Document:

exv10w39

 

EXHIBIT 10.39

The Parties Listed in Schedule 1

Build-A-Bear Workshop, Inc.

Build-A-Bear Workshop UK Holdings Limited

Andrew Mackay

Sale and Purchase Agreement for sale of the entire issued share capital of Amsbra Limited

	 	 	 	 	 
	Date:

	 	March 3, 2006

	Document Number:

	 	2309564.12	 	 
	Matter Number:

	 	0184713	 	 

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page
	1. INTERPRETATION

	 	 	1	 
	2. CONDITIONS

	 	 	5	 
	3. SALE AND PURCHASE

	 	 	6	 
	4. PURCHASE PRICE

	 	 	6	 
	5. COMPLETION

	 	 	6	 
	6. INDEMNITY RELATING TO SHARE OPTIONS AND AM OPTIONS

	 	 	8	 
	7. WARRANTIES

	 	 	8	 
	8. LIMITATIONS ON CLAIMS

	 	 	9	 
	9. WARRANTY AND INDEMNITY INSURANCE

	 	 	12	 
	10. TAX COVENANT

	 	 	12	 
	11. RESTRICTIONS ON SELLER

	 	 	12	 
	12. GUARANTEE

	 	 	13	 
	13. TERMINATION OF THE SHAREHOLDERS AGREEMENT

	 	 	15	 
	14. CONFIDENTIALITY AND ANNOUNCEMENTS

	 	 	15	 
	15. FURTHER ASSURANCE

	 	 	16	 
	16. ASSIGNMENT

	 	 	16	 
	17. WHOLE AGREEMENT

	 	 	17	 
	18. VARIATION AND WAIVER

	 	 	17	 
	19. COSTS

	 	 	17	 
	20. NOTICE

	 	 	17	 
	21. INTEREST ON LATE PAYMENT

	 	 	19	 
	22. SEVERANCE

	 	 	19	 
	23. AGREEMENT SURVIVES COMPLETION

	 	 	19	 
	24. THIRD PARTY RIGHTS

	 	 	19	 
	25. SUCCESSORS

	 	 	20	 
	26. COUNTERPARTS

	 	 	20	 
	27. LANGUAGE

	 	 	20	 
	28. GOVERNING LAW AND JURISDICTION

	 	 	20	 
	      Schedule 1 PARTICULARS OF THE COMPANY AND SUBSIDIARIES

	 	 	21	 
	      Schedule 2 CONDITIONS

	 	 	26	 
	      Schedule 3 COMPLETION

	 	 	27	 
	      Schedule 4 WARRANTIES

	 	 	32	 
	      Schedule 5 TAX COVENANT

	 	 	55	 
	      Schedule 6 INTELLECTUAL PROPERTY RIGHTS LICENSED FROM THIRD PARTIES

	 	 	66	 
	      Schedule 7 PARTICULARS OF PROPERTIES

	 	 	70	 

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THIS AGREEMENT is dated March 3, 2006

PARTIES

	(1)	 	The persons listed in Part 2 of Schedule 1 (Seller);
	 
	(2)	 	Build-A-Bear Workshop, Inc., a corporation organised under the laws of the state of Delaware
whose principal office is at 1954 Innerbelt Business Centre, St. Louis, MO 63114-5760, USA in
its capacity as Guarantor (“BABW”);
	 
	(3)	 	Build-A-Bear Workshop UK Holdings Limited, a company incorporated in England and Wales under
number 05651132 whose principal office is at St Stephens House, Arthur Road, Windsor,
Berkshire SL4 1RU (Buyer); and
	 
	(4)	 	Andrew Mackay of 10 Roseberry Crescent, Edinburgh EH12 5JY (AM).

BACKGROUND

	(A)	 	The Company has an issued share capital of £39,894.56 divided into 2,737,149 ordinary voting
‘A’ shares of 1p each and 1,252,307 ordinary non-voting ‘B’ shares of 1p each.
	 
	(B)	 	Further particulars of the Company at the date of this agreement are set out in Schedule 1,
Part 1.
	 
	(C)	 	The Seller has agreed to sell and the Buyer has agreed to buy the Sale Shares subject to the
terms and conditions of this agreement.

AGREED TERMS

	1	 	INTERPRETATION
	 
	1.1	 	The definitions and rules of interpretation in this clause apply in this agreement.
	 
	 	 	Accounts: each of the audited financial statements of the Company up to the Accounts Date,
including in each case the notes thereon and the auditor’s and Directors’ reports (copies of
which are attached to the Disclosure Letter).
	 
	 	 	Accounts Date: 3lst December 2004.
	 
	 	 	‘A’ Ordinary Shares: all A ordinary voting shares in the capital of the Company.
	 
	 	 	‘B’ Ordinary Shares: all B ordinary non-voting shares in the capital of the Company.
	 
	 	 	BABW Loan: the loan of $4,425,000 from Build-A-Bear Workshop Franchise Holdings, Inc. to
Amsbra Ltd.
	 
	 	 	Boldswitch Limited: a company registered in England and Wales under company number 02307096
whose registered office is at 10 Cornwall Terrace, London NW1 4QP.
	 
	 	 	Business: the business of the Company, namely the retail of build your own teddy bears.
	 
	 	 	Business Day: a day (other than a Saturday, Sunday or public holiday) when banks in the City
of London are open for business.

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	 	 	Buyer’s Solicitors: Bryan Cave, 33 Cannon Street, London EC4M STE.
	 
	 	 	CAA 2001: the Capital Allowances Act 2001.
	 
	 	 	Claim and Substantiated Claim: have the meanings set out respectively in clause 8
(Limitations on claims).
	 
	 	 	Company: Amsbra Limited, a company incorporated and registered in England and Wales with
company number 04537212 whose registered office is at St. Stephens House, Arthur Road,
Windsor, Berkshire SL4 1RU further details of which are set out in Part 1 of Schedule 1.
	 
	 	 	Companies Acts: the Companies Act 1985 and the Companies Act 1989.
	 
	 	 	Completion: completion of the sale and purchase of the Sale Shares in accordance with this
agreement.
	 
	 	 	Completion Date: has the meaning given in clause 5 (Completion).
	 
	 	 	Conditions: the conditions set out in Schedule 2 (Conditions).
	 
	 	 	Connected: in relation to a person, has the meaning contained in section 839 of the ICTA
1988.
	 
	 	 	Control: in relation to a body corporate, the power of a person to secure that the affairs
of the body corporate are conducted in accordance with the wishes of that person:

	 	(a)	 	by means of the holding of shares, or the possession of voting power, in or in
relation to that or any other body corporate; or
	 
	 	(b)	 	by virtue of any powers conferred by the constitutional or corporate documents,
or any other document, regulating that or any other body corporate,

	 	 	and a Change of Control occurs if a person who controls any body corporate ceases to do so
or if another person acquires control of it.
	 
	 	 	Director: each person who is a director or shadow director of the Company, the names of whom
are set out in Part 1 of Schedule 1 .
	 
	 	 	Disclosed: fairly and clearly disclosed (with sufficient detail to identify the nature and
scope of the matter disclosed) in or under the Disclosure Letter.
	 
	 	 	Disclosure Letter: the letter from the Warrantors to the Buyer with the same date as this
agreement that is described as the disclosure letter, including the bundle of documents
attached to it (Disclosure Bundle) and any further letter from the Warrantors to the Buyer
on a date which is one day before the Completion Date which may contain further disclosures.
	 
	 	 	Encumbrance: any interest or equity of any person (including any right to acquire, option or
right of pre-emption) or any mortgage, charge, pledge, lien, assignment, hypothecation,
security, title, retention or any other security agreement or arrangement.
	 
	 	 	Event: has the meaning given in Schedule 5 (Tax covenant).

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	 	 	Faber France: a company incorporated in France whose registered office is at 1 Bis, Rue
Lanneau, 75005 Paris.
	 
	 	 	AM Options: the 294,615 options held by AM over 235,692 ‘A’ Ordinary Shares and 58,923 ‘B’
Ordinary Shares.
	 
	 	 	Group: in relation to a company (wherever incorporated) that company, any company of which
it is a Subsidiary (its holding company) and any other Subsidiaries of any such holding
company; and each company in a group is a member of the group.
	 
	 	 	Unless the context otherwise requires, the application of the definition of Group to any
company at any time will apply to the company as it is at that time.
	 
	 	 	Guarantor: BABW.
	 
	 	 	HMRC: HM Revenue & Customs.
	 
	 	 	ICTA 1988: the Income and Corporation Taxes Act 1988.
	 
	 	 	IHTA 1984: the Inheritance Tax Act 1984.
	 
	 	 	Individual Vendors: the Seller save for the Warrantors, Boldswitch Limited and Wittington
Investments Limited.
	 
	 	 	Intellectual Property Rights: has the meaning given in paragraph 85 of Part 1 of Schedule 4
(Warranties).
	 
	 	 	Issued Shares: 3,989,456 issued and fully paid shares in the Company comprising 2,737,149
‘A’ Ordinary Shares and 1,252,307 ‘B’ Ordinary Shares.
	 
	 	 	Lombard Finance Lease: an agreement with Lombard Finance Limited and the Company dated 8
April 2004 in relation to the stuffing machines, EPOS, computer equipment and air
conditioning.
	 
	 	 	Management Accounts: the unaudited consolidated balance sheet and the unaudited consolidated
profit and loss account of the Company (including, in each case, any notes thereon) for the
period of 12 months ended 31 December 2005 (a copy of which is attached to the Disclosure
Letter).
	 
	 	 	Option Holders: Steven Bedford, Rupert Ashe, Sian Jones, Greg Pickers, James Hobbs, and
Laura Neaves.
	 
	 	 	Pension Scheme: The Build-A-Bear Workshop Group Stakeholder Pension Scheme.
	 
	 	 	Previously-owned Land and Buildings: has the meaning given in paragraph 115 of Part 1 of
Schedule 4 (Warranties).
	 
	 	 	Properties: has the meaning given in paragraph 111 of Part 1 of Schedule 4 (Warranties).
	 
	 	 	Sale Shares: the Issued Shares.
	 
	 	 	Seller’s Solicitors: Rosenblatt, 9-13 St. Andrew Street, London EC4A 3AF

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	 	 	Share Options: the 705,385 options held by the Option Holders at the date hereof to acquire
564,308 ‘A’ Ordinary Shares and 141,077 ‘B’ Ordinary Shares, a total of 705,385 shares in
the Company.
	 
	 	 	Shareholders Agreement: an agreement between Amsbra Limited (1), the Investor Group (2),
Rupert Ashe (3), Steven Bedford (4), Andrew Mackay (5) and The Trust Corporation of the
Channel Islands Limited as the Trustees of the Granola Trust (6) dated 12 May 2003.
	 
	 	 	Subsidiary: in relation to a company wherever incorporated (a holding company) means a
“subsidiary” as defined in section 736 of the Companies Act 1985 and any other company which
is a subsidiary (as so defined) of a company which is itself a subsidiary of such holding
company.
	 
	 	 	Unless the context otherwise requires the application of the definition of Subsidiary to any
company at any time will apply to the company as it is at that time.
	 
	 	 	Tax Covenant: the tax covenant in the form set out in Schedule 5 (Tax covenant) to be
entered into and delivered at Completion.
	 
	 	 	Tax or Taxation: has the meaning given in Schedule 5 (Tax covenant).
	 
	 	 	Tax Claim: has the meaning given in Schedule 5 (Tax covenant).
	 
	 	 	Tax Warranties: the Warranties in Part 2 of Schedule 4 (Warranties).
	 
	 	 	Taxation Authority: has the meaning given in Schedule 5 (Tax covenant).
	 
	 	 	Taxation Statute: has the meaning given in Schedule 5 (Tax covenant).
	 
	 	 	TCGA 1992: the Taxation of Chargeable Gains Act 1992.
	 
	 	 	TMA 1970: the Taxes Management Act 1970.
	 
	 	 	Transaction: the transaction contemplated by this agreement or any part of that transaction.
	 
	 	 	VATA 1994: the Value Added Tax Act 1994.
	 
	 	 	Warranties: the warranties in clause 7 (Warranties) and Schedule 4 (Warranties).
	 
	 	 	Warrantors: Rupert Ashe, Steven Bedford and Andrew Mackay.
	 
	 	 	Wittington Investments Limited: a company incorporated in England and Wales under company
no. 00366054 and whose registered office is at Weston Centre, 10 Grosvenor Street, London WK
4QY.
	 
	1.2	 	Clause and schedule headings do not affect the interpretation of this agreement.
	 
	1.3	 	A person includes a corporate or unincorporated body.
	 
	1.4	 	Words in the singular include the plural and in the plural include the singular.

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	1.5	 	A reference to one gender includes a reference to the other gender.
	 
	1.6	 	A reference to a statute or statutory provision is a reference to it as it is in force for
the time being taking account of any amendment, extension, or re-enactment and includes any
subordinate legislation for the time being in force made under it.
	 
	1.7	 	Writing or written includes faxes but not e-mail.
	 
	1.8	 	Documents in agreed form are documents in the form agreed by the parties or on their behalf
and initialled by them or on their behalf for identification.
	 
	1.9	 	References to clauses and schedules are to the clauses and schedules of this agreement;
references to paragraphs are to paragraphs of the relevant schedule.
	 
	1.10	 	Reference to this agreement include this agreement as amended or varied in accordance with
its terms.
	 
	2.	 	CONDITIONS
	 
	2.1	 	Completion of this agreement is subject to the Conditions in Schedule 2 being satisfied or
waived by the date and time provided in clause 2.4.
	 
	2.2	 	If any of the Conditions are not satisfied or waived by the date and time referred to in
clause 2.1 and clause 2.4, this agreement shall cease to have effect immediately after that
date and time except for:

	 	(a)	 	the provisions set out in clause 2.3; and
	 
	 	(b)	 	any rights or liabilities that have accrued under this agreement.

	2.3	 	The following provisions shall continue to have effect, notwithstanding failure to waive or
satisfy the Conditions:

	 	(a)	 	clause 1 (Interpretation);
	 
	 	(b)	 	clause 2.2 and clause 2.3 (Conditions);
	 
	 	(c)	 	clause 14 (Confidentiality and announcements);
	 
	 	(d)	 	clause 17 (Whole agreement);
	 
	 	(e)	 	clause 18 (Variation and waiver);
	 
	 	(f)	 	clause 19 (Costs);
	 
	 	(g)	 	clause 20 (Notice);
	 
	 	(h)	 	clause 27 (Language); and
	 
	 	(i)	 	clause 28 (Governing law and jurisdiction).

	2.4	 	The Warrantors and the Buyer shall use all reasonable endeavours (so far as lies within their
respective powers) to procure that the Conditions in paragraphs 2 to 4 of Schedule

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	 	 	2 are satisfied and the Warrantors shall ensure that the Condition in paragraph 1 of
Schedule 2 is satisfied as soon as practicable and in any event no later than 6.00 pm:

	 	(a)	 	on 30 May 2006; or
	 
	 	(b)	 	at such other time and date as may be agreed in writing by the Warrantors and
the Buyer.

	2.5	 	The Buyer and the Warrantors shall co-operate fully in all actions necessary to procure the
satisfaction of the Conditions including, but not limited to, the provision by all parties of
all information reasonably necessary to make any notification or filing that the Buyer deems
to be necessary or as requested by any relevant authority, keeping all parties informed of the
progress of any notification or filing and providing such assistance as may reasonably be
required.
	 
	2.6	 	The Buyer may, to such extent as it thinks fit and is legally entitled to do so, waive any of
the Conditions in Schedule 2 by written notice to the Seller.
	 
	3.	 	SALE AND PURCHASE
	 
	3.1	 	On the terms of this agreement and subject to the Conditions, the Seller shall sell and the
Buyer shall buy, with effect from Completion, the Sale Shares with full title guarantee free
from all Encumbrances and together with all rights that attach (or may in the future attach)
to them including, in particular, the right to receive all dividends and distributions
declared, made or paid on or after the date of this agreement.
	 
	3.2	 	At Completion the Buyer will advance the sum of £500,000 to the Company to enable the Company
to repay its loan obligation in such sum to Wittington Investments Limited and the Company
will repay such sum to Wittington Investments Limited on Completion.
	 
	4.	 	PURCHASE PRICE
	 
	4.1	 	Subject to clause 4.2 below, the consideration for the Issued Shares is £5,500,000 payable in
cash at Completion to the Seller’s Solicitors and shall be payable to the Seller in the
amounts set out in column five of Schedule 1, Part 2.
	 
	4.2	 	The consideration to be paid under clauses 4.1 hereof shall be deemed to be reduced by the
amount of any payment made to the Buyer:

	 	(a)	 	for a breach of any Warranty; or
	 
	 	(b)	 	under the Tax Covenant.

	5.	 	COMPLETION
	 
	5.1	 	Completion shall take place on the Completion Date at 2pm:

	 	(a)	 	at the offices of the Buyer’s Solicitors; or
	 
	 	(b)	 	at any other place or time as agreed in writing by the Seller and the Buyer.

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	5.2	 	Completion Date means the first Business Day which is three Business Days after satisfaction
or waiver of the Conditions, or if Completion is deferred in accordance with clause 5.7, the
date to which it is deferred.
	 
	5.3	 	The Buyer shall use its best endeavours to give the Seller 7 days notice in writing of the
expected Completion Date.
	 
	5.4	 	Each Seller undertakes to exercise the votes attaching to the Sale Shares held by it so as to
procure to the extent that it is able that the Business shall be conducted in the manner
provided in Part 3 of Schedule 3 (Completion) from the date of this agreement until Completion
and the Warrantors give the Buyer the undertakings set out in that Schedule.
	 
	5.5	 	At Completion the Seller shall:

	 	(a)	 	deliver or cause to be delivered the documents and evidence set out in Part 2
of Schedule 3;
	 
	 	(b)	 	procure that a board meeting of the Company is held at which the matters
identified in Part 3 of Schedule 3 are carried out; and
	 
	 	(c)	 	deliver any other documents referred to in this agreement as being required to
be delivered by the Seller.

	5.6	 	At Completion the Buyer shall:

	 	(a)	 	pay the consideration payable hereunder by telegraphic transfer to the Seller’s
Solicitors (who are irrevocably authorised to receive the same). Payment in accordance
with this clause shall constitute a valid discharge of the Buyer’s obligations under
clause 4.1;
	 
	 	(b)	 	deliver a certified copy of the resolution adopted by the board of directors of
the Buyer authorising the Transaction, and the execution and delivery by the officers
specified in such resolution of this agreement, and any other documents referred to in
this agreement as being required to be delivered by it.

	5.7	 	If the Seller does not comply with clause 5.5 in any material respect, the Buyer may, without
prejudice to any other rights it has:

	 	(a)	 	proceed to Completion; or
	 
	 	(b)	 	defer Completion to a date no more than 28 days after the date on which
Completion would otherwise have taken place; or
	 
	 	(c)	 	rescind this agreement.

	5.8	 	The Buyer may defer Completion under clause 5.7 only once, but otherwise clause 5 applies to
a Completion deferred under that clause as it applies to a Completion that has not been
deferred.
	 
	5.9	 	As soon as possible after Completion the Seller shall send to the Buyer (at the Buyer’s
registered office for the time being) all records, correspondence, documents, files, memoranda
and other papers relating to the Company not required to be delivered at Completion and which
are not kept at any of the Properties.

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	5.10	 	The parties agree that at Completion the Company shall have no indebtedness other than trade
creditors accruing through the ordinary activities of the Company, the loan of £500,000
repayable to Wittington Investments Limited, the monies due under the Lombard Finance Lease
and the monies due under the BABW Loan.
	 
	6.	 	INDEMNITY RELATING TO SHARE OPTIONS AND AM OPTIONS
	 
	6.1	 	The Warrantors shall indemnify the Buyer and the Company in respect of all losses, costs,
liabilities, penalties and expenses (including without limitation reasonable legal and other
professional fees) incurred by the Buyer or the Company which result from:

	 	(a)	 	the continued existence of the Share Options and the AM Options following the
date of Completion; and/or
	 
	 	(b)	 	the termination of the Share Options and the AM Options (whether defective or
otherwise).

	7.	 	WARRANTIES
	 
	7.1	 	The Buyer is entering into this agreement on the basis of, and in reliance on, the
Warranties.
	 
	7.2	 	The Warrantors warrant to the Buyer that each Warranty (other than the Warranties in
paragraph 5 and 6 of Schedule 4) is true, accurate and not misleading on the date of this
agreement except as Disclosed and the Warrantors, Boldswitch Limited, Wittington Investments
Limited and the Individual Vendors severally warrant to the Buyer that paragraphs 5 and 6 of
Schedule 4 are true, accurate and not misleading on the date of this agreement in relation to
such shares of the Company as are being sold by them.
	 
	7.3	 	The Warranties are deemed to be repeated on each day up to and including the Completion Date
and any reference made to the date of this agreement (whether express or implied) in relation
to any Warranty shall be construed, in relation to any such repetition, as a reference to each
such day.
	 
	7.4	 	The Seller and the Warrantors (in respect only of the warranties given by each of them
respectively) shall ensure that the Company does not do or omit to do anything which would, at
any time before or at Completion, be inconsistent with any of the Warranties, breach any
Warranty or make any Warranty untrue or misleading.
	 
	7.5	 	Without prejudice to the right of the Buyer to claim on any other basis or take advantage of
any other remedies available to it, if any Warranty is breached or proves to be untrue or
misleading, the Warrantors (or Boldswitch Limited, Wittington Investments Limited or the
Individuals Vendors in relation to paragraphs 5 and 6 of Schedule 4) shall pay to the Buyer on
demand:

	 	(a)	 	the amount necessary to put the Company into the position it would have been in
if the Warranty had not been breached or had not been untrue or misleading; and
	 
	 	(b)	 	all costs and expenses (including, legal and other professional fees and costs)
incurred by the Buyer or the Company as a result of such breach or of the Warranty
being untrue or misleading.

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	 	 	A payment made in accordance with the provisions of this clause 7.5 shall include any amount
necessary to ensure that, after any Taxation of the payment, the Buyer is left with the same
amount it would have had if the payment was not subject to Taxation.
	 
	7.6	 	If at any time before or at Completion the Warrantors (or Boldswitch Limited, Wittington
Investments Limited and the Individual Vendors in relation to paragraphs 5 and 6 of Schedule
4) become aware that a Warranty has been breached, is untrue or is misleading, or has a
reasonable expectation that any of those things might occur, it shall immediately:

	 	(a)	 	notify the Buyer in sufficient detail to enable the Buyer to make an accurate
assessment of the situation; and
	 
	 	(b)	 	if requested by the Buyer, use its best endeavours to prevent or remedy the
notified occurrence.

	7.7	 	If at any time before or at Completion it becomes apparent that a Warranty has been breached,
is untrue or misleading, or that the Seller has breached any other term of this agreement that
in either case is material to the sale of the Sale Shares, the Buyer may (without prejudice to
any other rights it may have in relation to the breach):

	 	(a)	 	rescind this agreement by notice to the Seller; or
	 
	 	(b)	 	proceed to Completion.

	7.8	 	Warranties qualified by the expression so far as the Warrantors are aware (or any similar
expression) are deemed to be given to the best of the knowledge, information and belief of the
Warrantors after they have made all reasonable and careful enquiries Provided That it is
acknowledged that the Warrantors have not carried out any searches of the local authority in
respect of the Properties.
	 
	7.9	 	Each of the Warranties is separate and, unless otherwise specifically provided, is not
limited by reference to any other Warranty or any other provision in this agreement.
	 
	7.10	 	With the exception of the matters Disclosed, no information of which the Buyer and/or its
agents and/or advisers has knowledge (actual, constructive or imputed) or which could have
been discovered (whether by investigation made by the Buyer or made on its behalf) shall
prejudice or prevent any Claim or reduce any amount recoverable thereunder.
	 
	7.11	 	In accordance with clause 7.10 above the Buyer confirms that it does not at the date hereof
know of any fact, matter or circumstance that entitles it to make a Claim against the Company,
or any claim under the Tax Covenant.
	 
	8.	 	LIMITATIONS ON CLAIMS
	 
	8.1	 	The definitions and rules of interpretation in this clause apply in this agreement.
	 
	 	 	Claim: a claim for breach of any of the Warranties (excluding for the avoidance of doubt any
claim under the Tax Covenant).
	 
	 	 	Substantiated Claim: a Claim in respect of which liability is admitted by the party against
whom such Claim is brought, or which has been adjudicated on by a Court of

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	 	 	competent jurisdiction and no right of appeal lies in respect of such adjudication, or the
parties are debarred by passage of time or otherwise from making an appeal.
	 
	 	 	A Claim is connected with another Claim or Substantiated Claim if they all arise out of the
occurrence of the same event or relate to the same subject matter.
	 
	8.2	 	This clause limits the liability of the Seller in relation to any Claim and, where specified,
any claim under the Tax Covenant.
	 
	8.3	 	The liability of the Seller for all Substantiated Claims and all claims under the Tax
Covenant shall not exceed £3,300,000.
	 
	8.4	 	The Seller shall not be liable for a Claim unless:

	 	(a)	 	the amount of a Substantiated Claim, or of a series of connected Substantiated
Claims of which that Substantiated Claim is one, exceeds £5,000;
	 
	 	(b)	 	the amount of all Substantiated Claims that are not excluded under clause (a)
when taken together, exceed £100,000, in which case the whole amount (and not just the
amount by which the limit in this clause (b) is exceeded) is recoverable by the Buyer.

	8.5	 	The Seller is not liable for a Claim or a claim under the Tax Covenant to the extent that the
Claim or a claim under the Tax Covenant:

	 	(a)	 	relates to matters Disclosed; or
	 
	 	(b)	 	relates to any matter specifically and fully provided for in the Accounts or
the Management Accounts.

	8.6	 	The Seller is not liable for a Claim or a claim under the Tax Covenant unless the Buyer has
given the Seller notice in writing of the Claim or the claim under the Tax Covenant,
summarising the nature of the Claim or claim under the Tax Covenant as far as it is known to
the Buyer and the amount claimed:

	 	(a)	 	in the case of a claim made under the Tax Warranties or the Tax Covenant,
within the period of seven years beginning with the Completion Date; and
	 
	 	(b)	 	in any other case, within the period of 14 months beginning with the Completion
Date,

	 	 	and unless proceedings in respect of which shall have been commenced and served on the
relevant Seller within six months of the date of such notice save in respect of a notified
Claim or claim under the Tax Covenant where liability is contingent on an act or omission of
a third party in which case such period shall only run from the date upon which the Claim or
claim under the Tax Covenant ceases to be contingent.
	 
	8.7	 	Nothing in clause 8 applies to a Claim or a claim under the Tax Covenant that arises or is
delayed as a result of dishonesty, fraud, wilful misconduct or wilful concealment by the
Seller, its agents or advisers.
	 
	8.8	 	The Warrantors shall not plead the Limitation Act 1980 in respect of any claims made under
the Tax Warranties or Tax Covenant up to seven years after the Completion Date.

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	8.9	 	Where the Buyer or the Company is entitled to recover from some other person or entity,
including (but without limitation) under the terms of any insurance policy of the Company, any
sum in respect of any matter or event giving rise to a Claim, the Buyer shall endeavour to
recover that sum at the Warrantors’ cost and, if any sum is so recovered, then either the
amount payable by the Warrantors in respect of such Claim shall be reduced by an amount equal
to the sum recovered or, if any amount shall already have been paid by the Warrantors in
respect of such Claim, there shall be repaid to the Warrantors an amount equal to the sum
recovered or, if less, the amount of such payment by the Warrantors.
	 
	8.10	 	If any Claim arises by reason of a liability of the Company which is a contingent liability
when such Claim is notified to the Warrantors, then the Warrantors shall not be obliged to
make any payment to the Buyer until such time as the contingent liability ceases to be
contingent and becomes an actual liability.
	 
	8.11	 	If the same fact, matter, event or circumstance gives rise to more than one Claim, the Buyer
shall not be entitled to recover more than once in respect of the same fact, matter, event or
circumstance.
	 
	8.12	 	The Buyer shall not be entitled to recover any sum in respect of any Claim if and to the
extent that it has already obtained reimbursement pursuant to a claim under the Tax Covenant
or vice versa.
	 
	8.13	 	The Warrantors shall have no liability in respect of any Claim or under the Tax Covenant:

	 	(a)	 	to the extent that the Claim in question arises, or is increased, as a result
of any increase in rates of Taxation or any change in the law or published practice
and/or interpretation of a Taxation Authority made after the date of Completion with
retrospective effect; or
	 
	 	(b)	 	to the extent that the Claim in question arises, or is increased, as a result
of any change in any accounting policy or practice of the Company made on or after
Completion.

	8.14	 	The amount of any Claim shall take into account the amount of any reduction in or relief from
Taxation arising by virtue of the loss or damage in respect of which the Claim is made.
	 
	8.15	 	For the avoidance of doubt nothing in this clause 8 shall limit the Buyer’s obligation to
mitigate any losses or damages which it may suffer in consequence of any breach by the
Warrantors of any of the Warranties or any fact, matter, event or circumstance giving rise to
a Claim.
	 
	8.16	 	The Buyer acknowledges and agrees with the Warrantors that is has not entered into this
agreement in reliance on any representations, warranties or undertakings of any kind other
than the Warranties (as qualified by the Disclosure Letter) where the Buyer’s only remedy (on
an indemnity basis) shall be for breach of contract, and that, with the exception of
representations made fraudulently, the Buyer will have no remedy against the Warrantors in
respect of any representation made on or prior to the date of this agreement.

11

 

	9.	 	WARRANTY AND INDEMNITY INSURANCE
	 
	9.1	 	The parties acknowledge that the Buyer will have taken out insurance cover with New Hampshire
Insurance Company by the Completion Date. It is acknowledged that the insurance premium will
be £100,000 and the excess on the policy will be £100,000 (“Excess”).
	 
	9.2	 	The Warrantors and the Buyer hereby agree that they shall not do any deliberate or
intentional act to render such insurance policy void or voidable.
	 
	9.3	 	The Buyer agrees to pay the sum of £40,000 by way of contribution to the premium for such
insurance cover which shall be payable on Completion. In the event of a claim under such
insurance cover the Buyer will pay the Excess.
	 
	9.4	 	The Warrantors and the Buyer shall each provide the other copies of any information which
they have supplied to the insurer for the purposes of obtaining the insurance cover prior to
Completion.
	 
	10.	 	TAX COVENANT
	 
	 	 	On Completion, the Warrantors and the Buyer shall enter into the Tax Covenant in Schedule 5.
	 
	11.	 	RESTRICTIONS ON WARRANTORS AND WITTINGTON INVESTMENTS LIMITED
	 
	11.1	 	The Warrantors and Wittington Investments Limited, covenant severally with the Buyer that
they shall not and Wittington Investments Limited shall procure that each of its Subsidiaries
shall not:

	 	(a)	 	at any time during the period of 4 years for the Warrantors and 2 years for
Wittington Investments Limited beginning with the Completion Date, in any geographic
areas in which any business of the Company was carried on at the Completion Date, carry
on or be employed, engaged or interested in any business which would be in competition
with any part of the Business as the Business was carried on at the Completion Date; or
	 
	 	(b)	 	at any time during the period of 2 years beginning with the Completion Date:

	 	(i)	 	offer employment to, enter into a contract for the services of
or attempt to entice away from the Company, any individual who is at the time
of the offer or attempt, and was at the Completion Date, employed or directly
engaged in an executive or managerial position with the Company; or
	 
	 	(ii)	 	procure or facilitate the making of any such offer or attempt
by any other person; or

	 	(c)	 	at any time after Completion, use in the course of any business:

	 	(i)	 	any trade or service mark, business or domain name, design or
logo which, at Completion, was or had been used by the Company; or

12

 

	 	(ii)	 	anything which is, in the reasonable opinion of the Buyer,
capable of confusion with such words, mark, name, design or logo; or

	 	(d)	 	at any time during a period of 12 months beginning with the Completion Date,
solicit or entice away from the Company any supplier to the Company who had supplied
goods and/or services to the Company at any time during the 12 months immediately
preceding the Completion Date, if that solicitation or enticement causes or would cause
such supplier to cease supplying, or materially reduce its supply of those goods and/or
services to the Company.

	11.2	 	The covenants in this clause 11 are intended for the benefit of the Buyer and the Company and
apply to actions carried out by the Warrantors and Wittington Investments Limited or any of
its Subsidiaries in any capacity and whether directly or indirectly, on the Warrantors’ and
Wittington Investments Limited’s or its Subsidiary’s own behalf or on behalf of any other
person or jointly with any other person.
	 
	11.3	 	Nothing in this clause 11 prevents the Warrantors and Wittington Investments Limited or any
of its Subsidiaries from holding for investment purposes only:

	 	(a)	 	any units of any authorised unit trust; or
	 
	 	(b)	 	not more than 3% of any class of shares or securities of any company traded on
the London Stock Exchange or the New York Stock Exchange; or
	 
	 	(c)	 	such shares in Faber France as they own at the date hereof.

	11.4	 	Each of the covenants in this clause 11 is a separate undertaking and shall be enforceable by
the Buyer separately and independently of its right to enforce any one or more of the other
covenants contained in this clause 11. Each of the covenants in this clause 11 is considered
fair and reasonable by the parties, but if any restriction is found to be unenforceable, but
would be valid if any part of it were deleted or the period or area of application reduced,
the restriction shall apply with such modifications as may be necessary to make it valid and
enforceable.
	 
	11.5	 	The consideration for the undertakings contained in this clause 11 is included in the
consideration payable under clause 4.1 of this agreement.
	 
	12.	 	GUARANTEE
	 
	12.1	 	In consideration of the Seller entering into this agreement, the Guarantor unconditionally
and irrevocably, as a continuing obligation, hereby guarantees to the Seller the proper and
punctual observance and performance by the Buyer of all its obligations, commitments and
undertakings under or pursuant to this agreement and agrees to indemnify the Seller against
all loss, damages, costs and expenses which the Seller may suffer through or arising from a
failure by the Buyer so to perform and observe any of its obligations, commitments and
undertakings under or pursuant to this agreement provided that in respect of the guarantee and
indemnity hereunder the Buyer’s failure to observe or perform the obligations, commitments and
undertakings under or pursuant to this agreement results from the Buyer’s insolvency or
liquidation. In the event of the Buyer’s insolvency or liquidation, the Guarantor at its
discretion shall have the right to step in to the position of the Buyer and perform the
Buyer’s obligations and receive the benefit of the Buyer’s rights under this agreement.

13

 

	12.2	 	If a the Buyer fails as a result of the Buyer’s insolvency or liquidation to perform or
observe any of the obligations, commitments or undertakings referred to in this agreement, the
Guarantor shall forthwith upon demand unconditionally perform (or procure the performance or
observance of) and satisfy (or procure the satisfaction of) the obligation, commitment or
undertaking in regard to which this failure has occurred in the manner prescribed in this
agreement and so that the same benefits shall be received by, or conferred on, the Seller as
they would have had if such obligation, commitment or undertaking had been duly performed,
observed and satisfied by the Buyer.
	 
	12.3	 	The Guarantor’s liability under this clause 12 shall remain in force until all of the Buyer’s
obligations, commitments and undertakings under or pursuant to this agreement have been fully
performed and discharged and all sums payable by the Buyer under this agreement have been
fully paid. Nothing shall impair or discharge the Guarantor’s liability or obligations under
this clause 12 and this shall apply, without limitation, in relation to:

	 	(a)	 	the existence, validity, taking or renewal of any other guarantee, security,
right of recourse, set off or combination or other right or interest held by the Seller
in relation to this agreement or any demand or enforcement of, neglect to perfect,
failure to demand or enforce or the release or waiver of any such guarantee, security,
right of recourse, set off or combination or other right or interest; or
	 
	 	(b)	 	any amendment to or variation (howsoever substantial or material) of this
agreement or any security or other document relating to this agreement or any
assignment of this agreement or any waiver or departure from its terms or any such
security or document; or
	 
	 	(c)	 	any release of, or granting of time or any other indulgence to, the Buyer or
any other person; or
	 
	 	(d)	 	any winding up, dissolution, reconstruction, arrangement or reorganisation,
legal limitation, disability, incapacity or lack of corporate power or authority or
other circumstances of, or any change in the constitution or corporate identity
(including amalgamation) or loss of corporate identity by, the Buyer, the Seller, the
Guarantor or any other person (or any act taken by the Buyer, the Seller, the Guarantor
or any other person in relation to any such event); or
	 
	 	(e)	 	any other circumstances which might render void or unenforceable the
obligations, commitments and undertakings of the Buyer under this agreement or which
might affect the Sellers’ ability to recover amounts from the Buyer.

	12.4	 	Demands may be made by the Seller under this clause 12 from time to time. The obligations of
the Guarantor under this clause 12 are continuing obligations and shall extend to all of the
obligations from time to time of the Buyer, regardless of any intermediate payment or
discharge in whole or in part, and are in addition to and not in substitution for any other
security which the Seller may now or in the future hold for the obligations of the Buyer under
this agreement and may be enforced by the Seller without the Seller first having recourse to
any such other security or taking any steps or proceedings against the Buyer.
	 
	12.5	 	Any release, compromise or discharge of the obligations of the Guarantor shall be deemed to
be made subject to the condition that it will be void if any payment,

14

 

	 	 	performance or security which may be or has been received by the Seller is set aside,
refunded or reduced or proves invalid for whatever reason. If such condition is satisfied,
the Seller shall be entitled to recover from the Guarantor on demand the value of such
security or the amount of such payment as if such discharge, release, composition or
arrangement had not been effected.
	 
	12.6	 	Any amounts payable under this clause 12 shall be paid in full without any deduction or
withholding whatsoever (whether in respect of set-off, counterclaim, duties, charges, taxes or
otherwise) unless such deduction or withholding is required by law, in which event the
Guarantor shall pay to the Seller an additional amount so that the net amount received by the
Seller will equal the full amount which the Seller would have received had no such deduction
or withholding been made.
	 
	13.	 	TERMINATION OF THE SHAREHOLDERS AGREEMENT
	 
	13.1	 	The Sellers hereby agree to terminate the Shareholders Agreement with effect from the
Completion Date.
	 
	14.	 	CONFIDENTIALITY AND ANNOUNCEMENTS
	 
	14.1	 	The Seller undertakes to the Buyer to keep confidential the terms of this agreement and all
information which it has acquired about the Company and the Buyer’s Group (as such Group is
constituted immediately before Completion) and to use the information only for the purposes
contemplated by this agreement.
	 
	14.2	 	The Buyer undertakes to the Seller to keep confidential the terms of this agreement and all
information that it has acquired about the Seller or its Groups (as such Groups are
constituted immediately after Completion) and to use the information only for the purposes
contemplated by this agreement.
	 
	14.3	 	The Buyer does not have to keep confidential or restrict its use of information about the
Company after Completion.
	 
	14.4	 	A party does not have to keep confidential or to restrict its use of:

	 	(a)	 	information that is or becomes public knowledge other than as a direct or
indirect result of a breach of this agreement; or
	 
	 	(b)	 	information that it receives from a source not connected with the party to whom
the duty of confidence is owed that it acquires free from any obligation of confidence
to any other person.

	14.5	 	Any party may disclose any information that it is otherwise required to keep confidential
under this clause 14:

	 	(a)	 	to such professional advisers, consultants and employees or officers of its
Group as are reasonably necessary to advise on this agreement, or to facilitate the
Transaction, if the disclosing party procures that the people to whom the information
is disclosed keep it confidential as if they were that party; or
	 
	 	(b)	 	with the written consent of all the other parties; or

15

 

	 	(c)	 	to confirm that the sale has taken place and the date of the sale (but without
otherwise revealing any other items of sale or making any other announcement); or
	 
	 	(d)	 	to the extent that the disclosure is required:

	 	(i)	 	by law; or
	 
	 	(ii)	 	by a regulatory body, Taxation Authority or securities
exchange; or
	 
	 	(iii)	 	to make any filing with, or obtain any authorisation from, a
regulatory body, Taxation Authority or securities exchange; or
	 
	 	(iv)	 	under any arrangements in place under which negotiations
relating to terms and conditions of employment are conducted; or
	 
	 	(v)	 	to protect the disclosing party’s interest in any legal
proceedings,

	 	 	but shall use reasonable endeavours to consult the other parties and to take into account
any reasonable requests they may have in relation to the disclosure before making it.
	 
	14.6	 	Each party shall supply any other party with any information about itself, its Group or this
agreement as such other party may reasonably require for the purposes of satisfying the
requirements of a law, regulatory body or securities exchange to which such other party is
subject.
	 
	15.	 	FURTHER ASSURANCE
	 
	 	 	The Seller shall (at its expense) promptly execute and deliver all such documents, and do
all such things, as the Buyer may from time to time require for the purpose of giving full
effect to the provisions of this agreement.
	 
	16.	 	ASSIGNMENT
	 
	16.1	 	Except as provided otherwise in this agreement, no party may assign, or grant any Encumbrance
or security interest over, any of its rights under this agreement or any document referred to
in it.
	 
	16.2	 	Each party that has rights under this agreement is acting on its own behalf.
	 
	16.3	 	The Buyer may assign its rights under this agreement (or any document referred to in this
agreement) but not its obligations to a member of its Group or to any person to whom it
transfers the Sale Shares.
	 
	16.4	 	If there is an assignment:

	 	(a)	 	the Seller may discharge its obligations under this agreement to the assignor
until it receives notice of the assignment; and
	 
	 	(b)	 	the assignee may enforce this agreement as if it were a party to it, but the
Buyer shall remain liable for any obligations under this agreement.

16

 

	17.	 	WHOLE AGREEMENT
	 
	17.1	 	This agreement, and any documents referred to in it, constitute the whole agreement between
the parties and supersede any arrangements, understanding or previous agreement between them
relating to the subject matter they cover.
	 
	17.2	 	Nothing in this clause 17 operates to limit or exclude any liability for fraud.
	 
	18.	 	VARIATION AND WAIVER
	 
	18.1	 	Any variation of this agreement shall be in writing and signed by or on behalf of each party.
	 
	18.2	 	Any waiver of any right under this agreement is only effective if it is in writing and signed
by the waiving or consenting party and it applies only in the circumstances for which it is
given and shall not prevent the party who has given the waiver from subsequently relying on
the provision it has waived.
	 
	18.3	 	No failure to exercise or delay in exercising any right or remedy provided under this
agreement or by law constitutes a waiver of such right or remedy or shall prevent any future
exercise in whole or in part thereof.
	 
	18.4	 	No single or partial exercise of any right or remedy under this agreement shall preclude or
restrict the further exercise of any such right or remedy.
	 
	18.5	 	Unless specifically provided otherwise, rights arising under this agreement are cumulative
and do not exclude rights provided by law.
	 
	19.	 	COSTS
	 
	 	 	All costs in connection with the negotiation, preparation, execution and performance of this
agreement, and any documents referred to in it, shall be borne by the party that incurred
the costs.
	 
	20.	 	NOTICE
	 
	20.1	 	A notice given under this agreement:

	 	(a)	 	shall be in writing in the English language (or be accompanied by a properly
prepared translation into English);
	 
	 	(b)	 	shall be sent for the attention of the person, and to the address or fax
number, specified in this clause 20 (or such other address, fax number or person as
each party may notify to the others in accordance with the provisions of this clause
20); and
	 
	 	(c)	 	shall be:

	 	(i)	 	delivered personally; or
	 
	 	(ii)	 	sent by fax; or
	 
	 	(iii)	 	sent by pre-paid first-class post or recorded delivery; or

17

 

	 	(iv)	 	(if the notice is to be served by post outside the country from
which it is sent) sent by airmail.

	20.2	 	The addresses for service of notice are:

	 	(a)	 	Steven Bedford (as Seller representative)

Audley Mead

20 Bolton Avenue

Windsor SL4 3JF
	 
	 	cc.	 	Rosenblatt

9-13 St Andrew Street

London EC4A 3AF

Tel: 020 7955 0880

Fax: 020 7955 0888
	 
	 	(b)	 	Build-A-Bear UK Holdings Limited

St Stephens House

Arthur Road

Windsor

Berkshire SL4 1RU
	 
	 	cc.	 	Bryan Cave

33 Cannon Street

London EC4M 5TE

Tel: 020 7246 5800

Fax: 020 7246 5858

	20.3	 	A notice is deemed to have been received:

	 	(a)	 	if delivered personally, at the time of delivery; or
	 
	 	(b)	 	in the case of fax, at the time of transmission; or
	 
	 	(c)	 	in the case of pre-paid first class post or recorded delivery, 1 Business Day
from the date of posting; or
	 
	 	(d)	 	in the case of airmail, 5 Business Days from the date of posting; or
	 
	 	(e)	 	if deemed receipt under the previous paragraphs of this clause 20.3 is not
within business hours (meaning 9.00 am to 5.30 pm Monday to Friday on a day that is not
a public holiday in the place of receipt), when business next starts in the place of
receipt.

	20.4	 	To prove service, it is sufficient to prove that the notice was transmitted by fax to the fax
number of the party or, in the case of post, that the envelope containing the notice was
properly addressed and posted.

18

 

	21.	 	INTEREST ON LATE PAYMENT
	 
	21.1	 	Where a sum is required to be paid under this agreement (other than under the Tax Covenant)
but is not paid before or on the date the parties agreed, the party due to pay the sum shall
also pay an amount equal to interest on that sum for the period beginning with that date and
ending with the date the sum is paid (and the period shall continue after as well as before
judgment).
	 
	21.2	 	The rate of interest shall be 2% per annum above the base lending rate for the time being of
HSBC. Interest shall accrue on a daily basis and be compounded quarterly.
	 
	21.3	 	This clause 21 is without prejudice to any claim for interest under the law.
	 
	22.	 	SEVERANCE
	 
	22.1	 	If any provision of this agreement (or part of a provision) is found by any court or
administrative body of competent jurisdiction to be invalid, unenforceable or illegal, the
other provisions shall remain in force.
	 
	22.2	 	If any invalid, unenforceable or illegal provision would be valid, enforceable or legal if
some part of it were deleted, the provision shall apply with whatever modification is
necessary to give effect to the commercial intention of the parties.
	 
	23.	 	AGREEMENT SURVIVES COMPLETION
	 
	 	 	This agreement (other than obligations that have already been fully performed) remains in
full force after Completion.
	 
	24.	 	THIRD PARTY RIGHTS
	 
	24.1	 	Subject to clause 24.2, this agreement and the documents referred to in it are made for the
benefit of the parties and their successors and permitted assigns and are not intended to
benefit, or be enforceable by, anyone else.
	 
	24.2	 	The following provisions are intended to benefit future buyers of the Sale Shares from the
Buyer and, where they are identified in the relevant clauses, the Company, and shall be
enforceable by them to the fullest extent permitted by law:

	 	(a)	 	clause 7 (Warranties) and Schedule 4 (Warranties), subject to clause 8
(Limitations on claims);
	 
	 	(b)	 	clause 9 (Tax covenant) and Schedule 5 (Tax covenant);
	 
	 	(c)	 	clause 11 (Restrictions on the Warrantors and Wittington Investments Limited);
	 
	 	(d)	 	clause 14 (Confidentiality and announcements); and
	 
	 	(e)	 	clause 21 (Interest on late payment).

	24.3	 	Each party represents to the other that their respective rights to terminate, rescind or
agree any amendment, variation, waiver or settlement under this agreement are not subject to
the consent of any person that is not a party to this agreement.

19

 

	25.	 	SUCCESSORS
	 
	 	 	The rights and obligations of the Seller and the Buyer under this agreement shall continue
for the benefit of, and shall be binding on, their respective successors and assigns.
	 
	26.	 	COUNTERPARTS
	 
	 	 	This agreement may be executed in any number of counterparts, each of which is an original
and which together have the same effect as if each party had signed the same document.
	 
	27.	 	LANGUAGE
	 
	 	 	If this agreement is translated into any language other than English, the English language
text shall prevail.
	 
	28.	 	GOVERNING LAW AND JURISDICTION
	 
	28.1	 	This agreement and any disputes or claims arising out of or in connection with its subject
matter are governed by and construed in accordance with the law of England.
	 
	28.2	 	The parties irrevocably agree that the courts of England have exclusive jurisdiction to
settle any dispute or claim that arises out of or in connection with this agreement.

This agreement has been entered into on the date stated at the beginning of it.

20

 

Schedule 1

PARTICULARS OF THE COMPANY AND SUBSIDIARIES

Part 1. The Company

	 	 	 	 	 
	Name:

	 	Amsbra Limited

	 
	 	 	 	 
	Registration number:

	 	4537212	 	 
	 
	 	 	 	 
	Registered office:

	 	St Stephen’s House

	 

	 	Arthur Road

	 

	 	Windsor

	 

	 	Berkshire SL4 1RU

	 
	Authorised share capital

Amount:

	 	10,000	 	 
	Divided into:

	 	10,000 of £1 each

	 
	 	 	 	 
	ISSUED SHARE CAPITAL

	 	£ 39,894.56	 	 
	Amount:

	 	2,737,149 Ordinary A Shares and

	Divided into:

	 	1,252,307 Ordinary B Shares

	 
	 	 	 	 
	Registered shareholders (and number of
Sale Shares held):

	 	(See part 2 below)

	 
	 	 	 	 
	Beneficial owner of Sale Shares (if
different) and number of Sale Shares
beneficially owned:

	 	As above

	 
	 	 	 	 
	Directors and shadow directors:

	 	Rupert Ashe, Nigel French, Andrew

	 

	 	Hugh Mackay, Steven Bedford

	 
	 	 	 	 
	Secretary:

	 	Rupert Ashe

	 
	 	 	 	 
	Auditors

	 	CLB Littlejohn Frazer

	 
	 	 	 	 
	Registered Charges

	 	 2	 	 

21

 

Part 2 The Shareholders

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Non-	 	Total	 	 	 	 
	 	 	 	 	 	 	Voting	 	Voting	 	issued	 	Total	 	 
	 	 	 	 	 	 	A	 	B	 	share	 	Nominal	 	Consideration
	 	 	 	 	 	 	Shares	 	Shares	 	capital	 	value £	 	received £
	 	1.	 	 	Wittington Investments Limited

Weston Centre

10 Grosvenor Street

London WK 4QY

	 	 	925981	 	 	 	492909	 	 	 	1418890	 	 	 	14189	 	 	 	1956125	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	2.	 	 	NSS Trustees Limited & Simon Bentley
on behalf of Regent’s Park Estates
Pension Scheme

c/o Simon Bentley

Mishcon de Reya

Summit House

12 Red Lion Sq.

London WCIR 4QD

	 	 	37068	 	 	 	28194	 	 	 	65262	 	 	 	653	 	 	 	89973	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	3.	 	 	Malcolm Dalgleish Esq.

Dalgleish & Co.

80 Bond Street

London W1S 1DD

	 	 	113641	 	 	 	76130	 	 	 	189771	 	 	 	1898	 	 	 	261625	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	4.	 	 	Global Partners Limited 
(Nigel French)

Century House

16 Par La Vile Road

Hamilton, HM

HX, Bermuda

	 	 	103123	 	 	 	70600	 	 	 	173723	 	 	 	1737	 	 	 	239501	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	5.	 	 	Justin Kendrick Esq.

4 Binjai Hill

Singapore

	 	 	22308	 	 	 	17500	 	 	 	39808	 	 	 	398	 	 	 	54882	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	6.	 	 	Christopher John

Newlands Sykes Esq.

Kingswood Farm

East Park Lane

Newchapel

Lingfield

Surrey RH7 6HS

	 	 	26500	 	 	 	17500	 	 	 	44000	 	 	 	440	 	 	 	60661	 

22

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Non-	 	Total	 	 	 	 
	 	 	 	 	 	 	Voting	 	Voting	 	issued	 	Total	 	 
	 	 	 	 	 	 	A	 	B	 	share	 	Nominal	 	Consideration
	 	 	 	 	 	 	Shares	 	Shares	 	capital	 	value £	 	received £
	 	7.	 	 	Aero Systems SA (Michael Mitchell)

10 Chemin des Chasseurs,

1380 Ohain

Belgium

	 	 	37068	 	 	 	28194	 	 	 	65262	 	 	 	1160	 	 	 	89971	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	8.	 	 	Michael Mitchell

[10 Chemin des Chasseurs

1380 Ohain

Belgium]

	 	 	0	 	 	 	50724	 	 	 	50724	 	 	 	 	 	 	 	69929	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	9.	 	 	Merville Limited

c/o Seamus McLaughlin,

Martin & Company,

25 St Thomas Street,

Winchester S023 9DD

	 	 	44616	 	 	 	35000	 	 	 	79616	 	 	 	796	 	 	 	109762	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	10.	 	 	Mrs Sue Buchan

53 Great King Street

Edinburgh EH3 6RP

	 	 	41558	 	 	 	54500	 	 	 	96058	 	 	 	961	 	 	 	132429	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	11.	 	 	Boldswitch Limited (British Land)

10 Cornwall Terrace

London NW1 4QP

	 	 	236116	 	 	 	160875	 	 	 	396991	 	 	 	3970	 	 	 	547305	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	12.	 	 	Steven Bedford Esq.

Audley Mead

20 Bolton Avenue

Windsor SL4 3JF

	 	 	310000	 	 	 	0	 	 	 	310000	 	 	 	3100	 	 	 	427375	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	13.	 	 	The Granola Trust (Andrew Mackay)

Trust Corporation of the

Channel Islands Limited,

PO Box 665, Rosenheath,

The Grange, St Peter Port,

Guernsey, GY1 3SJ

	 	 	470000	 	 	 	0	 	 	 	470000	 	 	 	4700	 	 	 	647957	 

23

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Non-	 	Total	 	 	 	 
	 	 	 	 	 	 	Voting	 	Voting	 	issued	 	Total	 	 
	 	 	 	 	 	 	A	 	B	 	share	 	Nominal	 	Consideration
	 	 	 	 	 	 	Shares	 	Shares	 	capital	 	value £	 	received £
	 	14.	 	 	Rupert Ashe Esq.

Wall House

No. 1 The Green

Wimbledon SW19 5AZ

	 	 	155000	 	 	 	5000	 	 	 	160000	 	 	 	1600	 	 	 	220581	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	15.	 	 	Angus Samuels

126 Jermyn St

SW1Y 4UJ

	 	 	28850	 	 	 	10413	 	 	 	39263	 	 	 	393	 	 	 	54130	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	16.	 	 	John Howard-Smith

126 Jermyn St

SW1Y 4UJ

	 	 	11540	 	 	 	4165	 	 	 	15705	 	 	 	157	 	 	 	21652	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	17.	 	 	Kenneth McKelvey

126 Jermyn St

SW1Y 4UJ

	 	 	57700	 	 	 	95825	 	 	 	153525	 	 	 	1535	 	 	 	211655	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	18.	 	 	Jonathan Punter

126 Jermyn St

SW1Y 4UJ

	 	 	31425	 	 	 	5206	 	 	 	36631	 	 	 	366	 	 	 	50502	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	19.	 	 	David Cule 

Lords Hill House

Lords Hill Common

Shamley Green

Guildford GU5 0UZ

	 	 	28850	 	 	 	46642	 	 	 	75492	 	 	 	755	 	 	 	104077	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	20.	 	 	Gary Jackson

152 Grosvenor Road

SW1V 3JL

	 	 	14425	 	 	 	14425	 	 	 	28850	 	 	 	289	 	 	 	39774	 

24

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Non-	 	Total	 	 	 	 
	 	 	 	 	 	 	Voting	 	Voting	 	issued	 	Total	 	 
	 	 	 	 	 	 	A	 	B	 	share	 	Nominal	 	Consideration
	 	 	 	 	 	 	Shares	 	Shares	 	capital	 	value £	 	received £
	 	21.	 	 	Paul Rosenblatt

Rosenblatt UK

603 Beetham Plaza

The Strand

Liverpool LS OXJ

	 	 	22308	 	 	 	17500	 	 	 	39808	 	 	 	398	 	 	 	54882	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	22.	 	 	Philip Lewis 

Hines UK

Queensberry House

3 Old Burlington St, W1S 3AE

	 	 	19072	 	 	 	21005	 	 	 	40077	 	 	 	401	 	 	 	55252	 
	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	TOTAL SHARES

	 	 	2737149	 	 	 	1252307	 	 	 	3989456	 	 	 	19421	 	 	 	5500000	 

25

 

Schedule 2

CONDITIONS

	1.	 	The termination of the Share Options and of the AM Options.
	 
	2.	 	The completion of the purchase by the Buyer or a member of the Buyer’s Group of the entire
issued share capital of The Bear Factory Ltd from Hamleys.
	 
	3.	 	The issue of an insurance policy by New Hampshire Insurance Company in terms reasonably
satisfactory to the Purchaser and the Warrantors for the purpose of providing insurance cover
in the event of a breach of warranty or a claim under the Tax Covenant.

26

 

Schedule 3

COMPLETION

Part 1. Conduct between exchange and completion

	1.	 	The Warrantors undertake to procure and procures that each member of their Group(s) undertake
to procure that the Business shall be conducted in the manner provided in this Part 3 of
Schedule 3 from the date of this agreement to Completion.
	 
	2.	 	The Company shall carry on business in the normal course.
	 
	3.	 	The Company shall not:

	 	(a)	 	dispose of any material assets used or required for the operation of its
business; or
	 
	 	(b)	 	allot or agree to allot any shares or other securities, repurchase, redeem or
agree to repurchase or redeem any of the shares; or
	 
	 	(c)	 	pass any resolution; or
	 
	 	(d)	 	enter into, modify or agree to terminate any Material Contract (as defined in
Part 1 of Schedule 4); or
	 
	 	(e)	 	incur any capital expenditure on any individual item in excess of £20,000; or
	 
	 	(f)	 	borrow any sum in excess of £20,000; or
	 
	 	(g)	 	enter into any lease, lease hire or hire purchase agreement or agreement for
payment on deferred terms; or
	 
	 	(h)	 	pay any dividend or make any other distribution of its assets; or
	 
	 	(i)	 	make, or agree to make, material alterations to the terms and conditions of
employment (including benefits) of any of its directors, officers or employees; or
	 
	 	(j)	 	provide or agree to provide any non-contract benefit to any director, officer,
employee or their dependants; or
	 
	 	(k)	 	dismiss any of its employees or employ or engage (or offer to employ or engage)
any person; or
	 
	 	(l)	 	create any Encumbrance over any of its assets or its undertaking; or
	 
	 	(m)	 	institute, settle or agree to settle any legal proceedings relating to its
business, except debt collection in the normal course of business; or
	 
	 	(n)	 	pay any management charge to the Seller; or
	 
	 	(o)	 	incur any liability to the Seller, other than trading liabilities incurred in
the normal course of business; or

27

 

	 	(p)	 	vary the terms on which it holds any of the Properties or settle any rent
review; or
	 
	 	(q)	 	(make any material change to the accounting procedures or principles by
reference to which its accounts are drawn up.

	4.	 	The Company may do anything falling within paragraph 3 of this Schedule 3 if the Buyer has
given prior written consent.
	 
	5.	 	The Company shall maintain in force insurance policies:

	 	(a)	 	that have limits of indemnity at least equal to; and
	 
	 	(b)	 	the other terms of which are no less favourable than,

	 	 	those policies of insurance maintained by the Company on the date of this agreement.
	 
	6.	 	The Warrantors shall use its best endeavours to maintain the trade and trade connections of
the Company in the ordinary course of business.
	 
	7.	 	The Warrantors shall give to the Buyer as soon as possible full details of any material
change in the business, financial position or assets of the Company.
	 
	8.	 	The Warrantors shall not:

	 	(a)	 	induce, or attempt to induce, any of the employees of the Company, whether
directly or indirectly, to terminate their employment before the Completion Date; or
	 
	 	(b)	 	incur any liabilities to the Company, other than trading liabilities incurred
in the normal course of business.

	9.	 	No amendment, other than one made solely to comply with legislative requirements, shall be
made to any agreements or arrangements for the payment of pensions or other benefits on
retirement:

	 	(a)	 	to present or former directors, officers or employees of the Company; or
	 
	 	(b)	 	to the dependants of any of those people.

	10.	 	The Warrantors shall, at the Buyer’s request and expense, provide the Buyer with such
information or documents as it may reasonably require relating to the terms of employment or
any other matter concerning any Employee or Worker or any body of employees or their
representatives in the period prior to the Completion Date.
	 
	11.	 	The Warrantors shall, at the Buyer’s expense and subject to its obligations under the Data
Protection Act 1998, give such assistance as the Buyer may reasonably require to contest any
claim by anyone employed or engaged by the Company prior to the Completion Date or their
representatives resulting from or in connection with this agreement.

28

 

Part 2. What the Seller shall deliver to the Buyer at Completion

	1.	 	At Completion, the Seller shall deliver or cause to be delivered to the Buyer the following
documents and evidence:

	 	(a)	 	transfers of the Sale Shares executed by the registered holder in favour of the
Buyer;
	 
	 	(b)	 	the share certificates for the Sale Shares in the name of the registered holder
or an indemnity in the agreed form for any lost certificates;
	 
	 	(c)	 	the waivers, consents and other documents required to enable the Buyer to be
registered as the holder of the Sale Shares;
	 
	 	(d)	 	irrevocable powers of attorney in agreed form given by the Seller in favour of
the Buyer to enable the beneficiary (or its proxies) to exercise all voting and other
rights attaching to the Sale Shares before the transfer of all such shares is
registered in the register of members;
	 
	 	(e)	 	the original of any power of attorney under which any document to be delivered
to the Buyer under this paragraph 1 has been executed;
	 
	 	(f)	 	in relation to the Company, the statutory registers and minute books (written
up to the time of Completion), the common seal, certificate of incorporation and any
certificates of incorporation on change of name;
	 
	 	(g)	 	the written resignation, executed as a deed and in the agreed form, of the
directors and secretary of the Company from their offices and employment with the
Company;
	 
	 	(h)	 	the written resignation of the auditors of the Company accompanied in each case
by:

	 	(i)	 	a statement that there are no circumstances connected with the
auditors’ resignation which should be brought to the notice of the members or
creditors of the Company; and
	 
	 	(ii)	 	a written assurance that the resignation and statement have
been, or will be, deposited at the registered office of the Company in
accordance with section 394 of the Companies Act 1985;

	 	(i)	 	signed copies of special resolutions of the Company in a form appropriate for
filing at Companies House to adopt new articles of association of the Company in the
form the Buyer requires;
	 
	 	(j)	 	a copy of the new articles of association of the Company appropriate for filing
at Companies House;
	 
	 	(k)	 	a certified copy of the minutes of the board meetings held pursuant to Part 3
of this Schedule 3;
	 
	 	(l)	 	in relation to the Company:

29

 

	 	(i)	 	statements from each bank at which the Company has an account,
giving the balance of each account at the close of business on the last
Business Day before Completion;
	 
	 	(ii)	 	all cheque books in current use and written confirmation that
no cheques have been written since those statements were prepared;
	 
	 	(iii)	 	details of their cash book balances; and
	 
	 	(iv)	 	reconciliation statements reconciling the cash book balances
and the cheque books with the bank statements delivered;
	 
	 	(v)	 	all title deeds and other documents relating to the Properties;
	 
	 	(vi)	 	evidence, in agreed form, that any indebtedness or other
liability of the kind described in paragraph 41 of Part 1 of Schedule 4
(Transactions with the seller) has been discharged;
	 
	 	(vii)	 	evidence, in agreed form, that the Company has been discharged
from any responsibility for the indebtedness, or for the default in the
performance of any obligation, of any other person;
	 
	 	(viii)	 	all charges, mortgages, debentures and guarantees to which the Company is a
party and, in relation to each such instrument and any covenants connected with
it:

	 	(1)	 	a sealed discharge or release in the agreed
form; and
	 
	 	(2)	 	a sworn and completed Form 403a (declaration
that part of the property or undertaking charged has been released from
the charge);
	 
	 	(3)	 	certified copy of the resolution adopted by the
board of directors of the Seller (as applicable) authorising and
approving the Transaction.

Part 3. Matters for the board meetings at Completion

	2.	 	The Seller shall cause a board meeting of the Company to be held at Completion at which the
matters set out in this Part 3 of this Schedule 3 shall take place.
	 
	3.	 	A resolution to register the transfer of the Sale Shares shall be passed at such board
meeting of the Company, subject to the transfer(s) being stamped at the cost of the Buyer.
	 
	4.	 	All directors, secretaries and auditors of the Company shall resign from their offices and
employment with the Company with effect from the end of the relevant board meeting.
	 
	5.	 	Such letters as may be required varying the terms of the service agreements of Rupert Ashe,
Steven Bedford and Andrew Mackay shall be entered into by the Company and the above
individuals.

30

 

	6.	 	The persons the Buyer nominates shall be appointed as directors and secretary of the Company
(but not exceeding any maximum number of directors contained in the Company’s articles of
association). The appointments shall take effect at the end of the board meeting.
	 
	7.	 	KPMG shall be appointed as the auditors of the Company with effect from the end of the
relevant board meeting.
	 
	8.	 	All the existing instructions and authorities to bankers shall be revoked and replaced with
new instructions and authorities to those banks in the form the Buyer requires.
	 
	9.	 	The address of the registered office of the Company shall be changed to the address required
by the Buyer.
	 
	10.	 	The accounting reference date of the Company shall be changed to the date required by the
Buyer.

31

 

Schedule 4

WARRANTIES

Part 1. General warranties

	 	 	POWER TO SELL THE COMPANY
	 
	1.	 	Each Seller has taken all necessary action and has all requisite power and authority to enter
into and perform this agreement in accordance with its terms and the other documents referred
to in it.
	 
	2.	 	This agreement and the other documents referred to in it constitute (or shall constitute when
executed) valid, legal and binding obligations on each Seller in the terms of the agreement
and such other documents.
	 
	3.	 	Compliance with the terms of this agreement and the documents referred to in it shall not
breach or constitute a default under any of the following:

	 	(a)	 	any agreement or instrument to which any Seller is a party or by which it is
bound; or
	 
	 	(b)	 	any order, judgment, decree or other restriction applicable to any Seller.

	 	 	SHARES IN THE COMPANY AND SUBSIDIARIES
	 
	4.	 	The Sale Shares constitute the whole of the allotted and issued share capital of the Company
and are fully paid.
	 
	5.	 	Each Seller is the sole legal and beneficial owner of the number of Sale Shares set against
his name in Schedule 1.
	 
	6.	 	The Sale Shares are free from all Encumbrances.
	 
	7.	 	No right has been granted or commitment given to create a right to any person to require the
Company to issue any share capital and no Encumbrance has been created or commitment given to
create any Encumbrance in favour of any person affecting any unissued shares or debentures or
other unissued securities of the Company and no person has claimed any rights in connection
with any of those things.
	 
	8.	 	The Company does not:

	 	(a)	 	does not hold or beneficially owns, nor has agreed to acquire, any securities
of any corporation; or
	 
	 	(b)	 	is not nor has agreed to become a member of any partnership or other
unincorporated association, joint venture or consortium (other than recognised trade
associations); or
	 
	 	(c)	 	does not have, outside its country of incorporation, any branch or permanent
establishment; or
	 
	 	(d)	 	has not allotted or issued any securities that are convertible into shares.

32

 

	9.	 	The Company has not at any time:

	 	(a)	 	purchased, redeemed or repaid any of its own share capital; or
	 
	 	(b)	 	given any financial assistance in connection with any acquisition of its share
capital as it would fall within sections 151 to 158 (inclusive) of the Companies Acts.

	10.	 	All dividends or distributions declared, made or paid by the Company have been declared, made
or paid in accordance with its memorandum, articles of association, the applicable provisions
of the Companies Acts and any agreements or arrangements made with any third party regulating
the payment of dividends and distributions.
	 
	 	 	CONSTITUTIONAL AND CORPORATE DOCUMENTS
	 
	11.	 	The copies of the memorandum and articles of association or other constitutional and
corporate documents of the Company Disclosed to the Buyer or its advisers are true, accurate
and complete in all respects and copies of all the resolutions and agreements required to be
annexed to or incorporated in those documents by the law applicable are annexed or
incorporated.
	 
	12.	 	All statutory books and registers of the Company have been properly kept and no notice or
allegation that any of them is incorrect or should be rectified has been received.
	 
	13.	 	All returns, particulars, resolutions and other documents which the Company is required by
law to file with or deliver to any authority in any jurisdiction (including, in particular,
the Registrar of Companies in England and Wales) have been correctly made up and filed or, as
the case may be, delivered.
	 
	 	 	INFORMATION
	 
	14.	 	The particulars relating to the Company in this agreement are accurate and not misleading.
	 
	 	 	COMPLIANCE WITH LAWS
	 
	15.	 	The Company has at all times conducted its business in accordance with all applicable laws
and regulations.
	 
	 	 	LICENCES AND CONSENTS
	 
	16.	 	The Company has all necessary licences, consents, permits and authorities necessary to carry
on its business in the places and in the manner in which its business is now carried on, all
of which are valid and subsisting.
	 
	17.	 	So far as the Warrantors are aware, there is no reason why any of those licences, consents,
permits and authorities should be suspended, cancelled, revoked or not renewed on the same
terms.
	 
	 	 	INSURANCE
	 
	18.	 	The insurance policies maintained by or on behalf of the Company provide full indemnity cover
against all losses and liabilities including business interruption and other

33

 

	 	 	risks that are normally insured against by a person carrying on the same type of business as
the Company.
	 
	19.	 	The brief particulars of those policies as set out in the Disclosure Letter are accurate and
not misleading.
	 
	20.	 	There are no material outstanding claims under, or in respect of the validity of any of those
policies and, so far as the Warrantors are aware, there are no circumstances likely to give
rise to any claim under any of those policies.
	 
	21.	 	All the insurance policies are in full force and effect, are not void or voidable, nothing
has been done or not done by the Company, or so far as the Warrantors are aware, by any third
party which would make any of them void or voidable and Completion will not terminate, or
entitle any insurer to terminate, any such policy.
	 
	 	 	POWER OF ATTORNEY
	 
	22.	 	There are no powers of attorney in force given by the Company.
	 
	23.	 	No person, as agent or otherwise, is entitled or authorised to bind or commit the Company to
any obligation not in the ordinary course of the Company business.
	 
	24.	 	The Disclosure Letter sets out details of all persons who have authority to bind the Company
in the ordinary course of business.
	 
	 	 	DISPUTES AND INVESTIGATIONS
	 
	25.	 	The Company nor, so far as the Warrantors are aware, any person for whom the Company is
vicariously liable:

	 	(a)	 	is engaged in any litigation, administrative, mediation or arbitration
proceedings or other proceedings or hearings before any statutory or governmental body,
department, board or agency (except for debt collection in the normal course of
business); or
	 
	 	(b)	 	is the subject of any investigation, inquiry or enforcement proceedings by any
governmental, administrative or regulatory body.

	26.	 	No director of the Company is, to the extent that it relates to the business of the Company,
engaged in or subject to any of the matters mentioned in paragraph 25 of this Schedule 4.
	 
	27.	 	No such proceedings, investigation or inquiry as are mentioned in paragraph 25 or paragraph
26 of this Schedule 4 have been threatened or are pending and, so far as the Warrantors are
aware, there are no circumstances likely to give rise to any such proceedings.
	 
	28.	 	The Company is not affected by any existing or pending judgments or rulings and has not given
any undertakings arising from legal proceedings to a court, governmental agency, regulator or
third party.

34

 

	 	 	DEFECTIVE PRODUCTS
	 
	29.	 	The Company has not sold any products which were, at the time they were sold, faulty or
defective or did not comply with:

	 	(a)	 	warranties or representations expressly made or implied by or on behalf of the
Company; or
	 
	 	(b)	 	all laws, regulations, standards and requirements applicable to the products.

	30.	 	No proceedings have been started, are pending or have been threatened against the Company in
which it is claimed that any products sold by the Company are defective, not appropriate for
their intended use or have caused bodily injury or material damage to any person or property
when applied or used as intended.
	 
	31.	 	No proceedings have been started and there are no outstanding liabilities or claims pending
or threatened against the Company in respect of the provision of in store customer service for
which the Company is or may become liable and no dispute exists between the Company and any of
its customers or clients.
	 
	 	 	CUSTOMERS AND SUPPLIERS
	 
	32.	 	In the 12 months ending with the date of this agreement, the business of the Company has not
been materially affected in an adverse manner as a result of any one or more of the following
things happening to the Company:

	 	(a)	 	the loss of any of its customers or suppliers; or
	 
	 	(b)	 	a reduction in trade with its customers or in the extent to which it is
supplied by any of its suppliers; or
	 
	 	(c)	 	a change in the terms on which it trades with or is supplied by any of its
customers or suppliers.

	 	 	COMPETITION
	 
	 	 	The definition in this paragraph applies in this agreement.
	 
	 	 	Competition Law: the national and directly effective legislation of any jurisdiction which
governs the conduct of companies or individuals in relation to restrictive or other
anti-competitive agreements or practices (including, but not limited to, cartels, pricing,
resale pricing, market sharing, bid rigging, terms of trading, purchase or supply and joint
ventures), dominant or monopoly market positions (whether held individually or collectively)
and the control of acquisitions or mergers.
	 
	33.	 	The Company is not engaged in any agreement, arrangement, practice or conduct which amounts
to an infringement of the Competition Law of any jurisdiction in which the Company conducts
business and no Director is engaged in any activity which would be an offence or infringement
under any such Competition Law.
	 
	34.	 	The Company is not the subject of any investigation, inquiry or proceedings by any relevant
government body, agency or authority in connection with any actual or alleged

35

 

	 	 	infringement of the Competition Law of any jurisdiction in which the Company conducts
business.
	 
	35.	 	No such investigation, inquiry or proceedings as mentioned in paragraph 34 of this Schedule 4
have been threatened or are pending and, so far as the Warrantors are aware, there are no
circumstances likely to give rise to any such investigation, inquiry or proceedings.
	 
	36.	 	The Company is not affected by any existing or pending decisions, judgments, orders or
rulings of any relevant government body, agency or authority responsible for enforcing the
Competition Law of any jurisdiction in which the Company conducts business and the Company has
not given any undertakings or commitments to such bodies which affect the conduct of the
Business.
	 
	37.	 	The Company is not in receipt of any payment, guarantee, financial assistance or other aid
from the government or any state body which was not, but should have been, notified to the
European Commission under Article 88 of the EC Treaty for decision declaring such aid to be
compatible with the common market.
	 
	 	 	CONTRACTS
	 
	 	 	The definition in this paragraph applies in this agreement.
	 
	 	 	Material Contract: an agreement or arrangement to which the Company is a party or is bound
by and which is of material importance to the business, profits or assets of the Company.
	 
	38.	 	Except for the agreements and arrangements Disclosed, the Company is not a party to or
subject to any agreement or arrangement which:

	 	(a)	 	is a Material Contract; or
	 
	 	(b)	 	is of an unusual or exceptional nature; or
	 
	 	(c)	 	is not in the ordinary and usual course of business of the Company; or
	 
	 	(d)	 	may be terminated as a result of any Change of Control of the Company; or
	 
	 	(e)	 	restricts the freedom of the Company to carry on the whole or any part of its
business in any part of the world in such manner as it thinks fit; or
	 
	 	(f)	 	involves agency or distributorship; or
	 
	 	(g)	 	involves partnership, joint venture, consortium, joint development,
shareholders or similar arrangements; or
	 
	 	(h)	 	is incapable of complete performance in accordance with its terms within six
months after the date on which it was entered into; or
	 
	 	(i)	 	cannot be readily fulfilled or performed by the Company on time and without
undue or unusual expenditure of money and effort; or

36

 

	 	(j)	 	involves or is likely to involve an aggregate consideration payable by or to
the Company in excess of £50,000; or
	 
	 	(k)	 	requires the Company to pay any commission, finders’ fee, royalty or the like;
or
	 
	 	(l)	 	is for the supply of goods and/or services by or to the Company on terms under
which retrospective or future discounts, price reductions or other financial incentives
are given; or
	 
	 	(m)	 	is not on arm’s length terms; or
	 
	 	(n)	 	provides for payments or other dealings in or calculated by reference to the
euro.

	39.	 	Each Material Contract is in full force and effect and binding on the parties to it. The
Company has not defaulted under or breached a Material Contract and:

	 	(a)	 	so far as the Warrantors are aware, no other party to a Material Contract has
defaulted under or breached such a contract; and
	 
	 	(b)	 	no such default or breach by the Company or any other party has been threatened
or, so far as the Warrantors are aware, is likely.

	40.	 	No notice of termination of a Material Contract has been received or served by the Company
and, so far as the Warrantors are aware, there are no grounds for determination, rescission,
avoidance, repudiation or a material change in the terms of any such contract.

	 	 	TRANSACTIONS WITH THE SELLER

	41.	 	There is no outstanding indebtedness or other liability (actual or contingent) and no
outstanding contract, commitment or arrangement between the Company and any of the following:

	 	(a)	 	any Seller or any member of a Seller’s Group (where a Seller is a company) or
person Connected with any Seller; or
	 
	 	(b)	 	any director of a member of a Seller’s Group (where a Seller is a company) or
any person Connected with such a member or director.

	42.	 	No Seller, nor any person Connected with any Seller, is entitled to a claim of any nature
against the Company or has assigned to any person the benefit of a claim against the Company
to which any Seller or a person Connected with any Seller would otherwise be entitled.
	 
	 	 	FINANCE AND GUARANTEES
	 
	43.	 	Full particulars of all money borrowed by the Company (including full particulars of the
terms on which such money has been borrowed) have been Disclosed.
	 
	44.	 	No guarantee, mortgage, charge, pledge, lien, assignment or other security agreement or
arrangement has been given by or entered into by the Company or any third party in respect of
borrowings or other obligations of the Company.

37

 

	45.	 	The total amount borrowed by the Company does not exceed any limitations on the borrowing
powers contained:

	 	(a)	 	in the memorandum and articles of association of the Company; or
	 
	 	(b)	 	in any debenture or other deed or document binding on the Company.

	46.	 	The Company does not have any outstanding loan capital, or has lent any money that has not
been repaid, and there are no debts owing to the Company other than debts that have arisen in
the normal course of business.
	 
	47.	 	The Company has not:

	 	(a)	 	factored any of its debts or discounted any of its debts or engaged in
financing of a type which would not need to be shown or reflected in the Accounts; or
	 
	 	(b)	 	waived any right of set-off it may have against any third party.

	48.	 	All debts (less any provision for bad and doubtful debts) owing to the Company reflected in
the Accounts and all debts subsequently recorded in the books of the Company have either prior
to the date of this agreement been realised or will, within three months after the date of
this agreement, realise in cash their full amount as included in those Accounts or books and
none of those debts nor any part of them has been outstanding for more than two months from
its due date for payment.
	 
	49.	 	No indebtedness of the Company is due and payable and no security over any of the assets of
the Company is now enforceable, whether by virtue of the stated maturity date of the
indebtedness having been reached or otherwise. The Company has not received any notice whose
terms have not been fully complied with and/or carried out from any creditor requiring any
payment to be made and/or intimating the enforcement of any security which it may hold over
the assets of the Company.
	 
	50.	 	The Company is not responsible for the indebtedness, or for the default in the performance of
any obligation, of any other person.
	 
	51.	 	The Company is not subject to any arrangement for receipt or repayment of any grant, subsidy
or financial assistance from any government department or other body.
	 
	52.	 	Particulars of the balances of all the bank accounts of the Company, showing the position as
at the Business Day immediately preceding the date of this agreement, have been Disclosed and
the Company has no other bank accounts. Since those particulars were given, there have been no
payments out of those accounts other than routine payments in the ordinary course of business.
	 
	53.	 	A Change of Control of the Company will not result in:

	 	(a)	 	termination of or material effect on any financial agreement or arrangement to
which the Company is a party or subject; or
	 
	 	(b)	 	any indebtedness of the Company becoming due, or capable of being declared due
and payable, prior to its stated maturity.

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	 	 	INSOLVENCY
	 
	54.	 	The Company:

	 	(a)	 	is not insolvent or unable to pay its debts within the meaning of the
Insolvency Act 1986 or any other insolvency legislation applicable to it; and
	 
	 	(b)	 	has not stopped paying its debts as they fall due.

	55.	 	No step has been taken to initiate any process by or under which the ability of the creditors
of the Company to take any action to enforce their debts is suspended, restricted or prevented
or a person is appointed to manage the affairs, business and assets of the Company.
	 
	56.	 	In relation to the Company:

	 	(a)	 	no administrator has been appointed;
	 
	 	(b)	 	no documents have been filed with the court for the appointment of an
administrator; and
	 
	 	(c)	 	no notice of an intention to appoint an administrator has been given by the
Company, its directors or by a qualifying floating charge holder (as defined in
paragraph 14 of Schedule B1 to the Insolvency Act 1986).

	57.	 	No process has been initiated which would lead to the Company being dissolved and its assets
being distributed among its creditors, shareholders or other contributors.
	 
	58.	 	No distress, execution or other process has been levied on an asset of the Company.
	 
	 	 	ASSETS
	 
	59.	 	The Company is the full legal and beneficial owner without Encumbrance of, and has good and
marketable title to and has possession and control of all the assets included in the Accounts,
any assets acquired since the Accounts Date and all other assets used by the Company, except
for those disposed of since the Accounts Date in the normal course of business.
	 
	 	 	CONDITION OF STOCK IN TRADE
	 
	60.	 	The stock-in-trade of the Company is in good condition and is capable of being sold by the
Company in the ordinary course of its business in accordance with its current price list
without discount, rebate or allowance to a buyer.
	 
	 	 	ENVIRONMENTAL
	 
	 	 	The definitions in this paragraph apply in this agreement.
	 
	 	 	Hazardous Substances: any natural or artificial substance (whether solid, liquid or gas and
whether alone or in combination with any other substance or radiation), capable of causing
harm to any human or other living organism or the Environment.

39

 

	 	 	Environment: air, water and land, all living organisms and natural or man-made structures.
	 
	 	 	Environmental Law: any law in so far as it relates to Environmental Matters.
	 
	 	 	Environmental Matters: the protection of human health, the protection and condition of the
Environment, the condition of the workplace, the generation, transportation, storage,
treatment, emission, deposit and disposal of any Hazardous Substance or Waste.
	 
	 	 	Waste: all waste, including any unwanted or surplus substance irrespective of whether it is
capable of being recycled or recovered or has any value.
	 
	61.	 	All permits, consents and licences required or issued under Environmental Law which are
necessary for carrying on the Business are in full force and effect and have been complied
with and, so far as the Warrantors are aware, there are no circumstances (including, but not
limited to, the sale of the Sale Shares to the Buyer) likely to give rise to the modification,
suspension or revocation of or lead to the imposition of unusual or onerous conditions on, or
to prejudice the renewal of any of those permits, consents or licences.
	 
	62.	 	The Company has at all times complied with all Environmental Laws applicable to it.
	 
	63.	 	No proceeding or action relating to Environmental Law has been taken, is pending or
threatened against the Company or any employees, directors or officers of the Company by any
competent authority or any other person.
	 
	 	 	INTELLECTUAL PROPERTY
	 
	64.	 	The definition in this paragraph applies in this agreement.
	 
	 	 	Intellectual Property Rights: patents, rights to inventions, utility models, copyright,
trade marks, service marks, trade, business and domain names, rights in trade dress or
get-up, rights in goodwill or to sue for passing off, unfair competition rights, rights in
designs, rights in computer software, database rights, topography rights, moral rights,
rights in confidential information (including know-how and trade secrets) and any other
intellectual property rights, in each case whether registered or unregistered and including
all applications for and renewals or extensions of such rights, and all similar or
equivalent rights or forms of protection in any part of the world.
	 
	65.	 	The Company does not own any Intellectual Property Rights.
	 
	66.	 	Complete and accurate particulars are set out in Schedule 6 respectively of all licences,
agreements, authorisations and permissions (in whatever form and whether express or implied)
under which the Company uses or exploits Intellectual Property Rights owned by any third party
and nothing is due to be done within 30 days of Completion which would jeopardise the use of
such Intellectual Property Rights.
	 
	67.	 	The agreements and licences set out in Schedule 6:

	 	(a)	 	are valid and binding;
	 
	 	(b)	 	have not been the subject of any breach or default by any party or of any event
which, with the giving of notice or lapse of time, would constitute a default;

40

 

	 	(c)	 	are not the subject of any claim, dispute or proceeding, pending or threatened;
	 
	 	(d)	 	have, where required, been duly recorded or registered; and
	 
	 	(e)	 	are all the agreements and licenses necessary for the operation of the
Business.

	68.	 	A Change of Control of the Company will not result in the termination of or materially affect
any of the Intellectual Property Rights set out in Schedule 6.
	 
	69.	 	The activities of the Company do not infringe any third party Intellectual Property Rights.
	 
	70.	 	The Buyer acknowledges and agrees that there shall be no breach of Warranty in respect of
paragraph 67(b) and 69 to the extent that the Company has been and is acting in accordance
with the provisions of its Franchise Agreement with Build-a-Bear Workshop Franchise Holdings,
Inc.
	 
	 	 	INFORMATION TECHNOLOGY
	 
	 	 	The definitions in this paragraph apply in this agreement.
	 
	 	 	IT System: all computer hardware (including network and telecommunications equipment) and
software (including associated preparatory materials, user manuals and other related
documentation) owned, used, leased or licensed by or to the Company.
	 
	71.	 	The IT System has been properly maintained, is in good working order and is, in the
reasonable opinion of the Warrantors, sufficient for the purposes of the Business as at the
date hereof.
	 
	 	 	EMPLOYMENT
	 
	 	 	The definitions in this paragraph apply in this agreement.
	 
	 	 	Employment Legislation: legislation applying in England and Wales affecting contractual or
other relations between employers and their employees or workers, including but not limited
to any legislation and any amendment, extension or re enactment of such legislation and any
claim arising under European treaty provisions or directives enforceable against the Company
by any Employee or Worker.
	 
	 	 	Employee: any person employed by the Company under a contract of employment.
	 
	 	 	Worker: any person who personally performs work for the Company but who is not in business
on their own account or in a client/customer relationship.
	 
	72.	 	The name of each person who is a Director is set out in Schedule 1.
	 
	73.	 	The Disclosure Letter includes anonymised details of all Employees and Workers of the Company
and the principal terms of their contract.
	 
	74.	 	The Disclosure Letter includes anonymised details of all persons who are not Workers and who
are providing services to the Company under an agreement which is not a contract of employment
with the Company (including, in particular, where the individual

41

 

	 	 	acts as a consultant or is on
secondment from a company) and the particulars of the terms on which the individual provides
services.
	 
	75.	 	The Disclosure Letter includes anonymised details of all Employees and Workers of the Company
who are on secondment, maternity, paternity, adoption or other leave or absent due to
ill-health or for any other reason.
	 
	76.	 	No notice to terminate the contract of employment of any Employee or Worker of the Company
(whether given by the relevant employer or by the Employee or Worker) is pending, outstanding
or threatened and no dispute under any Employment Legislation or otherwise is outstanding
between:

	 	(a)	 	the Company and any of its current or former Employees relating to their
employment, its termination and any reference given by the Company regarding them; or
	 
	 	(b)	 	the Company and any of its current or former Workers relating to their
contract, its termination and any reference given by the Company regarding them.

	77.	 	No offer of employment or engagement has been made by the Company that has not yet been
accepted, or which has been accepted but where the employment or engagement has not yet
started.
	 
	78.	 	The acquisition of the Sale Shares by the Buyer and compliance with the terms of this
agreement will not enable any Directors, officers or [senior] Employees of the Company to
terminate their employment or receive any payment or other benefit.
	 
	79.	 	All contracts between the Company and its Employees and Workers are terminable at any time on
three months’ notice or less without compensation (other than for unfair dismissal or a
statutory redundancy payment or any liability on the part of the Company other than wages,
commission or pension).
	 
	80.	 	All contracts between the Company and its Directors, Employees or Workers comply with any
relevant requirements of section 319 of the Companies Act 1985.
	 
	81.	 	The Company is not a party to, bound by or proposing to introduce in respect of any of its
Directors or Employees any redundancy payment scheme in addition to statutory redundancy pay,
nor is there any agreed procedure for redundancy selection.
	 
	82.	 	The Company is not a party to, bound by or proposing to introduce in respect of any of its
Directors, Employees or Workers any share option, profit sharing, bonus, commission or any
other scheme (not in force at the date hereof) relating to the profit or sales of the Company
(other than such scheme as Disclosed).
	 
	83.	 	The Company has not incurred any actual or contingent liability in connection with any
termination of employment of its Employees (including redundancy payments) or for failure to
comply with any order for the reinstatement or re-engagement of any Employee.
	 
	84.	 	The Company has not incurred any liability for failure to provide information or to consult
with Employees under any Employment Legislation.

42

 

	85.	 	The Company has not made or agreed to make a payment or provided or agreed to provide a
benefit to a present or former Director or officer, Employee or Worker or to their dependants
in connection with the actual or proposed termination or suspension of employment or variation
of an employment contract.
	 
	86.	 	The Company is not involved in any material industrial or trade dispute or negotiation
regarding a claim with any trade union, group or organisation of employees or their
representatives representing Employees or Workers and, so far as the Warrantors are aware,
there is nothing likely to give rise to such a dispute or claim.
	 
	87.	 	There are no sums owing to or from any Employee or Worker other than reimbursement of
expenses, wages for the current salary period and holiday pay for the current holiday year.
	 
	88.	 	The Company has not offered, promised or agreed to any future variation in the contract of
any Employee or Worker.
	 
	89.	 	In respect of each Employee and Worker, the Company has:

	 	•	 	performed all obligations and duties it is required to perform (and settled all
outstanding claims), whether or not legally binding and whether arising under contract,
statute, at common law or in equity or under any treaties including the EC Treaty or
laws of the European Community or otherwise;
	 
	 	•	 	complied with the terms of any relevant agreement or arrangement with any trade
union, employee representative or body of employees or their representatives (whether
binding or not);
	 
	 	•	 	maintained adequate and up to date records.

	90.	 	Part 7 of the Income Tax (Earnings and Pensions) Act 2003 does not apply to any shares in the
Company.
	 
	 	 	PROPERTY
	 
	 	 	The definitions in this paragraph apply in this agreement.
	 
	 	 	Current Use: the use for each Property as set out in Schedule 7.
	 
	 	 	Lease: the lease under which each Leasehold Property is held.
	 
	 	 	Leasehold Properties: the Leasehold Properties set out in Schedule 7and Leasehold Property
means any one of them or part of parts of any one of them.
	 
	 	 	Previously-owned Land and Buildings: land and buildings that have, at any time before the
date of this agreement, been owned (under whatever tenure) and/or occupied and/or used by
the Company, but which are either no longer owned, occupied or used by the Company, or are
owned, occupied or used by one of them but pursuant to a different lease, licence, transfer
or conveyance.
	 
	 	 	Planning Acts: the Town and Country Planning Act 1990; the Planning (Listed Buildings and
Conservation Areas) Act 1990; the Planning (Hazardous Substances) Act 1990; the Planning
(Consequential Provisions) Act 1990; the Planning and Compensation

43

 

	 	 	Act 1991; the Planning
and Compulsory Purchase Act 2004; and any other legislation from time to time regulating the
use or development of land.
	 
	 	 	Properties: the Leasehold Properties and Property means any one of them or any part or parts
of any one of them.
	 
	 	 	Property Statutes: the Public Health Acts; the Occupiers Liability Act 1957; the Offices,
Shops and Railway Premises Act 1963; the Health and Safety at Work etc. Act 1974; the
Control of Pollution Act 1974; the Occupiers Liability Act 1984; the Environmental
Protection Act 1990; the Construction (Design and Management) Regulations 1994; the
Environmental Protection Act 1995; the Disability Discrimination Act 1995; the Control of
Asbestos at Work Regulations 2002; and all regulations, rules and delegated legislation
under, or relating to, such statutes.
	 
	 	 	Statutory Agreement: an agreement or undertaking entered into under section 18 of the Public
Health Act 1936; section 52 of the Town and Country Planning Act 1971; section 33 of the
Local Government (Miscellaneous Provisions) Act 1982; section 106 of the Town and Country
Planning Act 1990; section 104 of the Water Industry Act 1991; and any other legislation
(later or earlier) similar to these statutes.
	 
	91.	 	The particulars of the Properties set out in Schedule 7 are true, complete and accurate.
	 
	92.	 	The Properties are the only land and buildings owned, used or occupied by the Company.
	 
	93.	 	The Company does not have any right of ownership, right of use, option, right of first
refusal or contractual obligation to purchase, or any other legal or equitable right, estate
or interest in, or affecting, any land or buildings other than the Properties.
	 
	94.	 	The Company does not have any actual or contingent liability in respect of Previously-owned
Land and Buildings.
	 
	95.	 	Neither the Company, nor any company that is or has at any time been a Subsidiary of the
Company, has given any guarantee or indemnity for any liability relating to any of the
Properties.
	 
	96.	 	The Company is solely legally and beneficially entitled to each of the Properties, and is in
possession and actual occupation of the whole of it on an exclusive basis and no right of
occupation has been granted to a third party.
	 
	97.	 	All the documents of title to be delivered to the Buyer on the Completion Date shall be
original documents, with all Stamp Duty Land Tax duly paid and registered, where completed.
	 
	98.	 	Where title to any of the Properties is not registered at HM Land Registry, there is no
caution against first registration of title and no event has occurred in consequence of which
a caution against first registration of title could be effected.
	 
	99.	 	There is no circumstance that could rnder any transaction affecting the title of the Company
to any of the Properties liable to be set aside under the Insolvency Act 1986.
	 
	100.	 	There are no insurance policies relating to any issue of title affecting the Properties.

44

 

	101.	 	There are, appurtenant to each of the Properties, all rights and easements necessary for
their Current Use and enjoyment (without restriction as to time or otherwise).
	 
	102.	 	The unexpired residue of the term granted by each Lease, is or will be vested in the Company
and is or will be valid and subsisting against all persons, including any person in whom any
superior estate or interest is vested.
	 
	103.	 	So far as the Company is aware, in relation to each Lease, the landlord and each lessee,
tenant, licensee or occupier has observed and performed in all material respects all
covenants, restrictions, stipulations and other encumbrances and there has not been (expressly
or impliedly) any waiver of or acquiescence to any breach of them.
	 
	104.	 	In relation to each Lease, all principal rent and additional rent and all other sums payable
by each lessee, tenant, licensee or occupier under each Lease (Lease Sums) have been paid as
and when they became due and no Lease Sums have been:

	 	•	 	set off or withheld; or
	 
	 	•	 	commuted, waived or paid in advance of the due date for payment.

	105.	 	Any consents required for the grant of each Lease, and for the assignments of each Lease,
have been obtained and placed with the documents of title along with evidence of the
registration of grant where completed.
	 
	106.	 	The Properties (and the proceeds of sale from them) are free from:

	 	•	 	any mortgage, debenture, charge (whether legal or equitable and whether fixed
or floating), rentcharge, lien or other right in the nature of security; and
	 
	 	•	 	any agreement for sale or estate contract, option,

	107.	 	So far as the Company is aware, the Properties are not subject to any matters which are, or
(where title to any of the Properties is not registered) would be unregistered interests which
override first registration under Schedule 1 to the Land Registration Act 2002 and
unregistered interests which override registered dispositions under Schedule 3 to the Land
Registration Act 2002.
	 
	108.	 	So far as the Company is aware, there are no covenants, restrictions, stipulations,
easements, profits à prendre, wayleaves, licences, grants or other encumbrances (whether of a
private or public nature, and whether legal or equitable) affecting the Properties which are
of an onerous or unusual nature, or affect their value, or which conflict with the Current Use
of the Properties.
	 
	109.	 	So far as the Company is aware, all covenants, restrictions, stipulations and other
encumbrances affecting the Properties have been fully observed and performed and no notice of
any alleged breach has been received by the Company (or its predecessors in title).
	 
	110.	 	There are no circumstances which (with or without taking other action) would entitle any
third party to exercise a right of entry to, or take possession of all or any part of the
Properties, or which would in any other way affect or restrict the continued possession,
enjoyment or use of any of the Properties.

45

 

	111.	 	So far as the Company is aware, there are no matters which are registered as local land
charges.
	 
	112.	 	The Current Use of each of the Properties is the permitted use for the purposes of the
Planning Acts. Where applicable, the Current Use of each of the Properties is in accordance
with the provisions of the Leases.
	 
	113.	 	All necessary building regulation consents have been obtained both in relation to the Current
Use of the Properties and any alterations and improvements to them.
	 
	114.	 	The Company is not aware of any claim or liability (contingent or otherwise) under the
Planning Acts in respect of the Properties, or any Statutory Agreement affecting the
Properties, are outstanding nor are the Properties the subject of a notice to treat or a
notice of entry, and no notice, order resolution or proposal has been published for the
compulsory acquisition, closing, demolition or clearance of the Properties, and, so far as the
Company is aware, the Company is not aware of any matter or circumstances which would lead to
any such notice, order, resolution or proposal.
	 
	115.	 	The Company and the Subsidiaries have complied with all applicable statutory and bye- law
requirements, and all regulations, rules and delegated legislation, relating to the Properties
and their Current Use, including (without limitation) all requirements under the Property
Statutes.
	 
	116.	 	Each of the Properties is in a good state of repair and condition and fit for the Current
Use.
	 
	117.	 	There are no development works, redevelopment works or fitting-out works outstanding in
respect of any of the Properties as opposed to the developments of which they form part.
	 
	 	 	ACCOUNTS
	 
	118.	 	The Accounts have been prepared in accordance with the Companies Acts and with accounting
standards, policies, principles and practices generally accepted in the UK and in accordance
with the law of that jurisdiction.
	 
	119.	 	The Accounts:

	 	(a)	 	make proper and adequate provision or reserve for all bad and doubtful debts,
obsolete or slow-moving stocks and for depreciation on fixed assets;
	 
	 	(b)	 	do not overstate the value of current or fixed assets; and
	 
	 	(c)	 	do not understate any liabilities (whether actual or contingent).

	120.	 	The Accounts show a true and fair view of the commitments and financial position and affairs
of the Company as at the Accounts Date and of the profit and loss of the Company for the
financial year ended on that date.
	 
	121.	 	The Accounts contain either provision adequate to cover, or full particulars in notes of, all
Taxation (including deferred Taxation) and other liabilities (whether quantified, contingent,
disputed or otherwise) of the Company as at the Accounts Date.

46

 

	122.	 	The Accounts are not affected by any unusual or non-recurring items or any other factor that
would make the financial position and results shown by the Accounts unusual or misleading in
any material respect.
	 
	123.	 	The Accounts have been filed and laid before the Company in general meeting in accordance
with the requirements of the Companies Acts.
	 
	124.	 	The Accounts have been prepared on a basis consistent with the audited accounts of the
Company for the prior accounting period without any change in accounting policies used.
	 
	125.	 	The Management Accounts have been prepared on a basis consistent with that employed in
preparing the previous management accounts of the Company and fairly represent the assets and
liabilities and the profits and losses of the Company as at and to the date for which they
have been prepared.
	 
	 	 	FINANCIAL AND OTHER RECORDS
	 
	126.	 	All financial and other records of the Company (excluding the Accounts and the Management
Accounts) including all deeds and documents belonging to the Company:

	 	(a)	 	have been properly prepared and maintained;
	 
	 	(b)	 	constitute an accurate record of all matters required by law to appear in them;
	 
	 	(c)	 	do not contain any material inaccuracies or discrepancies; and
	 
	 	(d)	 	are in the possession of the Company.

	127.	 	No notice has been received or allegation made that any of those records are incorrect or
should be rectified.
	 
	128.	 	All statutory records, including accounting records, required to be kept or filed by the
Company have been properly kept or filed and comply with the requirements of the Companies
Acts.
	 
	 	 	CHANGES SINCE ACCOUNTS DATE
	 
	129.	 	Since the Accounts Date:

	 	(a)	 	the Company has conducted its business in the normal course and as a going
concern;
	 
	 	(b)	 	there has been no material adverse change in the turnover, financial position
or prospects of the Company;
	 
	 	(c)	 	the Company has not issued or agreed to issue any share or loan capital;
	 
	 	(d)	 	no dividend or other distribution of profits or assets has been, or agreed to
be, declared, made or paid by the Company;
	 
	 	(e)	 	save as Disclosed, the Company has not borrowed or raised any money or taken
any form of financial security and no capital expenditure has been incurred on

47

 

	 	 	 	any
individual item by the Company and the Company has not acquired, invested or disposed
of (or agreed to acquire, invest or dispose of) any individual item in excess of
£50,000;
	 
	 	(f)	 	no shareholder resolutions of the Company have been passed other than as
routine business at the annual general meeting;
	 
	 	(g)	 	there has been no abnormal increase or reduction of stock in trade;
	 
	 	(h)	 	none of the stock in trade reflected in the Accounts has realised an amount
less than the value placed in it in the Accounts; and
	 
	 	(i)	 	the Company has not offered price reductions or discounts or allowances on
sales of stock in trade, or sold stock in trade at less than cost price.

	 	 	EFFECT OF SALE ON SALE SHARES
	 
	130.	 	Neither the acquisition of the Sale Shares by the Buyer nor compliance with the terms of this
agreement will:

	 	(a)	 	cause the Company to lose the benefit of any right or privilege it presently
enjoys; or
	 
	 	(b)	 	relieve any person of any obligation to the Company (whether contractual or
otherwise), or enable any person to determine any such obligation or any right or
benefit enjoyed by the Company, or to exercise any right in respect of the Company; or
	 
	 	(c)	 	give rise to, or cause to become exercisable, any right of pre-emption over the
Sale Shares; or
	 
	 	(d)	 	entitle any person to receive from the Company any finder’s fee, brokerage or
other commission in connection with the purchase of the Sale Shares by the Buyer; or
	 
	 	(e)	 	result in any customer or supplier being entitled to cease dealing with the
Company or to reduce substantially its existing level of business or to change the
terms on which it deals with the Company; or
	 
	 	(f)	 	so far as the Warrantors are aware, result in any officer or senior Employee
leaving the Company; or
	 
	 	(g)	 	result in a breach by the Company of contract, law, regulation, order,
judgment, injunction, undertaking, decree or other like imposition; or
	 
	 	(h)	 	result in the loss or impairment of or any default under any licence,
authorisation or consent required by the Company for the purposes of its business; or
	 
	 	(i)	 	result in the creation, imposition, crystallisation or enforcement of any
Encumbrance on any of the assets of the Company; or

48

 

	 	(j)	 	result in any present or future indebtedness of the Company becoming due and
payable, or capable of being declared due and payable, prior to its stated maturity
date or in any financial facility of the Company being withdrawn; or
	 
	 	(k)	 	entitle any person to acquire or affect the entitlement of any person to
acquire shares in the Company.

	 	 	RETIREMENT BENEFITS
	 
	131.	 	The Company has no Pension Scheme and the Company has no obligation to provide or contribute
towards pension, lump sum, death, ill health, disability or accident benefits in respect of
its past or present officers and employees.

Part 2. Tax warranties

	 	 	GENERAL
	 
	132.	 	All notices, returns (including any land transaction returns), reports, accounts,
computations, statements, assessments and registrations and any other necessary information
submitted by the Company to any Taxation Authority for the purposes of Taxation have been made
on a proper basis, were punctually submitted, were accurate and complete when supplied and
remain accurate and complete in all material respects and none of the above is, or, so far as
the Warrantors are aware, is likely to be, the subject of any material dispute with any
Taxation Authority.
	 
	133.	 	All Taxation (whether of the United Kingdom or elsewhere) for which the Company is or has
been liable or is liable to account for has been duly paid (insofar as such Taxation ought to
have been paid).
	 
	134.	 	The Company has not made any payments representing instalments of corporation tax pursuant to
the Corporation Tax (Instalment Payments) Regulations 1998 in respect of any current or
preceding accounting periods and is not under any obligation to do so.
	 
	135.	 	The Company has not paid since the date of its incorporation nor is liable to pay any
penalty, fine, surcharge or interest charged by virtue of the provisions of the TMA 1970 or
any other Taxation Statute.
	 
	136.	 	The Company has not within the past 12 months been subject to any non-routine visit, audit,
investigation, discovery or access order by any Taxation Authority and the Warrantors are not
aware of any circumstances existing which make it likely that a visit, audit, investigation,
discovery or access order will be made in the next 12 months.
	 
	137.	 	The amount of Taxation chargeable on the Company during any accounting period since the date
of its incorporation has not, to any material extent, depended on any concession, agreements
or other formal or informal arrangement with any Taxation Authority.
	 
	138.	 	All transactions in respect of which any clearance or consent was required from any Tax
Authority have been entered into by the Company after such consent or clearance has been
properly obtained, any application for such clearance or consent has been made on the basis of
full and accurate disclosure of all relevant material facts and considerations,
and all such transactions have been carried into effect only in accordance with the terms of
the relevant clearance or consent.

49

 

	139.	 	The Company has duly submitted all claims, disclaimers and elections the making of which has
been assumed for the purposes of the Accounts and, so far as the Warrantors are aware, none of
such claims, disclaimers or elections are likely to be disputed or withdrawn.
	 
	140.	 	The Disclosure Letter contains full particulars of all matters relating to Taxation in
respect of which the Company is or at Completion will be entitled to:

	 	(a)	 	make any claim (including a supplementary claim), disclaimer or election for
relief under any Taxation Statute or provision; and/or
	 
	 	(b)	 	appeal against any assessment or determination relating to Taxation; and/or
	 
	 	(c)	 	apply for a postponement of Taxation.

	141.	 	The Company is not liable to make to any person (including any Taxation Authority) any
payment in respect of any liability to Taxation of any other person where that other person
fails to discharge liability to Taxation to which he is or may be primarily liable.
	 
	142.	 	The Company has sufficient records to determine the tax consequence which would arise on any
disposal or realisation of any asset owned at the Accounts Date or acquired since that date
but prior to Completion.
	 
	 	 	CHARGEABLE GAINS
	 
	143.	 	The book value shown or adopted for the purposes of the Accounts as the value of each of the
assets of the Company on the disposal of which a chargeable gain or allowable loss could arise
does not exceed the amount which on a disposal of such asset at the date of this agreement
would be deductible under section 38 of TCGA 1992.
	 
	 	 	CAPITAL ALLOWANCES
	 
	144.	 	No balancing charge under the CAA 2001 (or any other legislation relating to capital
allowances) would be made on the Company on the disposal of any pool of assets (that is, all
those assets whose expenditure would be taken into account in computing whether a balancing
charge would arise on a disposal of any other of those assets) or of any asset not in such a
pool, on the assumption that the disposals are made for a consideration equal to the book
value shown in or adopted for the purpose of the Accounts for the assets in the pool or (as
the case may be) for the asset.
	 
	145.	 	No event has occurred since the Accounts Date (otherwise than in the ordinary course of
business) whereby any balancing charge may fall to be made against, or any disposal value may
fall to be brought into account by the Company under the CAA 2001 (or any other legislation
relating to capital allowances).
	 
	 	 	DISTRIBUTIONS
	 
	146.	 	No distribution or deemed distribution within the meaning of sections 209, 210 or 211 of ICTA
1988 has been made (or will be deemed to have been made) by the Company
except dividends shown in the Accounts and the Company is not bound to make any such
distribution.

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	147.	 	No rents, interest, annual payments or other sums of an income nature paid or payable by the
Company or which the Company is under an existing obligation to pay in the future are or may
be wholly or partially disallowable as deductions, management expenses or charges in computing
profits for the purposes of corporation tax.
	 
	148.	 	The Company has not since the date of its incorporation been engaged in, nor been a party to,
any of the transactions set out in sections 213 to 218 (inclusive) of ICTA 1988, nor has it
made or received a chargeable payment as defined in section 218(1) of ICTA 1988.
	 
	 	 	LOAN RELATIONSHIPS
	 
	149.	 	All interests, discounts and premiums payable by the Company in respect of its loan
relationships (within the meaning of section 81 of the Finance Act 1996) are eligible to be
brought into account by the Company as a debit for the purposes of Chapter II of Part IV of
the Finance Act 1996 at the time and to the extent that such debits are recognised in the
statutory accounts of the Company.
	 
	 	 	CLOSE COMPANIES
	 
	150.	 	The Company has not at any time since the date of its incorporation been a close company
within the meaning of sections 414 and 415 of ICTA 1988.
	 
	 	 	INTANGIBLE ASSETS
	 
	 	 	For the purposes of this paragraph 151, references to intangible fixed assets mean
intangible fixed assets and goodwill within the meaning of Schedule 29 to the Finance Act
2002 to which the provisions of that Schedule apply and references to an intangible fixed
asset shall be construed accordingly.
	 
	151.	 	The Disclosure Letter sets out the amount of expenditure on each of the intangible fixed
assets of the Company and provides the basis on which any debit relating to that expenditure
has been taken into account in the Accounts or, in relation to expenditure incurred since the
Accounts Date, will be available to the Company and, so far as the Warrantors are aware, no
circumstances have arisen since the Accounts Date by reason of which that basis might change.
	 
	152.	 	No claims or elections have been made by the Company under Part 7 of, or paragraph 86 of
Schedule 29 to, the Finance Act 2002 in respect of any intangible fixed asset of the Company.
	 
	153.	 	Since the Accounts Date:

	 	(a)	 	the Company has not owned and does not currently own an asset which has ceased
to be a chargeable intangible asset in the circumstances described in paragraph 108 of
Schedule 29 to the Finance Act 2002;
	 
	 	(b)	 	the Company has not realised or acquired an intangible fixed asset for the
purposes of Schedule 29 to the Finance Act 2002; and
	 
	 	(c)	 	no circumstances have arisen which have required, or, so far as the Warrantors
are aware, will require, a credit to be brought into account by the Company on a
revaluation of an intangible fixed asset.

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	 	 	COMPANY RESIDENCE AND OVERSEAS INTERESTS
	 
	154.	 	The Company has since incorporation been resident in the United Kingdom for corporation tax
purposes and has not at any time since incorporation been treated for the purposes of any
double taxation arrangements having effect by virtue of section 249 of the Finance Act 1994,
section 788 of ICTA 1988 or for any other tax purpose as resident in any other jurisdiction.
	 
	155.	 	The Company does not hold shares in a company which is not resident in the United Kingdom and
which would be a close company if it were resident in the United Kingdom in circumstances such
that a chargeable gain accruing to the company not resident in the United Kingdom could be
apportioned to the Company pursuant to section 13 of TCGA 1992.
	 
	156.	 	The Company is not holding nor has held since the date of its incorporation any interest in a
controlled foreign company within section 747 of ICTA 1988, and does not have any material
interest in an offshore fund as defined in section 759 of ICTA 1988.
	 
	157.	 	The Company does not have a permanent establishment outside the UK.
	 
	 	 	ANTI-AVOIDANCE
	 
	158.	 	All transactions or arrangements made by the Company have been made on fully arm’s length
terms and there are no circumstances in which section 770A of, or Schedule 28AA to, ICTA 1988
or any other rule or provision could apply causing any Taxation Authority to make an
adjustment to the terms on which such transaction or arrangement is treated as being made for
Taxation purposes.
	 
	159.	 	The Company has not at any time been a party to or otherwise involved in a transaction or
series of transactions in relation to which advisers considered that there was a risk that the
Company could be liable to taxation as a result of the principles in W.T Ramsey Limited v IRC
(54 TC 101) or Furniss v Dawson (55 TC 324), as developed in subsequent cases.
	 
	 	 	INHERITANCE TAX
	 
	160.	 	The Company has not made any transfer of value within sections 94 and 202 of the IHTA 1984,
nor has it received any value such that liability might arise under section 199 of the IHTA
1984, nor has it been a party to associated operations in relation to a transfer of value as
defined by section 268 of the IHTA 1984.
	 
	161.	 	There is no unsatisfied liability to inheritance tax attached to or attributable to the Sale
Shares or any asset of the Company and none of them are subject to any HM Revenue & Customs
charge as mentioned in section 237 and 238 of the IHTA 1984.
	 
	162.	 	No asset owned by the Company, nor the Sale Shares are liable to be subject to any sale,
mortgage or charge by virtue of section 212(1) of the IHTA 1984.
	 
	 	 	VAT
	 
	163.	 	The Company is a taxable person and is duly registered for the purposes of VAT with quarterly
prescribed accounting periods, such registration not being pursuant to paragraph 2 of Schedule
1 to the VATA 1994 or subject to any conditions imposed by or

52

 

	 	 	agreed with HM Revenue & Customs
and the Company is not (nor, so far as the Warrantors are aware, are there any circumstances
by virtue of which they may become) under a duty to make monthly payments on account under the
Value Added Tax (Payments on Account) Order 1993.
	 
	164.	 	The Company has complied with all statutory provisions, rules, regulations, orders and
directions in respect of VAT.
	 
	165.	 	All supplies made by the Company are taxable supplies and the Company has not been nor, so
far as the Warrantors are aware, will be denied full credit for all input tax by reason of the
operation of sections 25 and 26 of the VATA 1994 and regulations made thereunder or for any
other reasons and no VAT paid or payable by the Company is not input tax as defined in section
24 of the VATA 1994 and regulations made thereunder.
	 
	166.	 	The Company is not nor has been for VAT purposes a member of any group of companies and no
act or transaction has been effected in consequence whereof the Company is or may be held
liable for any VAT arising from supplies made by another company and no direction has been
given by HM Revenue & Customs under Schedule 9A to the VATA 1994 as a result of which the
Company would be treated for the purposes of VAT as a member of a group.
	 
	167.	 	For the purposes of paragraph 3(7) of Schedule 10 to the VATA 1994, the Company or any
relevant associates of the Company (within the meaning of paragraph 3(7) of Schedule 10 to the
VATA 1994) has exercised the election to waive exemption from VAT (pursuant to paragraph 2 of
Schedule 10 to the VATA 1994) only in respect of those Properties listed (as having been the
subject of such an election) in the Disclosure Letter and:

	 	(a)	 	all things necessary for the election to have effect have been done and in
particular any notification and information required by paragraph 3(6) of Schedule 10
to the VATA 1994 has been given and any permission required by paragraph 3(9) of
Schedule 10 to the VATA 1994 has been properly obtained; and
	 
	 	(b)	 	no election has or will be disapplied or rendered ineffective by virtue of the
application of the provisions of paragraph 2(3AA) of Schedule 10 to the VATA 1994.

	168.	 	The Company does not own nor has since the date of its incorporation owned any assets which
are capital items subject to the capital goods scheme under Part XV of the VAT Regulations
1995.
	 
	169.	 	The Company has not made any claim for bad debt relief under section 36 of the VATA 1994 and,
so far as the Warrantors are aware, and there are no existing circumstances by virtue of which
any refund of VAT obtained or claimed may be required to be repaid or there could be a claw
back of input VAT from any Company under section 36(4) of the VATA 1994.

53

 

	 	 	STAMP DUTY AND STAMP DUTY LAND TAX
	 
	170.	 	Any document that is necessary in proving the title of the Company to any asset which is
owned by the Company at Completion or any document which the Company may wish to enforce or
produce in evidence is duly stamped for stamp duty purposes.
	 
	171.	 	Neither entering into this agreement nor Completion will result in the withdrawal of any
stamp duty or stamp duty land tax relief granted on or before Completion which will affect the
Company.
	 
	172.	 	The Disclosure Letter sets out full and accurate details of any chargeable interest (as
defined under section 48, Finance Act 2003) acquired or held by the Company before Completion
in respect of which the Warrantors are aware or ought reasonably to be aware that an
additional land transaction return will be required to be filed with a Taxation Authority
and/or a payment of stamp duty land tax made on or after Completion.

54

 

Schedule 5

TAX COVENANT

	1.	 	INTERPRETATION
	 
	1.1	 	The definitions and rules of interpretation in this paragraph apply in this Tax Covenant:
	 
	 	 	Buyer’s Relief: means:

	 	(a)	 	any Accounts Relief (as defined in paragraph (a) of the definition of Liability
for Taxation) or Repayment Relief (as defined in paragraph (b) of the definition of
Liability for Taxation);
	 
	 	(b)	 	any Post Accounts Date Relief of the Company (as defined in paragraph (c) of
the definition of Liability for Taxation); and
	 
	 	(c)	 	any Relief whenever arising, of the Buyer or any member of the Buyer’s Tax
Group other than the Company.

	 	 	 	Buyer’s Tax Group: the Buyer and any other company or companies which either are or become
after Completion, or have within the seven years ending at Completion been, treated as
members of the same group as, or otherwise connected or associated in any way with, the
Buyer for any Tax purpose.
	 
	 	 	 	Event: includes (without limitation), the expiry of a period of time, the Company becoming
or ceasing to be associated with any other person for any Tax purpose or ceasing to be or
becoming resident in any country for any Tax purpose, the death or the winding up or
dissolution of any person, and any transaction (including the execution and completion of
all provisions of this agreement), event, act or omission whatsoever, and any reference to
an Event occurring on or before a particular date shall include Events which for Tax
purposes are deemed to have, or are treated or regarded as having, occurred on or before
that date.
	 
	 	 	 	Liability for Taxation: any liability of the Company to make a payment of or in respect of
Tax whether or not the same is primarily payable by the Company and whether or not the
Company has or may have any right of reimbursement against any other person or persons and
shall also include:

	 	(a)	 	the Loss of any Relief (Accounts Relief) where such Relief has been taken into
account in computing and so reducing or eliminating any provision for deferred Tax
which appears in the Accounts (or which but for such Relief would have appeared in the
Accounts) or where such Relief was treated as an asset of the Company in the Accounts
or was taken into account in computing any deferred Tax asset which appears in the
Accounts (Loss of an Accounts Relief), in which case the amount of the Liability for
Taxation will be the amount of Tax which would (on the basis of Tax rates current at
the date of such Loss) have been saved but for such Loss, assuming for this purpose
that the Company had sufficient profits or was otherwise in a position to use the
Relief;
	 
	 	(b)	 	the Loss of any right to repayment of Tax (including any repayment supplement)
(Repayment Relief) which was treated as an asset in the Accounts (Loss of a

55

 

	 	 	 	Repayment
Relief), in which case the amount of the Liability for Taxation will
be the amount of the loss of the right to repayment and any related repayment
supplement;
	 
	 	(c)	 	the set off or use against income, profits or gains earned, accrued or received
or against any Tax chargeable in respect of an Event occurring on or before the
Accounts Date of any Relief (Post Accounts Date Relief) or right to repayment of Tax
(including any repayment supplement) which is not available before the Accounts Date
but arises after the Accounts Date in circumstances where, but for such set off or use,
the Company would have had a liability to make a payment of or in respect of Tax for
which the Buyer would have been able to make a claim against the Warrantors under this
Tax Covenant (Loss of a Post-Accounts Date Relief), in which case, the amount of the
Liability for Taxation shall be the amount of Tax saved by the Company as a result of
such set off or use;
	 
	 	(d)	 	any liability of the Company to make a payment pursuant to an indemnity,
guarantee or covenant entered into before Completion under which the Company has agreed
to meet or pay a sum equivalent to or by reference to another person’s Tax liability,
in which case the Liability for Taxation shall be equal to the amount of the liability.

	 	 	Loss: any reduction, modification, loss, counteraction, nullification, utilisation,
disallowance or claw-back for whatever reason.
	 
	 	 	Overprovision: the amount by which any provision in the Accounts relating to Tax (other than
a provision for deferred Tax) is overstated (except to the extent that such overstatement
results from the utilisation of a Buyer’s Relief), applying the accounting policies,
principles and practices adopted in relation to the preparation of the Accounts (and
ignoring the effect of any change in law made after Completion).
	 
	 	 	Relief: includes any loss, relief, allowance, credit, exemption or set off in respect of Tax
or any deduction in computing income, profits or gains for the purposes of Tax and any right
to a repayment of Tax.
	 
	 	 	Saving: the reduction or elimination of any liability of the Company to make an actual
payment of Tax in respect of which the Warrantors would not have been liable under paragraph
2, by the use of any Relief arising wholly as a result of a Liability for Taxation in
respect of which the Warrantors have made a payment under paragraph 2 of this Tax Covenant.
	 
	 	 	Tax: all forms of taxation and statutory, governmental, state, federal, provincial, local,
government or municipal charges, duties, imposts, contributions, levies, withholdings or
liabilities wherever chargeable and whether of the UK or any other jurisdiction; and any
penalty, fine, surcharge, interest, charges or costs relating thereto, and Taxation shall
have the same meaning.
	 
	 	 	Tax Claim: any assessment (including self-assessment), notice, demand, letter or other
document issued or action taken by or on behalf of any Taxation Authority from which it
appears that the Company or the Buyer is or may be subject to a Liability for Taxation or
other liability in respect of which the Warrantors are or may be liable under this Tax
Covenant.

56

 

	 	 	Taxation Authority: HM Revenue & Customs, the Department of Social Security and any other
governmental authority whatsoever competent to impose any Tax whether in the United Kingdom
or elsewhere
	 
	 	 	Taxation Statute: any directive, statute, enactment, law or regulation wheresoever enacted
or issued, coming into force or entered into providing for or imposing any Tax and shall
include orders, regulations, instruments, bye-laws or other subordinate legislation made
under the relevant statute or statutory provision and any directive, statute, enactment,
law, order, regulation or provision which amends, extends, consolidates or replaces the same
or which has been amended, extended, consolidated or replaced by the same.
	 
	1.2	 	References to gross receipts, income, profits or gains earned, accrued or received shall
include any gross receipts, income, profits or gains deemed pursuant to the relevant Taxation
Statute to have been or treated or regarded as earned, accrued or received.
	 
	1.3	 	References to a repayment of Tax shall include any repayment supplement or interest in
respect of it.
	 
	1.4	 	A reference to an Event occurring on or before Completion includes a series or combination of
Events which are linked all of which were or the first of which was an Event occurring on or
before Completion.
	 
	1.5	 	Any reference to something occurring in the ordinary course of business shall, without
prejudice to the generality thereof, be deemed not to include:

	 	(a)	 	anything which involves, or leads directly or indirectly to, any liability of
the Company to Tax that is the primary liability of, or properly attributable to, or
due from another person (other than a member of the Buyer’s Tax Group) or is the
liability of the Company only because some other person, other than a member of the
Buyer’s Tax Group, has failed to pay it or is the liability of the Company because it
has elected to be regarded as taxable or liable or to be regarded as having made a
disposal; or
	 
	 	(b)	 	anything which relates to or involves the acquisition or disposal of an asset
or the supply of services (including the lending of money, or the hiring or licensing
of tangible or intangible property) in a transaction which is not entered into on arm’s
length terms; or
	 
	 	(c)	 	anything which relates to or involves the making of a distribution for Tax
purposes, the creation, cancellation or re-organisation of share or loan capital, the
creation, cancellation or repayment of any intra-group debt or the Company becoming or
ceasing to be associated or connected with any other company for any Tax purposes; or
	 
	 	(d)	 	anything which relates to a transaction or arrangement which includes, or a
series of transactions or arrangements which includes, any step or steps having no
commercial or business purpose apart from the reduction, avoidance or deferral of a
Liability for Taxation; or
	 
	 	(e)	 	anything which gives rise to a Liability for Taxation on deemed (as opposed to
actual) profits or to the extent that it gives rise to a Liability for Taxation on an

57

 

	 	 	 	amount of profits greater than the difference between the sale proceeds of an asset
and the amount attributable to that asset in the Accounts or, in the case of an
asset acquired since the Accounts Date, the cost of that asset; or
	 
	 	(f)	 	anything which involves, or leads directly or indirectly to, a change of
residence of the Company for Tax purposes.

	1.6	 	Unless the contrary intention appears, words and expressions defined in this agreement have
the same meaning in this Tax Covenant and any provisions in this agreement concerning matters
of construction or interpretation also apply in this Tax Covenant.
	 
	1.7	 	For the avoidance of doubt, references to any Liability for Taxation of the Company which
results from any gains earned or received on or before Completion or any Event on or before
Completion include a reference to any Liability for Taxation of the Company resulting from the
sale of the Sale Shares pursuant to this agreement (including, without limitation, any
liability arising under section 179 of TCGA 1992).
	 
	2.	 	COVENANT
	 
	 	 	The Warrantors covenant with the Buyer that, subject to the provisions of this Tax Covenant,
the Warrantors shall pay to the Buyer, to the extent possible, but not so as to limit the
amount payable where not wholly possible, by way of repayment of the consideration for the
Sale Shares, an amount equal to any:

	 	(a)	 	Liability for Taxation resulting from or by reference to any Event occurring on
or before Completion or in respect of any gross receipts, income, profits or gains
earned, accrued or received by the Company on or before Completion;
	 
	 	(b)	 	Liability for Taxation which arises solely as a result of the relationship for
Tax purposes of the Company with any person other than a member of the Buyer Tax Group
whensoever arising;
	 
	 	(c)	 	payment of interest or penalties for which the Company is liable as a result of
the Company failing to make any instalment payment under the Corporation Tax
(Instalment Payments) Regulations 1998 in any period ending on or before Completion
sufficient to avoid such interest or penalties;
	 
	 	(d)	 	Liability for Taxation falling within paragraph (a) to paragraph (d) of the
definition of Liability for Taxation; and
	 
	 	(e)	 	costs and expenses referred to in paragraph 11.

	3.	 	PAYMENT DATE AND INTEREST
	 
	3.1	 	Where the Warrantors are liable to make any payment under paragraph 2 (including any payment
pursuant to paragraph 2(e)), the due date for the making of that payment (Due Date) shall be
the earlier of the date falling seven days after the Buyer has served a notice on the
Warrantors demanding that payment and in a case:

	 	(a)	 	that involves an actual payment of Tax (including any payment pursuant to
paragraph 2(e)) by the Company, the date on which the Tax in question would have had to
have been paid to the relevant Taxation Authority in order to

58

 

	 	 	 	prevent a liability to interest or a fine, surcharge or penalty from arising in
respect of the Liability for Taxation in question; or
	 
	 	(b)	 	that falls within paragraph (a) of the definition of Liability to Taxation, the
last date upon which the Tax is or would have been required to be paid to the relevant
Taxation Authority in respect of the period in which the Loss of the Relief occurs
(assuming for this purpose that the Company had sufficient profits or was otherwise in
a position to use the Relief); or
	 
	 	(c)	 	that falls within paragraph (b) of the definition of Liability to Taxation, the
date upon which the repayment was due from the relevant Taxation Authority; or
	 
	 	(d)	 	that falls within paragraph (c) of the definition of Liability to Taxation, the
date upon which the Tax saved by the Company is or would have been required to be paid
to the relevant Taxation Authority; or
	 
	 	(e)	 	that falls within paragraph (d) (liability for indemnity, guarantee or covenant
payment) of the definition of Liability for Taxation, not later than the fifth day
before the day on which the Company is due to make the payment or repayment.

	3.2	 	Any dispute as to the amount specified in any notice served on the Seller under paragraph
3.1(b) to paragraph 3.1(e) shall be determined by the auditors of the Company for the time
being, acting as experts and not as arbitrators (the costs of that determination being shared
equally by the Warrantors and the Buyer).
	 
	3.3	 	If any sums required to be paid by the Warrantors under this Tax Covenant are not paid on the
Due Date, then, except to the extent that the Warrantors liability under paragraph 2
compensates the Buyer for the late payment by virtue of it extending to interest and
penalties, such sums shall bear interest (which shall accrue from day to day after as well as
before any judgment for the same) at the rate of 2% per annum over the base rate from time to
time of HSBC or (in the absence thereof) at such similar rate as the Buyer shall select from
the day following the Due Date up to and including the day of actual payment of such sums,
such interest to be compounded quarterly.
	 
	4.	 	EXCLUSIONS
	 
	4.1	 	The covenant contained in paragraph 2 above shall not cover any Liability for Taxation to the
extent that:

	 	(a)	 	a provision or reserve in respect thereof is made in the Accounts; or
	 
	 	(b)	 	it arises as a result of a transaction in the ordinary course of business of
the Company between the Accounts Date and Completion and is not an interest or penalty
(which expression includes interest or penalties under the Corporation Tax (Instalment
Payments) Regulations 1998), surcharge or fine in connection with Tax; or
	 
	 	(c)	 	it arises or is increased as a result only of any change in the law of Tax
announced and coming into force after Completion (whether relating to rates of Tax or
otherwise) or the withdrawal, after Completion, of any extra-statutory concession
previously made by a Taxation Authority (whether or not the change purports to

59

 

	 	 	 	be effective retrospectively in whole or in part) or any change in the published
practice of any Taxation Authority after Completion; or
	 
	 	(d)	 	it would not have arisen but for a change after Completion in the accounting
bases upon which the Company values its assets (other than a change made in order to
comply with UK GAAP); or
	 
	 	(e)	 	the Buyer is compensated for any such matter under any other provision of this
agreement; or
	 
	 	(f)	 	it would not have arisen but for a voluntary act or transaction carried out by
the Buyer or the Company after Completion being an act which:

	 	(i)	 	is not in the ordinary course of business; or
	 
	 	(ii)	 	could reasonably have been avoided; or
	 
	 	(iii)	 	the Company was not legally committed to do under a commitment
that existed on or before Completion; or
	 
	 	(iv)	 	the Buyer was aware would give rise to the Liability for
Taxation in question; or

	 	(g)	 	the Liability for Taxation arises from a matter disclosed in the Disclosure
Letter;
	 
	 	(h)	 	the Liability for Taxation has been made good or otherwise compensated for at
no expense to the Buyer or the Company;
	 
	 	(i)	 	the Liability for Taxation is attributable to the Company ceasing to be
entitled to the small companies’ rate of corporation tax;
	 
	 	(j)	 	the Liability for Taxation would not have arisen or would have been reduced or
eliminated but for any claim, disclaimer or election made after Completion by the Buyer
or the Company including, without limitation, a disclaimer of or a revision to a claim
for capital allowances claimed before Completion.

	5.	 	OVERPROVISIONS
	 
	5.1	 	If, on or before the seventh anniversary of Completion, the auditors for the time being of
the Company certify (at the request and expense of the Warrantors) that any provision for Tax
in the Accounts has proved to be an Overprovision, then:

	 	(a)	 	the amount of any Overprovision shall first be set off against any payment then
due from the Warrantors under this Tax Covenant;
	 
	 	(b)	 	to the extent that there is an excess, a refund shall be made to the Warrantors
of any previous payment or payments made by the Warrantors under this Tax Covenant (and
not previously refunded under this Tax Covenant) up to the amount of such excess; and
	 
	 	(c)	 	to the extent that excess referred to in paragraph 5.1(b) is not exhausted, the
remainder of that excess will be carried forward and set off against any future

60

 

	 	 	 	payment or payments which become due from the Warrantors under this Tax Covenant.

	5.2	 	After the Company’s auditors have produced any certificate under this paragraph 5, the
Warrantors or the Buyer may, at any time before the seventh anniversary of Completion, request
the auditors for the time being of the Company to review (at the expense of the party
requesting such review) that certificate in the light of all relevant circumstances, including
any facts of which it was not aware, and which were not taken into account, at the time when
such certificate was produced, and to certify whether in their opinion the certificate remains
correct or whether, in light of those circumstances, it should be amended.
	 
	5.3	 	If the auditors make an amendment to the earlier certificate and the amount of the
Overprovision is revised, that revised amount shall be substituted for the previous amount and
any adjusting payment that is required shall be made by or to the Warrantors as soon as
practicable.
	 
	6.	 	SAVINGS
	 
	6.1	 	If (at the Warrantors request and expense) the auditors for the time being of the Company
determine that the Company has obtained a Saving, the Buyer shall as soon as reasonably
practicable thereafter repay to the Warrantors the lesser of:

	 	(a)	 	the amount of the Saving (as determined by the auditors) less any costs
incurred by the Buyer or the Company; and
	 
	 	(b)	 	the amount paid by the Warrantors under paragraph 2 in respect of the Liability
for Taxation which gave rise to the Saving less any part of that amount previously
repaid to the Warrantors under any provision of this Tax Covenant or otherwise.

	7.	 	RECOVERY FROM THIRD PARTIES
	 
	7.1	 	Where the Warrantors have paid an amount in full discharge of a liability under paragraph 2
in respect of any Liability for Taxation and the Buyer or the Company is or becomes entitled
to recover from some other person not being the Buyer or the Company or any other company
within the Buyer’s Tax Group, any amount in respect of such Liability for Taxation, the Buyer
shall or shall procure that the Company shall:

	 	(a)	 	notify the Warrantors of its entitlement as soon as reasonably practicable; and
	 
	 	(b)	 	if required by the Warrantors and, subject to the Buyer or the Company being
indemnified by the Warrantors against any Tax that may be suffered on receipt of that
amount and any costs and expenses incurred in recovering that amount, take or procure
that the Company takes all reasonable steps to enforce that recovery against the person
in question (keeping the Warrantors fully informed of the progress of any action taken)
provided that the Buyer shall not be required to take any action pursuant to this
paragraph 7.1 (other than an action against:

	 	(i)	 	a Taxation Authority; or
	 
	 	(ii)	 	a person who has given Tax advice to the Company on or before
Completion),

61

 

	 	 	which, in the Buyer’s reasonable opinion, is likely to harm its or the Company’s commercial
relationship (potential or actual) with that or any other person.
	 
	7.2	 	If the Buyer or the Company recovers any amount referred to in paragraph 7.1, the Buyer shall
account to the Warrantors for the lesser of:

	 	(a)	 	any amount recovered (including any related interest or related repayment
supplement) less any Tax suffered in respect of that amount and any costs and expenses
incurred in recovering that amount (save to the extent that amount has already been
made good by the Warrantors under paragraph 7.1(b)); and
	 
	 	(b)	 	the amount paid by the Warrantors under paragraph 2 in respect of the Liability
for Taxation in question.

	8.	 	CORPORATION TAX RETURNS
	 
	8.1	 	The Warrantors or their duly authorised agent prepare the corporation tax returns and
computations of the Company for all accounting periods ended on or prior to the Accounts Date,
to the extent that the same have not been prepared before Completion, and submit them to the
Buyer.
	 
	8.2	 	The Buyer shall procure that the returns and computations referred to in paragraph 8.1 shall
be authorised, signed and submitted to the relevant Taxation Authority without amendment or
with such amendments as the Buyer reasonably considers to be necessary and shall give the
Warrantors or their agent all such assistance as may reasonably be required to agree those
returns and computations with the relevant Taxation Authority provided that the Buyer shall
not be obliged to take any such action as is mentioned in this paragraph 8.2 in relation to
any return that is not full, true and accurate in all material respects.
	 
	8.3	 	The Warrantors or their duly authorised agent shall prepare all documentation and shall have
conduct of all matters (including correspondence) relating to the corporation tax returns and
computations of the Company for all accounting periods ended on or prior to the Accounts Date
provided that the Warrantors shall not without the prior written consent of the Buyer (not to
be unreasonably withheld or delayed) transmit any communication (written or otherwise) to the
relevant Taxation Authority or agree any matter with the relevant Taxation Authority.
	 
	8.4	 	The Buyer shall procure that the Company afford such access to their books, accounts and
records as is necessary and reasonable to enable the Warrantors or their duly authorised agent
to prepare the corporation tax returns and computations of the Company for all accounting
periods ended on or before the Accounts Date and conduct matters relating to them in
accordance with this paragraph 8.
	 
	8.5	 	The Warrantor shall take all reasonable steps to ensure that the corporation tax returns and
computations of the Company for all accounting periods ended on or before the Accounts Date
are prepared and agreed with the relevant Taxation Authority in a timely manner.
	 
	8.6	 	For the avoidance of doubt:

62

 

	 	(a)	 	where any matter relating to Tax gives rise to a Tax Claim, the provisions of
paragraph 9 shall take precedence over the provisions of this paragraph 8; and
	 
	 	(b)	 	the provisions of this paragraph 8 shall not prejudice the rights of the Buyer
to make a Tax Claim under this Tax Covenant in respect of any Liability for Taxation.

	9.	 	CONDUCT OF TAX CLAIMS
	 
	9.1	 	If the Buyer or the Company becomes aware of a Tax Claim, the Buyer shall give or procure
that notice in writing is given to the Warrantors as soon as is reasonably practicable,
provided that if the Warrantors receive any Tax Claim for whatever reason, they shall notify
the Buyer in writing as soon as is reasonably practicable and the Buyer shall be deemed on
receipt of such notification to have given the Warrantors notice of such Tax Claim in
accordance with the provisions of this paragraph 9 provided always that the giving of such
notice shall not be a condition precedent to the Warrantors’ liability under this Tax
Covenant.
	 
	9.2	 	Provided that the Warrantors indemnify the Buyer and the Company to the Buyer’s reasonable
satisfaction against all liabilities, costs, damages or expenses which may be incurred thereby
including any additional Liability for Taxation, the Buyer shall take and shall procure that
the Company shall take such action as the Warrantors may reasonably request by notice in
writing given to the Buyer or the Company to avoid, dispute, defend, resist, appeal or
compromise any Tax Claim (such a Tax Claim where action is so requested being hereinafter
referred to as a Dispute), provided that neither the Buyer nor the Company shall be obliged to
appeal or procure an appeal against any assessment to Tax raised on any of them if, the
Warrantors having been given written notice of the receipt of such assessment, the Buyer or
the Company have not within 14 days of the date of the notice, received instructions in
writing from the Warrantors to do so.
	 
	9.3	 	If:

	 	(a)	 	the Warrantors do not request the Buyer or the Company to take any action under
paragraph 9.2 or fails to indemnify the Buyer or the Company to the Buyer’s reasonable
satisfaction within a period of time (commencing with the date of the notice given to
the Warrantors) that is reasonable having regard to the nature of the Tax Claim and the
existence of any time limit in relation to avoiding, disputing, defending, resisting,
appealing or compromising such Tax Claim, and which period will not in any event exceed
a period of 14 days; or
	 
	 	(b)	 	the Warrantors (or the Company before Completion) have been involved in a case
involving fraudulent conduct or wilful default in respect of the Liability for Taxation
which is the subject matter of the Dispute; or
	 
	 	(c)	 	the Dispute involves an appeal against a determination by the General or
Special Commissioners of the VAT and Duties Tribunal, unless the Warrantors have
obtained the opinion of Tax counsel of at least 5 years’ standing that there is a
reasonable prospect that the appeal will succeed, the Buyer or the Company shall have
the conduct of the Dispute absolutely (without prejudice to its rights under this Tax
Covenant) and shall be free to pay or settle the Tax Claim on such terms as the Buyer
or the Company may in its absolute discretion consider fit.

63

 

	9.4	 	Subject to paragraph 9.3, by agreement in writing between the Buyer and the Warrantors, the
conduct of a Dispute may be delegated to the Warrantors upon such terms as may be agreed from
time to time between the Buyer and the Warrantors, provided that, unless the Buyer and the
Warrantors specifically agree otherwise in writing, the following terms shall be deemed to be
incorporated into any such agreement:

	 	(a)	 	the Buyer or the Company shall promptly be kept fully informed of all matters
pertaining to a Dispute and shall be entitled to see and keep copies of all
correspondence and notes or other written records of telephone conversations or
meetings and, in the event that there is no written record, shall be given an immediate
report of all telephone conversations with any Taxation Authority to the extent that it
relates to a Dispute;
	 
	 	(b)	 	the appointment of solicitors or other professional advisers shall be subject
to the approval of the Buyer, such approval not to be unreasonably withheld or delayed;
	 
	 	(c)	 	all material written communications pertaining to the Dispute which are to be
transmitted to the relevant Taxation Authority shall first be submitted to the Buyer or
the Company for approval and shall only be finally transmitted if such approval is
given, which approval is not to be unreasonably withheld or delayed; and
	 
	 	(d)	 	the Warrantors shall make no settlement or compromise of the Dispute or agree
any matter in the conduct of the Dispute which is likely to affect the amount thereof
or the future liability to Tax of the Buyer or the Company without the prior approval
of the Buyer or the Company (as may be appropriate), such approval not to be
unreasonably withheld or delayed.

	9.5	 	The Buyer shall provide and shall procure that the Company provides to the Warrantors and
their professional advisors reasonable access to premises and personnel and to any relevant
assets, documents and records within their power, possession or control for the purpose of
investigating the matter and enabling the Warrantors to take such action as is referred to in
this paragraph 9.
	 
	9.6	 	Neither the Buyer nor the Company shall be subject to any claim by or liability to the
Warrantors for non-compliance with any of the provisions of this paragraph 9 if the Buyer or
the Company has bona fide acted in accordance with the instructions of the Warrantors.
	 
	10.	 	GROSSING UP
	 
	10.1	 	All sums payable by the Warrantors to the Buyer under this Tax Covenant shall be paid free
and clear of all deductions or withholdings whatsoever unless the deduction or withholding is
required by law. If any deductions or withholdings are required by law to be made from any of
the sums payable under this Tax Covenant, the Warrantors shall pay to the Buyer such sum as
will, after the deduction or withholding has been made, leave the Buyer with the same amount
as it would have been entitled to receive in the absence of any such requirement to make a
deduction or withholding. If any additional amount is paid pursuant to this paragraph by
virtue of any deduction or withholding being required by law to be made and the Buyer receives
a tax credit, repayment or other benefit by reason of any deduction or withholding in respect
of which the Warrantors

64

 

	 	 	have paid an additional amount, the Buyer shall pay to the Warrantors forthwith the amount
of such tax credit, repayment or other benefit.
	 
	10.2	 	If the Buyer incurs a taxation liability which results from, or is calculated by reference
to, any sum paid under this Tax Covenant, the amount so payable shall be increased by such
amount as will ensure that, after payment of the taxation liability, the Buyer is left with a
net sum equal to the sum it would have received had no such taxation liability arisen.
	 
	10.3	 	If the Buyer would, but for the availability of a Buyer’s Relief, incur a taxation liability
falling within paragraph 10.2, it shall be deemed for the purposes of that paragraph to have
incurred and paid that liability
	 
	10.4	 	If the Buyer assigns the benefit of this Tax Covenant or this agreement, the Warrantors
shall not be liable pursuant to paragraph 10.1 or paragraph 10.2, save to the extent that the
Warrantors would have been so liable had no such assignment occurred.
	 
	11.	 	COSTS AND EXPENSES
	 
	 	 	The covenant contained in paragraph 2 of this Tax Covenant shall extend to all costs and
expenses incurred by the Buyer or the Company in connection with any matter included under
paragraph 2 of this Tax Covenant and the enforcement of rights under this Tax Covenant.

65

 

Schedule 6

INTELLECTUAL PROPERTY RIGHTS LICENSED FROM THIRD PARTIES

	1)	 	Sub-Licence Agreement dated December 26 2003 between Build-A-Bear Workshop, Inc (1) and
Amsbra Ltd (2) re: trademarks owned by Sketchers USA, Inc.;
	 
	2)	 	Retail product licence between Amsbra Ltd and Sheffield Wednesday Football Club to sell
Sheffield Wednesday football kit dated June 2005.

PENDING APPLICATIONS FOR TRADEMARK 

REGISTRATION (EUROPEAN UNION)

	 	 	 	 	 
	 	 	Application	 	 
	Mark	 	Number	 	Classes
	A BOOK STUFFED WITH
MEMBEARIES
	 	PENDING	 	16,28,41
	A PAWSITIVELY FUN
FAMILY EXPERIENCE
	 	PENDING	 	28,35,41
	AIR BATH DESIGN
	 	PENDING	 	35,41,42
	ALL THE BUZZ THAT’S
BROUGHT TO BEAR
	 	PENDING	 	16
	AUDIO SOUND STATIONS
DESIGN STORE FIXTURE
	 	PENDING	 	35,41,42
	BEAR BUCKS
	 	PENDING	 	9,16
	BEAR HEAD DESIGN
	 	PENDING	 	9,16,18,25,28,35,38,41,42
	BEAR STUFF
	 	PENDING	 	28,35
	BEAR STUFF CLEANER
	 	PENDING	 	3
	BEARANTEE
	 	PENDING	 	28,35,41
	BEARARMOIRE
	 	PENDING	 	16,28,35,41,42
	BEARAMOIRE DESIGN
	 	PENDING	 	28,35,41
	BEAREMY
	 	PENDING	 	28,35,41
	BEAREMY’S KENNEL PALS
	 	PENDING	 	28
	BEARISM
	 	PENDING	 	16,28,35
	BEARY FUN CLUBHOUSE
	 	PENDING	 	28,35,41
	BEARY NEWSWORTHY
	 	PENDING	 	16,35,42
	BEARYJANE
	 	PENDING	 	28,35,41
	BUILD-A-BEAR WORKSHOP
	 	PENDING	 	6,9,14,16,18,20,21,24,25,28,35,39,41
	BUILD-A-BEAR
WORKSHOP & DESIGN
	 	PENDING	 	9,14,18,25,36,41
	BUILD-A-DOLL WORKSHOP
	 	PENDING	 	6,9,14,16,18,20,21,25,28,35,42

66

 

	 	 	 	 	 
	 	 	Application	 	 
	Mark	 	Number	 	Classes
	BUILD-A-GRAM
	 	PENDING	 	28,39,41
	BUILD-A-PARTY
	 	PENDING	 	28,35,41
	BUTTON DESIGN
	 	PENDING	 	16,25,28,35,41,42
	BUTTON WALL WITH
SPOOL DESIGN STORE
FIXTURE
	 	PENDING	 	16,35,41
	BUY STUFF CLUB
	 	PENDING	 	16,35,41
	CASH COUNTER DESIGN
	 	PENDING	 	35,41,42
	CHOOSE ME HEAR ME
STUFF ME STITCH ME
FLUFF ME NAME ME
DRESS ME 
   TAKE ME
HOME
	 	PENDING	 	35,39
	CLOTHES HANGER DESIGN
	 	PENDING	 	28
	COLLECTIBEAR
	 	PENDING	 	28,35,41
	COLLECTIBUNNY
	 	PENDING	 	28
	CUBCASE
	 	PENDIGN	 	28
	CUBCASE DESIGN
	 	PENDING	 	28,35,41
	CUB CONDO
	 	PENDING	 	28
	CUB CONDO DESIGN
	 	PENDING	 	16,35,41
	FIND-A-BEAR
	 	PENDING	 	28,35,40,42
	FLORA BEAR
	 	PENDING	 	28
	FRIENDSHOP
	 	PENDING	 	25,28,35
	FUN SHUI
	 	PENDING	 	16,28
	FUR SHUI
	 	PENDING	 	16,28
	HEART & PAWPRINT
DESIGN
	 	PENDING	 	28K,35,41
	HIBERNITIES
	 	PENDING	 	3,24,25,28
	LIL CUB
	 	PENDING	 	28
	LOVE STUFF
HEADQUARTERS
	 	PENDING	 	28,35,41
	MEMBEARIES
	 	PENDING	 	16,28,41
	PAWLETTE COUFUR
	 	PENDING	 	16,28
	PAWSIZER
	 	PENDING	 	28
	SEWING COLUMN DESIGN
	 	PENDING	 	35,41
	SHOE HANGER DESIGN
STORE FIXTURE
	 	PENDING	 	18,25,28
	SHOE SOLE #1 DESIGN
	 	PENDING	 	28,35,41
	SHOE SOLE #2 DESIGN
	 	PENDING	 	28,35,41
	SHOE SOLE #3 DESIGN
	 	PENDING	 	28,35,41
	SPOOL & TREE DESIGN
STORE FIXTURE
	 	PENDING	 	35,41,42

67

 

	 	 	 	 	 
	 	 	Application	 	 
	Mark	 	Number	 	Classes
	SPOOL DESIGN STORE
FIXTURE
	 	PENDING	 	35,41
	STITCHED WITH LOVE
	 	PENDING	 	25,28,35
	TEDDY BEAR CENTENNIAL
	 	PENDING	 	25,28
	TEDDYOLOGY
	 	PENDING	 	28,35,41
	THE BEAR PROMISE
	 	PENDING	 	35,41,42
	THE BEARY BEGINNING
	 	PENDING	 	16,28,41
	TOY FURNITURE
CARRIER (Comfy Stuff
Carrier)
	 	PENDING	 	28,35
	UNDIBEAR
	 	PENDING	 	3,25,28
	UNITED FOR THE PAWS
	 	PENDING	 	28,35,36
	WHERE BEST FRIENDS
ARE MADE
	 	PENDING	 	9,16,25,28,35,41
	WHERE BEST FRIENDS
FIND COMFY STUFF
	 	PENDING	 	35
	WHERE SPECIAL
MEMORIES ARE MADE
	 	PENDING	 	28,35,41
	WORKSHOP
	 	PENDING	 	25,28,35
	WORLD’S BEAR FAIR
	 	PENDING	 	35,41,42
	WORLDWIDE CUB CLUB
	 	PENDING	 	16,35,41
	ZIPPER COLUMN DESIGN
STORE FIXTURE
	 	PENDING	 	35, 41

REGISTERED TRADEMARKS (EUROPEAN UNION

	 	 	 	 	 
	 	 	Application	 	 
	Mark	 	Number	 	Classes
	BABW
	 	1,709,013	 	28,35,41
	BEARITAGE
	 	1,724,301	 	28,35,41
	BEARRIFIC
	 	1,724,285	 	28
	BUILD-A-BEAR WORKSHOP &
DESIGN
	 	   621,334	 	16,28,35,42
	BUILD-A-BEAR WORKSHOP
WHERE BEST FRIENDS ARE
MADE & MEDALLION DES
	 	1,010,834	 	6,9,14,16,18,20,21,
24,25,26,28,35,39,41,42
	BUILD-A-SOUND
	 	1,792,134	 	9,35,41
	CUB CASH
	 	2,086,783	 	16
	CUB CONDO DESIGN
	 	1,337,831	 	28,42
	FLUFF AND STUFF
	 	1,296,615	 	35,41,42

68

 

	 	 	 	 	 
	 	 	Application	 	 
	Mark	 	Number	 	Classes
	HEART IN A BEAR TRADE
DRESS
	 	1,399,229	 	28,35,41,42
	HEAR STUFF & DESIGN
	 	1,430,446	 	28,35,41
	JELLI BEARS
	 	1,719,533	 	28
	LIL O’ CUB
	 	1,719,673	 	28
	MAKING FRIENDS THAT MAKE
A DIFFERENCE
	 	2,094,431	 	25,28,35
	OUR FOUNDING TEDDY
	 	2,086,684	 	28
	SCOOTFUR
	 	2,181,964	 	28
	STORE FRONT DESIGN
	 	1,001,817	 	35,42
	STUFFED WITH HUGS AND
GOOD WISHES
	 	1,649,953	 	28
	TRAVELLING TEDDY
	 	1,328,699	 	28

REGISTERED TRADEMARK (UNITED KINGDOM)

	 	 	 	 	 
	Mark	 	Application Number	 	Classes
	BUILD-A-BEAR WORKSHOP WHERE BEST FRIENDS
ARE MADE & Medallion Design
	 	2,253,128	 	28,35

Part B – Copyright

	 	1.	 	The Build-a-Bear “Operating Manual” including all marks and trade dress together with
such other rights granted in the Build-a-bear Franchise Agreement.

69

 

Schedule 7

PARTICULARS OF PROPERTIES

Part 1. Leasehold properties

	1.	 	33 Fremlin Walk, Maidstone, Kent ME14 1QG.
	 
	2.	 	Ground Floor Premises at Unit 9 North Piazza, Covent Garden, London WC2.
	 
	3.	 	Shop Unit No. 69 Croydon Centrale Shopping Centre, Croydon — Title Number SGL651624.
	 
	4.	 	Unit 229, The Chimes Shopping Centre, Uxbridge.
	 
	5.	 	Unit 19 Whitefriars, 7 Gravel Walk, Canterbury.
	 
	6.	 	Unit 17 Culver Precinct, Culver Street West and Head Street, Colchester, Essex.
	 
	7.	 	Unit 36 Halle Square, Manchester, Arndale.
	 
	8.	 	Office 21, St Stephen’s House and Grounds.
	 
	9.	 	Unit 103 Central Court, Wimbledon, London SW19.
	 
	10.	 	Unit 66B (21B Park Lane), The Meadowhall Centre, Sheffield.
	 
	11.	 	Unit 36, The Centre (also known as 131 Silbury Arcade), Centre Milton Keynes, Bucks — Title
Number BM297374.
	 
	12.	 	Unit 18, The Glades Shopping Centre, Bromley.

70

 

Execution Page

	 	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	for and on behalf of WITTINGTON

	 	 	)	 	 	 
	INVESTMENTS LIMITED

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by
	 	 	 	 	 	 
	NSS TRUSTEES LIMITED AND

	 	 	)	 	 	 
	SIMON BENTLEY for and on behalf of

	 	 	)	 	 	 
	REGENT’S PARK ESTATES PENSION

	 	 	)	 	 	/s/ SWB
	SCHEME
	 	 	 	 	 	 
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	MALCOLM DALGLEISH

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	for and on behalf of GLOBAL PARTNERS

	 	 	)	 	 	 
	LIMITED

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	JUSTIN KENDRICK

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	CHRISTOPHER JOHN NEWLANDS SYKES

	 	 	)	 	 	 
	Steven Bedford as Attorney

	 	 	)	 	 	/s/ SWB
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	for and on behalf of AERO SYSTEMS SA

	 	 	)	 	 	 
	Steven Bedford as Attorney

	 	 	)	 	 	/s/SWB
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	for and on behalf of MERVILLE LIMITED

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	SUE BUCHAN

	 	 	)	 	 	/s/ K. T. McKelvey
	Kenneth McKelvey Under Power of Attorney for
	 	 	 	 	 	 

71

 

	 	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	ANDREW MACKAY

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	for and on behalf of BOLDSWITCH LIMITED

	 	 	)	 	 	/s/ Graham Roberts
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	STEVEN BEDFORD

	 	 	)	 	 	/s/ SWB
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	RUPERT ASHE

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by
	 	 	 	 	 	 
	Kenneth McKelvey Under Power of Attorney

	 	 	)	 	 	 
	for and on behalf of ANGUS SAMELS

	 	 	)	 	 	/s/ K. T. McKelvey
	 
	 	 	 	 	 	 
	Signed by
	 	 	 	 	 	 
	Kenneth McKelvey Under Power of Attorney

	 	 	)	 	 	 
	for and on behalf of JOHN HOWARD SMITH

	 	 	)	 	 	/s/ K. T. McKelvey
	 
	 	 	 	 	 	 
	Signed by
	 	 	 	 	 	 
	Kenneth McKelvey Under Power of Attorney

	 	 	)	 	 	 
	for and on behalf of KENNETH MCKELVEY

	 	 	)	 	 	/s/ K. T. McKelvey .
	 
	 	 	 	 	 	 
	Signed by
	 	 	 	 	 	 
	Kenneth McKelvey Under Power of Attorney

	 	 	)	 	 	 
	for and on behalf of JONATHAN PUNTER

	 	 	)	 	 	/s/ K. T. McKelvey
	 
	 	 	 	 	 	 
	Signed by
	 	 	 	 	 	 
	Kenneth McKelvey Under Power of Attorney

	 	 	)	 	 	 
	DAVID CULE

	 	 	)	 	 	/s/ K. T. McKelvey
	 
	 	 	 	 	 	 
	Signed by
	 	 	 	 	 	 
	Kenneth McKelvey Under Power of Attorney

	 	 	)	 	 	 
	GARY JACKSON

	 	 	)	 	 	/s/ K. T. McKelvey
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	PAUL ROSENBLATT

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 

72

 

	 	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	PHILIP LEWIS

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	MICHAEL MITCHELL

	 	 	)	 	 	/s/ SWB
	Steven Bedford as Attorney
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	for and on behalf of BUILD-A-BEAR

	 	 	)	 	 	 
	WORKSHOP INC

	 	 	)	 	 	/s/ Maxine Clark
	 
	 	 	 	 	 	 
	Signed by

	 	 	)	 	 	 
	for and on behalf of BUILD-A-BEAR

	 	 	)	 	 	 
	WORKSHOP UK HOLDINGS LIMITED

	 	 	)	 	 	/s/ Maxine Clark

73<PAGE>

                                                                   EXHIBIT 10.28

                                            ***TEXT OMITTED AND FILED SEPARATELY
                                    WITH THE SECURITIES AND EXCHANGE COMMISSION.
                                                CONFIDENTIAL TREATMENT REQUESTED
                                           UNDER 17 C.F.R. SECTIONS 200.80(B)(4)
                                                                  AND 240.24B-2.

                     LICENSE AND COMMERCIALIZATION AGREEMENT

                                 BY AND BETWEEN

                                   AMGEN INC.

                                       AND

                                 INTERMUNE, INC.

                                  JUNE 15, 2001

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
ARTICLE 1 DEFINITIONS                                                         1
   1.1    "Active Component"                                                  1
   1.2    "Affiliate"                                                         1
   1.3    "Amgen Know-How"                                                    1
   1.4    "Amgen Trademarks"                                                  1
   1.5    "Amgen Patent"                                                      2
   1.6    "Amgen Technology"                                                  2
   1.7    "BLA"                                                               2
   1.8    "CMC"                                                               2
   1.9    "Combination Product"                                               2
   1.10   "Commercialize" or "Commercialization"                              2
   1.11   "Commercially Reasonable Efforts"                                   2
   1.12   "Confidential Information"                                          2
   1.13   "Control"                                                           2
   1.14   "Default"                                                           2
   1.15   "Directly Competitive Product"                                      2
   1.16   "Dollar"                                                            2
   1.17   "Drug Approval Application"                                         2
   1.18   "Existing License"                                                  3
   1.19   "Existing License Patents"                                          3
   1.20   "Existing Licensor"                                                 3
   1.21   "FDA"                                                               3
   1.22   "Force Majeure"                                                     3
   1.23   "GAAP"                                                              3
   1.24   "Infergen"                                                          3
   1.25   "IND"                                                               3
   1.26   "Interferon alfacon-1"                                              3
   1.27   "Licensed Product"                                                  3
   1.28   "Losses"                                                            3
   1.29   "Net Sales"                                                         3
   1.30   "Ongoing Clinical Trials"                                           3
   1.31   "Other Licensee"                                                    3
   1.32   "Patent"                                                            3
   1.33   "PEG Know-How"                                                      4
   1.34   "PEG Patent"                                                        4
   1.35   "PEG Program"                                                       4
   1.36   "PEG-Infergen Product"                                              4
   1.37   "Phase III Clinical Trial"                                          4
   1.38   "Phase IV Clinical Trial"                                           4
   1.39   "Planning Period Date"                                              4
   1.40   "Regulatory Approval"                                               4
   1.41   "Regulatory Authority"                                              4
   1.42   "Royalty" or Royalties"                                             4
   1.43   "Sublicensee"                                                       4
   1.44   "Supply Terms"                                                      4
   1.45   "Term"                                                              4
   1.46   "Territory"                                                         4
   1.47   "Third Party"                                                       4
   1.48   "Trademark"                                                         4
   1.49   "Valid Claim"                                                       5

ARTICLE 2 LICENSES; EXCLUSIVITY; TRADEMARKS                                   5
   2.1    Technology Ownership                                                5
   2.2    Patent License to InterMune                                         5
   2.3    Trademark and Copyright Licenses to InterMune                       5
   2.4    Know-How License to InterMune                                       5
   2.5    Sublicenses                                                         5
   2.6    Sublicensed Technology                                              6
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                         <C>
   2.7    Exclusivity                                                         7
   2.8    Retained Rights.                                                    7
   2.9    Import                                                              7
   2.10   Covenant.                                                           7

ARTICLE 3 DEVELOPMENT                                                         7
   3.1    Ongoing Clinical Trials.                                            7
   3.2    PEG--Infergen Products                                              7
   3.3    Development Efforts.                                                8
   3.4    Amgen Interim Activities.                                           8
   3.5    Development Data.                                                   8
   3.6    Development Activities in Territory.                                8

ARTICLE 4 REGULATORY                                                          8
   4.1    General                                                             8
   4.2    Additional Regulatory Filings                                       9
   4.3    InterMune Access to Amgen Regulatory Data                           9
   4.4    Adverse Event Reporting; Customer Complaints                        9
   4.5    Communications                                                     10
   4.6    Applications for Regulatory Exclusivity                            10
   4.7    Recalls and Voluntary Withdrawals.                                 10
   4.8    Safety and Clinical Database                                       10

ARTICLE 5 COMMERCIALIZATION                                                  11
   5.1    Pricing                                                            11
   5.2    Diligence                                                          11
   5.3    Reports                                                            11
   5.4    Amgen Transition Assistance                                        11
   5.5    Change of Promotional Material                                     11
   5.6    Medical and Other Inquiries                                        11
   5.7    Trade Returns; Reimbursements                                      12
   5.8    Distribution Agreements                                            12

ARTICLE 6 COMPENSATION                                                       13
   6.1    License Fee                                                        13
   6.2    Amgen Performance Milestones.                                      13
   6.3    Product Milestones                                                 13
   6.4    Royalties                                                          14
   6.5    Term of Royalties                                                  14
   6.6    Combination Products                                               14
   6.7    Existing License Royalties                                         14
   6.8    Royalty Payments and Reports                                       15
   6.9    Taxes                                                              15
   6.10   Blocked Currency                                                   15
   6.11   Foreign Exchange                                                   15
   6.12   Patent and Trademark Expenses                                      15
   6.13   Late Payments                                                      15

ARTICLE 7 MANUFACTURE AND SUPPLY                                             16
   7.1    General.                                                           16

ARTICLE 8 INTELLECTUAL PROPERTY                                              16
   8.1    Ownership of Inventions                                            16
   8.2    Prosecution of Patents                                             16
   8.3    Infringement of Patents and Trademarks by Third Parties            16
   8.4    Infringement of Third Party Rights                                 17
   8.5    Patent Marketing                                                   17

ARTICLE 9 REPRESENTATIONS AND WARRANTIES                                     18
   9.1    Mutual Representations and Warranties                              18
   9.2    Mutual Covenants                                                   18
   9.3    Representations, Warranties and Covenants of InterMune             18
   9.4    Representations, Warranties and Covenants of Amgen                 19

ARTICLE 10                                                                   20
   10.1   Indemnification by Amgen                                           20
   10.2   Indemnification by InterMune                                       20
   10.3   Insurance                                                          20
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                         <C>
   10.4   Pre-Effective Date Losses.                                         21
   10.5   Limitation of Liability                                            21

ARTICLE 11 RECORDS; ROYALTY AUDIT; PUBLICATIONS                              21
   11.1   Records; Royalty Audit                                             21
   11.2   Publications                                                       21

ARTICLE 12 CONFIDENTIALITY                                                   22
   12.1   Treatment of Confidential Information                              22
   12.2   Authorized Disclosure                                              22
   12.3   Publicity; Terms of Agreement                                      22

ARTICLE 13 TERM AND TERMINATION                                              23
   13.1   Term                                                               23
   13.2   Discontinuation of Commercialization or Further Development        23
   13.3   Termination for Default                                            23
   13.4   Licenses Upon Expiration                                           23
   13.5   Survival                                                           24
   13.6   Determination of PEG Diligence.                                    24

ARTICLE 14 DISPUTE RESOLUTION                                                24
   14.1   Disputes                                                           24
   14.2   Governing Law; Judicial Resolution                                 24
   14.3   Patent and Trademark Dispute Resolution                            25

ARTICLE 15 MISCELLANEOUS                                                     25
   15.1   Entire Agreement; Amendment                                        25
   15.2   Force Majeure                                                      25
   15.3   Notices                                                            25
   15.4   Maintenance of Records                                             26
   15.5   No Strict Construction                                             26
   15.6   Assignment                                                         26
   15.7   Performance by Affiliates                                          26
   15.8   Counterparts                                                       26
   15.9   Severability                                                       26
   15.10  Headings                                                           27
   15.11  Further Actions                                                    27
   15.12  Independent Contractors                                            27
   15.13  Use of Name                                                        27
   15.14  No Waiver                                                          27
</TABLE>

                                       iii

<PAGE>

                     LICENSE AND COMMERCIALIZATION AGREEMENT

     THIS LICENSE AND COMMERCIALIZATION AGREEMENT (the "Agreement") is made
effective as of the 15th day of June, 2001 (the "Effective Date") by and between
AMGEN INC., a Delaware corporation having its principal place of business at One
Amgen Center Drive, Thousand Oaks, CA 91320-1799 ("Amgen") and INTERMUNE, INC.,
a Delaware corporation having its principal place of business at 1710 Gilbreth
Road, Suite 310, Burlingame, CA 94010-1317 ("InterMune"). Amgen and InterMune
are sometimes referred to herein individually as a "Party" and collectively as
the "Parties", and references to "InterMune" and "Amgen" shall include their
respective Affiliates.

                                    RECITALS

     WHEREAS, Amgen has bioengineered, developed, obtained regulatory approval
for, and currently markets in the United States and Canada a pharmaceutical
composition containing a novel, non-naturally occurring Type 1 interferon, sold
under the trademark Infergen(R);

     WHEREAS, InterMune has clinically developed and currently markets an
interferon-gamma product in the United States, and therefore has both clinical
development experience and a sales force that may be particularly well suited to
market and further develop a product such as Infergen;

     WHEREAS, InterMune desires to obtain, and Amgen wishes to grant InterMune,
the exclusive license to commercialize and further develop Infergen in the
United States and Canada on the terms and conditions set forth herein; and

     WHEREAS, Amgen is willing to supply InterMune, and InterMune wishes to be
supplied by Amgen, with quantities of Infergen (as such term is defined below)
on the Supply Terms (as defined below);

     NOW THEREFORE, based on the foregoing premises and the mutual covenants and
obligations set forth below, the Parties agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

     The following terms shall have the following meanings as used in this
Agreement:

     1.1 "ACTIVE COMPONENT" shall mean any product other than the Licensed
Product which [***] therapeutic or prophylactic function when combined with the
Licensed Product.

     1.2 "AFFILIATE" shall mean, except as provided below, a Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with Amgen or InterMune. For purposes
of this definition, "control" shall mean the possession, direct or indirect, of
the power to cause the direction of the management and policies of a Person,
whether through ownership of fifty percent (50%) or more of the voting
securities of such Person, by contract or otherwise. Affiliate [***] shall [***]

     1.3 "AMGEN KNOW-HOW" shall mean the following information: (1) information
disclosed in the BLA for Infergen as of the Effective Date, (2) information
disclosed as of the Effective Date in any BLA supplements for Infergen, (3) all
Amgen-sponsored investigator-driven clinical trial results, and the results of
the Ongoing Clinical Trials, (subject to any contractual confidentiality
obligations of Amgen to Third Parties regarding such results); (4) Infergen
sales and marketing training materials; (5) any regulatory data which Amgen
provides to InterMune pursuant to Section 4.3; (6) [***]; (7) the safety and
clinical database referenced in Section 4.8; and (8) Formulating Know-How (as
defined in Section 12.1 of Exhibit F).

     1.4 "AMGEN TRADEMARKS" shall mean the registered trademarks listed at
EXHIBIT A, all trademark applications listed at EXHIBIT A and all trademarks
issuing from such applications, together with any renewals, modifications or
extensions thereto.

                                             ***Confidential Treatment Requested

                                        1

<PAGE>

     1.5 "AMGEN PATENT" shall mean [***]

     1.6 "AMGEN TECHNOLOGY" shall mean all Amgen Patents, Amgen Know-How and
Amgen Trademarks.

     1.7 "BLA" shall mean a Biological License Application for Regulatory
Approval filed in the United States.

     1.8 "CMC" shall mean the Chemistry Manufacturing Control section of a BLA.

     1.9 "COMBINATION PRODUCT" shall have the meaning assigned such term
pursuant to Section 6.6.

     1.10 "COMMERCIALIZE" OR "COMMERCIALIZATION" shall mean those activities
relating to the promotion, marketing and sale of Licensed Products and shall
include without limitation, Phase IV Clinical Trials or equivalent clinical
trials conducted following Regulatory Approval to market a pharmaceutical
product.

     1.11 "COMMERCIALLY REASONABLE EFFORTS" shall mean the level of efforts and
resources required to Commercialize a Licensed Product in a sustained manner
consistent with the efforts a similarly situated biopharmaceutical company would
typically devote to a product of similar market potential, profit potential or
strategic value resulting from its own research efforts, based on conditions
then prevailing. Commercially Reasonable Efforts shall be determined on a
country-by-country (each country including its territories) basis for a
particular Licensed Product, and it is anticipated that the level of effort will
change over time reflecting changes in the status of the Licensed Product and
the country (including its territories) involved.

     1.12 "CONFIDENTIAL INFORMATION" shall mean all information received by
either Party from the other Party pursuant to this Agreement, other than that
portion of such information or materials which:

          (A) is publicly disclosed by the disclosing Party, either before or
     after it becomes known to the receiving Party;

          (B) was known to the receiving Party, without obligation to keep it
     confidential, prior to when it was received from the disclosing Party;

          (C) is subsequently disclosed to the receiving Party by a Third Party
     lawfully in possession thereof without obligation to keep it confidential;

          (D) has been publicly disclosed other than by the disclosing Party and
     without breach of an obligation of confidentiality with respect thereto; or

          (E) has been independently developed by the receiving Party without
     the aid, application or use of Confidential Information, as demonstrated by
     competent written proof.

     1.13 "CONTROL" shall mean possession of the ability to grant a license or
sublicense as provided for herein under such intellectual property right without
violating the terms of any agreement or other arrangement with any Third Party.

     1.14 "DEFAULT" shall mean with respect to either Party (i) that any
representation or warranty of such Party set forth herein shall have been untrue
in any material respect when made or (ii) such Party, such Party's Affiliate or
such Party's sublicensee shall have failed to materially perform any material
obligation set forth herein.

     1.15 "DIRECTLY COMPETITIVE PRODUCT" shall mean any pharmaceutical product
that contains [***] or [***] of such [***] and that [***] with [***] in [***]
such Licensed Product [***]

     1.16 "DOLLAR" shall mean a United States dollar, and "$" shall be
interpreted accordingly.

     1.17 "DRUG APPROVAL APPLICATION" shall mean an application for Regulatory
Approval required before commercial sale or use of a Licensed Product as a drug
or to treat a particular indication in a regulatory jurisdiction, including
without limitation applications to expand the label of an approved drug.

                                             ***Confidential Treatment Requested

                                        2

<PAGE>

     1.18 "EXISTING LICENSE" shall mean that certain Agreement between [***]

     1.19 "EXISTING LICENSE PATENTS" shall mean the Patents under which Amgen
has a license pursuant to the Existing License, a copy of which has been
provided to InterMune.

     1.20 "EXISTING LICENSOR" shall mean [***]

     1.21 "FDA" shall mean the United States Food and Drug Administration, or
any successor thereto.

     1.22 "FORCE MAJEURE" shall mean any occurrence beyond the reasonable
control of a Party that prevents or substantially interferes with the
performance by the Party of any of its obligations hereunder, if such occurs by
reason of any act of God, flood, fire, explosion, breakdown of plant,
earthquake, strike, lockout, labor dispute, casualty or accident, or war,
revolution, civil commotion, acts of public enemies, blockage or embargo, or any
injunction, law, order, proclamation, regulation, ordinance, demand or
requirement of any government or of any subdivision, authority or representative
or any such government, inability to procure or use materials, labor, equipment,
transportation, or energy sufficient to meet manufacturing needs without the
necessity of allocation, or any other cause whatsoever, whether similar or
dissimilar to those above enumerated, beyond the reasonable control of such
Party, if and only if the Party affected shall have used reasonable efforts to
avoid such occurrence and to remedy it promptly if it shall have occurred.

     1.23 "GAAP" shall mean United States generally accepted accounting
principles.

     1.24 "INFERGEN" shall mean the product containing Interferon alfacon-1 for
which Amgen has obtained Regulatory Approval in each country of the Territory
prior to the Effective Date, in either bulk or filled and finished form.

     1.25 "IND" shall mean Investigational New Drug application.

     1.26 "INTERFERON ALFACON-1" shall mean the polypeptide having the amino
acid sequence which is set forth in EXHIBIT C.

     1.27 "LICENSED PRODUCT" shall mean any product comprising Interferon
alfacon-1 or [***] Licensed Products include but are not limited to Infergen.

     1.28 "LOSSES" shall mean suits, claims, actions, demands, liabilities,
expenses and/or losses, including without limitation reasonable legal expenses
and attorneys' fees.

     1.29 "NET SALES" shall mean all revenues recognized in accordance with GAAP
from the sale or other disposition of Licensed Products by InterMune, its
Affiliates or Sublicensee to a Third Party, less [***]

     Amounts received by InterMune, its Affiliates or Sublicensees for the sale
of Licensed Products among InterMune, its Affiliates and Sublicensees for resale
shall not be included in the computation of Net Sales hereunder. Distributors of
InterMune selling Licensed Products shall not be deemed to be Sublicensees of
InterMune.

     1.30 "ONGOING CLINICAL TRIALS" shall mean those clinical trials listed at
Exhibit E hereto, which are clinical trials of Infergen that Amgen is conducting
in the Territory as of the Effective Date. For avoidance of doubt, Ongoing
Clinical Trials shall exclude any Amgen-sponsored investigator-driven clinical
trials. Amgen represents that the Ongoing Clinical Trials are the only clinical
trials of Infergen being conducted in the Territory by or on Amgen's behalf as
of the Effective Date.

     1.31 "OTHER LICENSEE" shall mean any Third Party to which Amgen has granted
or grants a license and/or sublicense to develop or Commercialize a Licensed
Product outside the Territory, including without limitation [***]

     1.32 "PATENT" shall mean (i) an issued, unexpired patent (with the term
"patent" being deemed to encompass, without limitation, an inventor's
certificate) which has not been held invalid or unenforceable by a court of
competent jurisdiction from which no appeal can be taken or has been taken
within the

                                             ***Confidential Treatment Requested

                                        3

<PAGE>

required time period, including without limitation any substitution, extension,
registration, confirmation, reissue, re-examination, renewal or any like filing
thereof or (ii) a pending application for a patent, including without limitation
any provisional, converted provisional, continued prosecution application,
continuation, divisional or continuation-in-part thereof; any patents issuing
therefrom; and any substitution, extension, registration, confirmation, reissue,
reexamination, renewal or like filing thereof.

     1.33 "PEG KNOW-HOW" shall mean any of the following which is conceived,
reduced to practice, developed or employed by Amgen (solely or jointly with
InterMune) [***] the PEG Program: (i) techniques and data specifically relating
to (but not necessarily solely to) the [***] of PEG-Infergen Product, including,
but not limited to, [***] and (ii) [***] of PEG Infergen Product. For avoidance
of doubt, PEG Know-How as it relates to manufacturing, shall only include [***]
PEG-Infergen Products, and shall not include [***]

     1.34 "PEG PATENT" shall mean [***]

     1.35 "PEG PROGRAM" shall mean a program of collaborative development by the
Parties of a PEG-Infergen Product (if any such program is agreed to by the
Parties pursuant to Section 3.2).

     1.36 "PEG-INFERGEN PRODUCT" shall mean a pharmaceutical composition
containing as its active ingredient [***]

     1.37 "PHASE III CLINICAL TRIAL" means a clinical trial (or set of clinical
trials) of a pharmaceutical product on sufficient numbers of patients which, if
the defined end-points are met, are designed or intended to file for Regulatory
Approval on the basis thereof.

     1.38 "PHASE IV CLINICAL TRIAL" shall mean a pharmaceutical product support
clinical trial of a pharmaceutical product commenced after receipt of Regulatory
Approval in the country where such trial is being conducted.

     1.39 "PLANNING PERIOD DATE" shall have the meaning assigned such term
pursuant to Section 3.2.

     1.40 "REGULATORY APPROVAL" shall mean any approvals (including supplements,
amendments, pre- and post-approvals and price approvals), licenses,
registrations or authorizations of any national, supra-national regional, state
or local regulatory agency, department, bureau, commission, council or other
governmental entity, necessary for the distribution, use or sale of a Licensed
Product in a regulatory jurisdiction. Regulatory Approval shall not include any
[***]

     1.41 "REGULATORY AUTHORITY" shall mean the FDA or any counterpart of the
FDA outside the United States.

     1.42 "ROYALTY" OR ROYALTIES" shall mean those amounts payable as royalties
by InterMune to Amgen pursuant to Sections 6.4 and 6.7(a) of this Agreement.

     1.43 "SUBLICENSEE" shall mean a sublicensee of InterMune under InterMune's
rights pursuant to Section 2.2, 2.3 and 2.4, the sublicense to whom is permitted
pursuant to Section 2.5.

     1.44 "SUPPLY TERMS" shall mean the terms and conditions set forth in
Exhibit F.

     1.45 "TERM" shall mean the term of this Agreement.

     1.46 "TERRITORY" shall mean the United States and Canada, and the
possessions and territories of each such country.

     1.47 "THIRD PARTY" shall mean any entity other than Amgen or InterMune or
an Affiliate of either of them.

     1.48 "TRADEMARK" shall mean any trade name, service mark, logo or trademark
(whether or not registered) together with all goodwill associated therewith, and
any renewals, extensions or modifications thereto.

                                             ***Confidential Treatment Requested

                                        4

<PAGE>

     1.49 "VALID CLAIM" shall mean (i) an unexpired claim of an issued patent
within the Amgen Patents that has not been found to be unpatentable, invalid or
unenforceable by a court or other authority in the country of the patent, from
which decision no appeal is taken or can be taken; or (ii) a claim of a pending
application within the Amgen Patents, which application claims a first priority
no more than [***] prior to the date upon which pendency is determined.

                                    ARTICLE 2
                        LICENSES; EXCLUSIVITY; TRADEMARKS

     2.1 TECHNOLOGY OWNERSHIP. Except for items (1) and (2) listed in the
definition of Amgen Know-How, Amgen shall retain sole right and interest,
subject only to the licenses granted in Section 2.2, 2.3 and 2.4 of this
Agreement, to the Amgen Technology.

     2.2 PATENT LICENSE TO INTERMUNE.

          (A) Subject to the terms and conditions of this Agreement, Amgen
     hereby grants to InterMune an exclusive (even as to Amgen) license, with
     the right to grant sublicenses (subject to InterMune's compliance with
     Section 2.5 of this Agreement), under the Amgen Patents to [***] Licensed
     Products in the Territory.

          (B) Subject to the terms and conditions of this Agreement, Amgen
     hereby grants to InterMune an exclusive (even as to Amgen) sublicense,
     without the right to grant sublicenses, under the Existing License Patents
     to [***] Infergen in the Territory. Except as expressly set forth herein,
     Amgen does not grant InterMune any other rights with respect to the
     Existing License or to Existing License Patents.

          (C) Subject to the terms and conditions of this Agreement, Amgen
     hereby grants to InterMune an exclusive license (even as to Amgen), under
     the PEG Patent, to [***] pegylated Licensed Products.

          (D) Subject to the terms and conditions of this Agreement, Amgen
     hereby grants to InterMune an exclusive [***] license (even as to Amgen),
     under PEG Know-How and Patents claiming PEG Know-How, to [***] pegylated
     Licensed Products.

     2.3 TRADEMARK AND COPYRIGHT LICENSES TO INTERMUNE.

          (A) Amgen hereby grants to InterMune an exclusive [***] license, with
     the right to grant sublicenses (subject to InterMune's compliance with
     Section 2.5 of this Agreement), under the entire right, title and interest
     in and to the Amgen Trademarks, to use and display the Amgen Trademarks in
     connection with Licensed Products in the Territory. InterMune shall have
     the right to select for and use and display with Licensed Products such
     Trademarks as it desires, consistent with any reasonable quality standards
     which Amgen may prescribe for use and display of the Amgen Trademarks.

          (B) Amgen hereby grants to InterMune an exclusive [***] license under
     Amgen's entire right, title and interest in any copyrights in
     Infergen-specific promotional materials existing on or before the Effective
     Date, with the right to grant sublicenses (subject to InterMune's
     compliance with Section 2.5 of this Agreement), to reproduce, distribute
     copies of, prepare derivative works of and publicly perform and display
     such promotional materials in connection with Licensed Products in the
     Territory.

     2.4 KNOW-HOW LICENSE TO INTERMUNE. Subject to the terms and conditions of
this Agreement, Amgen grants InterMune a [***], exclusive license under the
Amgen Know-How to use the Amgen Know-How for the sole purposes of [***] Licensed
Products in the Territory.

     2.5 SUBLICENSES. Subject to Amgen's prior written approval in each
instance, InterMune may grant sublicenses to Third Parties under Sections 2.2,
2.3 and 2.4. Notwithstanding the sublicensing of all or part of InterMune's
rights and obligations hereunder, InterMune shall remain responsible for the
full and complete performance of all of InterMune's obligations and duties under
this Agreement. There shall be

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                                        5

<PAGE>

no presumption that Amgen will provide its approval for InterMune to grant a
sublicense to any Third Party, however Amgen shall not unreasonably withhold its
consent.

     2.6 SUBLICENSED TECHNOLOGY. Amgen shall timely perform and discharge its
obligations under the Existing License during the Term and shall not permit any
action to be taken or event to occur, in each case, within Amgen's reasonable
control, which would give Existing Licensor the right to terminate Existing
License. InterMune agrees that the rights granted under this Agreement are
subject to, and agrees to be bound by, all the terms and conditions required of
sublicensees under the Existing License.

                                        6

<PAGE>

     2.7 EXCLUSIVITY.

          (A) Except as explicitly permitted pursuant to this Agreement, Amgen
     shall not use, develop, import, promote, sell, or offer for sale Licensed
     Products for use within the Territory.

          (B) Amgen shall not [***] a Directly Competitive Product in the
     Territory, and shall not [***] take such actions during the Term; provided,
     however, that the foregoing prohibition shall be subject to Amgen's rights
     pursuant to Section 13.6.

     2.8 RETAINED RIGHTS. Notwithstanding the exclusive license granted
InterMune pursuant to Section 2.2, Amgen retains the non-transferable,
non-exclusive right under the Amgen Patents and Amgen Know-How to [***];
provided, however, that, except as authorized under Section 12.2(b) Amgen shall
not publish the [***], to the extent [***] of the [***] in [***] nothing shall
prohibit Amgen or its Affiliates from fulfilling its obligations or exercising
its rights in this Agreement or with regard to Licensed Products outside the
Territory.

     2.9 IMPORT. The term "import" or "importing" whenever used in this
agreement shall not permit InterMune to conduct any activities outside the
Territory outside the Territory regarding Licensed Product without the express
written consent of the Other Licensees.

     2.10 COVENANT. Amgen hereby covenants that it and its Affiliates,
assignees, and licensees ("Covenantors") shall not sue InterMune, its Affiliates
and Sublicensees for infringement of any Patent owned or Controlled by any
Covenantor, or under which any Covenantor has the right to sue infringers, in
each case during the Term [***]

                                    ARTICLE 3
                                   DEVELOPMENT

     3.1 ONGOING CLINICAL TRIALS. As of the Effective Date, Amgen is conducting
the Ongoing Clinical Trials in the Territory. As soon as is reasonably practical
after the Effective date, Amgen will assign (to the extent assignable) and
transfer its clinical trial contracts covering the Ongoing Clinical Trials to
InterMune. Amgen shall make reasonable efforts to complete such assignments
within [***] days after the Effective Date and transfer to InterMune any data
from the Ongoing Clinical Trials that Amgen possesses as of such date. To the
extent that Amgen is still conducting the Ongoing Clinical Trials during such
[***] day transition period, Amgen shall comply with all applicable laws and
regulations, and regulations of the Regulatory Authorities having jurisdiction
in the Territory in Amgen's conduct of the Ongoing Clinical Trials, shall keep
InterMune promptly informed of any inquiries of such Regulatory Authorities
regarding the Ongoing Clinical Trials, shall provide InterMune with drafts of
all proposed correspondence with any such Regulatory Authority regarding any
Ongoing Clinical Trial and permit InterMune to be present at any meeting with
such a Regulatory Authority regarding any Ongoing Clinical Trial. InterMune
shall reimburse Amgen for all Ongoing Clinical Trial expenses incurred by Amgen
after the Effective Date.

     3.2 PEG-INFERGEN PRODUCTS. InterMune shall have a period of [***] days to
[***] and whether it desires to have Amgen provide [***] (as defined in the Code
of Federal Regulations, as may be amended from time to time) for the [***] The
Parties recognize that Amgen's expertise with Infergen may be particularly
applicable to the preclinical development of any PEG-Infergen Product. Within
[***] days after the end of such [***] day period, if InterMune notifies Amgen
in writing that InterMune wishes to negotiate with Amgen what development
activities Amgen would carry out with respect to such PEG-Infergen Product and
commercially reasonable terms upon which Amgen would carry out such [***] then
Amgen and InterMune shall negotiate in good faith such activities and terms for
a period of no less than [***] The end of such [***] day period shall be
referred to as the "Planning Period Date". The Parties have agreed that such
commercially reasonable terms for the development of PEG-Infergen would include
(i) InterMune funding any such development work by Amgen at a rate equal to
[***] and (ii) all PEG Know How and Patents claiming PEG

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<PAGE>

Know-How, which shall be included in the Amgen Technology and therefore subject
to the licenses of Article 2 of this Agreement.

     3.3 DEVELOPMENT EFFORTS. Beginning reasonably promptly after [***]
InterMune shall commence using Commercially Reasonable Efforts to develop and
seek Regulatory Approval for (in due course) a PEG-Infergen Product in the
regulatory jurisdictions of the Territory.

     3.4 AMGEN INTERIM ACTIVITIES. As InterMune evaluates the business
opportunity for PEG-Infergen Products, Amgen will undertake the following
preparatory activities to enable InterMune to better evaluate the possibility of
conducting a collaborative PEG Program with Amgen:

          (A) Amgen will [***] with a [***] and provide InterMune with written
     notice of such accomplishment.

          (B) Amgen will prepare and provide to InterMune a written [***] work
     plan detailing activities [***] as part of a PEG Program and associated
     anticipated schedules and costs. Any such plan shall include a description
     of actions (and associated timings and costs) for Amgen to develop and
     supply InterMune with quantities of GMP-compliant PEG-Infergen sufficient
     to commence Phase I Clinical Trials thereof. Such a plan shall be referred
     to herein as a "[***] Work Plan."

     Amgen's actions as permitted by this Section 3.4 shall not be deemed to
bind InterMune to proceed with a PEG Program in collaboration with Amgen.

     3.5 DEVELOPMENT DATA. [***] InterMune shall provide Amgen with written
summaries of all pre-clinical and clinical data generated by InterMune with
respect to Infergen (such summaries, the "Development Summaries"). All such
Development Summaries shall be considered Confidential Information of InterMune
and Amgen may share it with its Other Licensees under appropriate obligations of
confidentiality and non-use commensurate with those contained herein. Upon any
Other Licensee's request, InterMune will [***] in such detail as shall be
reasonably necessary to allow [***] outside the Territory.

     3.6 DEVELOPMENT ACTIVITIES IN TERRITORY.

          (A) InterMune may collaborate or consult with researchers and
     investigators and contract for pre-clinical studies without regard to
     whether such research, investigators and studies are inside or outside of
     the Territory and without obtaining permission from any Other Licensee, but
     in no event will InterMune conduct clinical trials with any Licensed
     Product outside the Territory without advance written consent from the
     Other Licensee in whose territory outside the Territory InterMune wishes to
     conduct such clinical trials.

          (B) Amgen and any Other Licensee may collaborate or consult with
     researchers and investigators and contract for pre-clinical studies without
     regard to whether such research, investigators and studies are inside or
     outside of the Territory and without obtaining permission from InterMune,
     but in no event will Amgen or any Other Licensee conduct clinical trials in
     the Territory with any Licensed Product without advance written consent
     from InterMune.

                                    ARTICLE 4
                                   REGULATORY

     4.1 GENERAL. As of the Effective Date, Amgen owns in its own name
Regulatory Approvals for Infergen in each country of the Territory. Exhibit D
contains a complete list of such Regulatory Approvals existing as of the
Effective Date. Subject to Amgen's rights of reference as described below in
Section 4.3 and Amgen's other rights pursuant to such Section, Amgen hereby
assigns to InterMune Amgen's entire right, title and interest in and to all
Regulatory Approvals and Drug Approval Applications for Infergen in the
Territory to InterMune. [***] after the Effective Date, Amgen shall notify
Regulatory Authorities in the Territory of, and as soon as is reasonably
practicable thereafter take all actions reasonably necessary to effect or
evidence, the transfer of such Regulatory Approvals to InterMune. In light of
such assignment

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and transfer during the time period when Amgen will be transitioning the Ongoing
Clinical Trials to InterMune, the Parties will [***] to make appropriate
arrangements in accordance with law to allow for Amgen continue to conduct the
Ongoing Clinical Trials under Amgen's IND until the transition of the Ongoing
Clinical Trials to InterMune is complete. For the avoidance of doubt, the
transfer of such Regulatory Approvals shall not be effective to transfer to
InterMune ownership of, [***] any manufacturing trade secret disclosed therein,
including without limitation, [***]

     4.2 ADDITIONAL REGULATORY FILINGS. InterMune shall have the exclusive right
to file, and will own in its own name, any additional Drug Approval Applications
for Licensed Products in the Territory, including without limitation any filings
relating to label expansions for Infergen.

     4.3 INTERMUNE ACCESS TO AMGEN REGULATORY DATA.

          (A) REGULATORY DATA AS OF THE EFFECTIVE DATE. Amgen will, as soon as
     is reasonably practicable after the Effective Date, provide InterMune
     originals of the BLA and Canadian equivalent for Infergen in the United
     States and Canada, respectively, and all supplements to either of the
     foregoing; provided, however that Amgen shall be entitled to redact any
     trade secret information relating to products other than Licensed Products
     and any manufacturing trade secrets proprietary to Amgen (other than the
     [***] for Infergen). Amgen has provided InterMune with a list of
     correspondence between Amgen and the FDA regarding Infergen for the
     approximately two (2) years prior to the Effective Date and shall provide
     InterMune with reasonable access to the correspondence referenced in such
     list, and to other correspondence between Amgen and Regulatory Authorities
     having jurisdiction in the Territory, upon the request of InterMune.

          (B) REGULATORY DATA GENERATED AFTER THE EFFECTIVE DATE. During the
     Term, Amgen will provide to InterMune all regulatory data owned or
     Controlled by Amgen regarding any Licensed Product and necessary for
     marketing or making regulatory filings for Licensed Products in the
     Territory as it becomes available. Such data shall be data generated in the
     Ongoing Clinical Trials (including adverse events encountered in the
     Ongoing Clinical Trials). Except for the information contained in the CMC
     section of Amgen's BLA filings for Infergen, Amgen shall have no
     obligation, for any reason or under any circumstance, to provide InterMune
     with any information regarding Amgen's manufacturing facility or any
     information pertaining to the manufacture of Licensed Products (including,
     without limitation, [***]).

          (C) AMGEN USE OF INFORMATION. Amgen shall have the right to review, a
     right of access, a right of reference and the right to use and incorporate
     all Amgen Know-How outside the Territory or to satisfy Amgen's obligations
     in the Territory hereunder or to any Other Licensee [***] The Parties shall
     discuss, as soon as practicable after the Effective Date, the form in which
     the Parties shall exchange information pursuant to this Section 4.3 and
     Section 4.4.

          (D) LEGALLY REQUIRED ACCESS. Notwithstanding anything to the contrary
     in this Agreement, InterMune shall have the right to receive from Amgen,
     and Amgen shall provide to InterMune, any regulatory data or information
     (including without limitation manufacturing information) to which
     InterMune, as the holder of any Regulatory Approval in the Territory, is
     required by law, rule, regulation or a Regulatory Authority having
     jurisdiction in the Territory, is required to have access, but shall only
     be entitled to use such regulatory data or information to the extent
     required by such law, rule, regulation or Regulatory Authority.

     4.4 ADVERSE EVENT REPORTING; CUSTOMER COMPLAINTS.

          (A) After the Effective Date, InterMune shall be responsible for the
     adverse experience and safety reporting for the Licensed Product in
     compliance with the requirements of the U.S. Food, Drug and Cosmetic Act,
     21 USC Section 321 et seq. and the regulations promulgated thereunder and
     the equivalent regulations in the Territory; provided that Amgen shall
     provide interim adverse experience and safety reporting services for
     Infergen on InterMune's behalf for a period of [***] after the Effective
     Date. Amgen shall, as soon as practicable following of the Effective Date,
     provide InterMune with a

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<PAGE>

     summary of the information relating to the investigation and reporting of
     adverse experiences regarding Infergen and all information submitted to
     Regulatory Authorities in Amgen's BLA for Infergen and any BLA supplements
     relevant to the safe use of Infergen. If Amgen receives any customer
     complaints regarding the marketing or distribution of Infergen in the
     Territory more than [***] after the Effective Date, it shall promptly refer
     such complaint to InterMune for handling.

          (B) To enable InterMune to satisfy its reporting obligations to the
     Regulatory Authorities having jurisdiction in the Territory, Amgen shall
     require each of its Other Licensees to disclose to Amgen and to allow Amgen
     to disclose to InterMune all information relating to adverse events
     encountered by or on behalf of such Other Licensee in connection with any
     Licensed Products.

          (C) InterMune shall reasonably promptly disclose to Amgen, and permit
     Amgen to disclose to Other Licensees all information relating to adverse
     events encountered by or on behalf of InterMune in connection with the
     Licensed Products.

     4.5 COMMUNICATIONS. Except as may be required by law, requested by
InterMune or any Regulatory Authority having jurisdiction in the Territory, and
except as to issues regarding the manufacture of Licensed Products in the
Territory, Amgen shall not communicate regarding any Licensed Product with any
Regulatory Authority having jurisdiction in the Territory unless requested to do
so by InterMune. Amgen will keep InterMune informed of any such required
communications. Amgen will reasonably cooperate with InterMune to make any
communications regarding manufacture of any Licensed Product by Amgen for supply
to InterMune, with the Regulatory Authorities having jurisdiction in the
Territory; provided that Amgen shall have no obligation, [***] to provide
InterMune with any information regarding [***] (including, without limitation,
[***]). For so long as Amgen is supplying InterMune with Infergen hereunder,
Amgen shall have the right to be present at all meetings and telephone calls
with the Regulatory Authorities having jurisdiction in the Territory at which
[***] is to be discussed.

     4.6 APPLICATIONS FOR REGULATORY EXCLUSIVITY. The Parties recognize that
exclusivity rights granted or provided for under regulatory laws of the
countries of the Territory may be commercially significant to Licensed Products.
To the extent permitted by law, InterMune shall have the exclusive right (even
as to Amgen) to file for, request and maintain any regulatory exclusivity rights
for Licensed Products in the Territory, including without limitation regulatory
exclusivity rights based upon an orphan drug designation of a Licensed Product,
and to conduct and prosecute any proceedings or actions to enforce such
regulatory exclusivity rights, and Amgen shall reasonably cooperate with
InterMune in such actions at InterMune's expense.

     4.7 RECALLS AND VOLUNTARY WITHDRAWALS. The Parties shall exchange their
internal standard operating procedures as to product recalls ("SOPs") reasonably
promptly after the Effective Date. If either Party becomes aware of information
about quantities of Licensed Product supplied by Amgen to InterMune indicating
that such quantities of Licensed Product may not conform to the specifications
for such product then in effect pursuant to the Supply Terms, or that there are
potential adulteration, misbranding and/or other issues regarding safety or
effectiveness, it shall promptly so notify the other Party. The Parties will
meet to discuss such circumstances and to consider appropriate courses of
action, which courses of action with respect to each recall shall be consistent
with the internal SOP of the Party having the right to control such recall
pursuant to this Section 4.7. InterMune shall have the right to control, and
shall bear all costs associated with, a recall of the Licensed Product in the
Territory. If [***] shall [***] not to [***] in the [***] shall have the [***]
at [***] As between Amgen and InterMune, Amgen shall control, at its sole
expense, all recalls of Licensed Product outside the Territory. InterMune and
Amgen shall each maintain complete and accurate records of any recall it has the
right to control pursuant to this Section 4.7 for such periods as may be
required by legal requirements, but in any event for no less than three (3)
years.

     4.8 SAFETY AND CLINICAL DATABASE. Within sixty (60) days after the
Effective Date, Amgen shall transfer to InterMune Amgen's safety and clinical
database relating to Infergen and existing on the Effective Date.

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<PAGE>

                                    ARTICLE 5
                                COMMERCIALIZATION

     5.1 PRICING. InterMune shall determine in its sole discretion the pricing,
discounting policy and other commercial terms relating to Licensed Products in
the Territory.

     5.2 DILIGENCE.

          (A) InterMune shall use its Commercially Reasonable Efforts to
     Commercialize Infergen in the Territory during the Term.

          (B) Beginning promptly after the receipt of Regulatory Approval for a
     first PEG-Infergen Product in each country of the Territory, InterMune
     shall use its Commercially Reasonable Efforts to Commercialize a
     PEG-Infergen Product in such country.

     5.3 REPORTS. InterMune shall provide Amgen with detailed written [***]
reports concerning its efforts regarding development and Commercialization of
the Licensed Products in the Territory. The information contained in such
reports shall be deemed to be InterMune's Confidential Information. InterMune
shall, at Amgen's request, promptly meet with Amgen no less frequently than
[***] to discuss the [***] reports and InterMune's progress regarding
development and Commercialization of the Licensed Products in the Territory.

     5.4 AMGEN TRANSITION ASSISTANCE.

          (A) During the period commencing on the Effective Date and ending
     [***] Amgen shall provide (i) reasonable assistance to InterMune in
     notifying Amgen's distributors and customers as of the Effective Date of
     InterMune's license to Commercialize and further develop the Licensed
     Product; and (ii) [***] on InterMune's behalf.

          (B) Until [***] after the Effective Date, Amgen shall provide
     reasonable assistance to InterMune to enable it to assume its
     responsibilities pursuant to Section 5.6.

          (C) For a period of up to [***] after the Effective Date, Amgen shall
     provide InterMune, at mutually agreed times and locations, with reasonable
     access to and assistance from those of Amgen's Infergen marketing
     personnel, as of the Effective Date, selected by Amgen to transition the
     marketing and sales force training knowledge and materials to InterMune.
     Such assistance would include, without limitation, meeting with InterMune's
     marketing and sales personnel to educate them regarding Infergen and the
     existing marketing arrangements that Amgen had in place for Infergen as of
     the Effective Date.

     5.5 CHANGE OF PROMOTIONAL MATERIAL. Promptly after the Effective Date and
subject to applicable regulatory requirements and Regulatory Approvals,
InterMune, at its own expense, shall prepare all advertising and promotional
materials for any Licensed Product to identify InterMune (or its distributors)
as the marketer of the Licensed Product, in such form as InterMune shall
determine. As soon as practicable after the Effective Date, InterMune, at its
own expense, shall make such changes in the package insert, Licensed Product
labeling and packaging as may be required to reflect InterMune as the marketer
of the Licensed Product, including making all required filings in connection
therewith including without limitation filings with the Regulatory Authorities
having jurisdiction in the Territory. Promptly after the Effective Date, Amgen
shall file with Regulatory Authorities in the Territory a notice that InterMune
is the marketer and distributor of the Licensed Product in the United States. To
the extent that Regulatory Authorities in the Territory request additional
information or meetings regarding InterMune's responsibilities as marketer and
distributor of the Licensed Product in the Territory, Amgen and InterMune shall
cooperate with each other, and coordinate a response.

     5.6 MEDICAL AND OTHER INQUIRIES. On the Effective Date, InterMune shall
assume all responsibility for all correspondence and communication with
physicians and other health care professionals and customers in the United
States and any other countries in the Territory where Amgen had this
responsibility relating

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<PAGE>

to the Licensed Product. InterMune shall keep such records and make such reports
as shall be reasonably necessary to document such communications in compliance
with all applicable regulatory requirements. After the Effective Date, Amgen
shall refer all questions relating to the Licensed Product raised by health care
professionals and customers to InterMune for its response.

     5.7 TRADE RETURNS; REIMBURSEMENTS. Amgen shall bear all costs and expenses
related to all returns, charge backs and rebates for units of Licensed Products
sold in the Territory prior to or on the Effective Date. InterMune shall bear
all costs and expenses related to all returns, charge backs and rebates for
units of Licensed Products sold after the Effective Date. [***] shall bear all
costs and expenses related to Medicaid reimbursements for the Licensed Product
[***] [***] shall bear all costs and expenses related to Medicaid reimbursements
for the Licensed Product [***] If Amgen receives any [***] it shall promptly
refer such [***] to InterMune for handling. If InterMune receives any [***]
InterMune shall promptly refer such [***] to Amgen for handling.

     5.8 DISTRIBUTION AGREEMENTS. Amgen has [***] of all outstanding material
contracts, agreements or arrangements between Amgen and any Third Party in the
Territory (including government agencies, health maintenance organizations and
all other buyers of Licensed Product, other than wholesalers) relating to the
sale of the Licensed Product (collectively, "Distribution Agreements"). On the
Effective Date, InterMune shall assume Amgen's obligations under the
Distribution Agreements, to the extent such Distribution Agreements are
assignable by their terms and to the extent (i) pertaining to time periods
subsequent to the Effective Date and (ii) not arising on or before the Effective
Date. To the extent any Distribution Agreement is not freely assignable, Amgen
shall use reasonable efforts to seek the consent of the applicable
Distributor(s) to assign such Distribution Agreement to InterMune and, if and
when so assigned, InterMune shall assume Amgen's obligations under such
Distribution Agreement to the extent (i) pertaining to a time period subsequent
to the date such Distribution Agreement is assigned to InterMune, and (ii) not
arising on or before such date.

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<PAGE>

                                    ARTICLE 6
                                  COMPENSATION

     6.1 LICENSE FEE.

          (A) Prior to the Effective Date InterMune paid Amgen one million
     Dollars ($1,000,000) in consideration of exclusive negotiations that led to
     the execution of this Agreement.

          (B) Within five (5) business days after the Effective Date, InterMune
     shall pay Amgen a license fee of twenty million Dollars ($20,000,000) in
     cash by wire transfer of immediately available funds into an account
     designated by Amgen. This license fee shall be nonrefundable and
     noncreditable against Royalties due Amgen pursuant to Section 6.3 and any
     other fees, milestone payments or other payments due Amgen under this
     Agreement.

     6.2 AMGEN PERFORMANCE MILESTONES.

          (A) Within [***] days after [***] InterMune shall pay Amgen a
     performance milestone payment equal to [***]

          (B) Within [***] days after the time Amgen provides InterMune with
     written notice, in accordance with Section [***] that Amgen has [***] that
     is [***] InterMune shall pay Amgen a performance milestone payment equal to
     [***]

          (C) Within [***] business days after the time Amgen provides InterMune
     with a [***] to do pursuant to [***] InterMune shall pay Amgen a
     performance milestone payment equal to [***]

     6.3 PRODUCT MILESTONES.

          (A) InterMune shall pay to Amgen milestone payments as set forth in
     this Section 6.3(a) within [***] days after the first achievement of the
     corresponding milestone for a PEG-Infergen Product that is pegylated [***]
     (an "Amgen PEG-Infergen Product") that is [***] to be [***]. No milestone
     payment shall be payable more than once, no matter how many times achieved
     by a single [***] or multiple [***] Such milestone payments shall be
     nonrefundable and noncreditable against royalties payable pursuant to
     Sections 6.4 and 6.7, and any other fees, milestone payments or other
     payments due Amgen under this Agreement.

<TABLE>
<CAPTION>
                  MILESTONE PAYMENT
MILESTONE EVENT         AMOUNT
---------------   -----------------
<S>               <C>
1. [***]                [***]
2. [***]                [***]
3. [***]                [***]
4. [***]                [***]
5. [***]                [***]
                        -----
TOTAL                   [***]
</TABLE>
          (B) InterMune shall pay to Amgen milestone payments as set forth in
     this Section 6.3(b) within [***] days after the first achievement of the
     corresponding milestone for an Amgen PEG-Infergen Product [***] No
     milestone payment shall be payable more than once, no matter how many times
     achieved by a single [***] or multiple [***] Such milestone payments shall
     be nonrefundable and

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<PAGE>

     noncreditable against Royalties payable pursuant to Sections 6.4 and 6.7,
     and any other fees, milestone payments or other payments due Amgen under
     this Agreement.

<TABLE>
<CAPTION>
                  MILESTONE PAYMENT
MILESTONE EVENT         AMOUNT
---------------   -----------------
<S>               <C>
1. [***]                [***]
2. [***]                [***]
3. [***]                [***]
4. [***]                [***]
5. [***]                [***]
                        -----
TOTAL                   [***]
</TABLE>

          (C) [***] MILESTONE PAYMENTS. If any Milestone Event [***] to Amgen
     hereunder of any previously listed Milestone Payment described in Sections
     6.3(a) or (b), respectively, with respect to such Licensed Product, then
     [***] all previously listed Milestone Payments described in Sections 6.3(a)
     or (b) with respect to such Licensed Product [***]

     6.4 ROYALTIES. Subject to the other terms and conditions of this Agreement,
InterMune shall pay Amgen a royalty equal to [***] percent [***] (the "Royalty")
of Net Sales of each Licensed Product sold during each calendar quarter by
InterMune and its Affiliates and Sublicensees. For purposes of calculating such
royalty, Net Sales of any Combination Product shall be determined as provided
pursuant to Section 6.6.

     6.5 TERM OF ROYALTIES. Amgen's right to receive Royalties under Section 6.4
shall expire, on a Licensed Product-by-Licensed Product basis, in each country
of the Territory upon the [***]

     6.6 COMBINATION PRODUCTS. Net Sales of any Licensed Product sold by or on
behalf of InterMune, its Affiliates and/or its Sublicensees as part of a product
which consists of the Licensed Product in combination with one or more Active
Components ("Combination Product"), for purposes of determining the Royalty
payable to Amgen under Section 6.4, shall be calculated as follows:

          (A) In the event each of the Active Components and Licensed Product
     are sold separately, the Net Sales for the purpose of determining Royalties
     on sales of the Combination Product shall be calculated by multiplying Net
     Sales of such Combination Product by the fraction A/(A+B) where A is the
     price to Third Parties of the Licensed Product component of the Combination
     Product when sold separately, and B is the price to Third Party end users
     of the Active Component(s) of the Combination Product when sold separately.

          (B) If, on a country-by-country basis, the Active Component(s) in the
     Combination Product are not sold separately in such country, but the
     Licensed Product is sold separately in such country, Net Sales for the
     purpose of determining Royalties of the Combination Product shall be
     calculated by multiplying Net Sales of such Combination Product by the
     fraction A/C where A is the price to Third Party end users of the Licensed
     Product when sold separately, and C is the price to Third Parties of the
     Combination Product. If, on a country-by-country basis, the Licensed
     Product is not sold separately in such country, Net Sales for the purposes
     of determining royalties of the Combination Product shall be D/(D+E), where
     D is the fair market value of the portion of the Combination Product that
     contains the Licensed Product and E is the fair market value of the portion
     of the Combination Product containing the Active Component(s) included in
     such Combination Product, as such fair market values are determined in good
     faith by the Parties.

     6.7 EXISTING LICENSE ROYALTIES.

          (A) Amgen is, as of the Effective Date, a party to the Existing
     License, and pursuant to the Existing License Amgen owes the Existing
     Licensor a royalty of [***] percent [***] on Net Sales of Infergen by Amgen
     and its sublicensees under its licenses pursuant to the Existing License.
     In addition

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<PAGE>

     to Royalties payable by InterMune pursuant to Section 6.4, InterMune shall
     pay to Amgen a royalty equal to [***] percent [***] of Net Sales of
     Infergen sold during each calendar quarter by InterMune and its Affiliates.
     Such obligation to pay Amgen a royalty beyond that due pursuant to Section
     6.4 shall expire upon the expiration or termination of Amgen's obligation
     to pay a royalty for Infergen pursuant to the Existing License in respect
     of Net Sales of Infergen by InterMune and its Affiliates. Without limiting
     Amgen's obligations pursuant to Section 2.6, including its obligations
     thereunder with respect to the Existing License, Amgen shall timely make
     all payments due to the Existing Licensor under the Existing License in
     respect of InterMune's and its Affiliates' Net Sales of Infergen. Amgen
     shall promptly notify InterMune of any notice of default or breach that it
     receives in relation to the Existing License. If the Existing License
     terminates or expires in such a way that Amgen does not have a right to
     sublicense under any intellectual property licensed under the Existing
     License that relates to Infergen, Amgen shall promptly notify InterMune.

     6.8 ROYALTY PAYMENTS AND REPORTS. All Royalties payable to Amgen under this
Agreement (including Royalties payable to Amgen under Section 6.6(a) in relation
to the Existing License) shall be paid in Dollars within [***] days of the end
of each calendar quarter except as otherwise specifically provided herein. Each
payment of Royalties owing to Amgen shall be accompanied by a statement [***] in
performing such computations and in accordance with GAAP, on a
country-by-country basis, of the amount of gross sales of Licensed Products and
Combination Products, an itemized calculation of Net Sales of each Licensed
Product and Combination Product during such quarter, showing any deductions
provided for in Section 1.30 during such quarter, the amount of aggregate
worldwide gross sales of Licensed Product and Combination Product and Net Sales
during such quarter and on a cumulative basis for the current year and the
amount of Royalty due on Net Sales during such quarter.

     6.9 TAXES. Amgen shall be responsible for any and all taxes levied on
account of amounts it receives under this Agreement. If InterMune is required by
law, rule or regulation to withhold taxes from such types of payments due Amgen
hereunder, InterMune will (i) deduct those taxes from the remittable amount,
(ii) pay the taxes to the proper taxing authority, and (iii) send original
copies of all official receipts evidencing such tax obligation together with
written evidence of payment to Amgen within [***] following that payment. In the
event of such withholding, the Parties agree to confer regarding other
reasonable, lawful measures to minimize such withholding.

     6.10 BLOCKED CURRENCY. In any country of the Territory where conversion of
the local currency is blocked and such currency cannot be removed from the
country, InterMune shall make payments of any Royalties due hereunder in respect
of Net Sales of Licensed Products in such country in local currency by
depositing such amount to an interest-bearing account in the name of Amgen, in a
bank within such country designated by Amgen.

     6.11 FOREIGN EXCHANGE. For the purpose of computing the Net Sales for
Licensed Products sold in a currency other than Dollars, such currency shall be
converted into Dollars at the average rate of exchange for buying funds as
retrieved from the on-line edition of the Wall Street Journal (at
http://www.interactive.wsj.com) for the calendar quarter in which such Net Sales
were made.

     6.12 PATENT AND TRADEMARK EXPENSES. InterMune shall reimburse Amgen's costs
(as documented by written invoices for legal services and receipts for filing
and maintenance fees paid) to [***] provided that Amgen shall obtain advance
written consent from InterMune (such consent not to be unreasonably withheld) in
the event any such expenses [***] In the event InterMune does not consent to
reimburse Amgen for any aspect related to [***] Amgen shall not be obligated to
continue any of its activities or to incur any further costs or expenses related
to such aspect.

     6.13 LATE PAYMENTS. Any amounts not paid by InterMune when due under this
Agreement shall be subject to interest from and including the date payment is
due through and including the date upon which InterMune has made a wire transfer
of immediately available funds into an account designated by Amgen at a rate
equal to the sum of [***] plus the annual prime rate or successive annual prime
rates of interest

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quoted in the Money Rates section of the on-line edition of the Wall Street
Journal (at http://www.interactive.wsj.com) calculated daily on the basis of a
365-day year.

                                    ARTICLE 7
                             MANUFACTURE AND SUPPLY

     7.1 GENERAL. As of the Effective Date, Amgen has established manufacturing
arrangements for bulk Infergen and finished Infergen. During the Term, Amgen
shall supply to InterMune, and InterMune shall purchase from Amgen, InterMune's
requirements of Licensed Products for Commercialization and any further clinical
development of Infergen in the Territory during the Term, on the Supply Terms
(set forth in Exhibit F). The Parties intend to be bound to a supply
relationship pursuant to the Supply Terms. Each Party hereby agrees that the
Supply Terms are sufficient to govern such relationship and legally binding upon
the Parties.

                                    ARTICLE 8
                              INTELLECTUAL PROPERTY

     8.1 OWNERSHIP OF INVENTIONS. Each Party shall own any inventions made
solely by its employees or agents in their activities hereunder. Inventions
hereunder made jointly by employees or agents of each Party ("Joint Inventions")
shall be owned jointly by the parties. Except to the extent either Party is
restricted by the licenses granted to the other Party and covenants contained
herein, and to the extent permitted by law, each Party shall be entitled to
practice and sublicense Joint Inventions without restriction or an obligation to
account to the other Party. Inventorship shall be determined in accordance with
U.S. patent laws.

     8.2 PROSECUTION OF PATENTS.

          (A) AMGEN PATENTS. [***] at InterMune's expense to the extent provided
     pursuant to Section 6.12 and, to the extent Amgen elects to incur
     additional expense for the further prosecution, defend or maintenance of
     such Amgen Patents, at Amgen's sole expense. [***] in the jurisdictions of
     the Territory. To that end, [***] prior to the date such submission is
     proposed to be made, and will [***] shall provide [***] with a copy of each
     submission to a patent authority of a jurisdiction within the Territory
     regarding any Amgen Patent reasonably promptly after making such filing.
     [***] discretion to abandon or not [***] any claim or patent application
     within the Amgen Patents anywhere in the Territory, then [***] and shall
     provide [***] claim or patent application in the Territory [***] sole
     expense.

          (B) JOINT PATENTS. With respect to Joint Inventions, the parties shall
     select and jointly retain mutually acceptable outside counsel to prosecute
     patent applications claiming such Joint Invention (any such patent
     application and any patents issuing therefrom a "Joint Patent"). Each party
     must consent to any action taken with respect to the Joint Patents (which
     consent will not be withheld if withholding consent will, in the opinion of
     the retained outside counsel, adversely affect the scope or validity of any
     patentable claims) on all such patent applications and patents and all
     correspondence to and from such patent offices, including proposed
     responses, interferences and oppositions. Each Party shall bear its own
     internal costs, and the external costs for outside counsel, filing fees,
     etc. shall be borne equally by the Parties, except as provided in the next
     sentence of this paragraph. Either Party may disclaim its interest in any
     particular Patent covering a Joint Invention, in which case (i) the
     disclaiming Party shall assign its ownership interest in such Patent to the
     other Party for no additional consideration, (ii) the Party which is then
     the sole owner shall be solely responsible for all future costs of such
     Patent, and (iii) the disclaiming Party shall have no further rights under
     such Patent.

     8.3 INFRINGEMENT OF PATENTS AND TRADEMARKS BY THIRD PARTIES.

          (A) [***] the Amgen Trademarks and Amgen Patents against Third Parties
     and to defend the Amgen Trademarks and Amgen Patents against any challenges
     in the Territory. In the event [***] shall

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     reasonably assist and cooperate in any such enforcement or defense. [***]
     all costs and expenses (including attorneys' fees) incurred by [***] after
     the Effective Date to carry out the activities described in the foregoing
     two (2) sentences. Recoveries in any actions under this Section 8.3(a)
     shall go first to reimburse the Parties' costs and expenses (including
     attorneys' fees) for such action and any remainder shall [***]

          (B) [***] does not commence an enforcement and/or defense action
     pursuant to Section 8.3(a) within [***] in writing or infringement of the
     Amgen Patents or Amgen Trademarks in the Territory (or of the filing of a
     declaratory judgement action, in the case of defense actions), [***] shall
     be entitled to bring and prosecute such an action [***]

          (C) JOINT PATENTS. With respect to Third Party Infringement of Joint
     Patents other than that Infringement described in Sections 8.5(b) and
     8.5(c), the Parties shall confer and take such action, and allocate
     expenses and recoveries, in such manner as they shall agree.

     8.4 INFRINGEMENT OF THIRD PARTY RIGHTS.

          (A) AMGEN AS NAMED PARTY. [***] any action naming Amgen [***] and
     claiming the infringement of (i) any Third Party Trademark through the
     development or Commercialization of Licensed Product; or (ii) Third Party
     Patent through the making, using, selling or having sold Licensed Product.
     The Parties shall confer with each other and cooperate during the defense
     of any action in which both Amgen and InterMune are named parties.
     InterMune shall assist and cooperate with Amgen in the defense of any such
     action and if Amgen finds it necessary or desirable to join InterMune as a
     party, InterMune shall execute all papers or perform such other acts as may
     reasonably be required by Amgen. [***] be entitled to [***] and [***] in
     any [***] [***] shall bear all associated costs and expenses (including
     attorneys' fees) incurred after the Effective Date and pay all damages and
     settlement amounts with respect to the Territory; provided, however, that
     [***] shall have no obligation to bear such costs and expenses and pay such
     damages and settlement amounts to the extent attributable to [***] Licensed
     Products.

          (B) INTERMUNE AS NAMED PARTY. InterMune [***] any action which names
     InterMune but does not name Amgen and which claims the infringement of (i)
     any Third Party Trademark through the development or Commercialization of
     Licensed Product; or (ii) Third Party Patent through the using, selling or
     having sold Licensed Product. If necessary and at InterMune's expense,
     Amgen will assist and cooperate with InterMune in any such defense.
     InterMune shall bear all costs and expenses (including attorneys' fees) and
     pay all damages and settlement amounts with respect to the Territory,
     arising out of or in connection with any such action.

          (C) NOTICE. Each Party shall promptly notify the other upon becoming
     aware of (i) any Third Party claim or action against InterMune and/or Amgen
     for infringement of any Third Party Trademark through the development or
     Commercialization of Licensed Product; or Third Party Patent through the
     using, selling or having sold Licensed Product; or (ii) any Third Party
     infringement of the Amgen Trademarks or Amgen Patents.

          (D) SETTLEMENT. Neither Party shall enter into any settlement that
     affects the other Party's rights or interests without such other Party's
     written consent, which consent shall not be unreasonably withheld or
     delayed.

     8.5 PATENT MARKING. Licensed Products marketed and sold by InterMune
hereunder shall be marked with appropriate patent numbers or indicia at Amgen's
request to the extent permitted by law in those countries of the Territory in
which such markings have notice value as against infringers of patents.

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                                    ARTICLE 9
                         REPRESENTATIONS AND WARRANTIES

     9.1 MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party hereby represents and
warrants to the other Party as follows:

          (A) CORPORATE EXISTENCE AND POWER. As of the Effective Date, it is a
     corporation duly organized, validly existing and in good standing under the
     laws of the state of Delaware, and has full corporate power and authority
     and the legal right to own and operate its property and assets and to carry
     on its business as it is now being conducted and as contemplated in this
     Agreement, including, without limitation, the right to grant the licenses
     granted hereunder.

          (B) AUTHORITY AND BINDING AGREEMENT. As of the Effective Date, (a) it
     has the corporate power and authority and the legal right to enter into
     this Agreement and perform its obligations hereunder; (b) it has taken all
     necessary corporate action on its part required to authorize the execution
     and delivery of the Agreement and the performance of its obligations
     hereunder; and (c) the Agreement has been duly executed and delivered on
     behalf of such Party, and constitutes a legal, valid and binding obligation
     of such Party that is enforceable against it in accordance with its terms.

          (C) NO CONFLICT. As of the Effective Date, the execution, delivery and
     performance of this Agreement by such Party does not conflict with, and
     would not result in a breach of any agreement, instrument or understanding,
     oral or written, to which it is a party or by which it may be bound, nor
     violate any material law or regulation of any court, governmental body or
     administrative or other agency having jurisdiction over it.

          (D) VALIDITY. As of the Effective Date, it is aware of no action,
     suit, inquiry or investigation instituted by any Third Party which
     questions or threatens the validity of this Agreement.

     9.2 MUTUAL COVENANTS. Each Party hereby covenants to the other Party as
follows:

          (A) NO MISAPPROPRIATION. It shall not knowingly misappropriate the
     trade secret of a Third Party in its activities to develop or Commercialize
     Licensed Products.

          (B) NO DEBARMENT. In the course of the development and manufacture of
     Licensed Products and during the Term, such Party shall not knowingly use
     and shall not have knowingly used any employee or consultant who is or has
     been debarred by the FDA or Regulatory Authorities, or, to the best of such
     Party's knowledge, is or has been the subject of debarment proceedings by
     the FDA or Regulatory Authorities.

          (C) NO CONFLICT. It will not enter into any agreement with any Third
     Party that is in conflict with this Agreement, and will not take any action
     that would in any way prevent it from assuming its obligations or granting
     the rights granted to the other Party under this Agreement, or that would
     otherwise materially conflict with or adversely affect its obligations or
     assuming the rights granted to the other Party under this Agreement.

     9.3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF INTERMUNE.

          (A) EXPERTISE. In entering into this Agreement, InterMune has [***]

          (B) DILIGENCE. InterMune covenants to use [***]

          (C) COMPLIANCE WITH TRADEMARK SPECIFICATIONS. InterMune covenants to
     maintain such reasonable quality standards as [***] in the use of the Amgen
     Trademarks to maintain the value of the Amgen Trademarks. During the Term,
     InterMune shall provide, at the request of Amgen, representative samples of
     items bearing the Amgen Trademarks (including but not limited to Licensed
     Product brochures, advertising and other promotional literature).

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          (D) COMPLIANCE BY INTERMUNE. InterMune covenants to comply with all
     applicable statutes, regulations and guidance of Regulatory Authorities
     relating to the Commercialization and further development of the Licensed
     Products in each country in the Territory.

     9.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF AMGEN.

          (A) REPRESENTATIONS AND WARRANTIES. Amgen represents and warrants to
     InterMune as follows:

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     [***]

                                   ARTICLE 10
                                 INDEMNIFICATION

     10.1 INDEMNIFICATION BY AMGEN. Amgen hereby agrees to defend, hold harmless
and indemnify (collectively "Indemnify") InterMune and its Affiliates, agents,
directors, officers and employees (the "InterMune Indemnitees") from and against
any and all Losses arising out of (i) any Third Party claims resulting directly
or indirectly out of any of Amgen's representations and warranties set forth in
this Agreement being untrue in any material respect when made or any material
breach or material default by Amgen of [***] To be eligible to be so
Indemnified, the InterMune Indemnitees shall provide Amgen with prompt notice of
any claim giving rise to the indemnification obligation pursuant to this Section
10.1 and the exclusive ability to defend (with the reasonable cooperation of
InterMune Indemnitees) and subject to InterMune's right to participate in and
have counsel selected by it participate, at InterMune's expense, in any action
for which InterMune seeks to be Indemnified by Amgen). InterMune shall not
settle any claim for the Loss associated with which any InterMune Indemnitee
seeks to be Indemnified by Amgen, without Amgen's prior written consent,
provided that the Indemnitor shall be relieved of its obligations only if the
failure by the Indemnitee to deliver prompt notice shall have been prejudicial
to its ability to defend such action. Amgen's obligation to Indemnify the
InterMune Indemnitees pursuant to this Section 10.1 shall not apply to the
extent of any Losses (i) that arise from the negligence or intentional
misconduct of any InterMune Indemnitee; (ii) that arise from InterMune's breach
of this Agreement; or (iii) for which InterMune is obligated to Indemnify the
Amgen Indemnitees pursuant to Section 10.2 of this Agreement [***]

     10.2 INDEMNIFICATION BY INTERMUNE. InterMune hereby agrees to Indemnify
Amgen and its Affiliates, agents, directors, officers and employees (the "Amgen
Indemnitees") from and against any and all Losses arising from Third Party
claims resulting directly or indirectly from (i) any of InterMune's
representations and warranties set forth in this Agreement (including without
limitation the Supply Terms) being untrue in any material respect when made or
any material breach or material default by InterMune of [***]; or (ii) the
making, having made, using, selling, having sold, offering for sale, or resale
and/or otherwise distributing of Licensed Products by, on behalf of, or under
the authority of InterMune, its Affiliates or any of its Sublicensees. Without
limiting the foregoing, InterMune agrees to Indemnify the Amgen Indemnitees from
any Losses arising from, relating to, or based upon any claim by a Third Party
that a Licensed Product was or is [***] or a Licensed Product caused any death
or personal injury of any kind, including but not limited to any death or
personal injury occurring during the conduct of any clinical trial by, on behalf
of, or under the authority of InterMune, its Affiliates or Sublicensees. To be
eligible to be Indemnified as described above in this Section 10.2, The Amgen
Indemnitees shall provide InterMune with prompt notice of any claim giving rise
to the indemnification obligation pursuant to this Section 10.2 and the
exclusive ability to defend (with the reasonable cooperation of Amgen
Indemnitees and subject to Amgen's right to participate in and have counsel
selected by it participate, at Amgen's expense, in any action for which Amgen
seeks to be Indemnified by InterMune). Amgen shall not settle any claim for the
Loss associated with which any Amgen Indemnitee seeks to be Indemnified by
InterMune, without InterMune's prior written consent, provided that InterMune
shall be relieved of its obligations only if the failure by the Amgen Indemnitee
to deliver prompt notice shall have been prejudicial to its ability to defend
such action. InterMune's obligation to Indemnify the Amgen Indemnitees pursuant
to this Section 10.2 shall not apply to the extent of any Losses (i) that arise
from the negligence or intentional misconduct of any Amgen Indemnitee [***],
(ii) for which Amgen is obligated to Indemnify the InterMune Indemnitees
pursuant to Section 10.1 of this Agreement or the Supply Terms, or (iii) that
arise from any material breach by Amgen of this Agreement [***]

     10.3 INSURANCE. Within thirty (30) days of the Effective Date, each Party
shall at its own expense procure and maintain during the Term, insurance
policy/policies, including product liability insurance,

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adequate to cover its obligations hereunder and which are consistent with normal
business practices of prudent companies similarly situated. Amgen may
self-insure and InterMune may, with the Amgen's prior written consent,
self-insure all or part of any such obligation consistent with pharmaceutical
industry practices. Each insurance policy required by, and procured under, this
Section 10.3 by InterMune shall name Amgen as an additional insured. Such
insurance shall not be construed to create a limit of the insuring Party's
liability with respect to its indemnification obligations under this Article 10.
InterMune shall provide Amgen with written evidence of such insurance upon
request. InterMune shall provide Amgen with written notice at least thirty (30)
days prior to the cancellation, non-renewal or material change in such insurance
or self-insurance which materially adversely affects the rights of Amgen
hereunder.

     10.4 PRE-EFFECTIVE DATE LOSSES. In connection with this Agreement,
InterMune is not assuming or liable for any Losses resulting from or arising in
connection with the use, marketing, sale, manufacture, distribution or promotion
of any Licensed Product on or prior to the Effective Date. In addition,
InterMune shall not assume or be liable for any Losses whatsoever related to
acts or omissions relating to the Licensed Product occurring prior to the
Effective Date.

     10.5 LIMITATION OF LIABILITY. NEITHER PARTY NOR ITS RESPECTIVE AFFILIATES
AND PERMITTED SUBLICENSEES SHALL BE LIABLE FOR SPECIAL, EXEMPLARY, CONSEQUENTIAL
OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR
OTHERWISE INCURRED BY THE OTHER PARTY IN CONNECTION WITH THIS AGREEMENT,
INCLUDING BUT NOT LIMITED TO DAMAGES MEASURING LOST PROFITS OR BUSINESS
OPPORTUNITIES. NOTWITHSTANDING THE FOREGOING, AMOUNTS PAID BY A PARTY TO A THIRD
PARTY AS SPECIAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN
CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE SHALL BE REIMBURSED SUCH
PARTY BY THE OTHER PARTY TO THE EXTENT SUCH OTHER PARTY IS REQUIRED TO INDEMNIFY
SUCH FIRST PARTY PURSUANT TO THE INDEMNIFICATIONS OF SECTION 10.2 OR 10.1.

                                   ARTICLE 11
                      RECORDS; ROYALTY AUDIT; PUBLICATIONS

     11.1 RECORDS; ROYALTY AUDIT. InterMune shall keep or cause to be kept such
records as are required to determine, in a manner consistent with GAAP, the
accuracy of calculations of all sums or credits due under this Agreement. Such
records shall be retained for no less than a [***] period following the year in
which any payments were made hereunder. Once per calendar year, Amgen shall have
the option to engage, at its own expense, an independent certified public
accountant appointed by Amgen and reasonably acceptable to InterMune, to
examine, in confidence, the records of InterMune as may be necessary to
determine, with respect to any calendar year, the correctness or completeness of
any report or payment required to be made under this Agreement. The report of
such accountant shall be limited to a certificate verifying any report made or
payment submitted by InterMune during such period but may include, in the event
the accountant shall be unable to verify the correctness of any such payment,
information relating to why such payment is unverifiable. All information
contained in any such certificate shall be deemed Confidential Information
hereunder. If any audit performed under this Section 11.1 discloses a variance
of more than [***] from the amount of the original report, Royalty or payment
calculation, InterMune shall bear the full cost of the performance of such
audit.

     11.2 PUBLICATIONS" Prior to oral or written presentation or submission for
publication of any data or information relating to Licensed Products, each Party
agrees to provide the other Party the opportunity to review any proposed
presentations or publication at least [***] to their intended submission for
publication for its Confidential Information and each Party shall remove the
Confidential Information of the other Party from any proposed publication or
presentation upon request by such other Party. Amgen will [***] permission from
each [***] relating to Infergen, and shall be [***] to review InterMune's
publications relating

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to Infergen. Any such publications that Amgen discloses to InterMune shall be
treated as Amgen Confidential Information hereunder, and Amgen shall only
disclose any such publications of InterMune's to Other Licensees that agree to
be bound by confidentiality and non-use obligations commensurate with those
contained herein.

                                   ARTICLE 12
                                 CONFIDENTIALITY

     12.1 TREATMENT OF CONFIDENTIAL INFORMATION. The Parties agree that during
the Term, and for a period of five (5) years after this Agreement expires or
terminates, a Party receiving Confidential Information of the other Party shall
(i) maintain in confidence such Confidential Information to the same extent such
Party maintains its own proprietary industrial information of similar kind and
value (but at a minimum each Party shall use commercially reasonable efforts to
maintain Confidential Information in confidence); (ii) not disclose such
Confidential Information to any Third Party without prior written consent of the
disclosing Party, except for disclosures to its licensees, sublicensees and
commercial partners for Licensed Products who agree to be bound by obligations
of non-disclosure and non-use at least as stringent as those contained in this
Article 12; and (iii) not use such Confidential Information for any purpose
except those purposes permitted by this Agreement Amgen shall not knowingly
disclose to InterMune any Third Party information or Know-How that Amgen does
not have the legal right to disclose to InterMune and/or has a contractual
obligation not to disclose to InterMune.

     12.2 AUTHORIZED DISCLOSURE. Notwithstanding any other provision of this
Agreement, each Party may disclose Confidential Information of the other Party:

          (A) to the extent and to the persons and entities as required by an
     applicable law, rule, regulation, legal process, court order or the rules
     of the National Association of Securities Dealers or of a Regulatory
     Authority; or

          (B) as necessary to file or prosecute those patent applications for
     which either Party has the right to assume prosecution or maintenance,
     pursuant to Section 8.2(b) of this Agreement (in the case of Amgen's
     Confidential Information), prosecute or defend litigation or otherwise
     establish rights or enforce obligations under this Agreement, but only to
     the extent that any such disclosure is necessary.

provided, however, that the Party required or intending to disclose the other
Party's Confidential Information under Sections 11.2(a) or (b) shall first have
given prompt notice to such other Party to enable it to seek any available
exemptions from or limitations on such disclosure requirement and shall
reasonably cooperate in such efforts by the other Party.

     12.3 PUBLICITY; TERMS OF AGREEMENT. The Parties agree that the existence of
and the material terms of this Agreement shall be considered Confidential
Information of both Parties, subject to the special authorized disclosure
provisions set forth below in this Section 12.3 (in lieu of the authorized
disclosure provisions set forth in Section 12.2, to the extent of any conflict)
and without limiting the generality of the definition of Confidential
Information set forth in Section 1.12. The Parties will mutually agree the text
of a press release announcing the execution of this Agreement. Thereafter, if
either Party desires to make a public announcement concerning this Agreement or
the terms hereof, such Party shall give reasonable prior advance notice of the
proposed text of such announcement to the other Party for its prior review and
approval, such approval not to be unreasonably withheld. A Party shall not be
required to seek the permission of the other Party to repeat any information as
to the terms of this Agreement that have already been publicly disclosed by such
Party in accordance with the foregoing or by the other Party. Either Party may
disclose the terms of this Agreement to potential investors who agree to be
bound by obligations of non-disclosure and non-use at least as stringent as
those contained in this Article 12. The Parties acknowledge that Amgen and/or
InterMune may be obligated to file a copy of this Agreement with the U.S.
Securities and Exchange Commission with its next quarterly report on Form 10-Q,
annual report on Form 10-K or current report on Form 8-K or with any
registration statement filed with the U.S. Securities

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and Exchange Commission (the "SEC") pursuant to the Securities Act of 1933, as
amended and each such Party shall be entitled to make such filing, provided that
it requests confidential treatment of the more sensitive terms hereof to the
extent such confidential treatment reasonably available to the filing Party
under the circumstances then prevailing. In the event of any such filing, the
filing Party will provide the non-filing Party with an advance copy of the
Agreement marked to show provisions for which the filing Party intends to seek
confidential treatment and shall reasonably consider the non-filings Party's
timely comments thereon.

                                   ARTICLE 13
                              TERM AND TERMINATION

     13.1 TERM. This Agreement shall become effective on the Effective Date and
shall remain in effect, unless earlier terminated pursuant to this Article 13,
until the expiration of the later to expire of the last Valid Claim within the
Amgen Patents claiming the use or sale of Licensed Product in the Territory.

     13.2 DISCONTINUATION OF COMMERCIALIZATION OR FURTHER DEVELOPMENT. In the
event InterMune shall at any time elect to discontinue all Commercialization and
development activities relating to Licensed Products, InterMune shall notify
Amgen in writing of such election and upon Amgen's receipt of such notification,
this Agreement shall terminate and all licenses under the Amgen Technology
granted to InterMune hereunder shall revert to Amgen.

     13.3 TERMINATION FOR DEFAULT.

          (A) INTERMUNE. Upon any Default by InterMune under this Agreement
     Amgen may notify InterMune of such Default and, in the event such Default
     shall be a payment Default, require that InterMune cure such Default within
     [***] days of Amgen's notice, or in the event such Default shall be a
     Default other than a payment Default, require that InterMune cure such
     Default within [***] days of Amgen's notice, or, if such Default (other
     than a payment Default) cannot reasonably be cured within such time period,
     present a reasonably achievable plan to cure such Default as promptly as is
     reasonably practicable under the circumstances. In the event InterMune
     shall not have cured the Default at the end of the applicable grace period,
     Amgen may terminate this Agreement, and all licenses and assignments
     granted hereunder to InterMune, its Affiliates and Sublicensees, shall
     revert to Amgen. Upon termination of this Agreement pursuant to this
     Section 13.3(a), InterMune shall immediately cease all development and
     Commercialization of the Licensed Products, return to Amgen all physical
     manifestations of the Amgen Technology, and promptly take all actions
     reasonably necessary to effect the transfer to Amgen of all Regulatory
     Approvals for Infergen in the Territory (including without limitation by
     making such filings as may be required with Regulatory Authorities and
     other governmental authorities of the Territory that may be necessary to
     effect such transfer).

          (B) AMGEN. Upon any Default by Amgen under this Agreement, InterMune
     may notify Amgen in writing of such Default and require that Amgen cure
     such Default within [***] days, or, if such Default cannot reasonably be
     cured within such time period, present a reasonably achievable plan to cure
     such Default as promptly as is reasonably practicable under the
     circumstances. In the event Amgen shall not have cured the Default at the
     end of the [***] grace period, InterMune may [***] or (ii) terminate this
     Agreement effective upon a second written notice to Amgen. If Amgen fails
     to cure a Default as described in clause (i) of the foregoing sentence
     within [***] after such written notice, then any [***] and InterMune shall
     be relieved of its obligations pursuant to [***] but the other provisions
     of this Agreement (including without limitation Section 6.4) shall remain
     in full force and effect.

     13.4 LICENSES UPON EXPIRATION. InterMune's licenses pursuant to Sections
2.2, 2.3 and 2.4 shall, upon expiration of this Agreement as provided in Section
13.1 shall automatically convert to being irrevocable and fully paid. Sections
3.1, 3.6, 4.1, 4.2, 4.3, 4.5, 4.6, and 4.8 shall survive expiration of this
Agreement.

                                             ***Confidential Treatment Requested

                                       23

<PAGE>

     13.5 SURVIVAL. The following provisions shall survive any expiration or
termination of this Agreement for the period of time specified: Articles 10, 11,
12, 13, 14 and 15 and Sections 2.1, 4.4, 4.7, 8.1, 8.2(b), 8.3 and 8.4 (but only
with respect to infringement during the Term), Termination of this Agreement
shall not relieve the Parties of any liability which accrued hereunder prior to
the effective date of such termination nor preclude either Party from pursuing
all rights and remedies it may have hereunder or at law or in equity with
respect to any breach of this Agreement nor prejudice either Party's right to
obtain performance of any obligation. The remedies provided in this Article 13
are not exclusive of any other remedies a Party may have in law or equity,
subject to the Section 13.6 as it applies to the limited category of Defaults
described therein.

     13.6 DETERMINATION OF PEG DILIGENCE. If at any time following the Planning
Period Date Amgen believes that InterMune is not meeting its diligence
obligations pursuant to Sections 3.3 or 5.2(b), then Amgen may so notify
InterMune in writing and the Parties will meet to discuss the situation in good
faith. If after such discussions, Amgen continues to believe that InterMune has
not met its diligence obligations pursuant to such Sections, then Amgen may
[***] pursuant to [***] solely to the extent pertaining to [***] and Amgen shall
be entitled to [***] in the Territory [***] provided, however, that if InterMune
disagrees as to whether it has met such diligence obligations, then the matter
shall be resolved in accordance with Article 14, and [***] hereunder shall [***]
until such dispute is resolved (if it is resolved in favor of Amgen).
Notwithstanding anything to the contrary express or implied in this Agreement,
the remedy provided pursuant to this Section 13.6 shall be Amgen's exclusive
remedy (including without limitation to the exclusion of any remedies provided
pursuant to Section 13.2) for InterMune Defaults relating to InterMune's
diligence obligations with respect to a PEG-Infergen Product pursuant to
Sections 3.3 and 5.2(b).

                                   ARTICLE 14
                               DISPUTE RESOLUTION

     14.1 DISPUTES. The Parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement which relate to
either Party's rights and/or obligations hereunder. It is the objective of the
Parties to establish procedures to facilitate the resolution of disputes arising
from, concerning or in any way relating to this Agreement in an expedient manner
by mutual cooperation and without resort to litigation. To accomplish this
objective, the Parties agree to follow the procedures set forth in this Section
14.1 if and when a dispute arises under this Agreement. The Parties shall
undertake good faith efforts to resolve any such dispute in good faith. In the
event the Parties shall be unable to resolve such dispute, either Party may, by
written notice to the other Party, have any dispute between the Parties
remaining unresolved after thirty (30) days referred to their respective
executive officers designated below or their designees or successors for
attempted resolution by good faith negotiations within thirty (30) days after
such notice is received. Such designated officers are as follows:

                   FOR INTERMUNE: INTERMUNE'S GENERAL COUNSEL

                       FOR AMGEN: AMGEN'S GENERAL COUNSEL

If the designated officers are not able to resolve such dispute within such
thirty (30) day period, either Party may at any time thereafter pursue any legal
or equitable remedy available to it. Notwithstanding the above, either Party
shall be entitled at all times and without delay to seek equitable relief.

     14.2 GOVERNING LAW; JUDICIAL RESOLUTION. Resolution of all disputes arising
out of or related to this Agreement or the performance, enforcement, breach or
termination of this Agreement and any remedies relating thereto, shall be
governed by and construed under the substantive laws of the State of California,
as applied to agreements executed and performed entirely in the State of
California by residents of the State of California, without regard to conflicts
of law rules. Any dispute arising under this Agreement shall be submitted to a
state or federal court of competent jurisdiction in California; provided
however, that if

                                             ***Confidential Treatment Requested

                                       24

<PAGE>

Amgen is the initiating Party in a dispute, such suit shall be brought in a
state or federal court which has jurisdiction over Burlingame, California; and
if InterMune is the initiating Party in a dispute, such suit shall be brought in
a state or federal court which has jurisdiction over Thousand Oaks, California.

     14.3 PATENT AND TRADEMARK DISPUTE RESOLUTION. Any dispute, controversy or
claim relating to the scope, validity, enforceability or infringement of any
patent rights claiming the use or sale of any Licensed Product or of any
Trademark rights relating to Licensed Product shall be submitted to a court of
competent jurisdiction in the Territory in which such patent or trademark rights
were granted or arose. Notwithstanding the foregoing, any dispute, controversy
or claim relating to the scope, validity, enforceability or infringement of any
United States patent rights covering the use or sale of any Licensed Product
shall be submitted to a court of competent jurisdiction in the State of
California. To the extent permitted by law, InterMune agrees that it shall not
dispute the scope, validity, enforceability or infringement of any patent right
outside the United States which claims the use or sale of any Licensed Product.

                                   ARTICLE 15
                                  MISCELLANEOUS

     15.1 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including all Exhibits),
the Confidential Disclosure Agreement dated March 9, 2001, and the Exclusive
Dealings Binder dated April 12, 2001 set forth the complete, final and exclusive
agreement and all the covenants, promises, agreements, warranties,
representations, conditions and understandings between the Parties hereto and
supersedes and terminates all prior agreements and understandings between the
Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as are set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the Parties unless reduced to writing and signed by an authorized officer
of each Party.

     15.2 FORCE MAJEURE. Both Parties shall be excused from the performance of
their obligations under this Agreement to the extent that such performance is
prevented by Force Majeure and the nonperforming Party promptly provides notice
of the prevention to the other Party. Such excuse shall be continued so long as
the condition constituting Force Majeure continues and the nonperforming Party
uses reasonable efforts to remove the condition.

     15.3 NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing, shall specifically refer to this Agreement and
shall be deemed to have been sufficiently given for all purposes if mailed by
first class certified or registered mail, postage prepaid, express delivery
service or

                                       25

<PAGE>

personally delivered, or if sent by facsimile, electronic transmission
confirmed. Unless otherwise specified in writing, the mailing addresses of the
Parties shall be as described below.

     For InterMune:    InterMune, Inc.
                       1710 Gilbreth Road, Suite 301
                       Burlingame, CA 94010-1317
                       Facsimile: (650) 259-0774
                       Attn: General Counsel

     With a Copy to:   Cooley Godward LLP
                       Five Palo Alto Square
                       3000 El Camino Real
                       Palo Alto, CA 94306
                       Fax: (650) 849-7400
                       Attention: Robert L. Jones, Esq.

     For Amgen:        Amgen, Inc.
                       One Amgen Center Drive
                       Thousand Oaks, CA 91320-1799
                       Fax: (805) 499-8011
                       Attention: Vice President, Licensing
                       With a Copy to: Corporate Secretary

     15.4 MAINTENANCE OF RECORDS. Each Party shall keep and maintain all records
required by law or regulation with respect to Licensed Products and shall make
copies of such records available to the other Party upon request.

     15.5 NO STRICT CONSTRUCTION. This Agreement has been prepared jointly and
shall not be strictly construed against either Party.

     15.6 ASSIGNMENT. Neither Party may assign or transfer this Agreement or any
rights or obligations hereunder without the prior written consent of the other,
except that a Party may make such an assignment without the other Party's
consent to Affiliates or to an entity that acquires all or substantially all of
the business of such Party, whether in a merger, consolidation, reorganization,
acquisition, sale or otherwise. This Agreement shall be binding on the
successors and assigns of the assigning Party, and the name of a Party appearing
herein shall be deemed to include the name(s) of such Party's successors and
permitted assigns to the extent necessary to carry out the intent of this
Agreement. Any assignment or attempted assignment by either Party in violation
of the terms of this Section 15.6 shall be null and void and of no legal effect.

     15.7 PERFORMANCE BY AFFILIATES. Each of Amgen and InterMune acknowledge
that obligations under this Agreement may be performed by Affiliates of Amgen
and InterMune. Each of Amgen and InterMune guarantee performance of this
Agreement by its Affiliates, notwithstanding any assignment to Affiliates in
accordance with Section 15.6 of this Agreement. Wherever in this Agreement the
Parties delegate responsibility to Affiliates or local operating entities, the
Parties agree that such entities may not make decisions inconsistent with this
Agreement, amend the terms of this Agreement or act contrary to its terms in any
way.

     15.8 COUNTERPARTS. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     15.9 SEVERABILITY. If any one or more of the provisions of this Agreement
is held to be invalid or unenforceable by any court of competent jurisdiction
from which no appeal can be or is taken, the provision shall be considered
severed from this Agreement and shall not serve to invalidate any remaining
provisions hereof. The Parties shall make a good faith effort to replace any
invalid or unenforceable

                                       26

<PAGE>

provision with a valid and enforceable one such that the objectives contemplated
by the Parties when entering this Agreement may be realized.

     15.10 HEADINGS. The headings for each article and section in this Agreement
have been inserted for convenience of reference only and are not intended to
limit or expand on the meaning of the language contained in the particular
article or section.

     15.11 FURTHER ACTIONS. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of the
Agreement.

     15.12 INDEPENDENT CONTRACTORS. The relationship between InterMune and Amgen
created by this Agreement is one of independent contractors and neither Party
shall have the power or authority to bind or obligate the other except as
expressly set forth in this Agreement.

     15.13 USE OF NAME. No right, express or implied, is granted to either Party
by this Agreement to use in any manner any Trademark (except the Amgen
Trademarks as set forth in this Agreement) of the other Party, including the
names "Amgen" and "InterMune", without the prior written consent of the owning
Party, subject to Section 12.3.

     15.14 NO WAIVER. Any delay in enforcing a Party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of such Party's rights to the future enforcement of its
rights under this Agreement, except with respect to an express written and
signed waiver relating to a particular matter for a particular period of time.

     IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their duly authorized representatives as of the Effective Date.

AMGEN INC.                              INTERMUNE, INC.

By: /s/ SCOTT J. FORAKER                By: /s/ JOHN J. WULF
    ---------------------------------       ------------------------------------
Print Name: Scott J. Foraker            Print Name: John J. Wulf
Title: Vice President, Licensing        Title: Senior Vice President of
                                               Corporate Development

                                       27

<PAGE>

                                    EXHIBIT A
                                AMGEN TRADEMARKS

[***]

INFERGEN

3) Country:       US
   Appln. Date:   8/13/93
   Appln. No.:    74/424795
   Reg. Date:     11/7/95
   Reg. No.:      1933729
   Goods:         Pharmaceutical preparation namely interferon for use in the
                  treatment of viral, neoplastic and autoimmune diseases.

4) Country:       Canada
   Appln. Date:   9/1/93
   Appln. No.:    736130
   Reg. Date:     7/21/95

                                             ***Confidential Treatment Requested

<PAGE>

                                    EXHIBIT B
                     AMGEN PATENTS AS OF THE EFFECTIVE DATE

                                      [***]

                                      [***]

                                             ***Confidential Treatment Requested

<PAGE>

                                    EXHIBIT C
                            PROTEIN SEQUENCE OF [***]

                                      [***]

                                             ***Confidential Treatment Requested

<PAGE>

                                    EXHIBIT D
           REGULATORY APPROVALS FOR INFERGEN AS OF THE EFFECTIVE DATE

UNITED STATES

BLA for HCV treatment--October 6, 1997
Supplement for SingleJect prefilled syringe--January 6, 1999
Supplement for 48-week retreatment--December 22, 1999
Supplement for geriatric language--August 10, 2000

CANADA

BLA for HCV treatment--March 9, 1999

<PAGE>

                                    EXHIBIT E
                             ONGOING CLINICAL TRIALS

                                  [***]   [***]
                                  [***]   [***]
                                  [***]   [***]

                                             ***Confidential Treatment Requested

<PAGE>

                                    EXHIBIT F
                                  SUPPLY TERMS

          -    SUPPLY OF INFERGEN.

     Amgen shall supply InterMune with InterMune's requirements of Infergen for
development and commercialization in the Licensed Territory in accordance with
the terms of this Exhibit F (the "Supply Terms").

          -    TERM.

     The term of Amgen's supply obligation hereunder shall expire on the earlier
of: (1) the date on which InterMune receives Regulatory Approval to market
Infergen obtained pursuant to a supply agreement [***] Third Party for supply of
Infergen in the Licensed Territory; (2) the date on which InterMune receives
Regulatory Approval to market Infergen manufactured by InterMune or a Third
Party of its choice [***] the effective date of termination of the License and
Commercialization Agreement [***] January 1, 2015.

               -    EFFECT OF EXPIRATION OR TERMINATION. [***] in addition to
                    any all other accrued but unpaid payments due Amgen from
                    InterMune, and Amgen will be obligated to deliver to
                    InterMune all such firm orders paid for.

          -    TRANSFER OF MANUFACTURING RIGHTS.

               -    AMGEN'S THIRD PARTY CONTRACTOR. Amgen may assign or
                    sublicense any of its rights or obligations under this
                    Exhibit F to a Third Party contractor, provided that if such
                    assignment or sublicense is made to a Third Party other than
                    [***], Amgen shall first obtain InterMune's prior written
                    consent (not to be unreasonably withheld). Amgen shall
                    continue to supply Infergen to InterMune in accordance with
                    the Supply Terms until such time as InterMune receives all
                    necessary Regulatory Approvals in the Licensed Territory to
                    market Infergen manufactured by such Third Party contractor.
                    [***] associated with all work necessary to obtain
                    Regulatory Approval for InterMune to market Infergen
                    manufactured by [***] as applicable.

               -    INTERMUNE AND ITS THIRD PARTY CONTRACTOR. [***] InterMune
                    will be responsible for paying all costs associated with all
                    work necessary for InterMune to obtain Regulatory Approval
                    to market Infergen manufactured by InterMune.

          -    FORM OF SUPPLY.

Infergen shall be supplied in the following forms only:

                    -    [***]

                    -    [***]

                    -    [***]

               -    PACKAGING AND LABELING. As of the Effective Date, Amgen has
                    in its inventory certain quantities of [***] Infergen,
                    labeled and packaged for commercial sale in the Territory
                    (the "Amgen Infergen Inventory") from which initial orders
                    of Infergen placed by InterMune will be filled. When the
                    Amgen Infergen Inventory is exhausted, InterMune shall
                    thereafter be responsible for and bear all costs associated
                    with the design, development, quality release and Regulatory
                    Approval of all labeling and packaging materials for
                    Infergen supplied hereunder for commercial sale. InterMune
                    shall perform its [***] InterMune shall be solely
                    responsible for labeling and packaging Infergen for clinical
                    trial use.

          -    SUPPLY PRICE; THIRD PARTY ROYALTIES; STATEMENTS AND PAYMENTS.

               -    INFERGEN SUPPLY PRICE

Amgen shall supply Infergen to InterMune at the following prices:

                    -    [***]

                                             ***Confidential Treatment Requested

<PAGE>

                    [***]

"Standard Cost" shall mean and include the following cost elements incurred by
Amgen: [***]

               -    ADDITIONAL WORK. If at InterMune's written request and upon
                    Amgen's written consent Amgen performs any work or
                    activities outside the scope of filling purchase orders
                    placed by InterMune pursuant to paragraph 6.3, or if Amgen
                    is required by a Regulatory Authority in the Licensed
                    Territory to perform work not necessitated by or arising
                    from Amgen's negligence in performing its obligations
                    hereunder, then [***] Any work performed or to be performed
                    by Amgen which is necessitated by or arises from Amgen's
                    negligence in performing its manufacture and supply
                    obligations hereunder, including but not limited to work
                    required by a Regulatory Authority in the Licensed Territory
                    [***]

               -    THIRD PARTY ROYALTIES. For purposes of this Section 5.3,
                    "Third Party Payments" shall mean [***]

                    -    [***]

                    -    During the term of Amgen's supply obligation hereunder,
                         [***]

               -    STATEMENTS AND PAYMENTS. Amgen shall, on an as delivered
                    basis, provide InterMune with a statement setting forth
                    quantities of Infergen delivered, the supply price, the
                    amount of any Third Party royalties and costs for additional
                    work, if any. Payments shall be due from InterMune within
                    [***] following the date of receipt of such shipment at
                    InterMune's designated facility. Delivery costs shall be
                    paid directly by InterMune to its designated carrier.

          -    FORECASTS/ORDERS.

               -    AMGEN INFERGEN INVENTORY.

     Promptly after execution of the License and Commercialization Agreement,
Amgen will provide to InterMune a report showing Amgen's then-current inventory
levels of Amgen Infergen Inventory. InterMune shall specify by binding written
firm purchase order its reasonable requirements of Amgen Infergen Inventory not
later than [***]

               -    ROLLING FORECASTS.

                    -    InterMune will determine its good faith projected
                         Infergen supply needs, taking into consideration the
                         Amgen Infergen Inventory levels, and will deliver the
                         first rolling forecast for the [***] months prior to
                         the requested delivery date for InterMune's first firm
                         order of Infergen to be supplied from Infergen
                         manufactured for InterMune (i.e., not Amgen Infergen
                         Inventory). For each quarter of the rolling forecast,
                         InterMune shall specify the quantity and form per
                         quarter of its future needs of Infergen. Following
                         submission of this first forecast, the forecast shall
                         be amended quarterly (no later than the first day of a
                         calendar quarter) to: (1) add a forecast for the next
                         successive calendar quarter for which no forecast has
                         been submitted and (2) [***] Each quarterly forecast
                         shall be [***]

                    -    Not later than [***] days after Amgen's receipt of each
                         rolling forecast, Amgen will confirm in writing that it
                         can manufacture and supply the quantities specified in
                         the forecast in the quarters specified therein (the
                         "Forecast Confirmation"). [***] Promptly thereafter the
                         Parties shall discuss in good faith [***] If, at any
                         time after Amgen submits to InterMune its Forecast
                         Confirmation, Amgen [***] Amgen shall so notify
                         InterMune in writing and the Parties shall discuss in
                         good faith such proposed arrangements and other
                         appropriate means to ensure an uninterrupted supply of
                         Infergen to InterMune consistent with its forecast.
                         [***]

               -    FIRM ORDERS. InterMune shall specify by binding written firm
                    purchase order its reasonable requirements of Infergen for
                    each calendar quarter at least [***] in advance of each such
                    calendar quarter (collectively "Firm Purchase Orders"). Each
                    Firm Purchase Order shall specify: the quantity [***] and
                    the delivery date. In no event shall a Firm Purchase Order
                    be

                                             ***Confidential Treatment Requested

<PAGE>

                    more or less than the amount specified for such applicable
                    quarter in the Rolling Forecast. Amgen will [***] Infergen
                    to InterMune in response to Firm Purchase Orders. For as
                    long as Amgen continues to manufacture Infergen [***]
                    Amgen's manufacturing capacity for Infergen for such period,
                    provided however that InterMune may order and Amgen shall
                    supply Infergen in quantities up to [***]

          -    PRODUCT SPECIFICATIONS; NONCOMPLIANT GOODS; INSPECTIONS.

               -    CGMP. Infergen supplied by Amgen hereunder will be
                    manufactured in accordance with current Good Manufacturing
                    Practices (as defined in the Code of Federal Regulations)
                    and the manufacturing process approved by the relevant
                    Regulatory Authorities in the Licensed Territory. Infergen
                    shall be manufactured by Amgen in a facility approved by
                    applicable Regulatory Authorities. Amgen shall be
                    responsible for keeping such facility and the manufacturing
                    processes for Infergen in compliance with current Good
                    Manufacturing Practices.

               -    SHELF LIFE. [***]

               -    PRODUCT SPECIFICATIONS AND MANUFACTURING PROCESS. Amgen will
                    supply Infergen which complies with the product
                    specifications and the manufacturing process approved by the
                    relevant Regulatory Authorities in the Licensed Territory
                    (collectively, the "Specifications"). For so long as
                    InterMune purchases Infergen from Amgen under the terms and
                    conditions set forth herein, no changes to the
                    Specifications may be made without each Party's prior
                    written consent (which may be withheld in either Party's
                    sole discretion, provided that no consent shall be needed
                    from InterMune in order for Amgen to make changes (i) as
                    required by the relevant Regulatory Authorities in the
                    Licensed Territory or (ii) to comply with current Good
                    Manufacturing Practices). [***] Amgen shall notify InterMune
                    in writing of any changes in or to the Specifications,
                    Amgen's manufacturing facilities or procedures, vendors, raw
                    materials or capital equipment that will or may require
                    InterMune to amend the BLA for Infergen or otherwise fulfill
                    InterMune's regulatory obligations.

               -    PRODUCT RELEASE. Amgen shall be responsible for the
                    manufacturer's release of Infergen. Amgen will provide to
                    InterMune upon release of each lot of Infergen complete and
                    accurate certificates of analysis, certificates of
                    compliance, and deviations and their investigations (the
                    "Disposition Package"). As InterMune may request from time
                    to time, Amgen will make batch records relating to
                    fermentation, bulk Infergen, Infergen for fill and finish
                    manufacturing and packaging available for InterMune's
                    inspection, which records shall be complete and accurate.

               -    TESTING AND NONCOMPLIANT GOODS. Amgen and InterMune shall
                    agree on a mutually acceptable Third Party to conduct
                    testing of Infergen for compliance with Specifications, and
                    Amgen and InterMune will each be entitled to a complete copy
                    of all testing data. InterMune shall have [***] from receipt
                    of all requested records, in which to (i) review the
                    Disposition Package, and upon InterMune's request, the
                    relevant batch records, provided pursuant to Subsection 7.4
                    above; (ii) test a shipment of Infergen for compliance with
                    Specifications, and (iii) notify Amgen in writing of any
                    noncompliant Infergen, including but not limited to Infergen
                    manufactured using a manufacturing process not approved by
                    the relevant Regulatory Authority. Amgen shall cooperate
                    with InterMune in good faith to determine whether such
                    rejection is justified. [***]

               -    FINAL PRODUCT LOT RELEASE. [***] shall be solely responsible
                    for final lot release of Infergen for all uses (including
                    but not limited to review of the Disposition Package and
                    batch records, and such testing as [***] may elect to
                    perform to ensure the final quality assurance and quality
                    control and conformance of such lots to the lot release
                    specifications of all applicable Regulatory Authorities).

               -    INSPECTIONS. In addition to its review of the Disposition
                    Package pursuant to subsection 7.4 above, InterMune may
                    visit and inspect and audit, at its own expense, [***] in
                    each case in so far as such facilities or records relate
                    solely to the Infergen supplied hereunder. Information
                    obtained by InterMune in the course of such inspections
                    shall be treated as Confidential

                                             ***Confidential Treatment Requested

<PAGE>

                    Information, provided however that InterMune may disclose
                    such Confidential Information to the extent necessary to
                    comply with applicable law or regulations or other
                    requirements of the relevant Regulatory Authorities in the
                    Licensed Territory. Inspections conducted hereunder will be
                    limited in scope to what is reasonably necessary to confirm
                    that Amgen has complied with current Good Manufacturing
                    Practices in manufacturing and labeling and packaging
                    Infergen supplied to InterMune hereunder. InterMune may
                    conduct inspections no more frequently than [***] InterMune
                    will coordinate all inspections of manufacturing facilities
                    relating to Infergen with Amgen and provide Amgen with [***]
                    Amgen shall respond in writing with an action plan for
                    corrective and preventative actions [***] Amgen shall
                    reasonably cooperate with applicable Regulatory Authorities
                    with respect to inspections.

               -    KNOW-HOW. Except as expressly set forth in the License and
                    Commercialization Agreement, Amgen shall have no obligation
                    to disclose to InterMune, and InterMune shall have no rights
                    with respect to, any Amgen Know-How, including but not
                    limited to that pertaining to the Manufacturing Know-How
                    relating to Infergen; [***]

               -    DISCLAIMER. OTHER THAN THE EXPRESS WARRANTIES SPECIFICALLY
                    SET FORTH IN SUBSECTIONS 7.1, 7.2 AND 7.3 ABOVE, AMGEN MAKES
                    NO REPRESENTATIONS OR WARRANTIES OF ANY KIND AND HEREBY
                    DISCLAIMS ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY
                    KIND WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ITS
                    SUPPLY OF INFERGEN TO INTERMUNE.

               -    STABILITY. [***]

          -    SHIPMENT AND DELIVERY. All Infergen supplied by Amgen will be
               delivered to [***] InterMune shall be responsible for all
               delivery logistics, delivery validation, insurance and compliance
               with laws and regulations (including but not limited to those
               applicable to the export of each [***] delivery from the United
               States to Canada) and all costs associated with any of the
               foregoing. [***]

          -    COMPLIANCE WITH LAWS.

     Subject to paragraph 5.2, Amgen shall be responsible for complying with
applicable laws and regulations relating to the manufacture of Infergen supplied
to InterMune hereunder. Amgen has and shall maintain all necessary government
permits, including without limitation, health and safety and environmental
permits necessary for the conduct of the actions it undertakes pursuant to its
supply obligations hereunder.

               -    BREACH OF SUPPLY OBLIGATION

     If Amgen fails to timely supply material quantities of Infergen in
accordance with Firm Purchase Orders (other than by reason of force majeure) or
supplies material quantities of Infergen in material breach of paragraphs 7.1,
7.2, or 7.3, then [***]

               -    ADDITIONAL AGREEMENTS.

                    -    [***]

                    -    SUPPLY OF LICENSED PRODUCT. This Exhibit F governs
                         solely the supply of Infergen. The Parties shall
                         negotiate in good faith a separate supply agreement for
                         the supply of Licensed Products other than Infergen.

               -    DEFINITIONS. All capitalized terms not otherwise defined
                    herein shall have the meaning assigned to them in the
                    License and Commercialization Agreement.

                    -    FORMULATING KNOW-HOW means Amgen's [***]

                    -    MANUFACTURING KNOW-HOW means any Know-how [***]

                    -    MANUFACTURING PATENTS mean any Patents [***]

                    -    AMGEN MANUFACTURING TECHNOLOGY means Manufacturing
                         Know-how and Manufacturing Patents.

                                             ***Confidential Treatment Requested

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