Document:

exv10w23

 

Exhibit 10.23

COAL SUPPLY AGREEMENT

     This Coal Supply Agreement (this “Agreement”) is made and entered into as of [Spinoff Date]
(the “Effective Date”) by and between COALSALES, LLC, a Delaware limited liability company
(“COALSALES”), and PATRIOT COAL SALES LLC, a Delaware limited liability company (“Patriot”).

RECITALS:

	A.	 	COALSALES and Tennessee Valley Authority (“End Customer”) have entered into that certain
Contract for the Purchase and Sale of Coal dated June 1, 2006 (as amended through the
Effective Date and as the same may be amended after the Effective Date, the “End Customer
Contract”) pursuant to which COALSALES supplies coal to End Customer.
	 
	B.	 	Patriot operates the Highland Mine/Reserve in Henderson, Kentucky, which is designated as an
approved source under the End Customer Contract; and such mine has supplied coal to COALSALES
to enable COALSALES to fulfill its supply obligations under the End Customer Contract.
	 
	C.	 	Immediately prior to the Effective Date, COALSALES and Patriot were both indirect
subsidiaries of Peabody Energy Corporation. Commencing on or after the Effective Date, as a
result of a spin-off transaction, Patriot will no longer be an indirect subsidiary of Peabody
Energy Corporation.
	 
	D.	 	It is the intent of the parties to allow COALSALES to continue to meet its obligations under
the End Customer Contract with respect to Quality A coal (as defined in Section 3.3) by
purchasing Quality A coal from Patriot in accordance with the terms and conditions of this
Agreement, including the Incorporated End Customer Contract (as hereinafter defined), except
where expressly provided otherwise in this Agreement.

AGREEMENT:

     NOW, THEREFORE, COALSALES and Patriot agree as follows:

	1.	 	INCORPORATION OF TERMS OF END CUSTOMER CONTRACT

	 	1.1	 	Incorporation of Terms of End Customer Contract. A copy of the applicable terms
of the End Customer Contract as amended through the Effective Date (hereinafter, the
“Incorporated End Customer Contract”) is attached hereto as Exhibit A. It is the
intent of the parties that except where expressly provided otherwise in this Agreement,
the terms and conditions of the Incorporated End Customer Contract (including the
rights, obligations and benefits of each party thereto) shall apply to Patriot as if
Patriot were named as the “Contractor” thereunder and to COALSALES, as if COALSALES
were named as “TVA” thereunder. Accordingly, the text of the Incorporated End Customer
Contract is hereby incorporated by reference into this Agreement, with the same force
and

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	 	 	 	effect as if such text were fully set forth herein, subject to the modifications
thereto set forth below.
	 
	 	1.2	 	No Assignment or Privity. For the avoidance of doubt, this Agreement does not
constitute a subcontract, delegation or assignment by COALSALES of the End Customer
Contract, and there will be no privity of contract between End Customer and Patriot
under or in respect of the End Customer Contract.
	 
	 	1.3	 	Communications For Scheduling, Transportation, and Related Activities.
COALSALES shall retain the responsibility for all communications with End Customer and
for the coordination of all deliveries under the End Customer Contract. Patriot shall
not have any communications with End Customer in regards to this Agreement and the End
Customer Contract unless COALSALES specifically authorizes such communication. To the
extent copies of any written communications under the End Customer Contract in
connection with scheduling, transportation and related activities are required by
Patriot to perform its obligations hereunder, COALSALES shall provide Patriot with
copies of such communications.
	 
	 	1.4	 	Assumption of Rights, Remedies, Responsibilities and Obligations. In
furtherance of the foregoing, Patriot hereby assumes toward COALSALES all obligations
and responsibilities with respect to Quality A coal (as hereinafter defined) that
COALSALES has under the Incorporated End Customer Contract toward End Customer; and
COALSALES will have the benefit of all rights and remedies against Patriot with respect
to Quality A coal that End Customer has against COALSALES under the Incorporated End
Customer Contract, in each case subject to the modifications set forth below. Likewise,
COALSALES hereby assumes toward Patriot all obligations and responsibilities with
respect to Quality A coal that End Customer has toward COALSALES under the Incorporated
End Customer Contract; and Patriot will have the benefit of all rights and remedies
with respect to Quality A coal against COALSALES that COALSALES has against End
Customer under the Incorporated End Customer Contract, in each case subject to the
modifications set forth below. For the sake of clarity, the terms and conditions of
the Incorporated End Customer Contract, as modified by the body of this Agreement, will
apply to Quality A coal that is resold by COALSALES to any third party. In addition,
at COALSALES request, Patriot shall continue to honor current practices at the Highland
Mine regarding the preparation and handling of Quality A coal and reporting of coal
quality for shipments to End Customer under this Agreement.
	 
	 	1.5	 	Conflicting Terms. If there is a conflict or inconsistency between a provision
of the Incorporated End Customer Contract with respect to Quality A coal and a
provision of the body of this Agreement, the provision of the body of this Agreement
will control. If there is a conflict or inconsistency between a provision of the End
Customer Contract with respect to Quality A coal applicable to Patriot under this
Agreement and a provision of the body of this Agreement, the provision of the body of
this Agreement will control.

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	 	1.6	 	Legal Proceedings. In addition to all other rights and remedies available under
this Agreement, including the Incorporated End Customer Contract, the following shall
apply solely with respect to Quality A coal:

	 	(a)	 	COALSALES will use commercially reasonable efforts to defend
its rights against End Customer under the End Customer Contract and to pursue
all necessary legal action to enforce its rights against End Customer under the
End Customer Contract; provided, however, that COALSALES shall have the right,
in its sole discretion, to determine whether or not it will pursue or defend a
given legal action; and in the event COALSALES determines not to pursue or
defend a given legal action, it shall notify Patriot of such determination.
COALSALES agrees that in the course of defending or pursuing its rights against
End Customer under the End Customer Contract that it will exercise commercially
reasonable efforts to avoid taking any actions that it knows or would
reasonably be expected to know would be detrimental to Patriot without first
advising Patriot of such actions. Notwithstanding the foregoing, however,
nothing in this Section 1.6(a) will be construed to limit any right that
Patriot may have against COALSALES under this Agreement as a result of such
action by, or inaction of, COALSALES.
	 
	 	(b)	 	If the parties are co-defendants in any legal proceeding
arising out of the End Customer Contract, the parties agree to work together in
good faith and in the spirit of mutual cooperation to defend such action in a
manner beneficial to both parties, provided, that each party shall have the
right to engage counsel of its choosing, and will bear the costs of its own
legal defense.

	2.	 	GENERAL MODIFICATIONS TO INCORPORATED END CUSTOMER CONTRACT
	 
	 	 	The purpose of this Agreement is to allow COALSALES to continue to meet its obligations with
respect to Quality A coal under the End Customer Contract by purchasing coal from Patriot in
accordance with the terms and conditions agreed to hereunder. Accordingly, this Agreement
will be construed and performed in furtherance of such purpose notwithstanding that the
parties may not have adequately modified the text of the Incorporated End Customer Contract.
	 
	 	 	The following provisions of this Article 2 set forth general modifications to be made to,
and rules of construction to be applied to, the text of the Incorporated End Customer
Contract.

	 	2.1	 	Notices and Information. To the extent certain provisions of the Incorporated
End Customer Contract relating to Quality A coal require that End Customer or COALSALES
provide the other with notice within a period of two (2) business days or less, for
purposes of incorporating such requirement into this Agreement, each party hereto shall
use commercially reasonable efforts to promptly relay

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	 	 	 	such notice to the other party, taking into consideration the notice requirement
under the Incorporated End Customer Contract. In all other situations under the
Incorporated End Customer Contract requiring the End Customer to provide notice or
information to COALSALES within a period of time greater than two (2) business days,
for purposes of incorporating such requirement into this Agreement, such period of
time shall be extended by two (2) business days to account for the possibility that
End Customer may not provide such notice or information to COALSALES until the end
of the specified period, provided, however, that upon receipt of any notice given by
End Customer, COALSALES will use commercially reasonable efforts to promptly forward
such notice to Patriot. Likewise, except for any provisions under the Incorporated
End Customer Contract requiring two (2) business days’ or less notice, whenever the
Incorporated End Customer Contract requires COALSALES to provide notice or
information to End Customer within a specified period of time, for purposes of
incorporating such requirement into this Agreement, such period of time shall be
shortened by two (2) business days to enable COALSALES sufficient time to provide
the same notice or information to End Customer under the End Customer Contract.
	 
	 	2.2	 	Audit and Inspection Rights. The following shall apply solely with respect to
Quality A coal: Whenever the End Customer Contract grants End Customer the right to
conduct an audit or inspection of, or access to coal production facilities, processes,
books, records, or otherwise, End Customer will be entitled, as applicable, to enforce
or exercise such audit, inspection and/or access rights against Patriot. If COALSALES
has the right under the End Customer Contract to conduct any inspections of End
Customer’s books, records, or premises, such right does not directly pass through to
Patriot under this Agreement; however, Patriot may request such inspection rights from
COALSALES, and COALSALES shall contact End Customer and use commercially reasonable
efforts to obtain End Customer’s consent to such request. In the event End Customer
refuses Patriot’s request to inspect, COALSALES shall be obligated to promptly conduct
the inspection on Patriot’s behalf and at Patriot’s sole expense, and shall report the
results of such inspection to Patriot promptly upon completion. Notwithstanding the
foregoing, this Section 2.2 does not eliminate or modify COALSALES’ audit, inspection
or access rights under the Incorporated End Customer Contract with respect to Patriot
or Patriot’s facilities, processes, books or records.
	 
	 	2.3	 	Amendments to End Customer Contract. For the avoidance of doubt, the parties
hereto understand and agree that COALSALES shall have the unconditional, unilateral
right, in its sole discretion, to amend the End Customer Contract in any manner
contemplated by the terms and conditions contained therein, without the prior written
consent of Patriot. However, any such amendment to the End Customer Contract will apply
only as between COALSALES and End Customer and will not amend the Incorporated End
Customer Contract without Patriot’s signed, written consent.

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	 	2.4	 	Assignment. Neither party shall assign this Agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, either party may, without the need of consent
from the other party (and without relieving itself from liability hereunder), (a)
transfer, sell, pledge, encumber, or assign this Agreement or the account, revenues or
proceeds hereof in connection with any financing or other financial arrangement; (b)
transfer or assign this Agreement to an affiliate of such party; or (c) transfer or
assign this Agreement to any person or entity succeeding to all or substantially all of
the assets of such party by way of merger, reorganization, or otherwise, provided,
however, that in each such case, any such assignee shall agree in writing to be bound
by the terms and conditions hereof, and that no such assignment shall in any way
relieve the assignor from liability or full performance under this Agreement. The
foregoing assignment rights notwithstanding, such rights shall under no circumstances
supersede, override, or violate the assignment rights in Section 21 of the End Customer
Contract, it being understood and agreed by the parties hereto that the terms and
conditions of such Section 21 shall remain in full force and effect for so long as the
End Customer Contract is effective.
	 
	 	2.5	 	Venue and Dispute Resolution. Notwithstanding anything to the contrary set
forth in the Incorporated End Customer Contract, but subject to Article 4, venue for
the resolution of disputes between COALSALES and Patriot under this Agreement will lie
exclusively in the federal courts of jurisdiction in the Eastern District of Missouri.
	 
	 	2.6	 	Indemnification. Each party hereto (as the “Indemnifying Party”) shall
indemnify, defend and hold harmless the other party, its directors, officers,
employees, agents and affiliates (collectively, the “Indemnified Party”) from and
against any and all suits, actions, legal or administrative proceedings, claims,
demands, actual damages, fines, punitive damages, losses, costs, liabilities, interest,
and attorneys’ fees (including any such fees and expenses incurred in enforcing this
indemnity) incurred by the Indemnified Party arising from a breach by the Indemnifying
Party of its obligations to the Indemnified Party under this Agreement.
	 
	 	2.7	 	Liquidated Damages and Early Termination Damages. The following shall apply
solely with respect to Quality A coal: In addition to all other rights and remedies
available under the Incorporated End Customer Contract, notwithstanding anything in
Section 1.6 of this Agreement to the contrary, to the extent liquidated damages or
early termination damages are due and payable to COALSALES under the Incorporated End
Customer Contract, any such liquidated damages or early termination damages that are
actually paid to COALSALES by End Customer under the End Customer Contract shall be
transferred by COALSALES to Patriot within five (5) business days of receipt. The
foregoing shall not apply in the event that COALSALES elects to continue to purchase
the full quantity of Quality A coal under this Agreement after the occurrence of the
event triggering the payment of liquidated damages or early

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	 	 	 	termination damages. COALSALES shall use commercially reasonable efforts to pursue
all such rights and defenses on Patriot’s behalf with respect to any liquidated
damages or early termination damages that become due and owing to COALSALES by End
Customer under the End Customer Contract. If legal action is necessary for COALSALES
to pursue the foregoing rights and defenses, all legal costs and fees incurred by
COALSALES in relation thereto shall be borne by Patriot.
	 
	 	2.8	 	COALSALES’ Right To Market Coal. COALSALES shall have the right, in its sole
discretion, to resell to any third party coal purchased from Patriot under this
Agreement. It is understood and agreed that if COALSALES elects to resell such coal, it
shall have the right to claim force majeure under this Agreement with respect to such
resold coal; provided that deficiencies in Quality A coal shall be made up by
COALSALES, subject to a mutually agreed schedule. If Patriot claims a force majeure
event, then notwithstanding the terms of the Incorporated End Customer Contract,
COALSALES has the right to require that Patriot make up deficiencies in Quality A coal
deliveries due to such force majeure event, subject to a mutually agreed schedule,
regardless of whether the quantity of deficient Quality A coal is sold to End Customer
or has been resold into the market.

	3.	 	SPECIFIC MODIFICATIONS TO INCORPORATED END CUSTOMER CONTRACT
	 
	 	 	The following provisions of this Article 3 set forth specific modifications to be made to
specified provisions of the Incorporated End Customer Contract. All references to sections
or pages are to sections or pages of the Incorporated End Customer Contract, unless
specifically indicated otherwise.

	 	3.1	 	Definitions. All defined terms in the Incorporated End Customer Contract shall
have the same meanings under this Agreement; and all capitalized terms herein that are
not otherwise defined shall have the meaning ascribed to them in the Incorporated End
Customer Contract, except that the term “Contract Administrator” means COALSALES.
	 
	 	3.2	 	Section 1. (Contract Term). Irrespective of whether or not COALSALES and End
Customer exercise their respective options to extend the term of the End Customer
Contract under Section 1 thereof, the term of this Agreement will commence on the
Effective Date and will expire on December 31, 2011, subject to earlier termination in
accordance with this Agreement.
	 
	 	3.3	 	Section 2.a. (Quantity). For the remainder of 2007, COALSALES will purchase
from Patriot, and Patriot will sell to COALSALES, under this Agreement a total of
[___] tons of Quality A coal from the Highland Mine Reserve. Furthermore, it
is intended and agreed by the parties that for each Contract Year thereafter, COALSALES
will purchase from Patriot, and Patriot will sell to COALSALES, 3,500,000 tons of
Quality A coal under this Agreement from the

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	 	 	 	Highland Mine Reserve. For purposes of this Agreement, the term “Quality A” coal
means coal provided from the Highland Mine Reserve. “Highland Mine Reserve” means
the “Highland Mine/Reserve” set forth on Exhibit I to the Incorporated End Customer
Contract.
	 
	 	3.4	 	[Intentionally Left Blank]
	 
	 	3.5	 	Sections 3 and 4. (Scheduling; Variations, Delays, and Interruptions in
Deliveries). In addition to, but not superseding the Incorporated End Customer
Contract, for purposes of ensuring the seamless delivery of Quality A coal, Patriot
shall comply with the Contractor (as that term is used in the Incorporated End Customer
Contract) obligations under Sections 3 and 4 of the Incorporated End Customer Contract,
including, without limitation, all requirements as to quantity, delivery,
specifications, quality, loading, transport, delivery, and establishment of a demurrage
account. All required notices and other communications related to the foregoing shall
be made directly by COALSALES within the stated notice period, and COALSALES shall use
commercially reasonable efforts to communicate same to Patriot within a reasonable time
thereafter. If End Customer reduces purchases of Quality A coal under Section 4 of the
End Customer Contract and such Section 4 has not been materially amended after the
Effective Date, COALSALES will be entitled to make a reduction of Quality A coal
required to be purchased under this Agreement.
	 
	 	3.6	 	Section 5. (Sources). It is understood and agreed by the parties hereto that
for purposes of this Agreement, Patriot shall have no right to deliver coal from any
additional area(s) or mine opening(s) that are in the Source Area but that are not an
Authorized Source (as those terms are defined in the Incorporated End Customer
Contract, but which terms, for purposes of this Agreement, refer solely to the Quality
A coal from the Highland Mine Reserve as described in Exhibit I of the Incorporated End
Customer Contract). Such rights to propose a new Authorized Source outside the Highland
Mine/Reserve Source Area, as more specifically set forth in Section 5 of the End
Customer Contract, shall apply solely to COALSALES. The foregoing notwithstanding,
Patriot may, at any time during the course of this Agreement, propose a new Authorized
Source for coal, and COALSALES shall have the right, in its sole discretion, to grant
or deny such request.
	 
	 	3.7	 	Section 5.e. (Affiliated Company). For purposes of this Agreement, the
reference to “Peabody Energy Corporation” in the definition of “affiliated company” is
changed to “Patriot Coal Corporation”. Notwithstanding such change, Patriot will not
ship coal from an affiliated company unless the same is approved in writing by End
Customer and COALSALES.
	 
	 	3.8	 	[Intentionally Left Blank]
	 
	 	3.9	 	Section 9.f. (Quality and Specifications). If the End Customer elects to
terminate the End Customer Contract pursuant to its rights under Section 9.f

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	 	 	 	thereof, then COALSALES shall have the right, at its sole option, to continue to
purchase up to 3,500,000 tons of Quality A coal per year under this Agreement for
the remainder of the term of this Agreement or to concurrently terminate this
Agreement. COALSALES will use commercially reasonable efforts to pursue all rights
and defenses it may have against End Customer under the End Customer Contract to
avoid such termination of the End Customer Contract. COALSALES will also work with
Patriot in good faith to avoid such termination of the End Customer Contract.
	 
	 	3.10	 	Section 10. (Contract Price Adjustments). The right of Patriot to adjust prices
for Quality A coal under this Agreement shall be subject to the following:

	 	(a)	 	If Patriot desires to pass through a price increase in
accordance with the Incorporated End Customer Contract, COALSALES shall use
commercially reasonable efforts to obtain End Customer’s consent to such
adjustment. If End Customer agrees, the Base Price under the Incorporated End
Customer Contract and the Base Price hereunder shall be adjusted accordingly.
	 
	 	(b)	 	If either COALSALES or Patriot desires to exercise its rights
under the Incorporated End Customer Contract to pass through a price increase
to End Customer, and if End Customer rejects or disputes such proposed price
increase, unless otherwise mutually agreed by the parties, such price increase
shall not take effect; and, unless otherwise mutually agreed by the parties,
neither COALSALES nor Patriot shall have the right to terminate this Agreement,
nor shall COALSALES terminate the End Customer Contract for such cause.

	 	3.11	 	Section 10.d. (Contract Price Adjustments — Transportation). COALSALES will
not terminate this Agreement under Section 10.d of the Incorporated End Customer
Contract unless End Customer terminates the End Customer Contract under Section 10.d
thereof. If, however, End Customer does exercise such termination rights, the parties
shall meet in good faith and exercise all reasonable efforts in an attempt to reach a
mutually agreeable resolution to prevent End Customer from terminating the End Customer
Contract for such cause. If the parties are unable to agree on a method for preventing
the termination of the End Customer Contract and End Customer terminates the End
Customer Contract, then COALSALES shall have the right, at its sole option, to continue
to purchase Quality A coal up to 3,500,000 tons per year under this Agreement for the
remainder of the term of this Agreement or to concurrently terminate this Agreement.
Neither party hereto shall have, after the effective date of such termination, any
further obligation under this Agreement to the other, provided, however, that such
termination shall not affect any rights or obligations of each party existing under
this Agreement for coal shipped or required to be shipped prior to the effective date
of said termination.

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	 	3.12	 	Section 12. (Notices). COALSALES’ address for notices will remain the same.
Patriot’s address for notices is as follows:
	 
	 	 	 	Patriot Coal Sales LLC

12312 Olive Boulevard, Suite 400

St. Louis, Missouri 63141

Fax: (     )      -                    

Attention: General Counsel
	 
	 	3.13	 	Section 13.b. (Shipping Notices — Barge Deliveries). For all barge-delivered
coal, Patriot will provide daily notifications as directed by COALSALES for coal
shipped under this Agreement at the facsimile number(s) or email address(es) provided
to Patriot by COALSALES.
	 
	 	3.14	 	Section 15. (Payments; Invoices). All invoices shall be submitted by Patriot
directly to COALSALES at the billing address(es) provided by COALSALES (e.g. mail,
facsimile and EDI as applicable), in accordance with the same procedures governing
COALSALES’ submission of invoices to End Customer. COALSALES shall remit payment to
Patriot in accordance with the same terms and conditions under the End Customer
Contract as apply to End Customer; provided, however in the event that End Customer
disputes part or all of the invoice and remits a partial payment only the remitted
partial payment shall be due to Patriot and COALSALES in accordance Section 1.6(a) will
use all commercially reasonable efforts to expeditiously resolve such disputes and
promply remit the receipt of any disputed payments. Patriot agrees that in the event of
a payment dispute between COALSALES and End Customer, it will cooperate fully with
COALSALES and will take all reasonable measures to assist COALSALES in resolving any
issues with End Customer relating to invoices, payment, and collection of all
outstanding amounts due from End Customer.
	 
	 	3.15	 	Section 19. (Clean Air Act). If End Customer reduces purchases of Quality A
coal under Section 19 of the End Customer Contract, COALSALES will likewise be entitled
to make a reduction of Quality A coal required to be purchased under this Agreement.
	 
	 	3.16	 	Section 20. (Unilateral Termination Right). The parties acknowledge that
pursuant to Section 20 of the Incorporated End Customer Contract, both COALSALES and
End Customer have the unilateral right to terminate the End Customer Contract. Except
as otherwise provided in this Agreement, neither COALSALES nor Patriot shall exercise
its unilateral right to terminate this Agreement under Section 20 of the Incorporated
End Customer Contract unless End Customer exercises its unilateral right to terminate
the End Customer Contract, in which event COALSALES shall have the right, at its sole
option, to continue to purchase up to 3,500,000 tons per year Quality A coal under this
Agreement for the remainder of the term of this Agreement or to concurrently terminate
this Agreement.

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	 	3.17	 	Exhibit 1. The line listing the Arclar Complex and all information related
thereto does not apply to this Agreement.
	 
	 	3.18	 	General Long Term Contract Conditions, Section 6 (Officials). Section 6 of the
General Long Term Contract Conditions, which is an attachment to the Incorporated End
Customer Contract, does not apply to this Agreement.

	4.	 	RESOLUTION OF DISPUTES UNDER THIS AGREEMENT.

	 	4.1	 	Notice of Dispute. Disputes arising pursuant to this Agreement shall be
resolved in accordance with this Article 4. Either party may invoke the procedures of
this Article 4 by written notice to the other party claiming the existence of a dispute
and describing the nature of that dispute (the “Dispute Notice”).
	 
	 	4.2	 	Resolution of Disputes. Any dispute between the parties arising under
this Agreement first shall be referred for resolution to a senior representative of
each party. Upon receipt of a notice describing the dispute, designating the notifying
party’s senior representative and indicating that the dispute is to be resolved by the
parties’ senior representatives under this Agreement, the other party shall promptly
designate its senior representative to the notifying party. The senior representatives
so designated shall attempt to resolve the dispute on an informal basis as promptly as
practicable. The parties agree that they shall negotiate expeditiously in good faith in
an effort to resolve any disputes arising under this Agreement. In the event a dispute
cannot be resolved by negotiation within thirty (30) days after the date that the
Dispute Notice was received by the other party, or within such other period as the
parties may jointly agree, then either party may commence an action at law or in equity
to resolve such dispute.

[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURES ON NEXT PAGE.]

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     IN WITNESS WHEREOF, COALSALES and Patriot have executed this Agreement as of the Effective
Date.

	 	 	 	 	 
	 	 	COALSALES, LLC
	 
	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	 
	 

	 	 	 	 
	 

	 	Title:
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	PATRIOT COAL SALES LLC
	 
	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 

	 	Name:
	 	 
	 

	 	 	 	 
	 

	 	Title:
	 	 
	 

	 	 	 	 

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Exhibit A

TABLE OF CONTENTS

	 	 	 	 	 
	1. Contract Term
	 	 	4	 
	2. Quantity
	 	 	5	 
	3. Scheduling
	 	 	7	 
	4. Variations, Delays, and Interruptions in Deliveries
	 	 	7	 
	5. Sources
	 	 	11	 
	6. Base Price
	 	 	12	 
	7. Sampling and Analysis
	 	 	14	 
	8. Adjustments for Quality
	 	 	16	 
	9. Quality and Specifications
	 	 	17	 
	10. Contract Price Adjustments
	 	 	22	 
	11. Remedies
	 	 	25	 
	12. Notices
	 	 	28	 
	13. Shipping Notices
	 	 	28	 
	14. Transportation
	 	 	29	 
	15. Payments, Invoices
	 	 	31	 
	16. Weights
	 	 	32	 
	17. Contract Administrator/Contracting Officer
	 	 	33	 
	18. Disputes
	 	 	33	 
	19. Clean Air Act and Other Environmental Requirements
	 	 	34	 
	20. Unilateral Termination Right
	 	 	34	 
	21. Permitted Assignment
	 	 	35	 
	22. Warranties
	 	 	35	 
	23. Contract Components
	 	 	36	 

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Contract                                          

Release                                          

CONTRACT FOR PURCHASE AND SALE OF COAL

     THIS AGREEMENT, is made and entered into this 1st day of June 1, 2006, by and between
TENNESSEE VALLEY AUTHORITY, a corporation organized and existing under an Act of Congress
(hereinafter called “TVA”), and COALSALES, LLC, a Delaware limited liability company
(hereinafter called “Contractor”).

W I T N E S S E T H:

In consideration of the mutual covenants hereinafter stated, the parties hereto agree as follows:

     Definitions: “Contract” shall mean this agreement, which shall be effective as of June
1, 2006.

     “Contract Year” shall mean a twelve-month period beginning January 1 and ending December 31
within the term of this Contract. However, the first year of this Contract shall be the period of
June 1, 2006 — December 31, 2006.

     “Calendar Year” shall be any period beginning January 1 and ending December 31 within the term
of this Contract.

     “Contract Quarter” shall mean any of the four quarters of a Contract Year, i.e. January —
March, April — June, etc.

     “Contract Administrator” shall be that TVA representative designated to administer the
contract on behalf of TVA.

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     “Delivery Point” shall be f.o.b. loaded in barges at Uniontown Dock (Ohio River mile 842.9)
for each ton of Quality A coal, purchased and delivered under this Contract; or such other point as
the parties may agree upon in writing for any new Authorized Source.

     “Destination Plant(s)” shall mean TVA’s Cumberland Fossil Plant, any other TVA fossil-fired
power plant or plants, a blending facility, if the coal is to be blended at a site remote from a
TVA plant, or such other destination as TVA may elect under Subsection 14.g. of this Contract for
which the coal is scheduled to be delivered. Coal delivered hereunder may have a Destination Plant
for blending, and one or more Destination Plants that are power plants. The Destination Plant(s)
shall be identified by TVA from time to time.

     “Shipment” shall mean for Quality A coal three (3) tows of five (5) barges per tow.

     1. Contract Term:

          Deliveries shall commence on June 1, 2006 (“Delivery Commencement Date”) and shall continue
for ten (10) years and seven (7) months from said Delivery Commencement Date unless terminated
earlier by agreement or as otherwise provided for herein. Provided, however, this Contract may be
reopened by either party on or before January 1, 2011 for the purpose of renegotiating price and
other terms and conditions or for the sole purpose of terminating deliveries. The party desiring
to exercise such reopener shall give the other party written notice no later than January 1, 2011
and may, but shall not be required to, specify the purpose of such reopening. Nothing herein is
intended to require a party who has commenced renegotiations hereunder to continue such
renegotiations if, for any reason, such party determines it is not in its interests to do so. If
the reopener provision has been exercised, this Contract will terminate on December 31, 2011 unless
TVA and the Contractor have mutually agreed in writing by July 1, 2011 to continue this Contract.
Neither party shall be under any obligation or liability to continue this Contract beyond said
termination or have any liability for refusing to do so, if either party desires to terminate
deliveries in accordance herewith. The Contract Administrator’s agreement to any modification
arising out of any renegotiations (including contract extension) shall be subject to approval

- 14 -

 

by
TVA’s Board of Directors and/or an authorized TVA officer or such officer’s designee. Contractor’s
agreement to any modification arising out
of any renegotiations (including contract extension) shall be subject to approval by
Contractor’s Board of Directors and/or an authorized officer.

     2. Quantity:

          a. The quantity of coal to be sold and purchased hereunder during each Contract Year shall be
as follows:

	 	 	 	 	 
	Contract Year	 	Quality A
	2007
	 	 	3,500,000	 
	2008
	 	 	3,500,000	 
	2009
	 	 	3,500,000	 
	2010
	 	 	3,500,000	 
	2011
	 	 	3,500,000	 

All tons shall be priced at the applicable Base Price outlined in Section 6, Base Price, herein.

     Except in the case of any failure to deliver that is excused under Section 4 herein, TVA may
exercise the remedies afforded it under Section 11, Remedies, or as otherwise provided by
law, in the event Contractor fails to deliver coal as provided in this Section 2 or Section 3,
Scheduling; provided, however, in lieu of other remedies, TVA may elect to reschedule for
delivery any deficiencies. This rescheduled coal shall be delivered in accordance with the
provisions of this contract and at the price in effect at the time during which such deficiencies
occurred.

          b. Excluding Contract Year 2006, the base tonnage of coal to be delivered each calendar month
shall be approximately two hundred ninety thousand (290,000) tons, subject however, to the other
provisions provided for in this Contract and a mutually agreeable monthly delivery schedule. Such
monthly delivery schedule shall not vary by more than five percent unless agreed to by TVA.

     This Contract is not and shall not be construed as a “requirements contract” for all of TVA’s
coal requirements for any Destination Plant. TVA reserves the right to purchase coal from other
coal suppliers

- 15 -

 

in any amount during the term of this Contract; provided, however, such purchase(s)
do not adversely impact Contractor’s right to supply approximately 290,000 tons per month.

     3. Scheduling:

          a. Contractor agrees to load railroad trains or barging companies’ barges at Contractor’s
loading point in accordance with the terms and conditions of TVA’s barge transportation
agreement(s). TVA shall provide the Contractor with a summary of the appropriate parts of the rail
carrier or barge transportation agreement that pertain to the responsibilities of Contractor. TVA
shall not unreasonably change such terms and conditions that materially impact Contractor’s
operations without the prior written consent of Contractor, which shall not be unreasonably
withheld or delayed. TVA shall be responsible for coordinating all deliveries under this Contract
with coal deliveries of its other contractor(s) for the purposes of establishing a uniform delivery
schedule for placement at either transloading and blending docks or TVA plants.

          b. Whether TVA or Contractor contracts for transportation services necessary to transport coal
purchased and sold hereunder to the transloading or blending facilities or the Destination Plants,
unless otherwise agreed, it shall be Contractor’s obligation to have coal ready for loading and
TVA’s responsibility to make timely arrangements for scheduling of transportation equipment for
moving the coal at the scheduled rate of delivery. Contractor shall be responsible for any
demurrage that accrues at the loading point resulting from Contractor’s delay in loading barges.
Likewise, TVA shall be responsible for any demurrage that accrues at the blending facilities or the
Destination Plants resulting from TVA’s delay in unloading barges.

     4. Variations, Delays, and Interruptions in Deliveries:

          a. Time of delivery is of major importance to both parties. Either party shall immediately
notify the other party of any expected deviation from the delivery schedule established in
accordance with Section 2, Quantity, and Subsection 3.a. of this Contract, and of the cause and
extent of deviation, except in the case of variations in quantity from schedule of up to five
percent (5%) per month.

- 16 -

 

          b. Subject to the conditions hereinafter stated, neither party shall be liable to the other
for failure to mine, deliver, take, or unload coal as provided for in this Contract if such failure
was due to supervening causes beyond its control and not due to its own negligence, and which
cannot reasonably be overcome by the exercise of due diligence. Such causes shall include by way
of illustration, but not limitation: acts of God or of the public enemy; insurrection; riots;
labor strike, labor lockout, labor slowdown or other labor difficulties arising in connection with
labor negotiations or disputes; nuclear disaster; partial or total outages of coal-fired units
(including
consideration of economic dispatch of TVA’s Cumberland plant); floods; accidents; major
breakdown of equipment or facilities (including emergency outages of equipment or facilities to
make repairs to avoid breakdowns thereof or damage thereto); fires; industry-wide shortages of
carriers’ equipment; embargoes; orders or acts of civil or military authority; or industry-wide
shortages of materials and supplies. Nor shall TVA be obligated to take coal hereunder at a
Destination Plant so long as such causes wholly or partially prevent the transloading and/or
blending of the coal or wholly or partially prevent the handling, unloading, stockpiling, or
burning of coal at the Destination Plant to which deliveries are consigned at the time the cause
occurs, in which case, TVA shall have the right but not the obligation to consign deliveries to
another plant or facility not affected by the excusable cause. The refusal of either party to
settle a permanent or temporary labor strike, lockout, slowdown, dispute or other labor
difficulties on terms other than it considers satisfactory, shall be considered an excusable cause
under this paragraph. Either party shall have the right, but not the obligation, to request the
other party to make up any tonnage not delivered in accordance with this section and the
non-requesting party shall have the right, but not the obligation to agree to the requesting
party’s request.

     In the event of partial failure to deliver, take, or unload which is excusable under this
subsection b, the parties shall prorate deliveries or receipts of coal in substantially the same
proportion based upon contractual commitments, (e.g. a fifty percent (50%) reduction in receiving
or production capacity would result in a fifty percent (50%) reduction in scheduled deliveries for
each supplier or consumer). Similarly, for coal delivered under this contract consigned to
multiple Destination Plants, the partial failure to take or unload coal at one of the Destination
Plants that is excusable under this subsection b shall result in a pro rata reduction in the
tonnage scheduled for such Destination Plant under this contract at the time of the

- 17 -

 

commencement of
the supervening cause in substantially the same proportion as the reduction in total receipts at
such Destination Plant resulting from the supervening cause. However, the parties shall not be
obligated to prorate a reduction in receipts or deliveries under coal supply contracts not affected
by the failure because they have different modes of delivery or have substantially different
quality requirements, or because their scheduled delivery dates are not affected by the failure.
During the periods TVA may experience such failures to take or unload coal, Contractor shall be
permitted to sell such coal normally intended for TVA. In the case of the period which Contractor
may experience such failures to deliver coal, TVA may purchase replacement coal. The disabling
effects of such failures to deliver, take, or unload coal shall be corrected by the party
experiencing such failure as soon as and to the extent reasonably practicable.

     If a party’s excused failure to deliver or receive coal in amounts substantially in
conformance with the schedule established under Section 2, Quantity, and Subsection 3.a. continues
for a period exceeding one-hundred eighty (180) consecutive days, the other party may terminate
this contract. In the event of such a termination, neither party shall have any further liability
to the other except for those liabilities which may have accrued with respect to performance or
defaults prior to said termination.

          c. TVA, by providing at least forty-five (45) days’ prior written notice to Contractor, shall
have the right to refuse any shipments otherwise scheduled for delivery to a Destination Plant
during extended plant maintenance or repair periods at such Destination Plant. TVA will make a
good faith effort to ensure, to the extent practicable, that any reductions in shipments by
Contractor are not unreasonably disproportionate to any reduction in shipments by other vendors
supplying coal to the Destination Plant during such period. The shipments missed during such
period may, at Contractor’s election be made up on a delivery schedule mutually agreed to by both
parties, with the base price of such makeup deliveries being the base price in effect at the time
of delivery.

          d. Any written notice and information provided by a party claiming an event of Force Majeure
to the non-claiming party under this Section 4 shall be submitted to the non-claiming party in
writing and accompanied by and attached to a Certificate of Force Majeure Information
(“Certificate”), using the format set forth below, and executed by an authorized representative of
the claiming party:

- 18 -

 

CERTIFICATE OF FORCE MAJEURE INFORMATION

TVA CONTRACT NO. [Insert Contract Number] (the “Contract”)

     I, [ insert name ], hereby certify that:

     (i) I have prepared and submitted the attached Notice of Force Majeure in good faith
and based upon facts and circumstances known personally to me;

     (ii) to the best of my knowledge and belief, the information contained in the attached
Notice is, as of the date of this Certificate, accurate, complete, not misleading, and can
be verified by supporting information currently in my possession or in the possession of
other employees or officers of [insert company name] and nothing has been omitted from the
attached Notice the inclusion of which is necessary for the information contained in the
attached Notice to be accurate, complete, and not misleading;

     (iii) to the best of my knowledge and belief, the failure to deliver or accept coal as
provided in the Contract is due to supervening causes beyond the control of the claiming
party (TVA or Contractor), and cannot be reasonably overcome by the exercise of due
diligence by the claiming party; and

     (iv) I am duly authorized to execute and submit this Certificate and attached Notice.

For the purposes of this certification, the term “Force Majeure” refers to the conditions and
causes set forth in Subsection 4.b. of the Contract, and the term “Notice” refers to the written
notice described in Subsection 4.d. of the Contract.

	 	 	 
	 
	 	 
	 	 	 
	 	 	 
	 

Name
	 	  
	 	 	 
	 	 	 
	 

Title
	 	  
	 	 	 
	 	 	 
	 

Company
	 	  
	 	 	 
	 	 	 
	 

Date of Execution
	 	  

- 19 -

 

          e. Failure to submit a Certificate of Force Majeure Information, failure to duly execute such
Certificate, or failure to otherwise submit such Certificate in proper form to the non-claiming
party shall be deemed a waiver by the claiming party of all rights under this Section 4 with
respect to such coal or such tonnage
scheduled for delivery prior to the date such Certificate is actually furnished or is actually
furnished in proper form and duly executed.

          f. Claiming party shall notify the non-claiming party, in writing, if the claiming party
learns that any certification submitted under Subsection 4.d was erroneous when submitted or has
become erroneous by reason of changed circumstances or other cause.

          g. Claiming party shall quantify and notify the non-claiming party, in writing, within
forty-five (45) days after the end of the Force Majeure event as to the impact of the Force Majeure
event on future deliveries.

     5. Sources:

          a. The source(s) of coal delivered under this Contract are of major importance to TVA.
The provisions of this Contract pertaining to coal quality and quantity requirements, price
adjustments, federal and state legislation, and other matters are directly related to the source(s)
of coal. As used in this Section 5, “Source Area” shall mean the total coal reserve areas outlined
in Exhibit I; provided, that, within the Source Area, only the area(s) for surfaced-mined coal or
mine opening(s) (for underground-mined coal) covered by the mining permit(s) listed in Exhibit I is
an “Authorized Source” of coal for delivery under this Contract. The mine area(s) and/or
opening(s) located within the Source Area shown on the Specific Location Maps(s), but not covered
by the mining permit(s) listed in Exhibit I may become an Authorized Source under the following
procedures as mining progresses and the appropriate permit(s) and license(s) are obtained.
Contractor shall notify TVA in writing at least forty-five (45) days in advance of its intention to
deliver coal from any additional area(s) or mine opening(s) that is in the Source Area but which is
not then authorized. TVA may approve such proposed source, provided, in TVA’s reasonable judgment,
the proposed source is capable of meeting the requirements of this contract. TVA reserves the right
to require Contractor to furnish any information TVA deems reasonably necessary bearing on the
ability of the source(s) to meet the quality requirement(s) of this Contract.

- 20 -

 

          b. Contractor shall as soon as reasonably possible notify TVA in writing of any events
affecting the size or location of the Authorized Source(s). All Authorized Sources under this
Contract shall substantially be in compliance with the Federal Mine Safety and Health Act of 1977,
as amended, and regulations issued under such laws and all Federal and State reclamation laws and
regulations. If Contractor fails to comply
with this requirement, whether or not coal from such Authorized Source is then being delivered
hereunder, TVA may exercise its rights under Section 11, Remedies.

          c. Contractor expressly assumes the risk that the Authorized Source(s) will permit the mining
and production of coal in such quantities and of such quality as will meet the requirements of this
Contract. Coal shall not be delivered from any other source(s), or shipped from any other
origin(s), or mined by any other producer(s) or subcontractor(s), unless authorized by TVA in
writing prior to delivery.

          d. Regardless of the cause of or reason for a request by Contractor to approve a new
Authorized Source outside the Source Area, TVA shall be under no obligation to approve the tendered
source as an Authorized Source, and TVA may withhold its approval on any basis or bases that TVA
may deem appropriate, including purely economic considerations.

          e. Notwithstanding the above restrictions concerning TVA’s right to approve a proposed new
Authorized Source, with advance notice submitted in writing to TVA, the Contractor may, from time
to time, and at no additional cost or expense to TVA, ship coal from its affiliated companies under
this Contract. For purposes of this subsection 5.e., an affiliated company must be at least
fifty-one percent (51%) owned by Peabody Energy Corporation if coal is to be shipped from its
mine(s) in order to fulfill the requirements under this Contract. Coal may be shipped from an
affiliated company in order to meet the requirements of the Contract only after Contractor notifies
TVA in writing that it intends to ship from an affiliated company and the name of the proposed
affiliated company. Coal that is shipped from affiliates must conform to the specifications in
Section 9, Quality and Specifications and the other requirements of this contract.

     6. Base Price:

          a. The Base Price shall be the FOB barge price at the Delivery Point paid by TVA to
Contractor. Calendar year pricing for Quality A tons is as follows or as adjusted under the
reopener provision in Section 1:

- 21 -

 

	 	 	 	 	 
	Calendar Year	 	Quality A
	 	 	Base Price per Ton
	2007
	 	$	31.62	 
	2008
	 	$	32.26	 
	2009
	 	$	32.90	 
	2010
	 	$	33.56	 
	2011
	 	$	34.23	 

The Base Price above shall be adjusted according to the price adjustment provisions in this
Agreement (rounded to the nearest hundredth) and shall be referred to herein as the “Adjusted Base
Price.”

          b. [Not Applicable]

     7. Sampling and Analysis:

          a. Contractor’s samples shall be used for the quality adjustment(s) for each quarter under
Section 8, Adjustments for Quality, provided all samples for such quarter meet all criteria below:

     (i) Ninety-five percent (95%) of shipments shall have been sampled and analyzed in accordance
with the methods described in the latest published edition of the Annual Book of ASTM Standards,
volume 05.06. Samples must have been collected utilizing mechanical systems meeting ASTM D 7256 /
D 7256 M-06 Type I, Condition B, , which have been shown to be free of bias within the past year.
The bias testing procedure and precision used must be approved by TVA. Systems will be subject to
a critical inspection according to ASTM D4702 prior to approval.

Analysis procedures used should be as follows unless otherwise approved in writing by TVA:

	 	 	 
	Parameter

	 	Method
	Residual Moisture

	 	ASTM D 3173 or 5142
	Ash

	 	ASTM D 3174 or 5142
	Sulfur

	 	ASTM D 4239
	Btu

	 	ASTM D 5865

Note if ASTM D 3173 is used for Residual Moisture, ASTM D 3174 must be used for Ash. Conversely,
if ASTM D 5142 is used for Residual Moisture, ASTM D 5142 must be used for Ash.

     (ii) Sample analysis and other data required by TVA to match data with shipment shall be
provided to TVA in a format approved by TVA.

- 22 -

 

     (iii) The lot size for each sample shall be by barge for barge coal, by trainload
for rail
coal, and by daily delivery for truck coal.

     (iv) Analysis for each sample shall have been received by TVA by electronic data interchange
within seven (7) days of collection of said sample.

     (v) The sampling system shall be located in an area acceptable to TVA such that the sample
collected for shipment is collected only from coal that is loaded for said shipment. If Contractor
fails to sample ninety-five percent (95%) and TVA samples twenty percent (20%) or more of the
tonnage received, and if any of Contractor’s samples for the affected quarter do not meet all of
the above criteria, TVA samples shall be used for said quarterly adjustment(s). If TVA samples
less than twenty percent (20%) of the tonnage received and any of Contractor’s samples do not meet
all of the above criteria, no adjustment for quality will be made for said quarter.

          b. In the event Contractor’s mechanical sampling system is not operating due to mechanical,
electrical, or operational failure, Contractor shall notify TVA and the parties shall agree upon an
alternative method of sampling.

          c. Contractor agrees to ensure that all sampling equipment is properly maintained and adjusted
so that each sample taken is proportionate and representative of the coal delivered. TVA or its
designated representative may observe any sampling or sample preparation performed by Contractor.
Contractor shall furnish the results of bias tests on the sampling system, and the results must be
acceptable to TVA. The sample system shall be bias tested at least every twelve (12) months.

          d. Contractor shall prepare the samples in accordance with ASTM D 2013 and shall divide such
samples into three splits and place in suitable airtight containers. Contractor will analyze the
first split and fax the results to the Contract Administrator who administers this Contract for TVA
and to the Coal Records Clerk and Yard Operations Supervisor at the Destination Plant. Except as
provided below, the Contractor’s results obtained on this first split will be utilized by TVA to
determine whether or not the coal covered by the sample will be unloaded at the Destination Plant.
TVA reserves the right not to unload coal at the Destination Plant until after the appropriate
analysis is received. Contractor shall be responsible for any demurrage charges incurred by TVA as
a result of failure to transmit the analyses when and as required. TVA may reject coal based on
these analyses. Within twenty-four (24) hours of

- 23 -

 

barge loading, Contractor shall send the second
split identified by such sample number directly to an independent laboratory (to be agreed upon by
TVA and Contractor) by expedited delivery for analysis. The analysis results obtained from the
second split shall supersede the first split sample results and will be utilized for all contract
purposes, and determining the price adjustment required to compensate for the difference between
the quality of the coal actually shipped and the contract guaranteed analysis. The third split
(“referee sample”) will be retained by Contractor for a minimum of sixty (60) days to be analyzed
by the second independent laboratory (to be
agreed upon by TVA and Contractor) in the event of a disagreement between the parties regarding the
results obtained on either of the other two splits. If the results of the referee analysis
indicate the analysis was improperly performed or the results of the referee analysis are not
within ASTM reproducibility limits with the first independent laboratory results, then the referee
analysis result will be conclusive between the parties in regard to the analysis of the sample in
question. The cost of any such referee analysis shall be borne by the party that requested it,
provided that if adjustment is made, then the cost of any such analysis shall be equally shared by
both parties.

     8. Adjustments for Quality:

          a. As used in this Section 8, a “Quarterly Average Value” shall mean the weighted average
value of the appropriate quality component determined from all samples collected and analyzed in
accordance with Section 7 during a calendar quarter based, on the tonnage, number of railcars, or
barges represented by the samples. Quarterly Average Values and adjustments for quality will be
calculated separately for Quality A Coal and Quality B Coal.

          b. For the coal accepted in each Contract Quarter, an adjustment, calculated to the nearest
cent per ton and using the Base Price shall be applied to the contract price to account for
variations in the Quarterly Average Value for as-received Btu/lb compared to the Typical Analysis
for as-received Btu. This adjustment shall in no way be affected by contract price adjustments
under Section 10, Contract Price Adjustment hereof. (See Exhibit II for example of calculations.)

          c. For the coal accepted in each Contract Quarter, an adjustment, calculated to the nearest
tenth of a cent per ton at a rate of either (1) $0.19 per ton (decrease) for each percentage
point the Quarterly Average Value for ash (as-received basis) exceeds the Typical Analysis for ash,
or (2) $0.19 per ton (increase) for each percentage point the Quarterly Average Value for
ash (on an as-

- 24 -

 

received basis) is less than the Typical Analysis for ash, shall be applied to the
contract price . The calculation shall be prorated to cover any fractional percentage. (See
Exhibit II for example of calculations.)

          d. For the coal accepted in each Contract Quarter, an adjustment, calculated to the
nearest tenth of a cent per ton a rate of either (1) $0.11 per ton (decrease) for each
percentage point the Quarterly Average Value of moisture exceeds the Typical Analysis for Moisture,
or (2) $0.11 per ton (increase) for each percentage point the Quarterly Average Value for
Moisture is less than the Typical Analysis for Moisture, shall be
applied to the contract price. The calculation shall be prorated to cover any fractional
percentage. (see Exhibit II for example of calculations.)

          e. For the coal accepted in each Contract Quarter, an adjustment, calculated to the
nearest cent per ton at a rate of either (1) $0.25 per ton (decrease) for each tenth (1/10)
of a pound per million BTUs the Quarterly Average Value of sulfur dioxide exceeds the Typical
Analysis for sulfur dioxide, or (2) $0.25 per ton (increase) for each (1/10) of a pound per
million BTUs the Quarterly Average Value for sulfur dioxide is less than the Typical Analysis for
sulfur dioxide, shall be applied to the contract price. The calculation shall be prorated to cover
any fractional amount tenth (1/10) of a pound. (See Exhibit II for example of calculations.)

          f. Within sixty (60) days after the end of each calendar quarter, TVA shall submit to
Contractor a report showing the quarterly Average Values and any adjustments determined under this
Section 8 of the contract. The number of tons of coal received by TVA which are subject to
adjustment shall be multiplied by said adjustments, and any resulting amount shall be paid promptly
(or credited to the extent of any offsetting debit) to the party to whom it is due. The assessment
of adjustments in accordance with the foregoing does not in any way impair TVA’s rights under the
contract or at law with respect to any failure by Contractor to meet the Typical Analysis that
gives rise to such adjustments.

     9. Quality and Specifications:

          a. All Quality A coal mined and delivered under this Contract shall conform to the following
Typical Analysis for Quality A coal on a quarterly average as determined by sampling and analyses
performed in accordance with Section 7, Sampling and Analysis: (see next page)

- 25 -

 

TYPICAL ANALYSIS FOR QUALITY A COAL

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	TYPICAL	 	 	 	 	 	 	 	REJECTION/SUSPENSION	 	 	 	 
	 	 	ANALYSIS (1)	 	 	 	 	 	 	 	SPECIFICATIONS (3)	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Lbs of SO2 per million Btu (2)

	 	 	5.20	 	 	lbs
	 	Not more than
	 	 	5.2	 	 	lbs

	Total Moisture

	 	 	13.0	 	 	 	%	 	 	Not more than
	 	 	13.0	 	 	 	%	 
	Sulfur (as-received) maximum

	 	 	3.013	 	 	 	%	 	 	Not more than
	 	 	3.44	 	 	 	%	 
	Ash (as received)

	 	 	10.00	 	 	 	%	 	 	Not more than
	 	 	13.00	 	 	 	%	 
	Btu/lb (as-received)

	 	 	11,300	 	 	 	 	 	 	Not less than
	 	 	11,000	 	 	 	 	 
	Ash fusion temperature reducing 

atmosphere Initial

	 	 	—	 	 	 	oF	 	 	Not [more/less] than
	 	 	—	 	 	 	oF	 
	Softening (Spherical) Min.

	 	 	2050	 	 	 	oF	 	 	Not [more/less] than
	 	 	1950	 	 	 	oF	 
	Fluid

	 	 	—	 	 	 	oF	 	 	Not [more/less] than
	 	 	—	 	 	 	oF	 
	Volatile Matter (dry basis) Min.

	 	 	32	 	 	 	%	 	 	Not less than
	 	 	30	 	 	 	%	 
	Grindability

	 	 	50	 	 	 	 	 	 	Not less than
	 	 	50	 	 	 	 	 
	(Hardgrove Index) Min.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Chlorine (dry basis) Max.

	 	 	0.29	 	 	 	%	 	 	Not more than
	 	 	0.29	 	 	 	%	 

 

			
	(1)	 	The Typical Analysis shall be used for the quality adjustment
under Section 8.
	 
	(2)	 	At 97.5%
	 
	(3)	 	Failure to comply with any of these specifications on a per
Shipment basis shall be basis for rejections and suspensions or termination
pursuant to Subsection 9.c., 9.d. and 9.e.

          b. The coal as-received shall have a top size not greater than two (2) inches and not less
than one and one-fourth (11/4) inches, with at least fifty percent (50%) of the production larger
than one-fourth (1/4) inch, and with at least eight-five percent (85%) of the product larger than 28
mesh (Tyler). Such sizes shall be determined by using screens with round openings. Coal shall not
exhibit a

- 26 -

 

temperature in excess of 120o F, and it shall be substantially free from mining
impurities and scrap such as drill bits, pieces of scrap metal or plate, plastic, rubber, rope,
cloth, wire, cable, bone, slate, earth, rock, pyrite, wood or water, which can be kept out or
removed with the exercise of reasonable care during mining, preparation and loading. It shall be
loaded in a manner that will ensure reasonably uniform consistency as to size and quality and shall
not contain slurry pond material (washer tailings), gob pile material (mine refuse),
petroleum-coke, oxidized coal, or blends of such materials, or create excessive amounts of dust
during the unloading and transferring to storage.

          c. If any coal delivered fails to meet any of the Rejection/Suspension Specifications stated
in Subsection 9.a on the basis of visual inspection or laboratory analysis, as applicable, TVA may
reject the coal at the source, loading point, any transloading or Destination Plant. TVA’s
acceptance of any amount of coal which
does not meet these requirements shall not constitute a waiver of any right which TVA may have
under this Contract or as provided by law on account of the delivery of such coal. In case of
rejection of any coal in accordance with this section, TVA will immediately orally notify , and
follow-up in writing, Contractor of the rejection and of the cause of rejection. In case of coal
rejected after loading, unless the cause for rejection is corrected, Contractor shall promptly
remove the coal from the carrier’s equipment, the transloading or blending facility or from TVA
premises, as the case may be, at Contractor’s expense. Contractor shall reimburse TVA for any
additional transportation costs, demurrage, equipment repair costs, or handling expenses incurred
by TVA in connection with any such rejection. TVA shall not be under any obligation or liability
to assist Contractor in any corrective actions required to remedy the cause for rejection.

          d. If more than 15 barges of coal within a forty-five (45) day period fail to meet the
Rejection/Suspension Specifications stated in Subsection 9.a. (excluding SO2, Sulfur (as
received), Moisture and Ash Fusion), TVA shall have the right to refuse to accept further
deliveries from that mine source until Contractor provides reasonable assurance to TVA that
Contractor will comply with the Rejection/Suspension Specifications. Such assurance must be given
in writing within fourteen (14) business days after the beginning of such suspension. In the event
Contractor fails to provide such assurances or TVA has suspended Contractor’s right to make further
deliveries under this provision two (2) times during any twelve (12) consecutive month period of
the Contract Term, TVA shall have the

- 27 -

 

immediate right, at its option, upon the second such
violation, to terminate this Contract. In the event TVA does not terminate this Contract upon the
second violation and accepts future deliveries, then as to the current suspension event, TVA’s
right to terminate this Contract shall be deemed waived.

          e. If more than 15 barges of coal within a forty-five (45) day period fail to meet the
Rejection/Suspension Specifications for SO2, Sulfur (as received), Moisture or Ash
Fusion stated in Subsection 9.a, TVA shall have the right to refuse to accept further deliveries
from that mine source until Contractor provides reasonable assurance to TVA that Contractor will
comply with the applicable Rejection/Suspension Specifications for SO2, Sulfur (as
received) Moisture or Ash Fusion as the case may be stated in Subsection 9.a. Such assurance must
be given in writing within fourteen (14) business days after the beginning of such suspension. In
the event Contractor fails to provide such assurances or TVA has suspended Contractor’s right to
make further deliveries under this provision two (2) times during any twelve (12) consecutive month
period of the Contract Term, TVA shall have the immediate right, at its option, upon such failure
to provide assurances or the second such violation, to
refuse to accept further deliveries from that mine source for the remainder of the term of the
Contract or terminate this Contract; provided, however, in such event TVA may waive its’ right to
refuse to accept further deliveries from that mine source or terminate the Contract under this
Sub-Section 9.e. In the event TVA does not terminate this Contract upon the second violation and
accepts future deliveries, then as to the current suspension event, TVA’s right to terminate this
Contract shall be deemed waived.

          f. If the normal operations in conformance with the design capabilities of the Destination
Plant cannot be accomplished with the coal delivered hereunder, although the coal complies with the
quality and size requirements of this Section 9, TVA may then terminate this Contract upon thirty
(30) days prior written notice to Contractor without further recourse to either party. In the
event such a termination is pending, the Contractor shall be given a reasonable opportunity to
remedy the cause for termination, which may include the offer of replacement coal. However, TVA is
not obligated to accept offers of replacement coal for the Destination Plant. In the case of
multiple Destination Plants, a termination under this subsection f. shall be effective only with
respect to the tonnage that would have been received at the affected Destination Plant.

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     10. Contract Price Adjustments:

          a. The prices stated in Section 6.a. may be modified under Section(s) 10.b. or 10.d. below.

          b. (1) In the event of enactment of or amendment to a federal, state, or county law,
statute, rule, or regulation after June 1, 2006, (or in the case of establishment of a new Base
Price under Subsection d., below, after the effective date of such new Base Price), that directly
affects and changes the cost of the mining or sale of coal delivered hereunder and is assessed on a
per ton basis, or changes a current assessment of a tax, fee, or other similar charge that is
assessed on a per ton basis and directly affects and changes the cost of the mining or sale of coal
delivered hereunder (collectively a “Law Change”), Contractor shall notify TVA of such Law Change
and supply from its records such reasonable information to TVA showing the effect, if any, of the
Law Change upon the cost per ton of mining or sale of coal under this contract. If a Law Change
increases Contractor’s cost of mining or sale of coal provided to TVA, a contract price increase
shall, subject to Subsection 10.c., be made by TVA for such Law Change effective retroactive to the
date of the change in Contractor’s cost of mining or sale of coal provided to TVA that is directly
attributable to such Law Change.

          If (i) a price adjustment under Subsection 10.b(1), other than one resulting from a coal
industry wide tax assessed on a per ton basis, requested by Contractor under Subsection 10.b.(1)
would result in a contract price increase exceeding ten percent (10%) of the Base Price, or (ii) a
combination of price adjustments under Subsection 10.b(1). and/or any other provision of this
contract that collectively come into effect during any one-year period would result in a contract
increase exceeding ten percent (10%) of the Base Price, then TVA may, at its sole discretion, elect
not to pay such increase and may terminate the contract upon sixty (60) days’ written notice given
after such an adjustment(s) is requested by Contractor. However, in lieu of termination,
Contractor may elect to forgo the Base Price adjustment of coal to cover the increased portion of
the cost above the aforementioned limit, in which case the contract shall remain in full force and
effect.

          (2) In the event of enactment of or amendment to a federal, state, or county law, statute,
rule, or regulation after June 1, 2006, (or in the case of establishment of a new Base Price under
Subsection d., below, after the effective date of such new Base Price), that directly affects and
changes

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the cost of the mining or sale of coal delivered hereunder and is not assessed on a per ton
basis, or changes a current assessment of a tax, fee, or other similar charge that is not assessed
on a per ton basis and directly affects and changes the cost of the mining or sale of coal
delivered hereunder (also collectively a “Law Change”), Contractor shall notify TVA of such Law
Change and supply from its records such reasonable information to TVA showing the effect, if any,
of the Law Change upon the cost per ton of mining or sale of coal under this contract. Among
other things not included in a Law Change under Subsection 10.b (1) or 10.b(2) , a Law Change does
not include: (i) a change in interpretation of an existing, new, or amended law, statute, rule or
regulation or a requirement imposed by an inspector that is not the direct result of a Law Change,
(ii) any increases in Contractor’s general or administrative overhead costs, (iii) any increase in
property tax rate or property tax assessments; and (iv) any increase in the rate or assessment of
any corporate, income, franchise, business, employment, advalorem (on real and personal property),
royalties, or license taxes applicable to Contractor.

          TVA shall have the right to accept or reject Contractor’s requested price increase under this
Subsection 10.b(2) within thirty (30) days of the date of TVA’s receipt of such notice of increase.
If TVA accepts Contractor’s requested price increase, the price of all tons affected by such Law
Change shall be adjusted accordingly subject to Subsection 10.c.. If TVA rejects Contractor’s
requested price increase under Subsection 10.b.(2), Contractor may terminate this Contract without
further obligation or liability to either party hereunder or at
law by giving TVA one hundred twenty (120) days’ prior written advance notice of such termination.
However, in lieu of termination, Contractor may elect to continue to ship tons at the applicable
Base Price of coal, in which case the contract shall remain in full force and effect.

          (3) If a Law Change increases Contractor’s cost of mining coal provided to TVA, a contract
price increase may, subject to Subsection 10.c., be requested of TVA under Subsection 10.b(1) or
Subsection 10.b(2) for such Law Change effective retroactive to the date of the change in
Contractor’s cost of providing coal to TVA that is directly attributable to such Law Change. If a
Law Change decreases Contractor’s Cost of mining coal to be provided to TVA, a price decrease shall
be made by TVA for such Law Change effective to the date such Law Change could be utilized to
reduce Contractor’s costs whether or not Contractor actually reduces such costs on such date.

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          c. The increase or decrease under each subsection shall be calculated separately to the
nearest one-tenth (1/10) cent per ton. Any changes (including a recalculation of previously
granted tentative price adjustment) considered applicable by Contractor under Subsection 10.b(1) or
Subsection 10.b(2) shall be reported to TVA by Contractor with appropriate data necessary to verify
the change. Contractor must furnish such supporting evidence as may be reasonably requested by
TVA. A request for a price adjustment considered applicable to Contractor must be submitted to TVA
with appropriate documentation within one hundred eighty (180) days of the date Contractor first
incurs such cost change, and failure to do so shall constitute a waiver of Contractor’s right to
any retroactive upward adjustment on all coal delivered prior to the submission of a request for
price adjustment with appropriate documentation.

     Contractor agrees that, in the event TVA reimburses Contractor under this Section 10 for a
cost incurred by Contractor and it is later determined that Contractor is entitled to recover such
cost from a third party, at TVA’s request Contractor shall use reasonable efforts to recover such
cost and upon such recovery shall reimburse TVA for amounts previously paid by TVA based on said
cost. Reasonable costs incurred by Contractor in pursuing such recovery at TVA’s request shall be
reimbursed by TVA; provided that where Contractor and/or other purchasers from Contractor also
receive a benefit from pursuing such recovery, the cost thereof shall be equitably shared.

          d. In the event TVA’s transportation cost for shipment of coal delivered hereunder increases
during any one-year period at a rate greater than twenty percent (20%) of the transportation cost
in effect on June 1, 2006, TVA may terminate the Contractor’s right to proceed under this contract
without further obligation or liability
to either party hereunder or at law by giving Contractor sixty (60) days’ advance written
notice of such termination any time within one year after TVA begins incurring such cost increase.
Notwithstanding the previous sentence, TVA cannot give such sixty (60) days’ advance written
notice of such termination prior to January 1, 2009. However, in lieu of termination, Contractor
may elect to reduce the Base Price of coal to cover the increased portion of the transportation
cost above the aforementioned limit, in which case the contract shall remain in full force and
effect. Contractor’s election must be set forth in writing within thirty (30) days of TVA’s notice
of termination. Such election by Contractor shall be irrevocable and binding for that increase
and, shall be effective as of the date of

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TVA’s written notification of the cost increase. TVA may
invoke the provisions of this Subsection d. each and every time its costs exceed the limit set
forth above.

          e. Contractor shall keep accurate records and books of accounts in machine readable form
supporting the cost increases claimed under this Section 10. TVA, or its agents, shall have the
right to audit without restrictions and at no additional cost to TVA, at any time during normal
working hours, all costs incurred by Contractor and billed to TVA under this Section 10 and may
examine Contractor’s records specifically relating thereto. Any payments to Contractor which are
not in accordance with Contract terms or are not supported by valid evidence shall be refunded to
TVA or may be deducted by TVA from any payments otherwise due to Contractor. If TVA makes an
overpayment to Contractor as a result of Contractor overbillings or charges not in accordance with
Contract terms, Contractor shall be liable to TVA for interest on the amount of such overpayment,
to be computed (1) for the period beginning on the date the overpayment was made to Contractor and
ending on the date Contractor repays the amount of such overpayment to TVA or, in the event TVA
deducts such overpayment from any amounts otherwise due Contractor, ending on the date TVA deducts
such overpayment, and (2) at the rate or rates identified in the Prompt Payment Act. Contractor
shall preserve and make available its records, both manual and those which are in machine readable
form, for a period of 3 years from the date of final payment by TVA.

     11. Remedies:

          a. This Subsection 11.a. does not apply to a situation where another Contract provision
provides a different procedure, such as Subsection 9.d. If either party in good faith believes
that the other party has failed to comply with any term or condition of this Contract, such
nonbreaching party shall give the breaching party oral notice, to be followed by written
confirmation, of any such violation. Such violation to be treated as follows:

     (i) If such breaching party fails to correct a curable contract violation within seven (7)
days of first notice, the nonbreaching party shall have the right to suspend further deliveries
until the breaching party provides adequate assurance(s) to the nonbreaching party that the
breaching party will comply with all provisions of this Contract, such assurance to be given in
writing within seven (7) days after such

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suspension. If the breaching party fails to provide such
adequate assurance(s) within the time specified or timely provides such reasonable assurance(s) but
the breaching party does not correct the curable contract violation(s) within seven (7) days after
giving such assurances, the nonbreaching party shall have the right, but not the obligation, to
terminate this Contract.

     (ii) In the case of a Contract violation by the breaching party that is not curable
(including, but not limited to, violations of Section 5, Source, of this Contract or of Section 6.
Officials Not to Benefit, of the General Long-Term Contract Conditions), upon providing notice as
described above, the nonbreaching party shall have the immediate right, but not the obligation, to
terminate or suspend for up to thirty (30) days, further deliveries under this Contract. If the
nonbreaching party suspends further deliveries, then, upon expiration of said thirty-day period,
the nonbreaching party shall either direct the nonbreaching party to continue performance of this
Contract or terminate this Contract.

          b. If this Contract is terminated or suspended by TVA, or if damages apply pursuant to
termination or suspension, except as excused by Force Majeure or as a result of TVA’s failure to
perform, if Contractor fails for any reason to deliver all or part of the quantity of coal to be
delivered hereunder, fails to meet the agreed upon delivery schedule (Section 3), or fails to
deliver coal meeting the Quality Specifications in Section 9 above and TVA rejects the coal or
suspends or terminates Contractor’s performance hereunder and the coal is not made up as mutually
agreed by TVA and Contractor, Contractor shall pay TVA for each ton of such deficiency (the
“Deficiency”) an amount equal to the positive difference, if any, obtained by subtracting the Base
Price for the Deficiency from the Replacement Price. If such difference is negative, neither Party
shall have any obligation to make any deficiency payment to the other. “Replacement Price” means
the price at which TVA, acting in a commercially reasonable manner, purchases substitute coal for
the Deficiency including liability incurred by TVA with respect to the transportation or other
handling of the replacement coal or, absent such a purchase, the market price for such quantity of
coal F.O.B. the Delivery Point, as determined by TVA in a commercially reasonable manner. It is
expressly agreed that TVA shall not be required to enter into a replacement transaction in order to
determine Replacement Price. Damages will be billed within ten (10) days of accrual and paid
fifteen (15) days
after receipt of billing. TVA may deduct any such excess costs from any amount otherwise due
Contractor under this Contract or otherwise.

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          c. If this Agreement is terminated or suspended by Contractor, except as TVA is excused by
Force Majeure or other provisions of this contract or as a result of Contractor’s failure to
perform, if TVA fails to accept all or any part of the quantity of coal to be delivered hereunder
for any reason, or if TVA fails to meet the agreed upon delivery schedule (Section 3) and the coal
is not made up as mutually agreed by TVA and Contractor, TVA shall pay Contractor for each ton of
the Deficiency an amount equal to the positive difference, if any, obtained by subtracting the
Sales Price from the Base Price. If such difference is negative, neither Party shall have any
obligation to make any deficiency payment to the other. “Sales Price” means the price at which
Contractor, acting in a commercially reasonable manner, resells (if at all) the Deficiency or,
absent such a sale, the market price for such quantity of coal F.O.B. the Delivery Point, as
determined by Contractor in a commercially reasonable manner. It is expressly agreed that
Contractor shall not be required to enter into a replacement transaction in order to determine the
Sales Price. Damages will be billed within ten (10) days of accrual and paid fifteen (15) days
after receipt of billing.

          d. Each party hereby stipulates that the payment obligations set forth in this section are
reasonable in light of the anticipated harm and the difficulty of estimation or calculation of
actual damages.

          e. Neither Contractor nor TVA shall be liable to the other for consequential, incidental,
punitive, special, exemplary or indirect damages, lost profits, or business interruption damages,
whether by statute, in tort or in contract, under any indemnity provision or otherwise. Neither
party shall be liable to the other party for losses or damages which result from the death of or
bodily injury to such other party’s employees, contractors or agents or damage to such other
party’s property due to the performance or non-performance of this Agreement, except, in each case,
to the extent such claims arising from the negligence or misconduct of such party.

          f. If either TVA or Contractor suspends or terminates the other party’s deliveries hereunder
or under any other provision of this Contract and such suspension or termination is finally
adjudicated, to have been improper, then the nonbreaching party’s sole remedy for such improper
termination or suspension shall be to require rescheduling of all coal not delivered due to such
termination or suspension, such coal to be rescheduled for delivery on dates acceptable to both
parties,

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but in any event not later than contract expiration. The price to be paid for such
rescheduled coal shall be that in effect at the time of delivery.

     12. Notices:

          Unless otherwise provided for in the Agreement, any contractual notice required to be given to
either party shall be deemed duly given by registered, certified, or first-class mail, telecopy,
telegram or electronic mail (email) to the intended party at the following address or at such
changed address as may from time to time be designated in a notice similarly delivered or mailed.
Except as expressly provided herein, any notice shall be deemed to have been given when sent.
Communications by telecopy, telegram or email shall be confirmed within 72 hours, excluding
holidays, by depositing a copy of the same in the post office for transmission by registered,
certified, or first-class mail in an envelope properly addressed as follows:

          In the case of Contractor to:

Vice President of Sales and Marketing

COALSALES, LLC

701 Market St., Ninth Floor

St. Louis, MO 63101

          In the case of TVA to:

Contract Administrator

Tennessee Valley Authority

Fossil Fuels

1101 Market Street, LP 5G

Chattanooga, Tennessee 37402-2801

          Either party may, by written notice to the other, change the representative or the address to
which such notices and communications are to be sent.

     13. Shipping Notices:

          a. For all rail-delivered coal Contractor shall forward by fax to the Destination Plant
Manager(s) and Contract Administrator and Terminal Supervisor, a daily notification, as to coal
shipped. This shipping notice must include the contract number, traffic control number, railcar
numbers, origin, name of mine, size of coal, shipping date, and approximate date of arrival and
such other information as TVA from time to time may reasonably require. In addition, Contractor
must complete the bill of lading (provided by TVA), and forward this document to the railroad and
plant for proper identification. TVA shall have the right to require Contractor to transmit all of
the above-referenced information via electronic data

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transfer direct to TVA’s computer system.
Contractor is responsible for ensuring that it’s computer system is compatible with TVA’s computer
system.

          b. For all barge-delivered coal Contractor shall forward by fax to the individual named in the
consigning instructions, Destination Plant Manager(s), and Terminal Supervisor, if applicable, a
daily notification, as to coal shipped. This shipping notice must include the contract number,
barge number, origin, traffic control number, name of mine, size of coal, shipping date, and
approximate date of arrival . TVA shall have the right to require Contractor to transmit all of
the above-referenced information via electronic data transfer direct to TVA’s computer system.
Contractor is responsible for ensuring that it’s computer system is compatible with TVA’s computer
system.

          c. Contractor must take whatever stops are necessary to ensure that shipping notices are
received by the Contract Administrator and the plant or terminal prior to delivery of the coal.
The plant or terminal will not unload coal until a correct shipping notice is received and
Contractor will be responsible to a carrier or TVA for any demurrage charges resulting from delays
due to late or improper notification.

     14. Transportation:

          a. TVA reserves the right to specify reasonable limitations on the type and size of
transportation equipment, the method of transportation (including railroad carrier lots, barge load
lots where lots are necessary to provide the lowest transportation rate possible), and the exact
routing to be used whether or not transportation is provided by TVA. TVA may reject any shipment
made in disregard of such specifications. Title to the coal and risk of loss and damage shall pass
to TVA at the Delivery Point unless such coal fails to meet, on the basis of visual inspection or
laboratory analysis, any of the Rejection/Suspension Specifications set forth in Section 9, in
which case title to such coal and risk of loss or damage shall, at all times, remain with
Contractor.

          b. For all coal to be delivered hereunder, it shall be Contractor’s responsibility to load the
coal and furnish loading devices which shall be suitable and fit for the purpose contemplated in
this Contract. Contractor shall be governed by carrier’s instructions regarding the height and
distribution of the load, weight of cargo, and other instructions which carrier deems necessary for
safe transportation.

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Contractor shall allow carrier’s inspection of loaded equipment to assure
compliance with carrier’s loading instructions.

          c. For all coal shipped, it shall be Contractor’s responsibility to visually inspect the
transportation equipment prior to each loading and ascertain that the equipment is empty and
suitable for loading. Any equipment found mechanically unsound for loading or contaminated with
material shall not be loaded. Contractor shall be responsible for all costs incurred by TVA,
including the cost of any coal lost in transit, resulting from Contractor’s failure to comply with
these requirements.

          d. For all coal purchased for delivery by rail, whether f.o.b. railcar or f.o.b. destination
fossil plant, Contractor shall be responsible for loading each car to the appropriate capacity as
required by the rail carrier. In addition, each trainload shipment tendered under this contract
shall be loaded to the minimum trainload weight as required by the rail carrier. Contractor’s
account will be charged with any charges assessed to TVA because of Contractor’s failure to observe
any minimum weight loading requirements. The gross weight of each car shall not exceed the maximum
allowed by the carrier. If cars are found to be loaded in excess of such maximum, it shall be
Contractor’s responsibility to correct the load at Contractor’s expense, including but not limited
to, Contractor’s payment to the carrier of a per car switching charge, as well as any demurrage
charges which may accrue while the car or cards await correction in load. Contractor agrees to
comply with the requirements of TVA’s coal transportation contract(s) with respect to loading.

          e. Contractor shall be responsible for any demurrage that accrues at any loading point as a
result of Contractor or its subcontractors not being prepared to load the coal as scheduled. The
carrier shall invoice Contractor and Contractor shall pay said carrier for all origin demurrage
charges which accrue at the loading point(s).

          f. The explicit obligation of this Contract is that it will be performed in accordance with
all applicable laws. Therefore, transportation of coal by Contractor to the Destination Plant, if
applicable, shall comply with applicable highway laws and regulations governing the weight of
vehicles, vehicle safety, and the operation of vehicles on public roads. If any Contractor fails
to comply with such laws or regulations, TVA shall have the same rights provided under Section 9,
Quality and Specifications, for failure to meet the requirements thereof, including but not
limited to the right to reject coal delivered in

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overweight trucks. To ensure compliance with this
provision and to help protect the road and highways, TVA may require that Contractor furnish a copy
of the “certified” truck weight ticket for all truck delivered coal. Regardless of the actual
weight of any truck coal received, the maximum gross weight that can be recorded for a single truck
will be limited to the applicable maximum weight enforced by law. Any weight exceeding that
maximum weight may be deducted from the total weight of coal used for payment purposes.

          g. TVA reserves the right to ship to any plant or storage blending facility any coal purchased
f.o.b. any shipping point, TVA may from time to time direct deliveries to any other plant or
location. For coal purchased f.o.b. any plant, or storage blending facility, or shipping point,
and if such deliveries cause an
increase or decrease in the transportation cost borne by Contractor in performing this
contract, an adjustment shall be made in the contract price to reflect the changes in such
transportation cost.

          h. When shipping F.O.B. barge, Contractor is required to leave the ends of barges open to
allow the removal of accumulate water and unloading of coal.

          i. The Base Prices per ton under this Contract are applicable for Quality A coal loaded in
barges at Uniontown, Kentucky ( Ohio River Mile 842.9). In addition to these Base Price costs, TVA
incurs a barging cost to deliver this coal. In the event Contractor ships coal from any source
where the coal is not loaded in the barge at the designated Delivery Point above and TVA’s barging
costs are different to the Destination Plant to which TVA intends to ship the coal, the price of
that coal shall be adjusted, up or down, so that the delivered cost to TVA’s Destination Plant is
the same cents-per-million Btu cost as if it were loaded at the designated Delivery Point. This
subsection 14.i. is not intended to permit shipment of coal from any source other than those
identified elsewhere in this Contract.

     15. Payments, Invoices:

          Payments under this contract are subject to the provisions of the Prompt Payment Act (31
U.S.C. Sections 3901-3907). Payments as are provided for in this Contract or by law will be made
by Electronic Fund Transfer (EFT). EFT’s will be made not more than thirty (30) calendar days,
after the later of: (i) receipt of a proper invoice(s) by TVA at the Accounts Payable Department,
P.O. Box 15500, Knoxville, Tennessee 37901-5500; or (2) receipt and unloading of the coal at TVA’s
fossil plants. In

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preparing invoices, Contractor shall multiply the number of tons delivered by
the Base Price applicable at the f.o.b. Delivery Point, plus or minus any adjustments that have
been made effective under Contract provisions. For purposes of this provision only,
“proper invoice” shall mean a numbered and dated invoice containing the complete name of
Contractor, agent’s name (if any), contract group number, contract number, total amount due,
correct weights (as defined below), traffic control number, shipping date, mine at which the coal
was produced, together with any documentation required to be submitted therewith by any other
provision of this Contract.

     16. Weights:

          a. Unless the parties determine circumstances require determination by other methods, all coal
shipped shall be weighed by Contractor at origin, on belt scales or truck scales which
are maintained and periodically calibrated for accuracy as required herein. Contractor shall
notify TVA immediately upon the
occurrence of inaccurate weighing or absence of actual weighing. Contractor shall confirm
such notification in writing to TVA within seven (7) working days of the date of each occurrence.
Such confirmation shall identify each affected coal shipment. Contractor’s account shall be
adjusted for any coal inaccurately weighed or not weighed, such adjustment to be made at whatever
time such occurrence(s) becomes known to TVA.

          b. Contractor shall perform scale certification tests on its scales at a minimum annually,
however, in addition to the annual certification test, Contractor shall perform load tests on its’
scales quarterly or more often than quarterly when requested by TVA. TVA shall be responsible for
the cost of additional requested tests unless the results thereof show that the scale failed to
conform to certification standards, in which event Contractor shall be responsible for such costs.
The aggregate weights determined during any payment period shall be acceptable as the quantity of
coal sold and purchased during such period for which invoices are to be rendered and payments to be
made.

     TVA shall have the right to have a representative present at any and all time during TVA
loadings to observe determination of weights. If TVA should at any time question the accuracy of
the weights thus determined, TVA shall so advise Contractor and Contractor shall permit TVA’s
representatives to test Contractor’s weighing devices or methods. If such tests show the weighing
devices to be in error, or if the weighing devices otherwise rare determined to be in error, the
weighing devices shall be adjusted to an

- 39 -

 

accurate condition. In the event TVA and Contractor are
unable to agree upon such tests and adjustments, or the devices or methods thereof, the weighing
devices and methods shall be tested and adjusted to a condition of accuracy by a qualified third
party, mutually chosen by TVA and Contractor, and the cost of the testing and adjusting by such
third party shall be shared equally by TVA and Contractor.

     If Contractor’s weighing devices or methods are determined to be in error over 0.5%, an
appropriate adjustment shall be made to the affected weights and related invoices and payments.
Such adjustments shall be made retroactively to a date midway between the date on which the
weighing devices were last tested and calibrated and the date on which the inaccuracy in weighing
methods or devices was first questioned and prospectively until the date on which the weighing
methods and devices are corrected.

          c. All scales used by Contractor to determine the governing weight of coal shall be maintained
and operated in accordance with the National Institute of Stands and Technology Handbook 44.

     17. Contract Administrator/Contracting Officer:

          The Manager of Coal Acquisition and Supply has designated the Contract Administrator who
administers this Contract for TVA as his/her duly authorized representative to act on behalf of
TVA, for all purposes in the administration of this Contract, such designation to continue until
revoked or modified by the Manager of Coal Acquisition and Supply . The Contract Administrator
shall serve as TVA’s “Contracting Officer” with respect to matters arising under terms of this
contract that provide for action by the Contracting Officer.

     18. Disputes:

          The parties agree that any lawsuit between them that asserts a claim or claims arising out of
or related to this contract (whether sounding in contract, tort, or otherwise) shall be filed and
litigated to conclusion only in the United States District Court for the Eastern District of
Tennessee at Knoxville, and each Party hereby consents to the jurisdiction and venue of that court
for all such lawsuits. The Parties further agree that in any such litigation (1) each will
stipulate to have a United States

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Magistrate Judge conduct any and all proceedings in the
litigation in accordance with 28 U.S.C. S 636 (c) and FED.R.Civ.P.73 and (2) each will waive any
right it may have to a trial by jury.

     19. Clean Air Act and Other Environmental Requirements:

          If any new environmental law is enacted or new regulation is promulgated which becomes
effective during the term of this Agreement, Contractor shall first make all reasonable efforts to
change its operations or equipment in order to permit TVA to continue utilizing the maximum amount
of coal meeting the existing coal quality specifications under the Agreement. If after all such
reasonable efforts have been made and TVA cannot continue to utilize all of the coal to be
delivered hereunder, TVA may reduce coal shipments hereunder on a pro-rata basis with any/all of
TVA contracts utilizing similar coal.

          If as a result, Contractor’s contract tonnage is reduced hereunder, then TVA shall promptly
notify Contractor, in writing, of the new required coal quality specifications for any replacement
tonnage. Contractor shall consider and evaluate what steps can be reasonably taken to meet the new
coal quality specifications. TVA and Contractor agree to negotiate in good faith, with neither
party under any obligation, in an attempt to reach a new agreement or an amendment of this contract
that will provide for delivery of coal that will be of a quality consistent with TVA’s requirements
resulting from such environmental changes in law. If the parties fail to reach a new agreement or
an amendment of this contract, Contractor shall have the right to match the product and price
selected
by the TVA to replace the remaining coal requirements for the term of the agreement on an
equivalent price per ton less twenty-five cents per ton.

     20. Unilateral Termination Right:

          In addition to any other termination rights provided in this contract or at law, both parties
expressly reserve the right, upon one hundred and fifty (150) days’ prior written notice to other
party, to unilaterally terminate this Contract; provided, however, that the terminating party shall
pay to other party an amount equal to twenty-five (25) percent of the Base Price, multiplied by the
remaining number of tons scheduled for delivery from the effective termination date herein through
the earliest applicable date for termination pursuant to the reopening provision under Section 1,
Contract Term; or if there is no

- 41 -

 

renegotiation provision capable of effectuation after the date of
termination under this Section 20, then through the date of expiration of this Contract; provided
further, that the remaining number of tons scheduled for delivery shall be based on the remaining
monthly tonnage required to be delivered hereunder Said payment by terminating party to
non-terminating party shall constitute non-terminating party’s sole remedy against terminating
party for any loss, cost, or damage incurred by non-terminating party as a result of terminating
party’s termination under this section. Terminating party shall have no further obligation or
liability under the contract or at law except with respect to coal delivered prior to said
termination date as otherwise provided in Section 8, Adjustment for Quality, Section 15,
Payment, Invoices, and Section 16, Weights.

     21. Permitted Assignment:

          Except as expressly permitted by the terms of this Section 21, neither party shall have the
right or the power to assign this Contract or any of its rights under this Contract in whole or in
part without the prior written consent of the other party. Either party may assign this Contract
without written consent to its parent company, a company wholly owned by or controlled by or under
the common control with such party, to an entity acquiring all or substantially all of the assets
of that party, or for purposes of securing indebtedness, or in the case of TVA, the sale of all or
a substantial portion of its coal-fired generation assets, but no such assignment shall release the
assigning party from the obligation to perform this Contract, unless the other party consents
thereto in writing. Any such assignee shall assume and agree to be bound by the terms and
conditions of this Agreement. Any consent to an assignment under this provision shall not be
construed as a waiver of this provision with regard to any subsequent assignment.

- 42 -

 

     22. WARRANTIES:

          EXCEPT AS EXPRESSLY STATED IN THIS CONTRACT, CONTRACTOR MAKES NO WARRANTIES, WHETHER EXPRESS
OR IMPLIED, WRITTEN OR ORAL, REGARDING MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.

     23. Contract Components:

          This Term Coal Contract; Exhibit I and II, General Long-Term Contract Conditions; Limitation
on Use of Outside Influence (ID-67); Coal Producer’s Statement(s); and the Subcontracting Plan (on
file with TVA), and attached maps constitute parts of this Contract.

          IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed as of the
aforesaid date by their duly authorized representatives.

	 	 	 	 	 
	 	 	Contractor:
	 
	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 

	 	 	 	(Signature)
	 
	 	 	 	 
	 

	 	Title:
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	TENNESSEE VALLEY AUTHORITY
	 
	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 

	 	 	 	(Signature)
	 
	 	 	 	 
	 

	 	Title:
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date
	 	 
	 

	 	 	 	 

- 43 -

 

EXHIBIT I

Approved sources as identified in Section 5

	 	 	 	 	 	 	 	 	 
	Mine/Reserve	 	County/State	 	Owner/Operator	 	MSHA/No.	 	Permit No.
	 
	 	 	 	 	 	 	 	 
	Highland

	 	Henderson/KY
	 	Highland Mining Company, LLC
	 	*
	 	*

 

			
	*	 	To be supplied by Contractor.

- 44 -

 

EXHIBIT II

EXAMPLE CALCULATION OF PRICE ADJUSTMENT

FOR QUALITY VARIATIONS

ON COAL

	 	 	 	 	 	 	 	 	 
	Assume:	 	Typical Analysis	 	Qtrly. Wtd. Avg. Analysis
	 
	 	 	 	 	 	 	 	 
	Btu/lb (as-received)
	 	 	11,300	 	 	 	11,400	 
	Ash (as received)
	 	 	10.00	%	 	 	9.00	%
	Total Moisture
	 	 	13.00	%	 	 	12.50	%
	SO2 in lbs./mmBtu at 97.5%
	 	 	5.20	 	 	 	5.10	 

Price equals $31.62

Ash Adjustment Increase/Decrease is $0.19 per percentage point

Moisture Adjustment Increase/Decrease is $0.11 per percentage point

Pounds of SO2 per mmBtu Adjustment Increase/Decrease is $0.25 for each tenth of a
pound.

Btu example for Section 8.b.

	 	 	 
	Btu Adjustment =

	 	(Quarterly Average Value — Typical Analysis) X Price
	 

	 	                              Typical Analysis

	 	 	 
	Btu Adjustment =

	 	(11,400 -11,300) X $31.62
	 

	 	               11,300

Btu Adjustment = $0.28 per ton

Ash example for Section 8.c.

Ash Adjustment = (Typical Analysis — Quarterly Average Value) X Adjustment

Ash Adjustment = (10.00 — 9.00) X $0.19

Ash Adjustment = $0.190 per ton

Moisture example for Section 8.d.

Moisture Adjustment = (Typical Analysis — Quarterly Average Value) X Adjustment

Moisture Adjustment = (13.00 — 12.50) X $0.11

Moisture Adjustment = $0.055 per ton

SO2 example for Section 8.e.

SO2 Adjustment = (((Typical Analysis — Quarterly Average Value) X 10) X Adjustment

SO2 Adjustment = (((5.20 — 5.10) X 10) x $0.25)

SO2 Adjustment = $0.25 per ton

- 45 -

 

GENERAL LONG-TERM CONTRACT CONDITIONS

TABLE OF CONTENTS

	 	 	 	 	 
	1. Verification of Date, Inspection of Records and Mine Sources
	 	 	40	 
	2. Coal Mining Reclamation and Conservation Requirements
	 	 	40	 
	3. Relationship of Parties — Producer’s Statement
	 	 	42	 
	4. Nonassignability; Subcontracts; Designation and Termination of Agent
	 	 	42	 
	5. Waivers
	 	 	43	 
	6. Officials Not to Benefit
	 	 	43	 
	7. Contingent Fees
	 	 	43	 
	8. Convict Labor
	 	 	43	 
	9. Walsh-Healey Act
	 	 	43	 
	10. Discrimination on the Basis of Age
	 	 	43	 
	11. Small Business Policy
	 	 	44	 
	12. Liquidated Damages for Subcontracting Plans
	 	 	44	 
	13. Utilization of Woman-Owned Business Concerns
	 	 	45	 
	14. Affirmative Action and Equal Opportunity
	 	 	45	 
	15. Safety and Health
	 	 	45	 
	16. Anti-Kickback Procedures
	 	 	45	 
	17. Drug-Free Workplace
	 	 	46	 
	18. Environmentally Acceptable Facilities Clean Air and Water
	 	 	46	 

- 46 -

 

GENERAL LONG-TERM CONTRACT CONDITIONS

     1. Verification of Data, Inspection of Records and Mince Sources: TVA, its employees, agents,
or representatives, shall have the right, after prior notice and at a reasonable time to inspect
Contractor’s or, of applicable, its producer’s records and mines and related facilities to verify
the accuracy of the data supplied by Contractor to support its request for price adjustments or to
establish Contractor’s actual cost change under section 10, Contract Price Adjustments, in
the Base Contract and for purposes of determining Contractor’s compliance with the provisions of
this contract. Information obtained by TVA, its employees, agents, or representatives, in
examining Contractor’s or its producer’s records or inspecting Contractor’s or its producer’s mines
shall not be disclosed to third parties without the Contractor’s consent, unless disclosure is
ordered by a court of competent jurisdiction, is made for purposed of any litigation or proceeding
(judicial, administrative, or investigatory) involving this contract, or is otherwise required by
law.

     2. Coal Mining Reclamation and Conservation Requirements: The following TVA reclamation and
conservation requirements are applicable to all spot contracts for the purchase of coal:

          a. TVA Policy on Areas from Which Coal will Be Procured: Coal Mining — Land and Water
Resource Protection. TVA accepts no coal mined from locations in or near areas officially
designated by state or federal agencies, or identified by TVA, as wild or scenic river areas, wild,
wilderness, natural scenic, public recreation areas or under study pursuant to legislative
authority for any such official designation, except where special circumstances exist. No coal
will be accepted from locations in or near areas designated under legislative authority as
potential sites for the above uses, unless, after coordination with the appropriate agencies, TVA
determines that the coal can be mined without substantially adversely affecting the area’s
potential for such use. In such cases and also in cases involving offerings of coal from mines in
or near other visually important areas such as major highways or population centers, special
provisions designed to protect aesthetic values may be incorporated in the purchase contracts. No
coal will be accepted from areas in which, in TVA’s judgment, mining would adversely affect a
public water supply and such adverse effect cannot be avoided by proper reclamation.

- 47 -

 

          b. Contractor agrees that all sources of coal delivered shall be in substantial compliance
with all state and federal reclamation laws, including the Surface Mining Control and Reclamation
Act of 1977 and all regulations issued thereunder. Violations of any such law or regulation shall
constitute a breach of contract, entitling TVA to exercise its remedies under this contract or as
provided by law. TVA will not accept coal mined
from any source, stockpile, or otherwise during any period when the source is subject to a
cessation order issued by the Office of Surface Mining and Reclamation (OSM) or any state
reclamation enforcement agency for violation of reclamation requirements. TVA also reserves the
right to either terminate this contract or suspend deliveries under the contract from any source
whatsoever when any authorized source listed in the contract, or as it may hereafter be amended, is
subject to cessation order. Coal which is not delivered due to such cessation order or suspension
shall not be considered excusable, and TVA may purchase replacement coal for the Contractor’s
account. If, upon appeal the Contractor under OSM’s or the appropriate state’s regulations, a
cessation order is held to have been improperly issued, the Contractor shall not be liable for the
cost of replacement coal, and any coal not delivered due to the order or suspension may, at
Contractor’s option, be canceled or rescheduled upon delivery terms reasonably acceptable to TVA.
This constitutes Contractor’s exclusive remedy against TVA in the event of a wrongful issuance of a
cessation order by OSM or a state agency.

          c. TVA reserves the right to require and Contractor agrees to perform over and above the
requirements specified by law any special or additional reclamation work which TVA deems necessary
to ensure that the mining operation complies with TVA’s overall policy for protection and
enhancement of the environment. TVA agrees to compensate Contractor for the performance of such
work in an amount to be mutually agreed upon before the commencement of work. No work performed by
Contractor shall be deemed special or additional reclamation work for the purposes hereof unless it
is so designated in writing the Contract Administrator.

          d. TVA, its agents, and assigns shall have the right to enter upon any of the land affected by
Contractor’s mining operation, at any time and without the necessity of giving notice, for any
purpose related to enforcing these reclamation and conservation requirement s or to observe mining
or reclamation completed or in progress.

- 48 -

 

          e. TVA will not accept coal from sources mined under the 16-2/3 percent exemption allowed
under P.L. 95-87, unless it can be documented that the source will be mined and reclaimed to the
performance standards established under P.L. 95-87, and furthermore, that the operation has the
concurrence of the coal mining and regulatory (primacy) authority established by this law in the
state from which the coal is to be mined.

     3. Relationship of Parties — Producer’s Statement:

          a. Regardless of whether the Contractor is the producer of the coal to be furnished or is the
sales agent of one or more producer, the Contractor binds and obligates itself for the full and
faithful performance of the contract in its entirety.

          b. If the Contractor is not the producer of the coal to be delivered hereunder, Contractor
represents that it has contracted directly with the producer(s) who has (have) executed the Coal
Producer’s Statement(s) for the delivery of the coal to TVA.

     4. Nonassignability; Subcontracts; Designation and Termination of Agent:

          a. Except as otherwise provided for in the contract, neither this contract nor any interest
herein or any payments hereunder shall be assigned without the written consent of TVA, which
consent TVA may withhold in its sole discretion. In the event TVA shall give such consent, the
same shall not be construed as a waiver of this provision with regard to any subsequent assignment.
TVA may assign its rights under this contract to any responsible party.

          b. The Contractor shall, on request, file with TVA copies of all subcontracts and terms of
commitments with subcontractors, and TVA shall have the right to disapprove of any subcontractor
within five (5) days after receipt of such information. Peabody Coal Company, LLC, Highland Mining
Company, LLC and Arclar Company, LLC are hereby approved as subcontractors by TVA.

          c. No designation of any agent by the Contractor to submit invoices, receive payments, or take
any other action in connection with the performance or administration of this contract shall be
effective or recognized by TVA until the Contractor has given written notice of such designation
and TVA has give Contractor specific written notice of its approval thereof.

- 49 -

 

          d. If Contractor notifies TVA in writing of the termination of any agent that Contractor may
have therefore designated to administer this contract on its behalf, TVA may thereafter rely on
such notice of termination in all dealings wit Contractor or a successor agent.

     5. Waivers: No waiver of any breach of this contract shall be held to be a waiver of any
other breach. Unless a remedy is expressly designated as exclusive, all remedies afforded under
the contract shall be in addition to every other remedy provided herein or by law.

     6. Officials Not To Benefit: Not member of or delegate to Congress or Resident Commissioner,
or any officers, employee, special Government employee, or agent of TVA shall be admitted to any
share or part of this
contract or to any benefit that may arise therefrom unless it be made with a corporation for its
general benefit; nor shall the Contractor offer or give, directly or indirectly, to any officer,
employee, special Government employee, or agent of TVA any gift, gratuity, favor, entertainment
loan, or any other thing of monetary value, except as provided in 5 C.F.R. part 2635. Breach of
this provision shall constitute a material breach of this contract, and TVA shall have the right to
exercise all remedies provided in this contract or at law.

     7. Contingent Fees: The Contractor warrants that no person or selling agency has been
employed or retained to solicit or secure this contract upon an agreement or understanding for a
commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bona fide
established commercial or selling agencies maintained by the Contractor for the purpose of securing
business. For breach or violation of this warranty, TVA shall have the right to terminate this
contract without liability or in its discretion to deduct from the contract price or consideration
the full amount of such commission, percentage, brokerage, or contingent fee.

     8. Convict Labor: Contractor shall not employ in the performance of this contract any person
undergoing sentence of imprisonment at hard labor.

     9. Walsh-Healey Act: All the representations and stipulations in 41 C.F.R., § 637(d) are
incorporated by reference.

     10. Discrimination on the Basis of Age: Contractor shall comply with Executive Order 11141.

- 50 -

 

     11. Small Business Policy: The requirements of 15 U.S.C. § 637(d) are incorporated by
reference.

     12. Liquidated Damages for Subcontracting Plans:

          a. Failure to make a good-faith effort to comply with the subcontracting plan, as used in this
clause, means a willful or intentional failure to perform in accordance with the requirement s of
the subcontracting plan approved under the section of the Request for Proposals titled SMALL
BUSINESS AND SMALL DISADVANTAGED BUSINESS SUBCONTRACTING PLAN (attached to this contract and made a
part hereof) or willful or intentional action to frustrate the plan.

          b. If, at contract completion, or in the case of a commercial products plan, at the close of
the fiscal year for which the plan is applicable, the Contractor has failed to meet its
subcontracting goals and the Contracting Officer decides in accordance with paragraph (c) of this
clause that the Contractor failed to make a good-faith effort to comply with its subcontracting
plan the Contractor shall pay TVA liquidate damages in an amount equal to the actual dollar amount
by which the Contractor failed to achieve each subcontract goal or, in the
case of a commercial products plan, that portion of the dollar amount allocable to government
contracts by which the Contractor failed to achieve each subcontract goal.

          c. Before the Contracting Officer makes a final decision that the Contractor has failed to
make such good-faith effort, the Contracting Officer shall give the Contractor written notice
specifying the failure and permitting the Contractor to demonstrate what good-faith efforts have
been made. Failure to respond to the notice may be taken as an admission that no valid explanation
exists. If, after consideration of all the pertinent data, the Contracting Officer finds that the
Contractor failed to make a good-faith effort to comply with the subcontracting plan, the
Contracting Officer shall issue a final decision to that effect and require that the Contractor pay
the government liquidated damages as provided in paragraph b. of this section.

          d. With respect to commercial products plans, i.e., company-wide or division-wide
subcontracting plans, the Contracting Officer of the agency that originally approved the plan will
exercise the functions of the Contracting Officer under this clause on behalf of all agencies that
warded contracts covered by that commercial products plan.

- 51 -

 

          e. The Contractor shall have the right of appeal, under the section in this contract titled
DISPUTES, from any final decision of the Contracting Officer.

          f. Liquidated damages shall be in addition to any other remedies that TVA may have.

     13. Utilization of Woman-Owned Business Concerns: It is the policy of the United States
Government that woman-owned businesses shall have the maximum practicable opportunity to
participate in the performance of contracts awards by and federal agency.

          The Contractor agrees to use its best efforts to carry out this policy in the award of
subcontracts to the fullest extent consistent with the efficient performance of this contract. As
used in this contract, a “woman-owned business” concern means a business that is at least 51% owned
by a woman or women who also control and operate it. “Control” in this context means exercising
the power to make policy decisions. “Operate” in this context means being actively involved in the
day-to-day management.

     14. Affirmative Action and Equal Opportunity: To the extent applicable, this contract
incorporates by reference the “Affirmative Action for Disabled Veterans and Veterans of the Vietnam
Era” clause 41 C.F.R. § 60-250.4; the “Affirmative Action for Handicapped Workers” clause 41 C.F.R.
§ 60-741.4; and the “Equal
Opportunity” clause, 41 C.F.R. § 60-1.4. Contractor shall comply with applicable regulatory
requirements, including, information reports and affirmative action programs.

     15. Safety and Health: All sources supplying coal purchased under this contract shall be in
full compliance with the Federal Mine Safety and Health Act of 1977 and regulations issued
thereunder. Failure to comply shall constitute a breach of contract, permitting TVA to exercise
its remedies under this contract or as provided by law.

     16. Anti-Kickback Procedures: In its operations and business relationships, Contractor shall
have in place and follow reasonable procedures designed to prevent and detect possible violations
of the Anti-Kickback Act of 1986 (41 U.S.C. §§ 51-58), (Act). If Contractor believes a violation
of the Act may have occurred, it shall promptly give TVA’s Inspector General written notice.
Contractor shall cooperate fully with TVA or any other federal agency investigating a possible
violation of the act. Contractor agrees to incorporate the substance of this section, including
this sentence, in all subcontracts under this contract.

- 52 -

 

     17. Drug-Free Workplace: In submitting its offer, Contractor certifies it will comply with
Public Law No. 100-690, the Drug-Free Workplace Act of 1988.

     18. Environmentally Acceptable Facilities Clean Air and Water: Contractor hereby stipulates
and agrees as follows:

          (1) That Contractor included in its offer a statement listing any facility or facilities to
be utilized in performance of this contract or any subcontract enabling the performance of this
contract which have given rise to a conviction under Section 113 (c) of the Clean Air Act or
Section 309 (c) of the Federal Water Pollution Control Act. If no such list is included in
accordance with the foregoing, then submission of an offer shall constitute certification by the
offeror that no facility or facilities to be utilized in performance of this contract or any
subcontract enabling the performance of this contract have given rise to such conviction.

          (2) To comply with all the requirements of Section 114 of the Clean Air Act and Section 308
of the Federal Water Pollution Control Act relating to inspection, monitoring, entry, reports, and
information, as well as all other requirements specified in Section 114 and Section 308 of the
Clean Air Act and the Federal Water Pollution Control Act, respectively, and all regulations and
guidelines issued thereunder.

          (3) That Contractor shall notify the awarding official if any facility to be utilized for
this contract has given rise to a conviction under Section 113(c) of the Clean Air Act or Section
309 (c) of the Federal Water Pollution Control Act. Prompt notification shall be required prior to
contract award.

          (4) That Contractor will include or cause to be included the criteria and requirements in
subparagraphs (1) through (4) of this provision in all subcontracts of $100,000 or more and all
subcontracts for indefinite quantities which may be $100,000 or more in any year, and Contractor
will take such action as TVA may direct as a means of enforcing such provision. Contractor shall
not award a subcontract without the prior written approval of TVA to any subcontractor whose
performance would involve the use of any facility or facilities which has given rise to a
conviction under Section 113 (c) of the Clean Air Act or Section 309 (c) of the Federal Water
Pollution Control Act. Prompt notification shall be required prior to contract award.

- 53 -

 

LIMITATION ON USE OF OUTSIDE INFLUENCE

ID-67 — Lobbying. This solicitation and any resulting contract are subject to the
requirement of Public Law No. 101-121 (31 U.S.C. § 1352), which prohibits certain lobbying
activities and requires disclosure of certain others, and to TVA’s implementing regulations
published at 55 Fed. Reg. 6736 (18 C.F.R. 1315).

	A.	 	Prohibition, Certification, and Disclosures.

	 	(1)	 	Appropriated Funds. Section 319 of Public Law No. 101-121 provides that
none of the funds appropriated by any act of Congress may be expended by the recipient
of a federal contract, grant, loan, or cooperative agreement to pay any person for
influencing or attempting to influence an officer or employee of any agency, a Member
of Congress, an officer or employee of Congress, or an employee of a cooperative
agreement to pay any person for influencing or attempting to influence an officer or
employee of Congress, or an employee of a Member of Congress in connection with: (a)
the awarding of any federal contract; (b) the making of any federal grant; (c) the
making of any federal loan; (d) the entering into of any cooperative agreement; or (e)
the extension, continuation, renewal, amendment, or modification of any federal
contract, grant, loan, or cooperative agreement.
	 
	 	(2)	 	Certification. By signing the certification entitled “Certification for
Contracts, Grants, Loans, and Cooperative Agreements,” at the end of this section
(“Certification”), the offeror shall certify that it has not violated the foregoing
prohibition.
	 
	 	(3)	 	Other Than Appropriated Funds. Except as provided in subsection D,
below, if offeror has paid or will pay any funds other than federal appropriated funds
to any person for influencing or attempting to influence an officer or employee of any
agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress, in connection with this offer, the offeror shall complete and
submit to TVA Standard Form-LLL, “Disclosure of Lobbying Activities,” in accordance
with its instructions. (Copies of Standard Form-LLL may be obtained from the TVA
representative for this solicitation.) The requirements of this subsection A(3) shall
not apply to payments of reasonable compensation to regularly employed officers or
employees. The term “regularly employed,” with respect to an officer or employee of a
person requesting or receiving a contract, means an officer or employee who is employed
by such a person for at least 130 working days within one year immediately preceding
the date of the submission that initiates TVA’s consideration of such person for
receipt of such contract.

	B.	 	Updating. At the end of each calendar quarter in which there occurs any even that
materially affects the accuracy of the information contained in the Certification or, if
applicable, Standard Form-LLL, the offeror shall file with TVA an initial or new Standard
Form-LLL with such new information or modifications as are necessary to correct any
inaccuracies in the information originally declared and certified.
	 
	C.	 	Subcontractors. In the even a contract is awarded to the offeror under this
solicitation, the successful offeror shall include or cause to be included the form of the
Certification in any subcontract exceeding $100,000 at any tier. The successful offeror shall
promptly file with TVA each Standard Form-LLL provided by a subcontractor.
	 
	D.	 	Exceptions. The prohibition described in subsection A(1) above and the disclosure
requirements in subsection A(3) do not apply in the case of (1) a payment of reasonable
compensation made to an officer or employee of the offeror to the extent that the payment is
for agency and legislative liaison activities not directly related to a federal action
referred to in subsection A; or (2) any reasonable payment to a person, or any payment or
reasonable compensation to an officer or employee of the Contractor, if the payment is for
professional or technical services rendered directly in the preparation or negotiation of this
offer or any resulting contract.

 

 

	E.	 	Definitions. Terms not defined herein shall have the meanings ascribed to them in
Public Law No. 101-121 and TVA’s implementing regulations.
	 
	F.	 	Penalties. (1) Any person who makes an expenditure prohibited by Public Law No.
101-121 shall be subject to a civil penalty of not less that $10,000 and not more than $100,00
for each such expenditure; and (2) any person who fails to file or amend a certification
required under subsection A(2) above or a disclosure required to be filed or amended under
subsection A(3) above shall be subject to a civil penalty of not less that $10,000 and not
more that $100,000 and to such other remedies as may apply for each such failure.

Certification for Contract, Grants, Loans, and Cooperative Agreements

The undersigned certifies, to the best of his or her knowledge and belief, that:

	(1)	 	No federal appropriated funds have been paid or will be paid by or on behalf of the
undersigned to any person for influencing or attempting to influence an officer or employee of
any agency, a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress in connection with the awarding of any federal contract, the making of any
federal grant, the making of any federal loan, the entering into of any cooperative agreement,
and the extension, continuation, renewal, amendment, or modification of any federal contract,
grant, loan, or cooperative agreement.
	 
	(2)	 	If any funds or other than federal appropriated funds have been paid or will be paid to any
person for influencing or attempting to influence an officer or employee of any agency, a
Member of Congress, an officer or employee of Congress, or an employee of a Member of Congress
in connection with this federal contract, grant, loan, or cooperative agreement, the
undersigned shall complete and submit Standard Form-LLL, “Disclosure of Lobbying Activities, “
in accordance with its instructions.
	 
	(3)	 	The undersigned shall require that the language of this certification be included in the
award documents for all subawards at all tiers (including subcontracts, subgrants, and
contracts under grants, loans and cooperative agreement) and that all subrecipients shall
certify and disclose accordingly.

This certification is a material representation of fact upon which reliance was placed when this
transaction was made or entered into. Submission of this certification is a prerequisite for
making or entering into this transaction imposed by 31 U.S.C. 1352. Any person who fails to file
the required certification shall be subject to a civil penalty of not less than $10,000 and not
more than $100,000 for each failure.

	 	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:exv10w39

 

Exhibit 10.39

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THOMAS J. MEREDITH (“EXECUTIVE”) AND

MOTOROLA, INC. (“COMPANY”)

(As Amended October 4, 2007)

     Executive, on behalf of his heirs, administrators, representatives, executors, successors and
assigns, and the Company, on behalf of each of the Company’s subsidiaries, partnerships, joint
ventures, limited liability companies and other affiliates, including entities in which the Company
has a significant investment (collectively, the Company and such entities, the “Affiliated Group”)
hereby agree to the following terms of Executive’s employment with the Company (the “Agreement”):

	1.	 	Title. For the Employment Period (as defined below), Executive shall serve as Acting Chief
Financial Officer and Executive Vice President with such duties and responsibilities as are
commensurate with such position, reporting directly to the Chief Executive Officer of the
Company. During the Employment Period, Executive shall continue to serve as a member of the
Board of Directors of the Company (the “Board”).
	 
	2.	 	Effective Date. The “Effective Date” of the Agreement shall mean April 1, 2007.
	 
	3.	 	Employment Period. The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to be employed by the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the earliest of:

	 	(a)	 	April 1, 2008;
	 
	 	(b)	 	the expiration of the 30 calendar day period after the start date of another
individual to serve as Chief Financial Officer of the Company;
	 
	 	(c)	 	the Executive’s termination of employment for any other reason pursuant to
Section 5, below.

The period of Executive’s interim employment with the Company pursuant to this Agreement is
referred to herein as the “Employment Period”.

	4.	 	Compensation and Benefits.

	 	(a)	 	Base Salary.

	 	(i)	 	For the period April 1, 2007 through September 30, 2007, the
Executive shall receive salary of $1 payable in a lump sum upon completion of
the Employment Period.

 

 

	 	(ii)	 	Beginning October 1, 2007 through the balance of the Employment
Period, the Executive shall receive a gross monthly salary of $75,000 payable
in a lump sum on the last business day of each month. The Company shall cease
payment of the Executive’s monthly salary upon the expiration of the Employment
Period. In the event the expiration of the Employment Period does not coincide
with the last business day of the month, the Executive shall receive a pro rata
lump sum payment based on the number of calendar days in the month occurring
prior to the expiration of the Employment Period.

	 	(b)	 	Director Compensation. During the Employment Period, Executive shall not
receive any compensation for his service on the Board.
	 
	 	(c)	 	Annual & Long-Term Cash Bonuses. During the Employment Period, the Executive
shall not be eligible to receive an annual or long-term cash bonus.
	 
	 	(d)	 	Long-Term Equity Awards. The Executive shall receive grants of equity
compensation awards pursuant to the Company’s Omnibus Incentive Plan of 2006 (the
“Incentive Plan”) as set forth below.

	 	(i)	 	Initial Stock Option Grant. On the Effective Date, the
Executive shall be granted an option (the “Initial Stock Option”) to purchase
250,000 shares of common stock of the Company (the “Common Stock”). The
Initial Stock Option shall have:

	 	(A)	 	a per share exercise price equal to the closing
price of a share of Common Stock on the date of grant as reported on
the New York Stock Exchange – Composite Transactions in the Wall Street
Journal, Midwest Edition (the “Fair Market Value”);
	 
	 	(B)	 	a vesting schedule such that the Initial Stock
Option will become exercisable in full on the first anniversary of the
date of grant, provided that the Executive remains in the employ of the
Company through September 30, 2007; and
	 
	 	(C)	 	a ten-year term.

	 	 	 	All the terms and conditions of the Initial Stock Option shall be subject to
the terms of the Incentive Plan and the award agreement evidencing the grant
of the Initial Stock Option.
	 
	 	(ii)	 	Initial Restricted Stock Unit Grant. On the Effective Date,
the Executive shall be granted an award of 500,000 restricted stock units (the
“Initial RSUs”) based on shares of Common Stock pursuant to the Incentive Plan.
The Initial RSUs shall vest:

- 2 -

 

	 	(A)	 	33% if the Fair Market Value of Company common
stock reaches $20.00 and remains at or above $20.00 for ten Trading
Days (as
defined below) out of any thirty consecutive Trading Days all of
which occur within the two-year period beginning on the date the
Initial RSUs are granted (the “Restriction Period”);
	 
	 	(B)	 	an additional 33% if the Fair Market Value of
Company common stock reaches $22.00 and remains at or above $22.00 for
ten Trading Days out of any thirty consecutive Trading Days all of
which occur within the Restriction Period; and
	 
	 	(C)	 	the remaining 34% if the Fair Market Value of
Company common stock reaches $24.00 and remains at or above $24.00 for
ten Trading Days out of any thirty consecutive Trading Days all of
which occur within the Restriction Period.

	 	 	 	For this purpose, a “Trading Day” shall be any day on which the New York
Stock Exchange is open for trading. All the terms and conditions of the
Initial RSUs shall be subject to the terms of the Incentive Plan and the
award agreement evidencing the grant of the Initial RSUs, as provided to
senior executives of the Company generally.
	 
	 	(iii)	 	Subsequent Stock Option Grants. Beginning October 1, 2007, on
the last business day of each month, if the Employment Period has not ended
prior to that date, then the Executive will be granted a number of stock
options (the “Subsequent Stock Options”) as determined below.
	 
	 	 	 	The number of options will be determined by dividing $200,000 by the
Black-Scholes option value calculated on the date the Subsequent Stock
Options are granted, as determined by the Company pursuant to the
methodology set forth in the Company’s annual report as filed on Form 10-K.
	 
	 	 	 	Each Subsequent Stock Option shall have the following terms:

	 	(A)	 	a per share exercise price equal to the Fair
Market Value on the applicable date of grant;
	 
	 	(B)	 	a vesting schedule such that the Subsequent
Stock Options will vest in four equal annual installments commencing on
the first anniversary of the applicable date of grant if the Executive
remains in the employ of the Company or serves as a Board member
through each such date; and
	 
	 	(C)	 	a ten-year term.

	 	 	 	The terms and conditions of the Subsequent Stock Options shall be subject to
the terms of the Incentive Plan and the award agreements evidencing

- 3 -

 

	 	 	 	the
grant of the Subsequent Stock Options which shall be in the form of the
award attached hereto as Exhibit 1.
	 
	 	(iv)	 	Subsequent RSUs. Beginning October 1, 2007, on the last
business day of each month, if the Employment Period has not ended prior to
that date, then the Executive will be granted a number of restricted stock
units (the “Subsequent RSUs”) equal to $300,000 divided by the Fair Market
Value of company stock on the date of grant. Each Subsequent RSU shall vest in
two equal installments as follows:

	 	(A)	 	50% vesting on the 30 month anniversary of the
applicable date of grant; and
	 
	 	(B)	 	50% vesting on the 60 month anniversary of the
applicable date of grant, if the Executive remains in the employ of the
Company or serves as a Board member through each such date.

	 	 	 	The terms and conditions of the Subsequent RSUs shall be subject to the
terms of the Incentive Plan and the award agreements evidencing the grant of
the Subsequent RSUs which shall be in the form of the award attached hereto
as Exhibit 2.

	 	(e)	 	Change in Control Benefits. Upon a Change in Control (as defined in the
Incentive Plan, and pursuant to the Motorola, Inc. Senior Officer Change in Control
Severance Plan or any successor change in control plan or program (the “Change in
Control Plan”)), the equity-based awards granted herein to the Executive shall become
fully vested and exercisable (or, if applicable, all restrictions shall lapse), and all
RSUs shall be paid out as promptly as practicable; provided, however, that the
treatment of outstanding awards set forth above (referred to herein as “Accelerated
Treatment”) shall not apply if and to the extent that such awards are assumed by the
successor corporation (or parent thereof) or are replaced with awards that preserve the
existing value of such awards at the time of the Change in Control and provide for
subsequent payout in accordance with the same vesting schedule applicable to the
original awards; provided, further, that (i) with respect to any Initial Stock Options
or Initial RSUs that are assumed or replaced, such assumed or replaced awards shall
provide for the Accelerated Treatment if the Executive is involuntarily terminated or
quits for Good Reason (as defined in the Incentive Plan) prior to the one year
anniversary of the Effective Date; and (ii) with respect to any Subsequent Stock
Options or Subsequent RSUs that are assumed or replaced, such assumed or replaced
awards shall provide for the Accelerated Treatment to the extent required in the
attached award documents. During the Employment Period, if the Company adopts an
equity incentive plan with Change in Control benefits more generous than the benefits
provided in this Section 4(e) or a Change in Control severance plan for senior
executives generally with more generous benefits than the Change in Control Plan, then
the Executive will be entitled to those more generous benefits

- 4 -

 

	 	 	 	to the extent
Executive’s awards are granted under such plan or such Change in Control severance plan
is adopted, as applicable.
	 
	 	(f)	 	Retirement Plans. During the Employment Period, the Executive shall not be
eligible to participate in any of the qualified or non-qualified pension plans,
practices, policies and programs of the Company, as may be in effect from time to time,
for senior executives of the Company generally. The Executive may, however,
participate in the Motorola 401(k) Plan, in accordance with the terms of such plan.
	 
	 	(g)	 	Other Benefits. Until the end of the Employment Period, the Executive shall be
eligible to participate in the welfare, perquisites, fringe benefit, and other benefit
plans, practices, policies and programs, as may be in effect from time to time, for
senior executives of the Company generally including without limitation: (i) reasonable
use of Company aircraft for personal and business purposes (up to 125 flight hours for
personal use; (ii) participation in the Company’s Elected Officer Life Insurance
Program; (iii) reimbursement of up to $60,000 of living expenses in Chicago; and (iv)
financial planning.
	 
	 	(h)	 	Expenses. During the Employment Period, the Executive shall be eligible for
prompt reimbursement for business expenses reasonably incurred by the Executive in
accordance with the Company’s policies, as may be in effect from time to time, for its
senior executives generally.

	5.	 	Termination of Employment. If the Executive’s employment is terminated for any reason during
the Employment Period, this Agreement shall terminate without further obligations to the
Executive or the Executive’s legal representatives under this Agreement. The vesting of each
stock option and RSU that is outstanding as of the date of termination shall be governed by
the applicable provisions of the applicable award agreement, each of which is incorporated
herein by reference, and the Incentive Plan.
	 
	6.	 	Additional Covenants.

	 	(a)	 	Confidential Information. The Executive shall not communicate, divulge or
disseminate Confidential Information, as defined in the attached agreements, at any
time during or after the Executive’s employment with the Affiliated Group, except with
prior written consent of the Company, or as otherwise required by law or legal process
or as such disclosure or use may be required in the course of the Executive performing
his duties and responsibilities as Acting Chief Financial Officer and Executive Vice
President. Notwithstanding the foregoing provisions, if the Executive is required to
disclose any such confidential or proprietary information pursuant to applicable law or
a subpoena or court order, the Executive shall promptly notify the Company in writing
of any such requirement so that the Company or the appropriate member of the Affiliated
Group may seek an appropriate protective order or other appropriate remedy or waive
compliance with the provisions hereof. The Executive shall reasonably cooperate with
the Affiliated Group to obtain such a protective order or other remedy. If such order

- 5 -

 

	 	 	 	or other remedy is not obtained prior to the time the Executive is required to make the
disclosure, or the Company waives compliance with the provisions hereof, the Executive
shall disclose only that portion of the confidential or proprietary
information which he is advised by counsel in writing (either his or the Company’s)
that he is legally required to so disclose. Upon his termination of employment with
the Company for any reason, the Executive shall promptly return to the Company, all
records, files, memoranda, correspondence, notebooks, notes, reports, customer
lists, drawings, plans, documents, and other documents and the like relating to the
business of the Affiliated Group or containing any trade secrets relating to the
Affiliated Group or that the Executive uses, prepares or comes into contact with
during the course of the Executive’s employment with the Company, and all keys,
credit cards and passes, and such materials shall remain the sole property of the
Company and/or the Affiliated Group, as applicable. For purposes of the preceding
sentence, the term “trade secrets” shall have the meaning ascribed to it under the
Illinois Trade Secrets Act or, if such act is repealed, the Uniform Trade Secrets
Act (on which the Illinois Trade Secrets Act is based). The Executive agrees to
represent in writing to the Company upon termination of employment that he has
complied with the foregoing provisions.
	 
	 	(b)	 	Assistance. The Executive agrees that during and after his employment by the
Company, the Executive will assist the Affiliated Group in the defense of any claims,
or potential claims that may be made or threatened to be made against any member of the
Affiliated Group in any action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (a “Proceeding”), and will assist the
Affiliated Group in the prosecution of any claims that may be made by any member of the
Affiliated Group in any Proceeding, to the extent that such claims may relate to the
Executive’s employment or the period of the Executive’s employment by the Company. The
Executive agrees, unless precluded by law, to promptly inform the Company if the
Executive is asked to participate (or otherwise become involved) in any Proceeding
involving such claims or potential claims. The Executive also agrees, unless precluded
by law, to promptly inform the Company if the Executive is asked to assist in any
investigation (whether governmental or otherwise) of any member of the Affiliated Group
(or their actions), regardless of whether a lawsuit has then been filed against any
member of the Affiliated Group with respect to such investigation. The Company agrees
to reimburse the Executive for all of the Executive’s reasonable out-of-pocket expenses
associated with such assistance, including travel expenses and any attorneys’ fees and
shall pay a reasonable per diem fee for the Executive’s service, other than for
testimony. In addition, the Executive agrees to provide such services as are
reasonably requested by the Company to assist any successor to the Executive in the
transition of duties and responsibilities to such successor, including without
limitation consulting services for the 60 calendar day period following the Employment
Period for no additional compensation. Any services or assistance contemplated in this
Section 6(b) shall be at mutually agreed to and convenient times.

- 6 -

 

	 	(c)	 	Remedies. The Executive acknowledges and agrees that in addition to all other
remedies at law and/or equity, including but not limited to those set forth in the
attached agreements, (x) the Executive’s breach of the provisions of Section 6 will
cause the Company irreparable harm, which cannot be adequately
compensated by money damages, and (y) if the Company elects to prevent the Executive
from breaching such provisions by obtaining an injunction against the Executive,
there is a reasonable probability of the Company’s eventual success on the merits.
The Executive consents and agrees that if the Executive commits any such breach or
threatens to commit any breach, the Company shall be entitled to temporary and
permanent injunctive relief from a court of competent jurisdiction, in addition to,
and not in lieu of, such other remedies as may be available to the Company for such
breach, including the recovery of money damages. The Parties further acknowledge
and agree that the provisions of Section 7(a) below are accurate and necessary
because (A) this Agreement is entered into in the State of Illinois, (B) as of the
Effective Date, Illinois will have a substantial relationship to the Parties and to
this transaction, (C) as of the Effective Date, Illinois will be the headquarters
state of the Company, which has operations nationwide and has a compelling interest
in having its employees treated uniformly within the United States, (D) the use of
Illinois law provides certainty to the Parties in any covenant litigation in the
United States, and (E) enforcement of the provision of this Section 6 would not
violate any fundamental public policy of Illinois or any other jurisdiction. If any
of the provisions of Section 6 are determined to be wholly or partially
unenforceable, the Executive hereby agrees that this Agreement or any provision
hereof may be reformed so that it is enforceable to the maximum extent permitted by
law. If any of the provisions of this Section 6 are determined to be wholly or
partially unenforceable in any jurisdiction, such determination shall not be a bar
to or in any way diminish the Company’s right to enforce any such covenant in any
other jurisdiction.
	 
	 	(d)	 	The covenants in this Section 6 apply in the countries in which Executive has
physically been present performing work for the Company at any time during the two
years preceding termination of his employment.

	7.	 	Successors.

	 	(a)	 	This Agreement is personal to the Executive and without the prior written
consent of the Company shall not be assignable by the Executive other than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit of and
be enforceable by the Executive’s legal representatives. This Agreement shall inure to
the benefit of and be binding upon the Company and its successors and assigns.
	 
	 	(b)	 	The Company shall cause any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all or a substantial
portion of its business and/or assets to assume expressly and agree to perform this
Agreement immediately upon such succession in the same manner and to the same extent
that the Company would be required to perform it if no such

- 7 -

 

	 	 	 	succession had taken place.
As used in this Agreement, “Company” shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.

	8.	 	Miscellaneous.

	 	(a)	 	This Agreement shall be governed by and construed in accordance with the laws
of the State of Illinois, without reference to principles of conflict of laws. The
Parties hereto irrevocably agree to submit to the jurisdiction and venue of the courts
of the State of Illinois, in any action or proceeding brought with respect to or in
connection with this Agreement. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be amended
or modified otherwise than by a written agreement executed by the Parties hereto or
their respective successors and legal representatives.
	 
	 	(b)	 	The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.
	 
	 	(c)	 	Notwithstanding any other provision of this Agreement, the Company may withhold
from any amounts payable or benefits provided under this Agreement any Federal, state,
and local taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
	 
	 	(d)	 	The Executive’s or the Company’s failure to insist upon strict compliance with
any provision of this Agreement or the failure to assert any right the Executive or the
Company may have hereunder, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
	 
	 	(e)	 	From and after the Effective Date, this Agreement, including the attachments
that are incorporated by reference, shall supersede any other employment agreement or
understanding between the Parties, provided that, notwithstanding any other provision
of this Agreement to the contrary, in the event of a Change in Control (as defined in
the Change in Control Plan), the Change in Control Plan shall supersede this Agreement;
provided, that, the Change in Control provisions in this Agreement will continue to
apply.

	9.	 	Director’s and Officer’s Insurance. The Company shall continue to provide the Executive with
reasonable Director’s and Officer’s insurance coverage that is at least as favorable as the
coverage provided to other directors and officers of the Company. Such insurance coverage
shall continue in effect both during the Employment Period and, while potential liability
exists, thereafter.
	 
	10.	 	Indemnification. The Company shall indemnify the Executive and hold him harmless to the
fullest extent permitted by law and under the by-laws of the Company against, and in respect
to, any and all actions, suits, proceedings, claims, demands, judgments, costs,

- 8 -

 

	 	 	expenses
(including reasonable attorney fees), losses and damages resulting from the Executive’s good
faith performance of his duties and obligations with the Company.
	 
	11.	 	Representations. The Executive hereby represents and warrants to the Company that the
Executive is not party to any contract, understanding, agreement or policy, whether or not
written, with his current employer (or any other previous employer) or otherwise, that
would be breached by the Executive’s entering into, or performing services under, this
Agreement. The Executive further represents that he has complied with all export control
requirements and that he is legally authorized to work in the United States, that he has
disclosed to the Company in writing all material threatened, pending, or actual claims that
are unresolved and still outstanding as of the Effective Date, in each case, against the
Executive of which he is aware, if any, as a result of his employment with his current
employer (or any other previous employer) or his membership on any boards of directors.
Executive agrees that he has not, will not and cannot rely on any representations not
expressly made herein and the only consideration for signing this Employment Agreement are
the terms stated herein and no other promises or representations of any kind have been made
by any person or entity whatsoever to cause him to sign this Employment Agreement.

     IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and the Company has
caused these presents to be executed in its name and on its behalf.

	 	 	 	 	 	 	 	 	 	 	 
	MOTOROLA, INC.	 	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Ruth A. Fattori
	 	 	 	 	 	/s/ Thomas J. Meredith
	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	Ruth A. Fattori
	 	 	 	 	 	Thomas J. Meredith	 	 
	Executive Vice President, Human Resources	 	 	 	 	 	 	 	 
	Date:

	 	October 4, 2007
	 	 	 	Date:
	 	October 4, 2007	 	 

- 9 -

 

ATTACHMENT A

STOCK OPTION CONSIDERATION AGREEMENT

GRANT DATE: April 2, 2007

The following Agreement is established to protect the trade secrets, intellectual property,
confidential information, customer relationships and goodwill of Motorola, Inc. and each of its
subsidiaries (the “Company”) both as defined in the Motorola Omnibus Incentive Plan of 2006 (the
“2006 Plan”).

As consideration for the stock option(s) granted to me on the date shown above under the terms of
the 2006 Plan (“the Covered Options”), and Motorola having provided me with Confidential
Information as a Motorola appointed vice president or elected officer, I agree to the following:

(1) I agree that during the course of my employment and thereafter, I will not use or disclose,
except on behalf of the Company and pursuant to its directions, any Company Confidential
Information. Confidential Information means information concerning the Company and its business
that is not generally known outside the Company. Confidential Information includes: (i) trade
secrets; (ii) intellectual property; (iii) the Company’s methods of operation and Company
processes; (iv) information regarding the Company’s present and/or future products, developments,
processes and systems, including invention disclosures and patent applications; (v) information on
customers or potential customers, including customer’s names, sales records, prices, and other
terms of sales and Company cost information; (vi) Company personnel data; (vii) Company business
plans, marketing plans, financial data and projections; and (viii) information received in
confidence by the Company from third parties. Information regarding products or technological
innovations in development, in test marketing or being marketed or promoted in a discrete
geographic region, which information the Company or one of its affiliates is considering for
broader use, shall not be deemed generally known until such broader use is actually commercially
implemented.

(2) I agree that during my employment and for a period of one year following my termination of
employment for any reason, I will not hire, recruit, solicit or induce, or cause, allow, permit or
aid others to hire, recruit, solicit or induce, or to communicate in support of those activities,
any employee of the Company who possesses Confidential Information of the Company to terminate
his/her employment with the Company and/or to seek employment with my new or prospective employer,
or any other company.

(3) I agree that during my employment and for a period of one year following the termination of my
employment for any reason, I will not, directly or indirectly, on behalf of myself or any other
person, company or entity, solicit or participate in soliciting, products or services competitive
with or similar to products or services offered by, manufactured by, designed by or distributed by
the Company to any person, company or entity which was a customer or potential customer for such
products or services and with which I had direct or indirect contact regarding those products or
services or about which I learned Confidential Information at any time during the two years prior
to my termination of employment with the Company.

(4) I agree that by accepting the Covered Options, if I violate the terms of paragraphs 1 through
and including 3 of this Agreement, then, in addition to any other remedies available in law and/or
equity, all of my vested and unvested Covered Options will terminate and no longer be exercisable,
and for all Covered Options exercised within one year prior to the termination of my employment for
any reason or anytime after termination of my employment for any reason, I will immediately pay to
the Company the difference between the exercise price on the date of grant as reflected in the
Award Document for the Covered Options and the market price of the Covered Options on the date of
exercise (the “spread”).

(5) The requirements of this agreement can be waived or modified only upon the prior written
consent of Motorola, Inc. I acknowledge that the promises in this Agreement, not any employment of
or services performed by me in the course and scope of that employment, are the sole consideration
for the Covered Options. I agree the Company shall have the right to assign this Agreement which
shall not affect the validity or enforceability of this Agreement. This Agreement shall inure to
the benefit of the Company assigns and successors.

 

 

(6) I agree that during my employment and for a period of one year following the termination
of my employment for any reason, I will immediately inform the Company of (i) the identity of my
new employer (or the nature of any start-up business, consulting arrangements or self-employment),
(ii) my new title, and (iii) my job duties and responsibilities. I hereby authorize the Company to
provide a copy of this Agreement to my new employer. I further agree to provide information to the
Company as may from time to time be requested in order to determine my compliance with the terms of
this Agreement.

(7) I acknowledge that the harm caused to the Company by the breach or anticipated breach of
paragraphs 1, 2, and/or 3 of this Agreement will be irreparable and I agree the Company may obtain
injunctive relief against me in addition to and cumulative with any other legal or equitable rights
and remedies the Company may have pursuant to this Agreement, any other agreements between me and
the Company for the protection of the Company’s Confidential Information, or law, including the
recovery of liquidated damages. I agree that any interim or final equitable relief entered by a
court of competent jurisdiction, as specified in paragraph 10 below, will, at the request of the
Company, be entered on consent and enforced by any such court having jurisdiction over me. This
relief would occur without prejudice to any rights either party may have to appeal from the
proceedings that resulted in any grant of such relief.

(8) With respect to the Covered Options, this Agreement is my entire agreement with the Company.
No waiver of any breach of any provision of this Agreement by the Company shall be construed to be
a waiver of any succeeding breach or as a modification of such provision. The provisions of this
Agreement shall be severable and in the event that any provision of this Agreement shall be found
by any court as specified in paragraph 10 below to be unenforceable, in whole or in part, the
remainder of this Agreement shall nevertheless be enforceable and binding on the parties. I also
agree that the court may modify any invalid, overbroad or unenforceable term of this Agreement so
that such term, as modified, is valid and enforceable under applicable law. Further, I
affirmatively state that I have not, will not and cannot rely on any representations not expressly
made herein.

(9) I accept the terms of this Agreement and the above option(s) to purchase shares of the Common
Stock of the Company, subject to the terms of this Agreement, the 2006 Plan, and any Award Document
issued pursuant thereto. I am familiar with the 2006 Plan and agree to be bound by it to the
extent applicable, as well as by the actions of the Company’s Board of Directors or any committee
thereof.

(10) I agree that this Agreement and the 2006 Plan, and any Award Document issued pursuant thereto,
together constitute an agreement between the Company and me. I further agree that this Agreement
is governed by the laws of Illinois, without giving effect to any state’s principles of Conflicts
of Laws, and any legal action related to this Agreement shall be brought only in a federal or state
court located in Illinois, USA.

	 	 	 	 	 
	 

	 	 
	 	 
	Date

	 	Signature
	 	Printed Name
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Commerce ID

IN ORDER FOR THE ABOVE-REFERENCED OPTION(S) TO BE AWARDED, THIS AGREEMENT, SIGNED AND DATED, MUST
BE RETURNED TO MOTOROLA c/o EXECUTIVE REWARDS NO LATER THAN                                         .

- 9 -

 

ATTACHMENT B

RESTRICTED STOCK UNIT AWARD AGREEMENT

     This Restricted Stock Unit Award (“Award”) is awarded on April 2, 2007 (“Date of Grant”), by
Motorola, Inc. (the “Company” or “Motorola”) to Thomas J. Meredith (the “Grantee”).

     WHEREAS, Grantee is receiving the Award under the Motorola Omnibus Incentive Plan of 2006, as
amended (the “2006 Incentive Plan”);

          WHEREAS, the Award is being made as a special grant of Motorola restricted stock units
authorized by the Board of Directors and the Board’s Compensation and Leadership Committee (the
“Compensation Committee”); and

          WHEREAS, it is a condition to Grantee receiving the Award that Grantee electronically accept
the terms, conditions and Restrictions applicable to the restricted stock units as set forth in
this agreement.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other
good and valuable consideration, the Company hereby awards restricted stock units to Grantee on the
following terms and conditions:

	1.	 	Award of Restricted Stock Units. The Company hereby grants to Grantee a total of 500,000
Motorola restricted stock units (the “Units”) subject to the terms and conditions set
forth below. All Awards shall be paid in whole shares of Motorola Common Stock (“Common
Stock”); no fractional shares shall be credited or delivered to Grantee.

	2.	 	Restrictions. The Units are being awarded to Grantee subject to the transfer and
forfeiture conditions set forth below (the “Restrictions”) which shall lapse, if at all,
as described in Section 3 below. For purposes of this Award, the term Units includes any
additional Units granted to the Grantee with respect to Units, still subject to the
Restrictions.

	 	a.	 	Grantee may not directly or indirectly, by operation of law or
otherwise, voluntarily or involuntarily, sell, assign, pledge, encumber, charge
or otherwise transfer any of the Units still subject to Restrictions. The Units
shall be forfeited if Grantee violates or attempts to violate these transfer
Restrictions. Motorola shall have the right to assign this Agreement, which
shall not affect the validity or enforceability of this Agreement. This
Agreement shall inure to the benefit of assigns and successors of Motorola.
	 
	 	b.	 	Any Units still subject to the Restrictions shall be automatically
forfeited upon the Grantee’s termination of employment with Motorola or a
Subsidiary during the twelve-month period following the Date of Grant for any
reason other than death (as provided in Section 3(a) below), Total and
Permanent Disability (as provided in Section 3(a) below), or Involuntary
Termination due to (A) a Divestiture or (B) for a reason other than for Serious
Misconduct. For purposes of this Agreement, a termination of employment shall
not include a change in Grantee’s work assignment from Executive Vice President
and Acting Chief Financial Officer to any other position in the Motorola
Finance organization or on the Motorola Senior Leadership Team or as a
consultant to the CEO or any member of the Senior
Leadership Team. Likewise for purposes of this agreement, a termination of
employment shall not include a change in Grantee’s employment status from a
full-time employee to either a non-employee 

 

 

	 	 	 	consultant to the Company or a
non-employee director of the Company, and a “Subsidiary” is any corporation
or other entity in which a 50 percent or greater interest is held directly
or indirectly by Motorola and which is consolidated for financial reporting
purposes. Total and Permanent Disability is defined in Section 3(a).

	 	c.	 	If Grantee engages in any of the following conduct, in addition to all
remedies in law and/or equity available to the Company or any Subsidiary,
Grantee shall forfeit all restricted stock units under the Award whose
Restrictions have not lapsed, and, for all restricted stock units under the
Award whose Restrictions have lapsed, Grantee shall immediately pay to the
Company the Fair Market Value (as defined in paragraph 7 below) of Common Stock
on the date(s) such Restrictions lapsed, without regard to any taxes that may
have been deducted from such amount. For purposes of subparagraphs (i) through
and including (iii) below, “Company” or “Motorola” shall mean Motorola Inc.
and/or any of its Subsidiaries:

	 	(i)	 	During the course of Grantee’s employment and
thereafter, Grantee uses or discloses, except on behalf of the
Company and pursuant to the Company’s directions, any Company
Confidential Information. “Confidential Information” means
information concerning the Company and its business that is not
generally known outside the Company, and includes (A) trade
secrets; (B) intellectual property; (C) the Company’s methods of
operation and Company processes; (D) information regarding the
Company’s present and/or future products, developments, processes
and systems, including invention disclosures and patent
applications; (E) information on customers or potential customers,
including customers’ names, sales records, prices, and other terms
of sales and Company cost information; (F) Company personnel data;
(G) Company business plans, marketing plans, financial data and
projections; and (H) information received in confidence by the
Company from third parties. Information regarding products,
services or technological innovations in development, in test
marketing or being marketed or promoted in a discrete geographic
region, which information the Company or one of its affiliates is
considering for broader use, shall be deemed not generally known
until such broader use is actually commercially implemented; and/or
	 
	 	(ii)	 	During Grantee’s employment and for a period of one
year following the termination of Grantee’s employment for any
reason, Grantee hires, recruits, solicits or induces, or causes,
allows, permits or aids others to hire, recruit, solicit or induce,
or to communicate in support of those activities, any employee of
the Company who possesses Confidential Information of the Company
to terminate his/her employment with the Company and/or to seek
employment with Grantee’s new or prospective employer, or any other
company; and/or
	 
	 	(iii)	 	During Grantee’s employment and for a period of
one year following the termination of Grantee’s employment for any
reason, Grantee,
directly or indirectly, on behalf of Grantee or any other
person, company or entity, solicits or participates in
soliciting, products or 

- 11 -

 

	 	 	 	services competitive with or similar to
products or services offered by, manufactured by, designed by or
distributed by the Company to any person, company or entity
which was a customer or potential customer for such products or
services and with which Grantee had direct or indirect contact
regarding those products or services or about which Grantee
learned Confidential Information at any time during the two
years prior to Grantee’s termination of employment with the
Company.

The Company will not be obligated to pay Grantee any consideration whatsoever for forfeited Units.

	3.	 	Lapse of Restrictions.

	 	a.	 	As long as the Units have not been forfeited as described in Section 2
above, and except as set forth in Section 3(b) below, the Restrictions
applicable to the Units shall lapse as follows:

	 	•	 	If in the two years following the Date of Grant (the
“Restriction Period”), the Fair Market Value (as defined in
paragraph 7 below) of Common Stock meets or exceeds the dollar
amount set forth below for at least ten Trading Days (as defined
below) during any thirty consecutive Trading Days, then the
Restrictions shall lapse as to the corresponding percentage of
Units set forth below:

	 	 	 
	Dollar Amount	 	Percent Vested
	$20.00 per share
	 	33%

	$22.00 per share
	 	An additional 33%

	$24.00 per share
	 	The final 34%

	 	 	 	For purposes of this Agreement, “Trading Day” means any date on
which the New York Stock Exchange is open for trading.
	 
	 	•	 	If a Change in Control of the Company occurs and the successor
corporation (or parent thereof) does not assume this Award or
replace it with a comparable award; provided, further, that with
respect to any Award that is assumed or replaced, such assumed or
replaced awards shall provide that the Restrictions shall lapse for
any Participant that is involuntarily terminated (for a reason
other than Cause) or quits for Good Reason within 12 months of the
Date of Grant. For purposes of this paragraph, the terms “Change
in Control”, “Cause ” and “Good Reason” are defined in the 2006
Incentive Plan;
	 
	 	•	 	Subject to the vesting conditions outlined in subparagraph (i)
above, upon termination of Grantee’s employment by Motorola or a
Subsidiary by Total and Permanent Disability. “Total and Permanent
Disability” means for (x) U.S. employees, entitlement to long term
disability benefits under the Motorola Disability Income Plan, as
amended and any successor plan or a determination of a permanent
and total disability under a state workers compensation statute and
(y) non-U.S. employees, as established by applicable Motorola policy or as
required by local regulations; or

- 12 -

 

	 	•	 	Subject to the vesting conditions outlined in subparagraph (i)
above, if the Grantee dies.

	 	b.	 	Subject to the vesting conditions outlined in subparagraph (i) above,
in the case of Involuntary Termination due to a Divestiture or for a reason
other than for Serious Misconduct before the expiration of the Restriction
Period, if the Units have not been forfeited as described in Section 2 above,
then the Restrictions shall lapse immediately.
	 
	 	c.	 	“Termination due to a Divestiture” for purposes of this Agreement means
if Grantee accepts employment with another company in direct connection with
the sale, lease, outsourcing arrangement or any other type of asset transfer or
transfer of any portion of a facility or any portion of a discrete
organizational unit of Motorola or a Subsidiary, or if Grantee remains employed
by a Subsidiary that is sold or whose shares are distributed to the Motorola
stockholders in a spin-off or similar transaction (a “Divestiture”).
	 
	 	d.	 	“Serious Misconduct” for purposes of this Agreement means any
misconduct identified as a ground for termination in the Motorola Code of
Business Conduct, or the human resources policies, or other written policies or
procedures.
	 
	 	e.	 	Subject to the vesting conditions outlined in subparagraph (i) above,
if, during the Restriction Period, the Grantee takes a Leave of Absence from
Motorola or a Subsidiary, the Units will continue to be subject to this
Agreement. If the Restriction Period expires while the Grantee is on a Leave
of Absence the Grantee will be entitled to the Units even if the Grantee has
not returned to active employment. “Leave of Absence” means an approved leave
of absence from Motorola or a Subsidiary that is not a termination of
employment, as determined by Motorola.
	 
	 	f.	 	To the extent the Restrictions lapse under this Section 3 with respect
to the Units, they will be free of the terms and conditions of this Award
(other than Section 2(c)). To the extent the Restrictions under this Section 3
do not lapse with respect to some or all of the Units prior to the end of the
Restriction Period, any such Units shall be forfeited.

	4.	 	Adjustments. If the number of outstanding shares of Common Stock is changed as a result
of a stock split or the like without additional consideration to the Company, the number
of Units subject to this Award shall be adjusted to correspond to the change in the
outstanding shares of Common Stock.
	 
	5.	 	Dividends. No dividends (or dividend equivalents) shall be paid with respect to Units
credited to the Grantee’s account.
	 
	6.	 	Delivery of Certificates or Equivalent. Upon the lapse of Restrictions applicable to the
Units, the Company shall, at its election, either (i) deliver to the Grantee a certificate
representing a number of shares of Common Stock equal to the number of Units upon which
such Restrictions have lapsed, or (ii) establish a brokerage account for the Grantee and
credit to that account the number of shares of Common Stock of the Company equal to the number
of Units upon which such Restrictions have lapsed.

	7.	 	Withholding Taxes. The Company is entitled to withhold applicable taxes for the
respective 

- 13 -

 

	 	 	tax jurisdiction attributable to this Award or any payment made in connection
with the Units. Grantee may satisfy any minimum withholding obligation by electing to
have the plan administrator retain shares of Common Stock deliverable in connection with
the Units having a Fair Market Value on the date the Restrictions applicable to the Units
lapse equal to the amount to be withheld. For purposes of this Agreement, the “Fair
Market Value” of Common Stock on any date shall be the closing price for a share of Common
Stock on that date as reported for the New York Stock Exchange — Composite Transactions in
the Wall Street Journal, Midwest edition.

	8.	 	Voting and Other Rights.

	 	a.	 	Grantee shall have no rights as a stockholder of the Company in
respect of the Units, including the right to vote and to receive cash
dividends and other distributions until delivery of certificates
representing shares of Common Stock in satisfaction of the Units.
	 
	 	b.	 	The grant of Units does not confer upon Grantee any right to
continue in the employ of the Company or a Subsidiary or to interfere with
the right of the Company or a Subsidiary, to terminate Grantee’s employment
at any time.

	9.	 	Agreement Following Termination of Employment. Grantee agrees that upon termination of
employment with Motorola or a Subsidiary, Grantee will immediately inform Motorola of (a)
the identity of any new employer (or the nature of any start-up business or
self-employment), (b) Grantee’s new title, and (c) Grantee’s job duties and
responsibilities. Grantee hereby authorizes Motorola or a Subsidiary to provide a copy of
this Award Document to Grantee’s new employer. Grantee further agrees to provide
information to Motorola or a Subsidiary as may from time to time be requested in order to
determine his/her compliance with the terms hereof.

	10.	 	Consent to Transfer Personal Data. By accepting this award, Grantee voluntarily
acknowledges and consents to the collection, use, processing and transfer of personal data
as described in this paragraph. Grantee is not obliged to consent to such collection,
use, processing and transfer of personal data. However, failure to provide the consent
may affect Grantee’s ability to participate in the Plan. Motorola, its Subsidiaries and
Grantee’s employer hold certain personal information about the Grantee, that may include
his/her name, home address and telephone number, date of birth, social security number or
other employee identification number, salary grade, hire data, salary, nationality, job
title, any shares of stock held in Motorola, or details of all restricted stock units or
any other entitlement to shares of stock awarded, canceled, purchased, vested, or
unvested, for the purpose of managing and administering the Plan (“Data”). Motorola
and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose
of implementation, administration and management of Grantee’s participation in the Plan,
and Motorola and/or any of its Subsidiaries may each further transfer Data to any third
parties assisting Motorola in the implementation, administration and management of the
Plan. These recipients may be located throughout the world, including the United States.
Grantee authorizes them to receive, possess, use, retain and transfer the Data, in
electronic or other form, for the purposes of implementing, administering and managing
Grantee’s participation in the Plan, including any requisite
transfer of such Data as may be required for the administration of the Plan and/or the
subsequent holding of shares of stock on the Grantee’s behalf to a broker or other third
party with whom the Grantee may elect to deposit any shares of stock acquired pursuant
to the Plan. Grantee may, at any time, review Data, require any necessary amendments to
it or withdraw the consents herein in writing by contacting Motorola; however,
withdrawing consent may affect the Grantee’s ability to participate in the Plan.

- 14 -

 

	11.	 	Nature of Award. By accepting this Award Agreement, the Grantee acknowledges his or her
understanding that the grant of Units under this Award Agreement is completely at the
discretion of Motorola, and that Motorola’s decision to make this Award in no way implies
that similar awards may be granted in the future or that Grantee has any guarantee of
future employment. Nor shall this or any such grant interfere with Grantee’s right or the
Company’s right to terminate such employment relationship at any time, with or without
cause, to the extent permitted by applicable laws and any enforceable agreement between
Grantee and the Company. In addition, the Grantee hereby acknowledges that he has entered
into employment with Motorola or a Subsidiary upon terms that did not include this Award
or similar awards, that his decision to continue employment is not dependent on an
expectation of this Award or similar awards, and that any amount received under this Award
is considered an amount in addition to that which the Grantee expects to be paid for the
performance of his services. Grantee’s acceptance of this Award is voluntary. The Award
is not part of normal or expected compensation for purposes of calculating any severance,
resignation, redundancy, end of service payments, bonuses, long-service awards, pension,
or retirement benefits or similar payments, notwithstanding any provision of any
compensation, insurance agreement or benefit plan to the contrary.

	12.	 	Remedies for Breach. Grantee hereby acknowledges that the harm caused to the Company by
the breach or anticipated breach of paragraphs 2(c)(i), (ii) and/or (iii) of this
Agreement will be irreparable and further agrees the Company may obtain injunctive relief
against the Grantee in addition to and cumulative with any other legal or equitable rights
and remedies the Company may have pursuant to this Agreement, any other agreements between
the Grantee and the Company for the protection of the Company’s Confidential Information,
or law, including the recovery of liquidated damages. Grantee agrees that any interim or
final equitable relief entered by a court of competent jurisdiction, as specified in
paragraph 15 below, will, at the request of the Company, be entered on consent and
enforced by any such court having jurisdiction over the Grantee. This relief would occur
without prejudice to any rights either party may have to appeal from the proceedings that
resulted in any grant of such relief.

	13.	 	Acknowledgements. With respect to the subject matter of paragraphs 2(c)(i), (ii) and
(iii) and paragraphs 12 and 15 hereof, this Agreement is the entire agreement with the
Company. No waiver of any breach of any provision of this Agreement by the Company shall
be construed to be a waiver of any succeeding breach or as a modification of such
provision. The provisions of this Agreement shall be severable and in the event that any
provision of this Agreement shall be found by any court as specified in paragraph 15 below
to be unenforceable, in whole or in part, the remainder of this Agreement shall
nevertheless be enforceable and binding on the parties. Grantee hereby agrees that the
court may modify any invalid, overbroad or unenforceable term of this Agreement so that
such term, as modified, is valid and enforceable under applicable law. Further, by
accepting any Award under this Agreement, Grantee affirmatively states that he has not,
will not and cannot rely on any representations not expressly made herein.

	14.	 	Funding. No assets or shares of Common Stock shall be segregated or earmarked by the
Company in respect of any Units awarded hereunder. The grant of Units hereunder shall
not constitute a trust and shall be solely for the purpose of recording an unsecured
contractual obligation of the Company.

	15.	 	Governing Law. All questions concerning the construction, validity and interpretation of
this Award shall be governed by and construed according to the law of the State of
Illinois without regard to any state’s conflicts of law principles. Any disputes
regarding this Award or Agreement shall be brought only in the state or federal courts of
Illinois.

- 15 -

 

	16.	 	Waiver. The failure of the Company to enforce at any time any provision of this Award
shall in no way be construed to be a waiver of such provision or any other provision
hereof.

	17.	 	Actions by the Compensation Committee. The Committee may delegate its authority to
administer this Agreement. The actions and determinations of the Compensation Committee
or its delegate shall be binding upon the parties.

	18.	 	Acceptance of Terms and Conditions. By electronically accepting this Award within 30
days after the date of the electronic mail notification by the Company to Grantee of the
grant of this Award (“Email Notification Date”), Grantee agrees to be bound by the
foregoing terms and conditions, the 2006 Incentive Plan and any and all rules and
regulations established by Motorola in connection with awards issued under the 2006
Incentive Plan. If Grantee does not electronically accept this Award within 30 days of
the Email Notification Date, Grantee will not be entitled to the Units.

	19.	 	Plan Documents. The 2006 Incentive Plan and the Prospectus for the 2006
Incentive Plan are available at
http://myhr.mot.com/pay_finances/awards_incentives/stock_options/plan_documents.jsp or
from Global Rewards, 1303 East Algonquin Road, Schaumburg, IL 60196 (847) 576-7885.

- 16 -

 

ATTACHMENT C

MOTOROLA, INC.

AWARD DOCUMENT

For the

Motorola Omnibus Incentive Plan of 2006

Terms and Conditions Related to Employee Nonqualified Stock Options

	 	 	 	 	 	 	 
	Recipient:
	 	Thomas J. Meredith	 	Date of Expiration:	 	April 2, 2017
	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Commerce ID#:
	 	 	 	Number of Options:	 	250,000
	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Date of Grant:
	 	April 2, 2007	 	Exercise Price:	 	$
	 
	 	 	 	 

Motorola, Inc. (“Motorola” or “the Company”) is pleased to grant you options to purchase shares of
Motorola’s common stock under the Motorola Omnibus Incentive Plan of 2006 (the “Plan”). The number
of options (“Options”) awarded to you and the Exercise Price per Option, which is the Fair Market
Value on the Date of Grant, are stated above. Each Option entitles you to purchase one share of
Motorola’s common stock on the terms described below and in the Plan.

Vesting and Exercisability

You cannot exercise the Options until they have vested.

Regular Vesting – The Options will vest in accordance with the following schedule (subject to the
other terms hereof):

	 	 	 
	Percent	 	Date
	100%
	 	April 2, 2008

Special Vesting – You may be subject to the Special Vesting Dates described below if your
employment or service with Motorola or a Subsidiary (as defined below) terminates.

Exercisability – You may exercise Options at any time after they vest and before they expire as
described below.

Expiration

All Options expire on the earlier of (1) the Date of Expiration as stated above or (2) any of the
Special Expiration Dates described below. Once an Option expires, you no longer have the right to
exercise it.

Special Vesting Dates and Special Expiration Dates

There are events that cause your Options to vest sooner than the Regular Vesting schedule discussed
above or to expire sooner than the Date of Expiration as stated above; provided, however, that for
purposes of this award, a termination of employment shall not include a change in your work
assignment from Executive Vice President and Acting Chief Financial Officer to any other position
in the Motorola Finance organization or on the Motorola Senior Leadership Team or as a consultant
to the CEO or any member of the Senior Leadership Team. Likewise for purposes of this agreement, a
termination of employment shall not include a change in your employment status from a full-time
employee to either a non-employee consultant to the Company or a non-employee director of the
Company. The events are as follows:

     Disability – If your employment or service with Motorola or a Subsidiary is terminated because of
your Total and Permanent Disability (as defined below), Options that are not vested will automatically become fully vested upon your
termination of employment or service. All your Options will then expire on the earlier of the
first anniversary of your termination of
employment or service because of your Total and Permanent Disability or the Date of Expiration
stated above. Until that time, the Options will be exercisable by you or your guardian or legal
representative.

     Death – If your employment or service with Motorola or a Subsidiary is terminated because of your
death, Options that are not vested will
automatically become

 

 

fully vested upon your death. All your Options will then expire on the
earlier of the first anniversary of your death or the Date of Expiration stated above. Until that
time, with written proof of death and inheritance, the Options will be exercisable by your legal
representative, legatees or distributees.

Change In Control – If a Change in Control of the Company occurs, and the successor corporation
does not assume these Options or replace them with options that are at least comparable to these
Options, then: (1) all of your unvested Options will be fully vested and (2) all of your Options
will be exercisable until the Date of Expiration set forth above.

Further, with respect to any Options that are assumed or replaced as described in the preceding
paragraph, such assumed or replaced options shall provide that they will be fully vested and
exercisable until the Date of Expiration set forth above if you are involuntarily terminated (for a
reason other than Cause) or if you quit for Good Reason within 24 months of the Change in Control.
For purposes of this paragraph, the terms “Change in Control”, “Cause” and “Good Reason” are
defined in the Plan.

Termination of Employment or Service Because of Serious Misconduct – If Motorola or a Subsidiary
terminates your employment or service because of Serious Misconduct (as defined below) all of your
Options (vested and unvested) expire upon your termination.

Change in Employment in Connection with a Divestiture – If you accept employment with another
company in direct connection with the sale, lease, outsourcing arrangement or any other type of
asset transfer or transfer of any portion of a facility or any portion of a discrete organizational
unit of Motorola or a Subsidiary, or if you remain employed by a Subsidiary that is sold or whose
shares are distributed to the Motorola stockholders in a spin-off or similar transaction (a
“Divestiture”), all of your unvested Options will automatically expire upon termination of your
employment with Motorola, and all of your vested but not yet exercised Options will expire on the
Date of Expiration stated above.

Termination of Employment or Service by Motorola or a Subsidiary Other than for Serious Misconduct
or a Divestiture– If Motorola or a Subsidiary on its initiative, terminates your employment or
service other than for Serious Misconduct or a Divestiture, all of your unvested Options will
automatically expire upon termination and all of your vested but not yet exercised Options will
expire on the Date of Expiration stated above.

Termination of Employment or Service for any Other Reason than Described Above – If your employment
or service with Motorola or a Subsidiary terminates for any reason other than that described above,
including voluntary resignation of your employment or service, all of your unvested Options will
automatically expire upon termination of your employment or service and all of your vested but not
yet exercised Options will expire on the Date of Expiration stated above.

Leave of Absence/Temporary Layoff

If you take a Leave of Absence from Motorola or a Subsidiary that your employer has approved in
writing in accordance with your employer’s Leave of Absence Policy and which does not constitute a
termination of employment as determined by Motorola, or you are placed on Temporary Layoff (as
defined below) by Motorola or a Subsidiary the following will apply:

Vesting of Options – Options will continue to vest in accordance with the vesting schedule set
forth above.

Exercising Options – You may exercise Options that are vested or that vest during the Leave of
Absence or Temporary Layoff.

Effect of Termination of Employment or Service – If your employment or service is terminated during
the Leave of Absence or Temporary Layoff, the treatment of your Options will be determined as
described under “Special Vesting Dates and Special Expiration Dates” above.

Other Terms

Method of Exercising – You must follow the procedures for exercising options established by
Motorola from time to time. At the time of exercise, you must pay the Exercise Price for all of
the Options being exercised and any taxes that are required to be withheld by Motorola or a
Subsidiary in connection with the exercise. Options may not be exercised for less than 50 shares
unless the number of shares represented by the Option is less than 50 shares, in which case the
Option must be exercised for the remaining amount.

- 18 -

 

Transferability – Except to the extent provided by the Committee, Options are not transferable
other than by will or the laws of descent and distribution.

Tax Withholding – Motorola or a Subsidiary is entitled to withhold an amount equal to the required
minimum statutory withholding taxes for the respective tax jurisdictions attributable to any share
of common stock deliverable in connection with the exercise of the Options. You may satisfy any
minimum withholding obligation and any additional withholding, if desired, by electing to have the
plan administrator retain Option shares having a Fair Market Value on the date of exercise equal to
the amount to be withheld.

Definition of Terms

If a term is used but not defined, it has the meaning given such term in the Plan.

“Confidential Information” means information concerning the Company and its business that is not
generally known outside the Company, and includes (A) trade secrets; (B) intellectual property; (C)
the Company’s methods of operation and Company processes; (D) information regarding the Company’s
present and/or future products, developments, processes and systems, including invention
disclosures and patent applications; (E) information on customers or potential customers, including
customers’ names, sales records, prices, and other terms of sales and Company cost information; (F)
Company personnel data; (G) Company business plans, marketing plans, financial data and
projections; and (H) information received in confidence by the Company from third parties.
Information regarding products, services or technological innovations in development, in test
marketing or being marketed or promoted in a discrete geographic region, which information the
Company or one of its affiliates is considering for broader use, shall be deemed generally known
until such broader use is actually commercially implemented.

“Fair Market Value” is the closing price for a share of Motorola common stock on the date of grant
or date of exercise, whichever is applicable. The official source for the closing price is the New
York Stock Exchange Composite Transaction as reported in the Wall Street Journal, Midwest edition.

“Serious Misconduct” means any misconduct identified as a ground for termination in the Motorola
Code of Business Conduct, or the human resources policies, or other written policies or procedures.

“Subsidiary” means an entity of which Motorola owns directly or indirectly at least 50% and that
Motorola consolidates for financial reporting purposes.

“Total and Permanent Disability” means for (x) U.S. employees, entitlement to long-term disability
benefits under the Motorola Disability Income Plan, as amended and any successor plan or a
determination of a permanent and total disability under a state workers compensation statute and
(y) non-U.S. employees, as established by applicable Motorola policy or as required by local
regulations.

“Temporary Layoff” means a layoff or redundancy that is communicated as being for a period of up to
twelve months and as including a right to recall under defined circumstances.

Consent to Transfer Personal Data

By accepting this award, you voluntarily acknowledge and consent to the collection, use, processing
and transfer of personal data as described in this paragraph. You are not obliged to consent to
such collection, use, processing and transfer of personal data. However, failure to provide the
consent may affect your ability to participate in the Plan. Motorola, its Subsidiaries and your
employer hold certain personal information about you that may include your name, home address and
telephone number, date of birth, social security number or other employee identification number,
salary, salary grade, hire date, nationality, job title, any shares of stock held in Motorola, or
details of all options or any other entitlement to shares of stock awarded, canceled,
purchased, vested, or unvested, for the purpose of managing and administering the Plan (“Data”).
Motorola and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose
of implementation, administration and management of your participation in the Plan, and Motorola
and/or any of its Subsidiaries may each further transfer Data to any third parties assisting
Motorola in the implementation, administration and management of the Plan. These recipients may be
located throughout the world, including the United States. You authorize them to receive, possess,
use, retain and transfer the Data, in electronic or other form, for the purposes of implementing,
administering and managing your participation in the Plan, including any requisite transfer of such
Data as may be required for the administration of the Plan and/or the subsequent holding of shares
of stock on your behalf to a broker or other third party with whom you may elect to deposit

- 19 -

 

any shares of stock acquired pursuant to the Plan. You may, at any time, review Data, require any
necessary amendments to it or withdraw the consents herein in writing by contacting Motorola;
however, withdrawing your consent may affect your ability to participate in the Plan.

Acknowledgement of Discretionary Nature of the Plan; No Vested Rights

You acknowledge and agree that the Plan is discretionary in nature and limited in duration, and may
be amended, cancelled, or terminated by Motorola or a Subsidiary, in its sole discretion, at any
time. The grant of awards under the Plan is a one-time benefit and does not create any contractual
or other right to receive an award in the future or to future employment. Nor shall this or any
such grant interfere with your right or the Company’s right to terminate such employment
relationship at any time, with or without cause, to the extent permitted by applicable laws and any
enforceable agreement between you and the Company. Future grants, if any, will be at the sole
discretion of Motorola, including, but not limited to, the timing of any grant, the amount of the
award, vesting provisions, and the exercise price.

No Relation to Other Benefits/Termination Indemnities

Your acceptance of this award and participation under the Plan is voluntary. The value of your
stock option awarded herein is an extraordinary item of compensation outside the scope of your
employment contract, if any. As such, the stock option is not part of normal or expected
compensation for purposes of calculating any severance, resignation, redundancy, end of service
payments, bonuses, long-service awards, pension, or retirement benefits or similar payments,
notwithstanding any provision of any compensation, insurance agreement or benefit plan to the
contrary.

Agreement Following Termination of Employment

As a further condition of accepting the Options, you acknowledge and agree that for a period of one
year following your termination of employment or service, you will not hire, recruit, solicit or
induce, or cause, allow, permit or aid others to hire, recruit, solicit or induce, or to
communicate in support of those activities, any employee of Motorola or a Subsidiary who possesses
Confidential Information of Motorola or a Subsidiary to terminate his/her employment with Motorola
or a Subsidiary and/or to seek employment with your new or prospective employer, or any other
company.

You agree that upon termination of employment with Motorola or a Subsidiary, and for a period of
one year thereafter, you will immediately inform Motorola of (i) the identity of your new employer
(or the nature of any start-up business or self-employment), (ii) your new title, and (iii) your
job duties and responsibilities. You hereby authorize Motorola or a Subsidiary to provide a copy
of this Award Document to your new employer. You further agree to provide information to Motorola
or a Subsidiary as may from time to time be requested in order to determine your compliance with
the terms hereof.

Substitute Stock Appreciation Right

Motorola reserves the right to substitute a Stock Appreciation Right for your Option in the event
certain changes are made in the accounting treatment of stock options. Any substitute Stock
Appreciation Right shall be applicable to the same number of shares as your Option and shall have
the same Date of Expiration, Exercise Price, and other terms and conditions. Any substitute Stock
Appreciation Right may be settled only in common stock.

Acceptance of Terms and Conditions

By accepting the Options, you agree to be bound by these terms and conditions, the Plan, any and
all rules and regulations established by Motorola in connection with awards issued under the Plan,
and any additional covenants or promises Motorola may require as a condition of the grant.

Other Information about Your Options and the Plan

You can find other information about options and the Plan on the Motorola website
http://myhr.mot.com/pay_finances/awards_incentives/stock_options/plan_documents.jsp. If you do not
have access to the website, please contact Motorola Global Rewards, 1303 E. Algonquin Road,
Schaumburg, IL 60196 USA; GBLRW01@Motorola.com; 847-576-7885; for an order form to request Plan
documents.

- 20 -

 

Exhibit 1

RSU Form

T. Meredith

RESTRICTED STOCK UNIT AWARD AGREEMENT

     This Restricted Stock Unit Award (“Award”) is awarded on «Grant_date» (“Date of
Grant”), by Motorola, Inc. (the “Company” or “Motorola”) to «First_Name»
«Last_Name» (the “Grantee”).

     WHEREAS, Grantee is receiving the Award under the Motorola Omnibus Incentive Plan of 2006, as
amended (the “2006 Incentive Plan”);

     WHEREAS, the Award is being made as a special grant of Motorola restricted stock units
authorized by the Board of Directors (the “Board”) and the Board’s Compensation and
Leadership Committee (the “Compensation Committee”); and

     WHEREAS, it is a condition to Grantee receiving the Award that Grantee electronically
accept the terms, conditions and Restrictions applicable to the restricted stock units as
set forth in this Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good
and valuable consideration, the Company hereby awards restricted stock units to Grantee on the
following terms and conditions:

	1.	 	Award of Restricted Stock Units. The Company hereby grants to Grantee a total of
«Txt_Nbr_of_Shares» («Whole_Nbr_of_Shares») Motorola restricted stock units (the
“Units”) subject to the terms and conditions set forth below. All Awards shall be
paid in whole shares of Motorola Common Stock (“Common Stock”); no fractional shares shall
be credited of delivered to Grantee.
	 
	2.	 	Restrictions. The Units are being awarded to Grantee subject to the transfer and
forfeiture conditions set forth below (the “Restrictions”) which shall lapse, if
at all, as described in Section 3 below. For purposes of this Award, the term Units
includes any additional Units granted to the Grantee with respect to Units, still subject
to the Restrictions.

	 	a.	 	Grantee may not directly or indirectly, by operation of law or otherwise,
voluntarily or involuntarily, sell, assign, pledge, encumber, charge or
otherwise transfer any of the Units still subject to Restrictions. The Units
shall be forfeited if Grantee violates or attempts to violate these transfer
Restrictions. Motorola shall have the right to assign this Agreement, which
shall not affect the validity or enforceability of this Agreement. This
Agreement shall inure to the benefit of assigns and successors of Motorola.
	 
	 	b.	 	Except to the extent Grantee’s Employment Period (as defined in his Amended
and Restated Employment Agreement dated October 4, 2007) is immediately
succeeded by his continued service as a non-employee director on the Board, any
Units still subject to the Restrictions shall be (x) automatically forfeited
upon the Grantee’s termination of employment with Motorola or a Subsidiary for
any reason other than death (as provided in Section 3(a) below), Total
and Permanent Disability (as provided in Section 3(a) below), or
Involuntary Termination due to (A) a Divestiture or (B) for a reason other than
for Serious Misconduct (as provided in Section 3(b) below). Further, if
Grantee is removed from the Board
or is not renominated to the Board for “Cause”, or if Grantee or voluntarily

 

 

	 	 	 	resigns from the Board, then any Units still subject to the Restrictions
shall be automatically forfeited. For purposes of this Award, a
“Subsidiary” is any corporation or other entity in which a 50 percent or
greater interest is held directly or indirectly by Motorola and which is
consolidated for financial reporting purposes. “Cause” is defined in the
2006 Incentive Plan.
	 
	 	c.	 	If Grantee engages in any of the following conduct, in addition to all
remedies in law and/or equity available to the Company or any Subsidiary,
Grantee shall forfeit all restricted stock units under the Award whose
Restrictions have not lapsed, and, for all restricted stock units under the
Award whose Restrictions have lapsed, Grantee shall immediately pay to the
Company the Fair Market Value (as defined in paragraph 7 below) of Common Stock
on the date(s) such Restrictions lapsed, without regard to any taxes that may
have been deducted from such amount. For purposes of subparagraphs (i) through
and including (iii) below, “Company” or “Motorola” shall mean Motorola Inc.
and/or any of its Subsidiaries:

	 	(i)	 	During the course of Grantee’s employment and
thereafter, Grantee uses or discloses, except on behalf of the
Company and pursuant to the Company’s directions, any Company
Confidential Information. “Confidential Information” means
information concerning the Company and its business that is not
generally known outside the Company, and includes (A) trade
secrets; (B) intellectual property; (C) the Company’s methods of
operation and Company processes; (D) information regarding the
Company’s present and/or future products, developments, processes
and systems, including invention disclosures and patent
applications; (E) information on customers or potential customers,
including customers’ names, sales records, prices, and other terms
of sales and Company cost information; (F) Company personnel data;
(G) Company business plans, marketing plans, financial data and
projections; and (H) information received in confidence by the
Company from third parties. Information regarding products,
services or technological innovations in development, in test
marketing or being marketed or promoted in a discrete geographic
region, which information the Company or one of its affiliates is
considering for broader use, shall be deemed not generally known
until such broader use is actually commercially implemented; and/or
	 
	 	(ii)	 	During Grantee’s employment and for a period of one
year following the termination of Grantee’s employment for any
reason, Grantee hires, recruits, solicits or induces, or
causes, allows, permits or aids others to hire, recruit,
solicit or induce, or to communicate in support of those
activities, any employee of the Company who possesses
Confidential Information of the Company to terminate his/her
employment with the Company and/or to seek employment with
Grantee’s new or prospective employer, or any other company; and/or

 

 

	 	(iii)	 	During Grantee’s employment and for a period of one
year following
the termination of Grantee’s employment for any reason Grantee,
directly or indirectly, on behalf of Grantee or any other person,
company or entity, solicits or participates in soliciting,
products or services competitive with or similar to products or
services offered by, manufactured by, designed by or distributed
by the Company to any person, company or entity which was a
customer or potential customer for such products or services and
with which Grantee had direct or indirect contact regarding those
products or services or about which Grantee learned Confidential
Information at any time during the two years prior to Grantee’s
termination of employment with the Company.

The Company will not be obligated to pay Grantee any consideration whatsoever for forfeited Units.

	3.	 	Lapse of Restrictions.

	 	a.	 	Except as set forth in Section 3(b) below, the Restrictions applicable to
the Units shall lapse, as long as the Units have not been forfeited as
described in Section 2 above, as follows:

	 	(i)	 	50% on the 30 month anniversary of the Date of Grant and an
additional 50% on the 60 month anniversay of the Date of Grant (the
“Restriction Period”);
	 
	 	(ii)	 	If Grantee ceases to serve as a member of the Board for any
reason (other than Grantee’s voluntary resignation or if Grantee is
removed from the Board or is not renominated to the Board for
“Cause”);
	 
	 	(iii)	 	If a Change in Control of the Company occurs during Grantee’s
Employment Period or any subsequent period of service on the Board
and the successor corporation (or parent thereof) does not, during
the Restriction Period, assume this Award or replace it with an
award that preserves the existing value of this Award at the time
of the Change in Control and that provides for subsequent payout in
accordance with the same vesting schedule applicable to this Award;
provided, further, that with respect to any Award that is assumed
or replaced, such assumed or replaced Award shall provide that the
Restrictions shall lapse if Grantee is involuntarily terminated
(for a reason other than “Cause”) or quits for “Good Reason” within
24 months of the Change in Control. For purposes of this
paragraph, the terms “Change in Control”, “Cause” and “Good Reason”
are defined in the 2006 Incentive Plan;
	 
	 	(iv)	 	Upon termination of Grantee’s Employment Period by Motorola or a
Subsidiary due to Grantee’s Total and Permanent Disability. “Total
and Permanent Disability” means for (x) U.S. employees, entitlement
to long term disability benefits under the Motorola Disability
Income Plan, as amended and any successor plan or a determination
of a

 

 

	 	 	 	permanent and total disability under a state workers
compensation statute and, (y) non-U.S. employees, as established by
applicable Motorola policy or as required by local regulations; or
	 
	 	(v)	 	If the Grantee dies.

	 	b.	 	In the case of Involuntary Termination during the Employment Period due to a
Divestiture or for a reason other than for Serious Misconduct before the
expiration of the Restriction Period, if the Units have not been forfeited as
described in Section 2 above, then the Restrictions shall lapse on a
pro rata basis determined by dividing (i) the number of completed full years of
service by the Grantee from the Award Date to the employee’s date of
termination by (ii) the total length of the Restriction Period.
	 
	 	c.	 	“Termination due to a Divestiture” for purposes of this Agreement means if,
during the Employment Period, Grantee accepts employment with another company
in direct connection with the sale, lease, outsourcing arrangement or any other
type of asset transfer or transfer of any portion of a facility or any portion
of a discrete organizational unit of Motorola or a Subsidiary, or if Grantee
remains employed by a Subsidiary that is sold or whose shares are distributed
to the Motorola stockholders in a spin-off or similar transaction during the
Employment Period (a “Divestiture”).
	 
	 	d.	 	“Serious Misconduct” for purposes of this Agreement means any misconduct
identified as a ground for termination of employment in the Motorola Code of
Business Conduct, or the human resources policies, or other written policies or
procedures.
	 
	 	e.	 	If, during the Employment Period, the Grantee takes a Leave of Absence from
Motorola or a Subsidiary, the Units will continue to be subject to this
Agreement. If the Restriction Period expires while the Grantee is on a Leave
of Absence the Grantee will be entitled to the Units even if the Grantee has
not returned to active employment. “Leave of Absence” means an approved leave
of absence from Motorola or a Subsidiary that is not a termination of
employment, as determined by Motorola.
	 
	 	f.	 	To the extent the Restrictions lapse under this Section 3 with respect to
the Units, they will be free of the terms and conditions of this Award (other
than Section 2(c)).

	4.	 	Adjustments. If the number of outstanding shares of Common Stock is changed as a
result of a stock split or the like without additional consideration to the Company, the
number of Units subject to this Award shall be adjusted to correspond to the change in the
outstanding shares of Common Stock.
	 
	5.	 	Dividends. No dividends (or dividend equivalents) shall be paid with respect to
Units credited to the Grantee’s account.

 

 

	6.	 	Delivery of Certificates or Equivalent. Upon the lapse of Restrictions
applicable to the Units, the Company shall, at its election, either (i) deliver to the
Grantee a certificate representing a number of shares of Common Stock equal to the number
of Units upon which such Restrictions have lapsed, or (ii) establish a brokerage account
for the Grantee and credit to that account the number of shares of Common Stock of the
Company equal to the number of Units upon which such Restrictions have lapsed.
	 
	7.	 	Withholding Taxes. The Company is entitled to withhold applicable taxes for
the respective tax jurisdiction attributable to this Award or any payment made in
connection with the Units. Grantee may satisfy any minimum withholding obligation by
electing to have the plan administrator retain shares of Common Stock deliverable in
connection with the Units having a Fair Market Value on the date the Restrictions
applicable to the Units lapse equal to the amount to be withheld. “Fair Market
Value” for this purpose shall be the closing price for a share of Common Stock on
the day the Restrictions applicable to the Units lapse as reported for the New York Stock
Exchange-Composite Transactions in the Wall Street Journal, Midwest edition.
	 
	8.	 	Voting and Other Rights.

	 	a.	 	Grantee shall have no rights as a stockholder of the Company in respect
of the Units, including the right to vote and to receive cash dividends and
other distributions until delivery of certificates representing shares
of Common Stock in satisfaction of the Units.
	 
	 	b.	 	The grant of Units does not confer upon Grantee any right to continue in
the employ of the Company or a Subsidiary or to interfere with the right of
the Company or a Subsidiary, to terminate Grantee’s employment at any time.

	9.	 	Agreement Following Termination of Employment. Grantee agrees that upon termination
of employment with Motorola or a Subsidiary, Grantee will immediately inform Motorola of (a)
the identity of any new employer (or the nature of any start-up business or self-employment),
(b) Grantee’s new title, and (c) Grantee’s job duties and responsibilities. Grantee hereby
authorizes Motorola or a Subsidiary to provide a copy of this Award Document to Grantee’s new
employer. Grantee further agrees to provide information to Motorola or a Subsidiary as may
from time to time be requested in order to determine his/her compliance with the terms hereof.
	 
	10.	 	Consent to Transfer Personal Data. By accepting this award, Grantee voluntarily
acknowledges and consents to the collection, use, processing and transfer of personal data
as described in this paragraph. Grantee is not obliged to consent to such collection,
use, processing and transfer of personal data. However, failure to provide the consent
may affect Grantee’s ability to participate in the Plan. Motorola, its Subsidiaries and
Grantee’s employer hold certain personal information about the Grantee, that may include
his/her name, home address and telephone number, date of birth, social security number or
other employee identification number, salary grade, hire data, salary, nationality, job
title, any shares of stock held in Motorola, or details of all restricted stock units or
any other entitlement to shares of stock awarded, canceled, purchased, vested, or
unvested, for the purpose of managing and administering the Plan (“Data”). Motorola
and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose
of implementation, administration and management of Grantee’s participation in the Plan,
and Motorola and/or any of its Subsidiaries may each further transfer Data to any third
parties assisting Motorola in the implementation, administration and management

 

 

	 	 	of the
Plan. These recipients may be located throughout the world, including the United States.
Grantee’s authorizes them to receive, possess, use, retain and transfer the Data, in
electronic or other form, for the purposes of implementing, administering and managing
Grantee’s participation in the Plan, including any requisite transfer of such Data as may
be required for the administration of the Plan and/or the subsequent holding of shares of
stock on the Grantee’s behalf to a broker or other third party with whom the Grantee may
elect to deposit any shares of stock acquired pursuant to the Plan. Grantee may, at any
time, review Data, require any necessary amendments to it or
withdraw the consents herein in writing by contacting Motorola; however, withdrawing
consent may affect the Grantee’s ability to participate in the Plan.
	 
	11.	 	Nature of Award. By accepting this Award Agreement, the Grantee acknowledges his
or her understanding that the grant of Units under this Award Agreement is completely at
the discretion of Motorola, and that Motorola’s decision to make this Award in no way
implies that similar awards may be granted in the future or that Grantee has any guarantee
of future employment. Nor shall this or any such grant interfere with Grantee’s right or
the Company’s right to terminate such employment relationship at any time, with or without
cause, to the extent permitted by applicable laws and any enforceable agreement between
Grantee and the Company. In addition, the Grantee hereby acknowledges that he has entered
into employment with Motorola or a Subsidiary upon terms that did not include this Award
or similar awards, that his decision to continue employment is not dependent on an
expectation of this Award or similar awards, and that any amount received under this Award
is considered an amount in addition to that which the Grantee expects to be paid for the
performance of his services. Grantee’s acceptance of this Award is voluntary. The Award
is not part of normal or expected compensation for purposes of calculating any severance,
resignation, redundancy, end of service payments, bonuses, long-service awards, pension,
or retirement benefits or similar payments, notwithstanding any provision of any
compensation, insurance agreement or benefit plan to the contrary.
	 
	12.	 	Remedies for Breach. Grantee hereby acknowledges that the harm caused to the
Company by the breach or anticipated breach of paragraphs 2(c)(i), (ii) and/or (iii) of
this Agreement will be irreparable and further agrees the Company may obtain injunctive
relief against the Grantee in addition to and cumulative with any other legal or equitable
rights and remedies the Company may have pursuant to this Agreement, any other agreements
between the Grantee and the Company for the protection of the Company’s Confidential
Information, or law, including the recovery of liquidated damages. Grantee agrees that
any interim or final equitable relief entered by a court of competent jurisdiction, as
specified in paragraph 15 below, will, at the request of the Company, be entered on
consent and enforced by any such court having jurisdiction over the Grantee. This relief
would occur without prejudice to any rights either party may have to appeal from the
proceedings that resulted in any grant of such relief.
	 
	13.	 	Acknowledgements. With respect to the subject matter of paragraphs 2(c)(i),
(ii), and (iii), and paragraphs 12 and 15 hereof, this Agreement is the entire agreement
with the Company. No waiver of any breach of any provision of this Agreement by the
Company shall be construed to be a waiver of any succeeding breach or as a modification of
such provision.

 

 

	 	 	The provisions of this Agreement shall be severable and in the event that
any provision of this Agreement shall be found by any court as specified in paragraph 15
below to be unenforceable, in whole or in part, the remainder of this Agreement shall
nevertheless be enforceable and binding on the parties. Grantee hereby agrees that the
court may modify any invalid, overbroad or unenforceable term of this Agreement so that
such term, as modified, is valid and enforceable under applicable law. Further, by
accepting any Award under this Agreement, Grantee affirmatively states that he has not,
will not and cannot rely on any representations not expressly made herein.
	 
	14.	 	Funding. No assets or shares of Common Stock shall be segregated or earmarked by
the Company in respect of any Units awarded hereunder. The grant of Units hereunder shall
not constitute a trust and shall be solely for the purpose of recording an unsecured
contractual obligation of the Company.
	 
	15.	 	Governing Law. All questions concerning the construction, validity and
interpretation of this Award shall be governed by and construed according to the law of
the State of Illinois without regard to any state’s conflicts of law principles. Any
disputes regarding this Award or Agreement shall be brought only in the state or federal
courts of Illinois.
	 
	16.	 	Waiver. The failure of the Company to enforce at any time any provision of this
Award shall in no way be construed to be a waiver of such provision or any other provision
hereof.
	 
	17.	 	Actions by the Compensation Committee. The Committee may delegate its authority
to administer this Agreement. The actions and determinations of the Compensation
Committee or its delegate shall be binding upon the parties.
	 
	18.	 	Acceptance of Terms and Conditions. By electronically accepting this Award
within 30 days after the date of the electronic mail notification by the Company to
Grantee of the grant of this Award (“Email Notification Date”), Grantee agrees to be bound
by the foregoing terms and conditions, the 2006 Incentive Plan and any and all rules and
regulations established by Motorola in connection with awards issued under the 2006
Incentive Plan. If Grantee does not electronically accept this Award within 30 days of
the Email Notification Date, Grantee will not be entitled to the Units.
	 
	19.	 	Plan Documents. The 2006 Incentive Plan and the Prospectus for the 2006
Incentive Plan are available at http://myhr.mot.com/pay_finances/awards_incentives/
stock_options/plan_documents.jsp or from Global Rewards, 1303 East Algonquin Road,
Schaumburg, IL 60196 (847) 576-7885.

 

 

Exhibit
2

T. Meredith
2006 plan

MOTOROLA, INC.

AWARD DOCUMENT

For the

Motorola Omnibus Incentive Plan of 2006

Terms and Conditions Related to Employee Nonqualified Stock Options

	 	 	 	 	 	 	 
	Recipient:

	 	 	 	Date of Expiration:	 	 
	 

	 	 
	 	 	 	 
	Commerce ID#:

	 	 	 	Number of Options:	 	 
	 

	 	 
	 	 	 	 
	Date of Grant:

	 	 	 	Exercise Price:	 	 
	 

	 	 
	 	 	 	 

Motorola, Inc. (“Motorola” or “the Company”) is pleased to grant you options to purchase shares of
Motorola’s common stock under the Motorola Omnibus Incentive Plan of 2006 (the “Plan”). The number
of options (“Options”) awarded to you and the Exercise Price per Option, which is the Fair Market
Value on the Date of Grant, are stated above. Each Option entitles you to purchase one share of
Motorola’s common stock on the terms described below and in the Plan.

Vesting and Exercisability

You cannot exercise the Options until they have vested.

Regular Vesting – The Options will vest in accordance with the following schedule (subject to the
other terms hereof):

	 	 	 	 	 
	Percent	 	          Date
	  25%
	 	 	_____  ____, 20__	 
	  25%
	 	 	_____  ____, 20__	 
	  25%
	 	 	_____  ____, 20__	 
	  25%
	 	 	_____  ____, 20__	 

Special Vesting – You may be subject to the Special Vesting Dates described below if your
employment or service with Motorola or a Subsidiary (as defined below) terminates.

Exercisability – You may exercise Options at any time after they vest and before they expire as
described below.

Expiration

All Options expire on the earlier of (1) the Date of Expiration as stated above or (2) any of the
Special Expiration Dates described below. Once an Option expires, you no longer have the right to
exercise it.

Special Vesting Dates and Special Expiration Dates

There are events that cause your Options to vest sooner than the Regular Vesting schedule discussed
above or to expire sooner than the Date of Expiration as stated above. Those events are as
follows:

Disability – If your employment or service with Motorola or a Subsidiary is terminated during your
Employment Period because of your Total and Permanent Disability (as defined below), Options that
are not vested will automatically become fully vested upon your termination of employment or
service. All your Options will then expire on the earlier of the first anniversary of your
termination of employment or service because of your Total and Permanent Disability or the Date of
Expiration stated above. Until that time, the Options will be exercisable by you or your guardian
or legal representative.

Death – If your employment or service with Motorola or a Subsidiary is terminated during your
Employment Period because of your death, Options
that are not vested will automatically become fully vested upon your death. All your Options will
then expire on the earlier of the first anniversary of your death or the Date of Expiration stated
above. Until that time, with written proof of death and inheritance,

 

 

the Options will be
exercisable by your legal representative, legatees or distributees.

Change In Control – If a “Change in Control” of the Company occurs during your Employment Period
and the successor corporation does not assume these Options or replace them with options that
preserve the existing value of this award at the time of the Change in Control and provide for
subsequent payout in accordance with the same vesting schedule applicable to this award, then: (1)
all of your unvested Options will be fully vested and (2) all of your Options will be exercisable
until the Date of Expiration set forth above.

Further, with respect to any Options that are assumed or replaced as described in the preceding
paragraph, such assumed or replaced options shall provide that they will be fully vested and
exercisable until the Date of Expiration set forth above if you are involuntarily terminated from
employment for a reason other than “Cause” or if you quit for “Good Reason” within 24 months of the
Change in Control. For purposes of this paragraph, the terms “Change in Control”, “Cause” and
“Good Reason” are defined in the Plan.

Termination of Employment or Service Because of Serious Misconduct – If Motorola or a Subsidiary
terminates your employment or service during the Employment Period because of Serious Misconduct
(as defined below) all of your Options (vested and unvested) expire upon your termination.

Change in Employment in Connection with a Divestiture – If you accept employment with another
company during the Employment Period in direct connection with the sale, lease, outsourcing
arrangement or any other type of asset transfer or transfer of any portion of a facility or any
portion of a discrete organizational unit of Motorola or a Subsidiary, or if you remain employed by
a Subsidiary that is sold or whose shares are distributed to the Motorola stockholders in a
spin-off or similar transaction (a “Divestiture”) during the Employment Period, all of your
unvested Options will automatically expire upon termination of your employment with Motorola, and
all of your vested but not yet exercised Options will expire on the earlier of (i) 90 days after
such Divestiture or (ii) the Date of Expiration stated above.

Termination of Employment or Service by Motorola or a Subsidiary Other than for Serious Misconduct
or a Divestiture – If Motorola or a Subsidiary on its initiative, terminates your employment or
service during the Employment Period other than for Serious Misconduct or a Divestiture, all of
your unvested Options will automatically expire upon termination and all of your vested but not yet
exercised Options will expire on the earlier of (i) 90 days after your termination of employment or
(ii) the Date of Expiration stated above.

Termination of Employment or Service for any Other Reason than Described Above – If your employment
or service with Motorola or a Subsidiary terminates during the Employment Period for any reason
other than that described above, including voluntary resignation of your employment or service, all
of your unvested Options will automatically expire upon termination of your employment or service
and all of your vested but not yet exercised Options will expire on the earlier of (i) the date
ninety (90) days after the date of termination of your employment or service or (ii) the Date of
Expiration stated above.

Board
Service Following Employment Period – Notwithstanding any provision of this award to the
contrary, if your Employment Period with Motorola or a Subsidiary terminates but you continue as a
member of the Board of Directors of the Company (the “Board”), then all of your Options will
continue to vest in accordance with the Regular Vesting schedule (or, in the event of a “Change in
Control”, in accordance with the Special Vesting rules discussed below) based upon your continued
service as a member of the Board. If you cease to serve as a member of the Board for any reason,
then (a) all of your unvested Options will become fully vested on the date your Board service
ceases, and (b) all of your Options will be exercisable from the date your Board service ceases
until the Date of Expiration set forth above, unless any of the following four Special Vesting
rules apply:

	•	 	If you are removed from the Board or not re-nominated to the Board for “Cause” as defined
in the Plan, then, all of your Options (vested and unvested) expire upon the date you cease to
be a member of the Board.
	 
	•	 	If you voluntarily resign from the Board, all of your unvested Options will automatically
expire upon the effective date of your resignation, and

 

 

	 	 	all of your vested but not yet
exercised Options will expire on the earlier of (i) the date ninety (90) days after the date
of resignation, or (ii) the Date of Expiration stated above.
	 
	•	 	If your service with the Board ends because of your death, Options that are not vested will
automatically become fully vested upon your death. All your Options will then expire on the
earlier of the first anniversary of your death or the Date of Expiration stated above. Until
that time, with written proof of death and inheritance, the Options will be exercisable by
your legal representative, legatees or distributees.
	 
	•	 	If a “Change in Control” of the Company occurs during your service with the Board, and the
successor corporation does not assume these Options or replace them with options that preserve
the existing value of this award at the time of the Change in Control and provide for
subsequent payout in accordance with the same vesting schedule applicable to this award, then:
(1) all of your unvested Options will be fully vested and (2) all of your Options will be
exercisable until the Date of Expiration set forth above. Further, with respect to any
Options that are assumed or replaced as described above, such assumed or replaced options
shall provide that they will be fully vested and exercisable until the Date of Expiration set
forth above if you resign from the Board for Good Reason or are removed from the Board or not
renominated to the Board for a reason other than “Cause” within 24 months of the Change in
Control. For purposes of this paragraph, the terms “Good Reason”, “Change in Control” and
“Cause” are defined in the Plan.

Leave of Absence/Temporary Layoff

If you take a Leave of Absence from Motorola or a Subsidiary during the Employment Period that your
employer has approved in writing in accordance with your employer’s Leave of Absence Policy and
which does not constitute a termination of employment as determined by Motorola, or you are placed
on Temporary Layoff (as defined below) by Motorola or a Subsidiary during the Employment Period the
following will apply:

Vesting of Options – Options will continue to vest in accordance with the vesting schedule set
forth above.

Exercising Options – You may exercise Options that are vested or that vest during the Leave of
Absence or Temporary Layoff.

Effect of Termination of Employment or Service – If your employment or service is terminated during
the Leave of Absence or Temporary Layoff, the treatment of your Options will be determined as
described under “Special Vesting Dates and Special Expiration Dates” above.

Other Terms

Method of Exercising – You must follow the procedures for exercising options established by
Motorola from time to time. At the time of exercise, you must pay the Exercise Price for all of
the Options being exercised and any taxes that are required to be withheld by Motorola or a
Subsidiary in connection with the exercise. Options may not be exercised for less than 50 shares
unless the number of shares represented by the Option is less than 50 shares, in which case the
Option must be exercised for the remaining amount.

Transferability – Unless the Committee provides, Options are not transferable other than by will or
the laws of descent and distribution.

Tax Withholding – Motorola or a Subsidiary is entitled to withhold an amount equal to the required
minimum statutory withholding taxes for the respective tax jurisdictions attributable to any share
of common stock deliverable in connection with the exercise of the Options. You may satisfy any
minimum withholding obligation and any additional withholding, if desired, by electing to have the
plan administrator retain Option shares having a Fair Market Value on the date of exercise equal to
the amount to be withheld.

Definition of Terms

If a term is used but not defined, it has the meaning given such term in the Plan.

“Confidential Information” means information concerning the Company and its business that is not
generally known outside the Company, and includes (A) trade secrets; (B) intellectual property; (C)
the Company’s methods of operation and Company processes; (D) information regarding the Company’s
present and/or future products, developments, processes and systems, including invention
disclosures and patent applications; (E) information

 

 

on customers or potential customers, including
customers’ names, sales records, prices, and other terms of sales and Company cost information; (F)
Company personnel data; (G) Company business plans, marketing plans, financial data and
projections; and (H) information received in confidence by the Company from third parties.
Information regarding products, services or technological innovations in development, in test
marketing or being marketed or promoted in a discrete geographic region, which information the
Company or one of its affiliates is considering for broader use, shall be deemed generally known
until such broader use is actually commercially implemented.

“Employment Period” is as defined in your Amended and Restated Employment Agreement with Motorola,
dated October 4, 2007.

“Fair Market Value” is the closing price for a share of Motorola common stock on the date of
grant or date of exercise, whichever is applicable. The official source for the closing price is
the New York Stock Exchange Composite Transaction as reported in the Wall Street Journal, Midwest
edition.

“Serious Misconduct” means any misconduct identified as a ground for termination in the Motorola
Code of Business Conduct, or the human resources policies, or other written policies or procedures.

“Subsidiary” means an entity of which Motorola owns directly or indirectly at least 50% and that
Motorola consolidates for financial reporting purposes.

“Total and Permanent Disability” means for (x) U.S. employees, entitlement to long-term disability
benefits under the Motorola Disability Income Plan, as amended and any successor plan or a
determination of a permanent and total disability under a state workers compensation statute and
(y) non-U.S. employees, as established by applicable Motorola policy or as required by local
regulations.

“Temporary Layoff” means a layoff or redundancy that is communicated as being for a period of up to
twelve months and as including a right to recall under defined circumstances.

Consent to Transfer Personal Data

By accepting this award, you voluntarily acknowledge and consent to the collection, use, processing
and transfer of personal data as described in this paragraph. You are not obliged to consent to
such collection, use, processing and transfer of personal data. However, failure to provide the
consent may affect your ability to participate in the Plan. Motorola, its Subsidiaries and your
employer hold certain personal information about you, that may include your name, home address and
telephone number, date of birth, social security number or other employee identification number,
salary, salary grade, hire date, nationality, job title, any shares of stock held in Motorola, or
details of all options or any other entitlement to shares of stock awarded, canceled, purchased,
vested, or unvested, for the purpose of managing and administering the Plan (“Data”). Motorola
and/or its Subsidiaries will transfer Data amongst themselves as necessary for the purpose of
implementation, administration and management of your participation in the Plan, and Motorola
and/or any of its Subsidiaries may each further transfer Data to any third parties assisting
Motorola in the implementation, administration and management of the Plan. These recipients may be
located throughout the world, including the United States. You authorize them to receive, possess,
use, retain and transfer the Data, in electronic or other form, for the purposes of implementing,
administering and managing your participation in the Plan, including any requisite transfer of such
Data as may be required for the administration of the Plan and/or the subsequent holding of shares
of stock on your behalf to a broker or other third party with whom you may elect to deposit any
shares of stock acquired pursuant to the Plan. You may, at any time, review Data, require any
necessary amendments to it or withdraw the consents herein in writing by contacting Motorola;
however, withdrawing your consent may affect your ability to participate in the Plan.

Acknowledgement of Discretionary Nature of the Plan; No Vested Rights

You acknowledge and agree that the Plan is discretionary in nature and limited in duration, and may
be amended, cancelled, or terminated by Motorola or a Subsidiary, in its sole discretion, at any
time. The grant of awards under the Plan is a one-time benefit and does not create any contractual
or other right to receive an award in the future or to future employment. Nor shall this or any
such grant interfere with your right or the Company’s right to terminate such employment
relationship at any time,

 

 

with or without cause, to the extent permitted by applicable laws and any
enforceable agreement between you and the Company. Future grants, if any, will be at the sole
discretion of Motorola, including, but not limited to, the timing of any grant, the amount of the
award, vesting provisions, and the exercise price.

No Relation to Other Benefits/Termination Indemnities 

Your acceptance of this award and participation under the Plan is voluntary.  The value of your
stock option awarded herein is an extraordinary item of compensation outside the scope of your
employment contract, if any.  As such, the stock option is not part of normal or expected
compensation for purposes of calculating any severance, resignation, redundancy, end of service
payments, bonuses, long-service awards, pension, or retirement benefits or similar payments,
notwithstanding any provision of any compensation, insurance agreement or benefit plan to the
contrary.

Agreement Following Termination of Employment

As a further condition of accepting the Options, you acknowledge and agree that for a period of one
year following your termination of employment or service, you will not hire, recruit, solicit or
induce, or cause, allow, permit or aid others to hire, recruit, solicit or induce, or to
communicate in support of those activities, any employee of Motorola or a Subsidiary who possesses
Confidential Information of Motorola or a Subsidiary to terminate his/her employment with Motorola
or a Subsidiary and/or to seek employment with your new or prospective employer, or any other
company.

You agree that upon termination of employment with Motorola or a Subsidiary, and for a period of
one year thereafter, you will immediately inform

Motorola of (i) the identity of your new employer
(or the nature of any start-up business or self-employment), (ii) your new title, and (iii) your
job duties and responsibilities. You hereby authorize Motorola or a Subsidiary to provide a copy
of this Award Document to your new employer. You further agree to provide information to Motorola
or a Subsidiary as may from time to time be requested in order to determine your compliance with
the terms hereof.

Substitute Stock Appreciation Right

Motorola reserves the right to substitute a Stock Appreciation Right for your Option in the
event certain changes are made in the accounting treatment of stock options. Any substitute Stock
Appreciation Right shall be applicable to the same number of shares as your Option and shall have
the same Date of Expiration, Exercise Price, and other terms and conditions. Any substitute Stock
Appreciation Right may be settled only in common stock.

Acceptance of Terms and Conditions

By accepting the Options, you agree to be bound by these terms and conditions, the Plan, any and
all rules and regulations established by Motorola in connection with awards issued under the Plan,
and any additional covenants or promises Motorola may require as a condition of the grant.

Other Information about Your Options and the Plan

You can find other information about options and the Plan on the Motorola website http://myhr.mot.com/pay_finances/awards_incentives/
stock_options/plan_documents.jsp. If you do not
have access to the website, please contact Motorola Global Rewards, 1303 E. Algonquin Road,
Schaumburg, IL 60196 USA; GBLRW01@Motorola.com; 847-576-7885; for an order form to request Plan
documents.

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