteen (18) months (or a longer
period if extended in writing by the Company) if the Severed Employee commences assistance within
sixty (60) days of the Severance Date.

          SECTION 2.5 Notwithstanding anything in the Plan to the contrary, Severed Employees shall be
entitled to receive payments and benefits under the applicable compensation and benefit plans of
the Company and its Affiliates to the extent set forth in such plans, including any amounts earned
but not yet paid through the Severance Date.

          SECTION 2.6 Notwithstanding anything in the Plan to the contrary, the receipt by a Severed
Employee of payments and benefits under Section 2 of the Plan shall be conditioned on the execution
(and non-revocation) by the Severed Employee of a written release substantially in the form
attached as Exhibit A hereto and complies with the restrictive covenants set forth in
Section 5 hereof. In addition, as a condition to the receipt of benefits or payments hereunder,
each Severed Employee shall be required, upon the Company’s reasonable request, to cooperate with
the Company for a period of 30 days following Severance Date with respect to transitioning the
Severed Employee’s duties, provided that such services shall be provided at such time and place as
may be selected by the Severed Employee and in a manner that does not interfere with the Severed
Employee’s subsequent employment or other business endeavors.

SECTION 3. EXCISE TAXES.

          SECTION 3.1 In the event that any portion of the Total Payments will be subject to the Excise
Tax, the Company shall pay to the Eligible Employee an additional amount (the “Gross-Up Payment”)
such that the net amount retained by the Eligible Employee, after deduction of any Excise Tax on
the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon
the Gross-Up Payment, and after taking into account the phase out of itemized deductions and
personal exemptions attributable to the Gross-Up Payment, shall be equal to the Total Payments.
The Gross-Up Payment shall be paid to the Eligible Employee as soon as reasonably practicable.

9

 

          SECTION 3.2 For purposes of determining whether any of the Total Payments will be subject to
the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as
“parachute payments” (within the meaning of Section 280G(b)(2) of the Code) unless, in the opinion
of Tax Counsel, such payments or benefits (in whole or in part) do not constitute parachute
payments, (ii) all “excess parachute payments” within the meaning of Section 280G(b)(l) of the Code
shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the “base amount”
within the meaning of Section 280G(b)(3) of the Code allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up
Payment, the Eligible Employee shall be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation in the state and locality
of the Eligible Employee’s residence on the Severance Date, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local taxes.

          SECTION 3.3 In the event that the Excise Tax is finally determined to be less than the amount
taken into account hereunder in calculating the Gross-Up Payment, the Eligible Employee shall repay
to the Company, within five (5) business days following the time that the amount of such reduction
in the Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the
Eligible Employee), to the extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Eligible Employee ‘s taxable income and wages for purposes of
federal, state and local income and employment taxes, plus interest on the amount of such repayment
at 120% of the rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which cannot be determined
at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by the Eligible Employee
with respect to such excess) within five (5) business days following the time that the amount of
such excess is finally determined. The Eligible Employee and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial proceedings concerning
the existence or amount of liability for Excise Tax with respect to the Total Payments.

          SECTION 3.4 Notwithstanding anything in this Section 3 to the contrary, the Plan Administrator
shall make such arrangements as it shall deem equitable and

10

 

appropriate in the event of an Eligible Employee who is not a United States taxpayer in the
event of the imposition of the Excise Tax or similar tax on such employee.

SECTION 4. PLAN ADMINISTRATION.

          SECTION 4.1 The Plan shall be interpreted, administered and operated by the Plan
Administrator, who shall have complete authority, in its sole discretion subject to the express
provisions of the Plan, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to approve Eligible Employees who have been recommended by the
management of the Company and to make all other determinations necessary or advisable for the
administration of the Plan. Notwithstanding the foregoing, the Plan Administrator may delegate any
of its duties hereunder to such person or persons from time to time as it may designate;
provided, however, the approval of Eligible Employees shall not be delegated and
shall remain in the sole authority of the Plan Administrator.

          SECTION 4.2 (a) Prior to a Change in Control, in the event of a claim by an Eligible Employee
as to the amount or timing of any payment or benefit for a Severance, a Level 1 Employee shall
present the reasons for his claim in writing to the Plan Administrator and a Level 2 Employee shall
present the reason for his claim in writing to the Chief Executive Officer of the Company. Upon a
Change in Control, in the event of a claim by an Eligible Employee as to the amount or timing of
any payment or benefit for a Severance, a Level 1 Employee and a Level 2 Employee shall present the
reasons for his claim in writing to the Plan Administrator.

          (b) In accordance with clause (a) above, either the Plan Administrator or the Chief Executive
Officer shall, within sixty (60) days after receipt of such written claim, send a written
notification to the Eligible Employee as to its disposition. In the event the claim is wholly or
partially denied, such written notification shall (i) state the specific reason or reasons for the
denial, (ii) make specific reference to pertinent Plan provisions on which the denial is based,
(iii) provide a description of any additional material or information necessary for the Eligible
Employee to perfect the claim and an explanation of why such material or information is necessary,
and (iv) set forth the procedure by which the Eligible Employee may appeal the denial of his claim.
In the event an Eligible Employee wishes to appeal the denial of his claim, he may request a
review of such denial by making application in writing to such Plan Administrator or Chief
Executive Officer, as applicable, within sixty (60) days after receipt of such denial. Such
Eligible Employee (or his duly authorized legal representative) may, upon written request to the
Plan Administrator or the Chief Executive Officer, as applicable, review any documents pertinent to
his claim, and submit in writing issues and comments in support of his position. Within sixty (60)
days after receipt of a written appeal (unless special circumstances, such as the need to hold a
hearing, require an extension of time, but in no event more than one hundred twenty (120) days
after such receipt), such Plan Administrator or Chief Executive Officer, as applicable, shall
notify the Eligible Employee of the final decision. The final decision (subject to Section 7.3)
shall be in writing and shall include specific reasons for the decision, written in a manner
calculated

11

 

to be understood by the claimant, and specific references to the pertinent Plan provisions on which
the decision is based.

          SECTION 4.3 The Plan Administrator is empowered, on behalf of the Plan, to engage accountants,
legal counsel (which may be the Company’s internal legal department) and such other personnel as it
deems necessary or advisable to assist it in the performance of its duties under the Plan. The
functions of any such persons engaged by the Plan Administrator shall be limited to the specified
services and duties for which they are engaged, and such persons shall have no other duties,
obligations or responsibilities under the Plan. Such persons shall exercise no discretionary
authority or discretionary control respecting the management of the Plan. All reasonable expenses
thereof shall be borne by the Company.

SECTION 5. RESTRICTIVE COVENANTS

          SECTION 5.1 During and after the period of an Eligible Employee’s employment, the Eligible
Employee may not, without authorization from the Company, divulge, disclose or otherwise
communicate to any person or company any information of a confidential nature pertaining to
specific details of the business, functions or operations of the Company or any Affiliate, except
pursuant to the order of a court of competent jurisdiction. Upon termination of an Eligible
Employee’s employment with the Company or any Affiliate for any reason, the Eligible Employee will
promptly return to the Company all books and records of or pertaining to the business of the
Company or its Affiliate, and all other property belonging to the Company and the Affiliate which
is in the Eligible Employee’s custody or possession.

          SECTION 5.2 (a) In consideration of the payments under this Agreement, the Eligible Employee
covenants and agrees that for the Restricted Period, he or she shall not directly or indirectly,
whether as an employee, employer, officer, director, owner, partner, member, investor, shareholder,
independent contractor, consultant, agent, representative, volunteer or in any other capacity
perform professional or technical services or solicit business on behalf of himself or herself, or
any other person, entity or business in competition with any line of business in which the Company
and its Affiliates have or have been engaged and any line of business in which the Company or any
of its Affiliates may be engaged in the future which is reasonably related to the current
operations. “Line of business” shall be defined to include all product and service lines of
business, and specifically any and all products and product concepts (whether or not commercialized
or reduced to practice) that the Company and its Affiliates have conceived, considered, researched,
developed, marketed or produced before or during the tenure of the Eligible Employee’s employment
with the Company.

          (b) During the Restricted Period the Eligible Employee also agrees, in any of the capacities
defined above in (a), not to directly or indirectly (i) divert or attempt to divert any business
from the Company or any of its Affiliates or any entity distributing Company products (a
“Distributor”), solicit any current or past customer of the Company, any of its Affiliates or any
Distributor, or attempt to influence any customer of the Company, any of its Affiliates or any
Distributor; or (ii) hire, solicit, contact or attempt to

12

 

hire or solicit any employee or representative of the Company or any of its Affiliates for the
purpose of inducing that person to end his/her employment or business relationship with the Company
or any of its Affiliates whether to enter into an employment or other business relationship with
any other entity, or for any other purpose.

          (c) If the Eligible Employee breaches or attempts to breach this covenant not to compete, the
Company shall be entitled to an immediate injunction or restraining order, in addition to all other
remedies available under law or equity, from a court of competent jurisdiction enforcing the terms
of this Section 5.2, and, if the Company is successful in enforcing the terms of this Section 5.2,
the Eligible Employee shall be liable to the Company for all reasonable attorney’s fees, costs and
expenses incurred by the Company in enforcing this Section 5.2.

          (d) If any court of competent jurisdiction shall at any time deem the Restricted Period too
lengthy or the scope of the covenants too broad, the restrictive time period shall be deemed to be
the longest period permissible by law, and the scope shall be deemed to comprise the largest scope
permissible by law under the circumstances.

          (e) In the event that the Eligible Employee violates his or her obligations under this Section
5.2, he or she shall forfeit the right to receive any additional payments under this Agreement.
The Eligible Employee acknowledges and agrees that any such forfeiture shall in no way impair the
validity and enforceability of the provisions of this Section 5.2.

          SECTION 5.3 The restrictive covenants set forth in this Section 5 shall be in addition to any
restrictive covenants set forth in an employment or other agreement between the Company or its
Affiliates and the Eligible Employee.

SECTION 6. PLAN MODIFICATION OR TERMINATION.

          The Plan may be amended or terminated by the Plan Administrator at any time; provided,
however, that except as required by law, the Plan may not be amended or terminated within
six (6) months prior to a Change in Control and two (2) years immediately following a Change in
Control in a manner that would adversely affect the rights of Eligible Employees under the Plan
without the express written consent of each Eligible Employee so affected. Following an Eligible
Employee’s Severance or CIC Severance, no Plan termination or amendment shall adversely affect the
rights of such Severed Employee under the Plan, without such Severed Employee’s written consent.

SECTION 7. GENERAL PROVISIONS.

          SECTION 7.1 Except as otherwise provided herein or by law, no right or interest of any
Eligible Employee under the Plan shall be assignable or transferable, in whole or in part, either
directly or by operation of law or otherwise, including without limitation, by execution, levy,
garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall
be effective; and no right or interest of any Eligible Employee under the Plan shall be subject to,
any obligation or liability of such

13

 

Eligible Employee. When a payment is due under the Plan to an Eligible Employee who is unable
to care for his affairs, payment may be made directly to his legal guardian or personal
representative.

          SECTION 7.2 If the Company or an Affiliate is obligated by law or by contract to pay severance
pay, a termination indemnity, notice pay, or the like, or if the Company or an Affiliate is
obligated by law to provide advance notice of separation, then any Severance Pay or CIC Severance
Pay paid to a Severed Employee hereunder shall be reduced (but not below zero) by the amount of any
such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount
of any salary or wages received by the Severed Employee after the Company or an Affiliate provided
notice of separation according to Section 7.4 hereof. To the extent that the Company or its
Affiliates have an obligation to provide benefits following termination of employment, such
benefits shall not be provided hereunder to the extent that to do so would result in duplication of
such benefits. Except as specifically set forth in the preceding sentence, amounts payable
hereunder shall not be subject to mitigation or offset.

          SECTION 7.3 (a) Upon a Severance, determinations of the Plan Administrator shall be final and
binding.

          (b) Upon a Change in Control, the provisions of the Plan (including Section 4.2) shall not be
construed as prohibiting an Eligible Employee from commencing an action, suit or proceeding in any
court of competent jurisdiction with respect to such Eligible Employee’s rights under the Plan.
Except as provided in Section 5.2(c), if the Company and the Eligible Employee become involved in
any such action, suit or proceeding, the Company shall reimburse the Eligible Employee for all
reasonable expenses (including reasonable attorney’s fees) incurred by the Eligible Employee in
connection with such action, suit or proceeding provided that the Eligible Employee does not
commence such action, suit or proceeding in bad faith. Such costs shall be paid to such Eligible
Employee promptly upon presentation of expense statements or other supporting information
evidencing the incurrence of such expenses. Determinations of the Plan Administrator shall not be
entitled to deference in the event of any action or proceeding described in this Section 7.3(b)
regarding the Plan.

          SECTION 7.4 All notices or other communications hereunder shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) upon confirmation of receipt when
such notice or other communication is sent by facsimile or telex, (c) one day after timely delivery
to an overnight delivery courier, or (d) on the fifth day following the date of deposit in the
United States mail if sent first class, postage prepaid, by registered or certified mail. The
address for the Company shall be as follows: Chief Legal Officer, Executive Severance Plan,
Steelcase Inc., 901 44th Street SE, Grand Rapids, Michigan 49508. The address for each
Eligible Employee shall be the address on file with the Company.

          SECTION 7.5 Neither the establishment of the Plan, nor any modification thereof, nor the
creation of any fund, trust or account, nor the payment of any benefits shall be construed as
giving any Eligible Employee, or any person

14

 

whomsoever, the right to be retained in the service of the Company or an Affiliate, and all
Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never
been adopted.

          SECTION 7.6 The Company shall be entitled to withhold from amounts to be paid to an Eligible
Employee hereunder any federal, state or local withholding or other taxes which it is from time to
time required by law to withhold. Notwithstanding any provision to the contrary herein, the
payment of any amounts payable hereunder to a Key Employee shall be delayed until the earliest date
upon which such payment may be made without resulting in the imposition of an additional tax or
penalty under Section 409A of the Code; provided, however that such delay shall
only apply to the extent the Company reasonably determines (upon the advice of counsel) that such
delay is required under Section 409A of the Code. Furthermore, with respect to payments of the LT
Balance and the CIC SERP Benefit in accordance with Sections 2.1 or 2.2 of the Plan, in the event
such payment would be made during 2007, such payment shall instead be made on January 2, 2008.

          SECTION 7.7 If any provision of the Plan shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions herein, and the Plan shall be
construed and enforced as if such provisions had not been included.

          SECTION 7.8 The Plan shall be binding upon the heirs, executors, administrators, successors
and assigns of the parties, including each Eligible Employee, present and future, and any successor
to the Company.

          SECTION 7.9 The headings and captions herein are provided for reference and convenience only,
shall not be considered part of the Plan, and shall not be employed in the construction of the
Plan. Whenever any words are used herein in the masculine gender, they shall be construed as
though they were also used in the feminine gender in all cases where they would so apply, and,
whenever any words are used herein in the singular form, they shall be construed as though they
were also used in the plural form in all cases where they would so apply.

          SECTION 7.10 (a) The Plan shall not be funded. Any amounts payable under the Plan shall be
paid out of the general assets of the Company and each Eligible Employee and their beneficiaries
shall be deemed to be a general unsecured creditor of the Company. No Eligible Employee shall have
any right to, or interest in, any assets of any Company which may be applied by the Company to the
payment of benefits or other rights under the Plan.

          (b) The Company may create a grantor trust to pay its obligations hereunder (a so-called
rabbi trust), the assets of which shall be treated, for all purposes, as the assets of the Company,
provided however, that the Company shall not create a rabbi trust if such funding would have
adverse tax consequences under Code Section 409A. The terms of the trust will generally conform to
the terms of the model trust described Revenue Procedure 92-64.

15

 

          (c) In all events, it is the intent of the Company that the Plan be treated as unfunded for
tax purposes and for purposes of Title I of ERISA.

          SECTION 7.11 The Plan shall be construed and enforced according to the laws of the State of
Michigan without reference to its choice of law rules. In the event of dispute or controversy
arising under or in connection with this Plan that has not been resolved pursuant to Section 4.2 of
the Plan, the Eligible Employee irrevocably agrees to submit to the jurisdiction and venue of the
courts of the State of Michigan either in state court of the county of Kent or in the federal court
of the Western District of Michigan.

     IN
WITNESS OF WHICH, the Company executes the Plan.

	 	 	 	 	 
	 	STEELCASE INC.

 	 
	Dated: February 9, 2007 	By:  	/s/ Nancy W. Hickey
 	 
	 	 	      Nancy W. Hickey 	 
	 	Its: 	Sr. Vice President & Chief
Administrative Officer	 
	 	 	 	 
	 

16

 

Exhibit A

RELEASE

          (a)                                          (“Employee”) for and in consideration of the payments and
benefits provided pursuant to the Steelcase Inc. Executive Severance Plan (the “Plan”) maintained
by Steelcase Inc. (the “Company”), on behalf of Employee and Employee’s heirs, executors,
administrators, successors and assigns, voluntarily, knowingly and willingly releases and
discharges the Company and its parents, subsidiaries and affiliates (collectively, the “Company
Group”), together with their respective present and former partners, officers, directors,
employees and agents, and each of their predecessors, heirs, executors, administrators, successors
and assigns, and any and all employee pension or welfare benefit plans of the Company, including
current and former trustees and administrators of these plans (collectively, the “Company
Releasees”) from any and all charges, complaints, claims, promises, agreements, controversies,
causes of action, demands, damages and liabilities (“Claims”) of any nature whatsoever, known or
unknown, suspected or unsuspected, which against the Company Releasees, jointly or severally,
Employee or Employee’s heirs, executors, administrators, successors or assigns ever had or now have
by reason of any matter, cause or thing whatsoever arising from the Employee’s employment
relationship with the Company (the “Release”). This Release includes any Claims arising out of or
relating in any way to Employee’s employment relationship with the Company, or the termination
thereof, any Claims arising under any statute or regulation, including but not limited to the Age
Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act
of 1993 and the Employee Retirement Income Security Act of 1974 each as amended, or any other
federal, state or local law, regulation, ordinance or common law, or under any policy, agreement,
understanding or promise, written or oral, formal or informal, between any Company Releasee and
Employee. Employee shall not be entitled to any recovery, in any action or proceeding that may be
commenced on Employee’s behalf in any way arising out of or relating to the matters released under
this Release. Notwithstanding the foregoing, nothing herein shall release any Company Releasee
from any Claim based on (i) Employee’s rights under the Plan or any other plan or agreement with
the Company (including, but not limited to, any stock option agreements), (ii) any right or claim
that arises after the date Employee executes this Release, (iii) Employee’s eligibility for
indemnification in accordance with applicable laws or the certificate of incorporation or by-laws
of the Company (or any affiliate or subsidiary) or any applicable insurance policy, with respect to
any liability Employee incurs or incurred as a director, officer or employee of the Company or any
affiliate or subsidiary (including as a trustee, director or officer of any employee benefit plan)
or (iv) any rights Employee may have to vested benefits under any employee benefit plan or program.

          (b) Employee has been advised to consult with an attorney of Employee’s choice prior to
signing this Release, has done so and enters into this Release freely and voluntarily.

17

 

          (c) Employee has had at least twenty-one (21) calendar days to consider the terms of this
Release. Once Employee has signed this Release, Employee has seven (7) additional days to revoke
Employee’s consent and may do so by writing to the Company in accordance with Section 7.4 of the
Plan. Employee’s Release shall not be effective, and no payments or benefits shall be due under
the Plan, until the eighth day after Employee has executed this Release and returned it to the
Company, assuming that Employee has not revoked Employee’s consent to this Release during such time
(the “Revocation Date”).

          (e) In the event that any one or more of the provisions of this Release shall be held to be
invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder
thereof shall not in any way be affected or impaired thereby.

          (f) This Release shall be governed by the law of the State of Michigan without reference to
its choice of law rules.

          (g) This Release sets forth the entire understanding and agreement of the parties hereto
regarding the subject matter of this Release. This Release supersedes all prior negotiations,
discussions, correspondence, communications, understandings and agreements between the parties
relating to the subject matter of this Release.

Signed as
of this ___ day of                     .

                                        

Employee

18

 

Attachment 1

Level 1 Employees

19

 

Attachment 2

Level 2 Employees

20

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