Document:

Exhibit 10.1

ASSET
PURCHASE AGREEMENT

BY
AND BETWEEN

KAWASAKI
HEAVY INDUSTRIES, LTD.

AND

CATALYTICA
ENERGY SYSTEMS, INC.

June 30,
2006

 

TABLE
OF CONTENTS

	
  

  	
   

  	
  

  	
   

  	
  Page

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 1 DEFINITIONS

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1

  	
   

  	
  Defined Terms

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 2 PURCHASE, SALE
  AND DELIVERY

  	
   

  	
  5

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1

  	
   

  	
  Acquisition Assets

  	
   

  	
  5

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.2

  	
   

  	
  Excluded Assets

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.3

  	
   

  	
  Purchase Price

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.4

  	
   

  	
  Allocation Reporting

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.5

  	
   

  	
  Closing

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.6

  	
   

  	
  Closing Deliveries

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 3 LIABILITIES AND
  OBLIGATIONS

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1

  	
   

  	
  Limited Liabilities Assumed by
  the Purchaser

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 4 REPRESENTATIONS
  AND WARRANTIES OF THE PURCHASER

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1

  	
   

  	
  Organization and Qualification

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.2

  	
   

  	
  Authority; Consents; Binding
  Agreement

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.3

  	
   

  	
  Litigation

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.4

  	
   

  	
  Brokers and Finders

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 5 REPRESENTATIONS
  AND WARRANTIES OF THE SELLER

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1

  	
   

  	
  Organization and Qualification

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.2

  	
   

  	
  Authority; Non-Contravention;
  Consents and Approvals

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.3

  	
   

  	
  Litigation

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.4

  	
   

  	
  No Violation of Law; Compliance
  with Agreements

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.5

  	
   

  	
  Title to Assets

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.6

  	
   

  	
  Brokers and Finders

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.7

  	
   

  	
  Intellectual Property

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.8

  	
   

  	
  Assumed Agreements

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.9

  	
   

  	
  Condition of Assets

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 6 CERTAIN
  UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1

  	
   

  	
  Pre-Closing Covenants

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.2

  	
   

  	
  Woodward Agreement

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.3

  	
   

  	
  CEC Agreements

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.4

  	
   

  	
  Further Assurances

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.5

  	
   

  	
  Expenses and Fees

  	
   

  	
  15

  	
   

  

 

 i
 

 

TABLE
OF CONTENTS

(cont’d)

	
  

  	
   

  	
  

  	
   

  	
  Page

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.6

  	
   

  	
  Public Statements

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.7

  	
   

  	
  Tax Covenants

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.8

  	
   

  	
  Mutual Releases

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.9

  	
   

  	
  Non-competition

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.10

  	
   

  	
  Conduct of Business by Seller
  after Closing

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.11

  	
   

  	
  Specific Performance

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.12

  	
   

  	
  Intellectual Property

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.13

  	
   

  	
  Confidentiality

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 7 CONDITIONS TO
  CLOSING; TERMINATION

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1

  	
   

  	
  Conditions to Obligation of the
  Purchaser

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.2

  	
   

  	
  Conditions to Obligations of
  the Seller

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.3

  	
   

  	
  Other Agreements

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.4

  	
   

  	
  Termination

  	
   

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.5

  	
   

  	
  Effect of Termination

  	
   

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 8 INDEMNIFICATION

  	
   

  	
  22

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1

  	
   

  	
  The Seller’s Indemnity Obligations

  	
   

  	
  22

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.2

  	
   

  	
  Purchaser’s Indemnity
  Obligations

  	
   

  	
  22

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.3

  	
   

  	
  Indemnification Procedures

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.4

  	
   

  	
  Limitations on Defense to the
  Claims of the Purchaser

  	
   

  	
  25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.5

  	
   

  	
  Limitation of Liability

  	
   

  	
  25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.6

  	
   

  	
  Remedies Exclusive

  	
   

  	
  25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Article 9 GENERAL
  PROVISIONS

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1

  	
   

  	
  Survival

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.2

  	
   

  	
  Notices

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.3

  	
   

  	
  Interpretation

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.4

  	
   

  	
  Miscellaneous

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.5

  	
   

  	
  Governing Law

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.6

  	
   

  	
  Process and Venue

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.7

  	
   

  	
  Disclosure Schedules

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.8

  	
   

  	
  Independent Obligations

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.9

  	
   

  	
  Attorney’s Fees

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.10

  	
   

  	
  Amendment

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.11

  	
   

  	
  Counterparts

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.12

  	
   

  	
  Parties in Interest

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.13

  	
   

  	
  Validity

  	
   

  	
  28

  	
   

  

 

 ii

 

 

ASSET
PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT, dated as of June 30,
2006 (this “Agreement”), is by and among KAWASAKI HEAVY INDUSTRIES,
LTD., a Japanese corporation (the “Purchaser”) and CATALYTICA ENERGY
SYSTEMS, INC., a Delaware corporation (the “Seller”). KAWASAKI GAS
TURBINES — AMERICAS, a division of KAWASAKI MOTORS CORP., U.S.A., a Delaware
corporation (“KGT-A”) joins this Agreement for purposes of Section 6.8
only.

The Purchaser and the Seller are each a “Party”
and, collectively, they are sometimes referred to as the “Parties.”

W I T N E S S E T
H:

WHEREAS, the Purchaser desires to purchase from the
Seller, and the Seller desires to sell, transfer, assign and deliver to the
Purchaser, upon the terms and conditions set forth herein, certain Acquisition
Assets (as defined in Section 2.1) related to Seller’s small gas
turbine business.

NOW, THEREFORE, in consideration of the premises and
the representations, warranties, covenants and agreements stated herein, the
receipt and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound, covenant and agree as follows:

ARTICLE
1

DEFINITIONS

Defined
Terms. As used in this Agreement, certain capitalized words
and terms have the meanings ascribed to them as set forth below. Other
capitalized terms have the meanings ascribed to them elsewhere in this
Agreement.

“Acquisition Assets” is defined in Section 2.1.

“Affiliate(s)” means, with respect to any Person as
hereinafter defined, any other Person which directly or indirectly controls, is
controlled by, or is under common control with, such Person. A Person shall be
regarded as in control of another Person if it owns, or directly or indirectly
controls, at least fifty percent (50%) of the voting stock or other ownership
interest of the other Person, or if it directly or indirectly possesses the
power to direct or cause the direction of the management and policies of the
other Person by any means whatsoever. A Person shall be deemed to be an
Affiliate of another Person only for so long as the foregoing control
relationship exists.

“Assigned Patents” is defined in Section 2.1(b).

“Assignment and Assumption Agreement” is defined in Section 2.6(a)(iv).

 1
 

 

“Assumed Liabilities” is defined in Section 3.1.

“Bill of Sale” is defined in Section 2.6(a)(ii).

“Business” means the business of supplying NOx
emission reduction technology and equipment designed for use with Small Gas
Turbines.

“CEC” means the California Energy Commission.

“CEC Agreements” means both Royalty Agreement ROY-05-0001,
Contract # 500-01-030, and Royalty Agreement ROY-05-0002,
Contract # 500-97-033 between Seller and the CEC. In no event shall
CEC Agreements be construed to include any other agreements between Seller and
the CEC, including without limitation, Contract # 500-01-030 or
Contract # 500-97-033, which underlie the CEC Agreements.

“Claim Notice” is defined in Section 8.3.

“Closing” is defined in Section 2.5.

“Closing Date” is defined in Section 2.5.

“Code” means the Internal Revenue Code of 1986, as
amended, or any amending or superseding tax laws of the United States of
America.

“Covenant Period” is defined in Section 6.9(b).

“DOE” means the U.S. Department of Energy.

“Disclosure Schedules” is defined in the preamble to Article 5.

“Election Period” is defined in Section 8.3.

“Encumbrance” means any lien, pledge, hypothecation,
charge, mortgage, deed of trust, security interest, encumbrance, equity, trust,
equitable interest, claim, easement, right-of-way, servitude, right of
possession, lease tenancy, license, encroachment, covenant, infringement,
interference, proxy, option, right of first refusal, community property
interest, exception, condition, restriction, reservation, limitation,
impairment, imperfection of title, restriction on or condition to the voting of
any security, restriction on the transfer of any security or other asset,
restriction on the receipt of any income derived from any security or other
asset, and restriction on the possession, use, exercise or transfer of any
other attribute of ownership, whether based on or arising from common law,
constitutional provision, statute or contract, other than minor liens or
encumbrances that do not materially impair Purchaser’s use of the item in
question.

“Excluded Assets” is defined in Section 2.2.

“Excluded Liabilities” is defined in Section 3.1.

“GAAP” means generally accepted accounting principles
applied on a consistent basis.

 2
 

 

“Governmental Authority” or “Governmental Authorities”
means the U.S. government, any state or political subdivision thereof and any
agency or entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, the U.S. government.

“Governmental Authorization” means any permit,
license, franchise, approval, certificate, consent, ratification, permission,
confirmation, endorsement, waiver, certification, registration, qualification
or other authorization issued, granted, given or otherwise made available by or
under the authority of any Governmental Authority or pursuant to any Legal
Requirement.

“Indemnified Amounts” is defined in Section 8.1.

“Indemnified Party” is defined in Section 8.3.

“Indemnifying Party” is defined in Section 8.3.

“Indemnity Claim” is defined in Section 8.3.

“Intellectual Property” is defined in Section 5.7.

“Legal Requirement” means any U.S. law, statute,
ordinance, decree, requirement, Order, treaty, proclamation, convention, rule or
regulation (or interpretation of any of the foregoing) of, and the terms of any
authorization issued by, any Governmental Authority.

“Liability” or “Liabilities” means any debt,
obligation, duty or liability of any nature (including any unknown,
undisclosed, unfixed, unliquidated, unsecured, unmatured, unaccrued,
unasserted, contingent, conditional, inchoate, implied, vicarious, joint, several
or secondary liability or STRICT LIABILITY), regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet prepared in accordance with GAAP.

“License Agreement” is defined in Section 2.6(a)(iii).

“NOx” means nitrogen oxides.

“Order” means any order, judgment, injunction, edict,
decree, ruling, pronouncement, determination, decision, opinion, sentence,
subpoena, writ or award issued, made, entered or rendered by any U.S. court,
administrative agency or other Governmental Authority or by any U.S.
arbitrator.

“Organizational Documents” means (a) articles or
certificate of incorporation and bylaws of a corporation; (b) the limited
partnership agreement and a certificate of limited partnership of a limited
partnership; (c) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of any Person; and (d) any
amendment to any of the foregoing.

“Person” means any individual, corporation,
partnership, limited partnership, limited liability company, trust, business
trust, association, joint stock company, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

 3
 

 

“Proceeding” means any action, suit, litigation,
arbitration, lawsuit, claim, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding and any informal
proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination, investigation, challenge, controversy or dispute commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority or any U.S. arbitrator.

“Purchase Price” is defined in Section 2.3.

“Purchaser Indemnified Party” is defined in Section 8.1.

“Seller” means Catalytica Energy Systems, Inc., a
Delaware corporation.

“Seller Indemnified Party” is defined in Section 8.2.

“Seller’s Non-Infringement Representation” is defined
in Section 5.7.

“Small Gas Turbines” means gas turbines of output up
and including 25 megawatts nameplate rating and designed for power generation
or mechanical drives. In no event shall Small Gas Turbines be construed to
directly or indirectly include any gas turbines for use in connection with any
mode of power or emission control for vehicles or any application involving
diesel fuel.

“Subsidiary” or “Subsidiaries” shall mean, when used
with reference to an entity, any other entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions, or a majority
of the outstanding voting securities of which, are owned directly or indirectly
by such entity.

“Taxes” shall mean any and all taxes, charges, fees,
levies or other assessments, including, without limitation, income, gross
receipts, excise, real or personal property, sales, withholding, social
security, occupation, use, severance, environmental, license, net worth,
payroll, employment, franchise, transfer and recording taxes, fees and charges,
imposed by the IRS or any other taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or foreign government
or any subdivision or taxing agency thereof (including a United States
possession)), whether computed on a separate, consolidated, unitary, combined
or any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments.

“Tax Disputes” is defined in Section 6.7(b).

“Tax Return(s)” shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes, including, without limitation, information returns and documents (i) with
respect to or accompanying payments of estimated Taxes or (ii) with
respect to or accompanying requests for the extension of time in which to file
any such report, return, document, declaration or other information, including
any schedule or attachment thereto and any amendment thereof.

“TDTA” is defined in Section 6.8.

 4
 

 

“Territory” is defined in Section 6.9(b).

“TKK” means Tanaka Kikinzoku Kogyo K.K.

 “Transfer Taxes”
is defined in Section 6.7(c).

“Woodward Agreement” means the Control Patent and
Cross License Agreement dated December 19, 2001 between Woodward Governor
Company and the Seller.

“Xonon Module” means the Seller developed product
designated by Seller as the XononTM Module which consists of a catalyst
container, which includes therein a catalyst structure and supporting structure
for fixing the catalyst structure in the container, as designed specifically
for reducing the emissions of NOx from the Kawasaki gas turbine Model 1.4 MW
M1A-13X.

ARTICLE
2

PURCHASE,
SALE AND DELIVERY

Acquisition
Assets. Subject to the terms and conditions of this Agreement
and the License Agreement, and on the basis of the representations and
warranties hereinafter set forth, at the Closing (as hereinafter defined), the
Seller hereby sells, transfers, conveys, assigns and delivers to the Purchaser,
and the Purchaser hereby acquires and purchases from the Seller, the following
assets, properties and rights of the Seller:

all inventory of Xonon Modules and H214 foil, in each case as described
on Schedule 2.1(a);

the Patents listed on Schedule 2.1(b) (the “Assigned
Patents”), together with all Technical Information (as defined in the
License Agreement) associated with the Assigned Patents that is applicable
solely to Small Gas Turbines and not applicable to other products or
technologies, the right to secure copyright, trademark, patent, or other forms
of protection therein, the right to continue the prosecution of any
applications contained in the Assigned Patents, the right to secure renewals,
reissues and extensions of the Assigned Patents, and the right to recover for
infringement thereof;

copies of all books, records and papers of whatever nature and wherever
located that are in the possession or control of the Seller, that relate to the
inventory described in clause (a) above and that are required or
reasonably necessary for the Purchaser to continue the manufacturing of the
Xonon Modules from and after the Closing Date, as such manufacturing was
conducted by Seller in the U.S. in the ordinary course of business prior to the
Closing Date;

all rights under express or implied warranties from the suppliers of
the Seller with respect to the inventory described in clause (a) above, to
the extent they are assignable.

 5
 

 

Subject to Section 2.2
hereof, all of the assets referenced in this Section 2.1 are
collectively referred to as the “Acquisition Assets”.

Excluded
Assets. Notwithstanding the foregoing, the Seller is not
selling and the Purchaser is not purchasing pursuant to this Agreement any
assets of Seller other than the Acquisition Assets, all of which shall be
retained by the Seller (collectively, the “Excluded Assets”).

Purchase
Price. (a) Subject to the terms and conditions of this Agreement,
and as full consideration for the purchase of the Acquisition Assets and the
representations, warranties, covenants and agreements contemplated herein, the
Purchaser shall pay to the Seller the aggregate purchase price (the “Purchase
Price”) of TWO MILLION ONE HUNDRED THOUSAND DOLLARS ($2,100,000.00), which
Purchase Price shall be paid by the Purchaser to the Seller as follows: (i) TWO
MILLION DOLLARS ($2,000,000.00) at the Closing in immediately available funds;
and (ii) ONE HUNDRED THOUSAND DOLLARS ($100,000.00) within five (5) days
following the completion of the training described in Section 4 of
the License Agreement.

Allocation
Reporting. Unless otherwise agreed in writing by the
Purchaser and the Seller, (i) Schedule 2.4 hereto sets forth the
allocations established by the Purchaser and the Seller of the Purchase Price
(and any other items constituting consideration paid by the Purchaser or
received by the Seller in connection with the disposition of the Acquisition
Assets) among the Acquisition Assets; (ii) the allocations set forth on Schedule
2.4 hereto will be used by the Purchaser and the Seller as the basis for
reporting asset values and other items for purposes of all required Tax Returns
(including any Tax Returns required to be filed under Section 1060(b) of
the Code and the Treasury regulations thereunder); and (iii) the Purchaser
and the Seller shall not assert, in connection with any audit or other
Proceeding with respect to Taxes, any asset values or other items inconsistent
with the allocations set forth on Schedule 2.4 hereto.

Closing.
Subject to the terms and conditions of this Agreement, the purchase and sale
provided for herein (the “Closing”) shall take place at the offices of
Morrison & Foerster LLP, 755 Mill Road, Palo Alto, California 94304,
on the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the Parties
will take at the Closing itself) or at such other place and time as may be
agreed by the Parties in writing (the “Closing Date”).

Closing
Deliveries.

At the Closing,
the Seller shall deliver to the Purchaser:

the tangible Acquisition Assets, it being understood that certain of
the Acquisition Assets will be delivered to Purchaser in connection with the
training described in Section 4 of the License Agreement;

an executed counterpart of a bill of sale,
assignment and assumption agreement in the form attached hereto as Exhibit A
(the “Bill of Sale”), with respect to the CEC Agreements and the
Woodward Agreement, together with such other 

 6
 

 

assignments and conveyances as the Purchaser may reasonably require to
assure the full and effective sale, transfer, conveyance, assignment and
delivery to the Purchaser of the Acquisition Assets free and clear of any
Encumbrances;

an executed counterpart of a license agreement in the form attached
hereto as Exhibit B (the “License Agreement”);

assignments, in recordable form, with respect to the Assigned Patents,
duly executed by the Seller and in form and substance reasonably satisfactory
to the Purchaser, together with the original letters patent with respect
thereto, as available;

a certified copy of resolutions duly adopted by the board of directors
of the Seller authorizing and approving the execution and delivery of this
Agreement and the License Agreement, including the exhibits and schedules
hereto and thereto, and the consummation of the transactions contemplated
hereby and thereby;

notification, if any, to the DOE of the terms and conditions of this
Agreement and the License Agreement in form and substance deemed necessary by
the Seller in its sole discretion to consummate this Agreement and the License
Agreement;

notification to Woodward of the assignment to and assumption by the
Purchaser of the Woodward Agreement in form and substance reasonably
satisfactory to the Purchaser;

a written consent of the CEC of the assignment to and assumption by the
Purchaser of the CEC Agreements in form and substance reasonably satisfactory
to the  Parties;

U.S. Residency Certificate relating to Seller, issued by the U.S.
Department of Treasury (Internal Revenue Service);

a fully completed and executed Application Form for Income Tax
Convention, in the form attached hereto as Exhibit C;

consent of TKK, to the extent required for consummation of the
transactions contemplated hereby and by the License Agreement, it being
understood and agreed that the “Consent for Assignment and License” executed by
TKK on June 9, 2006 fully satisfied this delivery requirement and all
related closing conditions herein;

a certificate, duly executed by or on behalf
of Seller, as to whether each condition specified in Sections 7.1(a),
(b), and (c) has been satisfied;

evidence from the appropriate Governmental Authorities that the
payments contemplated under this Agreement are not subject to withholding
taxes; and

such other documents, including certificates
of the Seller, as may be required by this Agreement or otherwise reasonably
requested by the Purchaser.

 7

 

 

At the Closing, the Purchaser shall deliver the following to the
Seller:

the Purchase Price set forth in Section 2.3;

an executed counterpart of the Bill of Sale;

an executed counterpart of the License
Agreement;

evidence of approval by the governing body of
the Purchaser of this Agreement and the License Agreement, including the
exhibits and schedules hereto and thereto, and the consummation of the
transactions contemplated hereby and thereby;

a State of Arizona transaction privilege tax
exemption certificate from the Purchaser in the form attached as Exhibit D;

a certificate, duly executed by or on behalf
of Purchaser, as to whether each condition specified in Sections 7.2(a) and
(b) has been satisfied; and

such other documents, including certificates
of the Purchaser, as may be required by this Agreement or otherwise reasonably
requested by the Seller.

ARTICLE
3

LIABILITIES
AND OBLIGATIONS

Limited
Liabilities Assumed by the Purchaser. Subject to the terms
and conditions of this Agreement, at the Closing, Seller shall assign, and
Purchaser shall assume, the liabilities specifically listed on Schedule 3.1
(the “Assumed Liabilities”). Except for the Assumed Liabilities, the
Purchaser does not assume or agree to pay, perform or discharge, and shall not
be responsible for, any commitments, contracts, agreements or Liabilities of
the Seller whatsoever, including without limitation, the following
(collectively, the “Excluded Liabilities”):

any Taxes or charges, if any, which may become payable by reason of the
sale and transfer of the Acquisition Assets under any taxing authority (whether
domestic or foreign, including, without limitation, any state, county, local or
foreign government or any subdivision or taxing agency thereof), or may be
imposed upon the Seller by reason of receipt of the Purchase Price or relief
from any Liability pursuant to this Agreement;

any of the costs and expenses incurred in connection with the future
operations of the Seller, and the costs and expenses of the Seller incurred in
negotiating, entering into and carrying out their obligations pursuant to this
Agreement;

the trade accounts payable, accrued Liabilities and any other
Liabilities of the Seller as of the Closing Date and any indebtedness (whether
short-term or long-term) for borrowed money, together with all
interest thereon;

 8
 

 

any Liability attributable to, assessed or arising out of operations
during any period through and including the Closing Date for (i) any and
all Taxes of the Seller, (ii) any and all Taxes of any member of an
affiliated, consolidated, combined or unitary group of which the Seller (or any
predecessor of the foregoing) is or was a member, including pursuant to
Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local, or foreign law), (iii) any and all Taxes of any Person as a
transferee or successor, by contract or otherwise, which relate to an event or
transaction occurring before the Closing; and (iv) any and all ad valorem
Taxes and special assessments on the Acquisition Assets;

any prepayment penalties or other Liabilities related to retiring or
extinguishing any indebtedness of the Seller;

any Liabilities arising out of or in connection with periods or
activity prior to the Closing Date related to any other Governmental Authority,
or any violation of any Legal Requirement, and any unrecorded Liabilities or
contingencies that are not expressly identified on Schedule 3.1;

any Liability of the Seller arising out of any claim, litigation, or
Proceeding threatened or pending on or before the Closing Date or any claim,
litigation, or Proceeding threatened or initiated after the Closing Date to the
extent based on an act or omission of the Seller or any current or former
officer, director, employee, agent or representative of the Seller or the operation
of the Acquisition Assets occurring before the Closing Date; and

any Liability under or in connection with or related to the Excluded
Assets.

ARTICLE
4

REPRESENTATIONS
AND

WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Seller as
follows:

Organization
and Qualification. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its country
of incorporation and has the requisite power and authority to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted. The Purchaser is duly qualified to do business as a foreign
entity and is in good standing in each jurisdiction in which the properties
owned, leased, or operated by it or the nature of the business conducted by it
makes such qualification necessary.

Authority;
Consents; Binding Agreement. The Purchaser has full power and
authority to execute and deliver this Agreement and the other documents
delivered by the Purchaser at Closing and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized by the Purchaser,
and no additional approvals on the part of the board of directors of the
Purchaser are necessary to authorize the execution and delivery of this
Agreement or the consummation by the Purchaser of the transactions contemplated
hereby. 

 9
 

 

Except as otherwise specifically provided for in this
Agreement, no approvals, consents or waivers on the part of any Governmental
Authorities or other Persons are necessary for the Purchaser to execute and
deliver this Agreement and consummate the transactions contemplated hereby. Each
of this Agreement and the other documents delivered by the Purchaser at Closing
has been duly executed and delivered by the Purchaser and, assuming the due
authorization, execution and delivery hereof by the Seller, constitutes a valid
and legally binding agreement of the Purchaser and is enforceable against the
Purchaser in accordance with its terms, except as such enforcement may be
subject to bankruptcy, insolvency, reorganization or other similar laws
affecting or relating to enforcement of creditors’ rights generally.

Litigation.
There is no action to which the Purchaser is a party in which relief is sought
which would prevent, delay or make illegal the transactions contemplated by
this Agreement, and there is no litigation, action, suit, proceeding or
governmental investigation pending or threatened against the Purchaser (orally
or in writing), involving, affecting or relating to the transactions
contemplated by this Agreement.

Brokers
and Finders. The Purchaser has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of such Purchaser to pay any finder’ s fees, brokerage or agent
commissions or other like payments in connection with the transactions
contemplated hereby. There is no claim for payment by the Purchaser of any
investment banking fees, finder’s fees, brokerage or agent commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby.

ARTICLE
5

REPRESENTATIONS
AND WARRANTIES

OF THE SELLER

Except as set forth on the corresponding section or
subsection of the disclosure schedules attached hereto (the “Disclosure
Schedules”), the Seller represents and warrants to the Purchaser as
follows:

Organization
and Qualification. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite power and authority to own, lease and operate
its Acquisition Assets and to carry on its business relating thereto as it is
now being conducted. The Seller is duly qualified to do business as a foreign
entity and is in good standing in each jurisdiction in which the properties
owned, leased, or operated by it or the nature of the business conducted by it
makes such qualification necessary.

Authority;
Non-Contravention; Consents and Approvals.

The Seller has full power and authority to execute and deliver this
Agreement and the other documents delivered by the Seller at Closing and to
consummate the transactions contemplated hereby. This Agreement has been duly
authorized by the Seller, and no additional approvals on the part of the board
of directors of the Seller 

 10
 

 

are necessary to
authorize the execution and delivery of this Agreement or the consummation by
the Seller of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Seller, and, assuming the due authorization,
execution and delivery hereof by the Purchaser, constitutes a valid and legally
binding agreement of the Seller, enforceable against the Seller in accordance
with its terms, except as such enforcement may be subject to bankruptcy,
insolvency, reorganization or other similar laws affecting or relating to
enforcement of creditors’ rights generally.

The execution and delivery of this Agreement and the other documents
delivered by the Seller at Closing, and the consummation by the Seller of the
transactions contemplated hereby and thereby, do not and will not violate or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or except as described
in Schedule 5.2(b) result in the creation of any Encumbrance upon any of
the Acquisition Assets under any of the terms, conditions or provisions of (i) the
Organizational Documents of the Seller, (ii) any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
of any court or Governmental Authority applicable to the Seller, or any of the
Acquisition Assets, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Seller is now a
party or by which the Seller or any of Acquisition Assets may be bound.

Except as indicated in Schedule 5.2(c), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
Governmental Authority or any other Person is necessary for the execution and
delivery of this Agreement or the License Agreement by the Seller or the
consummation by the Seller of the transactions contemplated hereby or thereby.

Litigation.
Except as indicated in Schedule 5.3, there is no action to which Seller is a
party in which relief is sought involving, affecting, or relating to the
ownership, operation, or use of the Acquisition Assets or the conduct of the
business of Seller relating thereto or which would prevent, delay, or make
illegal the transactions contemplated by this Agreement, and there is no
litigation, action, suit, proceeding or governmental investigation pending or
threatened against Seller (orally or in writing), involving, affecting or
relating to the Acquisition Assets or the transactions contemplated by this
Agreement.

No
Violation of Law; Compliance with Agreements.

With respect to its ownership, operation or use of the Acquisition
Assets, (i) the Seller is not in violation of and has not been given
notice or been charged with any violation of, any Legal Requirement; and (ii) to
the knowledge of Seller, no investigation or review by any Governmental
Authority is pending or threatened. There are no Governmental Authorizations
that are necessary to permit the Seller to 

 11
 

 

own, operate, use,
and maintain the Acquisition Assets in compliance with all applicable Legal
Requirements in all material respects.

The Seller is not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has
occurred which, with lapse of time or action by a third party, could result in
a default under, (a) the Organizational Documents of the Seller or (b) any
contract, commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which the Seller is a
party or by which it is bound relating to any of the Acquisition Assets.

Title
to Assets. Except as indicated on Schedule 5.5, the
Seller has good and marketable title to the Acquisition Assets under all
applicable Legal Requirements and Seller’s title to the Acquisition Assets is
free and clear of any and all Encumbrances.

Brokers
and Finders. Except for Seller’s agreement with W.Y. Campbell &
Company, the Seller has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of the
Seller to pay any finder’s fees, brokerage or agent commissions or other like
payments in connection with the transactions contemplated hereby. Except
pursuant to the agreement referenced in the preceding sentence, there is no
claim for payment by the Seller of any investment banking fees, finder’s fees,
brokerage or agent commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.

Intellectual
Property. The Assigned Patents and the Multi-Use Patents (as
defined in the License Agreement) constitute all of the patents owned by Seller
that read on the manufacture, use and sale of Xonon Modules as sold by the
Seller to KHI pursuant to the Xonon Module Supply Agreement referenced in
clause (i) of Section 6.8 below. The Seller’s manufacture, use
and sale of Xonon Modules does not infringe or misappropriate, and Seller has
no reason to believe that it will receive any notice alleging any such
infringement or misappropriation of, the U.S. intellectual property rights of
any Person (“Seller’s Non-Infringement Representation”). Except as set
forth on  Schedule 5.7, the Seller
solely owns or has the right to license all of the Multi-Use Patents and New
Technical Materials (as defined in the License Agreement), purported to be
licensed to the Purchaser pursuant to the License Agreement, without the grant
of such license causing any infringement or misappropriation of any U.S.
intellectual property rights of any Person or any breach of any contract to
which the Seller is a party, and, except as set forth on Schedule 5.7,
no consent of any Person is required in connection with the licenses
contemplated thereunder. The patents, copyrights and trade secrets (“Intellectual
Property”) included in the Acquisition Assets or otherwise assigned or
licensed to Kawasaki under the License Agreement constitute all of the
Intellectual Property owned or licensed by the Seller necessary to continue the
manufacture of Xonon Modules, as such manufacturing was conducted by Seller in
the U.S. in the ordinary course of business prior to the Closing Date. To the
knowledge of the Seller, no Person is infringing the rights of the Seller in
any Assigned Patents, Multi-Use Patents or New Technical Materials.

Assumed
Agreements.  Attached
hereto as Schedule 5.8 are true, complete and correct copies of the
Woodward Agreement and the CEC Agreements, in each case as amended, together 

 12
 

 

with a detailed payment history therefor. Each of the
Woodward Agreement and the CEC Agreements is in full force and effect and each
constitutes a legal, valid and binding agreement of Seller and of each other
party thereto, enforceable in accordance with its terms, and no term or
condition thereof has been amended from the form attached hereto. There are no
defaults by Seller under any of its obligations under the Woodward Agreement or
any CEC Agreement and no events have occurred that with the lapse of time or
action or inaction by any party thereto would result in any violations thereof
or any defaults thereunder. There is no action to which Seller is a party in
which relief is sought involving, affecting or relating in any manner to the
Woodward Agreement or any CEC Agreement and, to the knowledge of Seller, there
is no litigation, action, suit, proceeding or governmental investigation
pending or threatened against Seller (orally or in writing) involving,
affecting or relating to the Woodward Agreement or any CEC Agreement. Except as
indicated in Schedule 5.8, none of Seller’s rights under the Woodward
Agreement or any CEC Agreement will be impaired by the consummation of the
transactions contemplated by this Agreement, and all such rights will inure to
and be enforceable by Purchaser after the Closing Date without any
authorization, approval, permission or license of, or filing with, any other
Person.

Condition
of Assets. Except as indicated on Schedule 5.9, the
Acquisition Assets described in clause (a) of Section 2.1
consist of a quality and quantity usable and salable in the ordinary course of
business. Notwithstanding anything herein to the contrary, Purchaser’s
inability to sell any of the Acquisition Assets described in clause (a) of
Section 2.1 due to a breach of Seller’s Non-Infringement
Representation will be deemed a breach of this Section 5.9. For
purposes of Section 8.1 hereof, the preceding sentence shall
survive the Closing for the same period as Seller’s Non-Infringement
Representation.

ARTICLE
6

CERTAIN
UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES

Pre-Closing
Covenants.

Conduct of Business. Until
the Closing, Seller will continue
to operate the Acquisition Assets in a manner consistent with its past practice
and good business practices. Without limiting the generality of the foregoing:

Seller will not sell, transfer or assign any
of the Acquisition Assets;

Seller will not impose or permit to be
imposed any Encumbrances on any of the Acquisition Assets;

Seller will use commercially reasonable
efforts to preserve and protect the Acquisition Assets and to maintain the
Acquisition Assets in good operating condition and repair; and

Seller will inform Purchaser as promptly as
practicable of the occurrence of any destruction, material damage or loss of
any Acquisition Asset, and will consult with the Purchaser prior to performing
any repairs to any Acquisition Asset.

 13
 

 

Best Efforts. Each
Party will use its reasonable best efforts to take all actions and to do all
things necessary, proper or advisable to consummate, make effective and comply
with all of the terms of this Agreement (including satisfaction, but not
waiver, of the closing conditions herein).

No Shop. Seller
shall not, directly or indirectly, (i) solicit, initiate or encourage the
submission of inquiries, proposals or offers from any Person relating to any
acquisition or purchase of the Acquisition Assets (an “Acquisition Proposal”),
(ii) participate in any discussions or negotiations regarding an
Acquisition Proposal or furnish any Person any information concerning the
Acquisition Assets in connection with an Acquisition Proposal, (iii) enter
into or consummate any agreement or letter of intent regarding any Acquisition
Proposal or (iv) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any Person to
do or seek any of the foregoing, in each case except in connection with the
transactions contemplated by this Agreement. Seller shall immediately provide
the Purchaser with written notice of any Acquisition Proposal, which notice
shall include the terms of any such Acquisition Proposal. Notwithstanding
anything in this Section 6.1(c), the Purchaser acknowledges and
agrees that Seller may, without the consent of the Purchaser and without
violating this Section 6.1(c), offer for sale or sell (i) all
or any portion of the common stock of Seller or (ii) all or any portion of
the assets of Seller other than the Acquisition Assets, provided that any such
sale of equity or assets shall be subject to the terms and conditions of this
Agreement and the License Agreement for as long as such agreements shall be
outstanding.

Woodward
Agreement. The Seller hereby assigns to the Purchaser the
Woodward Agreement and the Purchaser hereby accepts such assignment and agrees
to fully and timely pay, perform, discharge and satisfy all obligations of
Seller thereunder following the Closing Date.

CEC
Agreements. The Seller hereby assigns to the Purchaser the
CEC Agreements, and the Purchaser hereby accepts such assignment and agrees to
fully and timely pay, perform, discharge and satisfy all obligations of Seller
thereunder following the Closing Date.

Further
Assurances. The Seller and the Purchaser shall execute and
deliver to the other, after the Closing Date, any other instrument which may be
reasonably requested by the other and which is reasonably appropriate to
perfect or evidence any of the sales, assignments, transfers or conveyances
contemplated by this Agreement or to obtain any consents reasonably necessary
for the Purchaser to manufacture the Xonon Modules, as such manufacturing was
conducted by Seller in the U.S. in the ordinary course of business prior to the
Closing Date. Seller agrees to execute any documents reasonably requested by
Purchaser that might be helpful or necessary to perfect or evidence the
Purchaser’s ownership of the Assigned Patents and its associated Technical
Information. If the Purchaser notifies Seller in writing that the intellectual
property laws of a country require the consent of a joint owner of an Assigned
Patent to perfect the Purchaser’s ownership interest in such Assigned Patent,
Seller shall be responsible for acquiring the consent of such joint owner
within a reasonable time thereafter; provided,
however, that nothing in this paragraph shall require Seller to seek
the authorization of any non-U.S. governmental entity unless requested in
writing by the Purchaser at the Purchaser’s sole cost and expense. If for any
reason, Seller does not or is unable to execute such further documents within 

 14
 

 

ten (10) days of the Purchaser’s written request,
the Seller hereby irrevocably appoints the Purchaser as its attorney-in-fact
(which appointment is coupled with an interest) to execute and deliver any assignments,
applications or other instruments to protect and vest title in the Assigned
Patents and its associated Technical Information fully in the Purchaser. Without
the consent of the Seller, which consent will not unreasonably be withheld, the
obligations under this Section 6.4 will expire two years from the
Closing.

Expenses
and Fees. The Seller shall pay all costs and expenses
incurred by the Seller in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any and all broker’s
commissions, employee bonuses and the fees and expenses of the Seller’s
attorneys and accountants, and will make all necessary arrangements so that the
Purchaser will not be charged with any such cost or expense. The Purchaser shall
pay all costs and expenses incurred by the Purchaser in connection with this
Agreement and the transactions contemplated hereby, including without
limitation, any and all broker’s commissions, employee bonuses and the fees and
expenses of their attorneys and accountants.

Public
Statements. Except as required by law or regulation in
accordance with the advice of their respective counsel and except as permitted
in Section 6.13, the Parties shall obtain the written consent of
the other prior to issuing any press release or any written public statement
with respect to this Agreement or the transactions contemplated hereby and
shall not issue any such press release or written public statement prior to
such consent, which will not be unreasonably withheld.

Tax
Covenants.

Tax Returns. The
Seller will be responsible for the preparation and filing of all Tax Returns
for the Seller for all periods as to which Tax Returns are due after the
Closing Date (including the consolidated, unitary, and combined Tax Returns for
the Seller which include the operations of the Acquisition Assets for any
period ending on or before the Closing Date). The Seller will make all payments
required with respect to any such Tax Returns.

Cooperation. Following
the Closing, the Parties shall use all reasonable efforts to cooperate with
each other and their respective representatives, in a prompt and timely manner,
in conjunction with any audit or other examination by any Tax authority or any
Proceeding involving any Tax Return (collectively, the “Tax Disputes”)
relating to the Acquisition Assets and relating to any Taxes (i) filed or
required to be filed by or for the Seller for any taxable period beginning
before the Closing Date, or (ii) filed or required to be filed by or for
the Purchaser for any taxable period ending after the Closing Date. Notwithstanding
anything to the contrary herein, the Seller shall retain control of any Tax
Dispute to the extent such Tax Dispute arises out of or is related to events or
circumstances prior to the Closing, and the Purchaser shall retain control of
any Tax Dispute to the extent such Tax Dispute arises out of or is related to
events or circumstances after the Closing. Such cooperation shall include, but
not be limited to making available to one another during normal business hours,
and within five (5) business days of any reasonable request therefore, all
books, records and information, and the assistance of all officers 

 15
 

 

and employees,
reasonably required in connection with any Proceeding with regard to Taxes or
any Tax Dispute. The Parties hereto agree to conduct any investigation or
examination hereunder without causing any material interference or disruption
of the operations of the business of any other Party hereto or their Affiliates.
The Seller will retain, until the expiration of the applicable statutes of
limitation (including any extensions thereof) copies of all Tax Returns,
supporting work schedules and other records relating to Taxes for all taxable
years or periods (or portions thereof) ending on or prior to the Closing Date.

Certain Taxes and Fees.
All excise, sales, use, transfer (including real property transfer or gains),
stamp, documentary, filing, recordation and other similar taxes, together with
any interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties, resulting directly from the
transactions contemplated by this Agreement (the “Transfer Taxes”),
shall be paid by the Seller when due, and the Seller will, at its own expense,
file all necessary Tax Returns, and other documentation with respect to all
such Taxes, fees and charges, and, if required by applicable law, the Purchaser
will, and will cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation.

Mutual
Releases. Subject only to the obligations of the Parties
under this Agreement, the License Agreement and the Confidentiality Agreement
referenced in Section 6.13, effective as of the Closing Date, the Seller, on the one hand, and the Purchaser
and KGT-A, on the other, hereby release and forever discharge each other and
the other’s respective heirs, representatives, successors and assigns,
officers, directors, employees, agents, stockholders, controlling persons and
Affiliates for, from and against any and all claims, present and future, known
and unknown, including without limitation under each of the following
agreements, in each case as amended: (i) that certain Xonon Module Supply
Agreement by and among the Parties and KGT-A dated December 13, 2000, as
amended as of July 2, 2003; (ii) that certain Technology Development
and Transfer Agreement by and between the Parties dated as of December 13,
2000 (“TDTA”); and (iii) that certain Amended and Restated Support
Agreement by and between Seller and KGT-A dated as of October 6, 2003. Without
limiting the generality of the foregoing, Seller is under no further obligation
to deliver any products to Purchaser or KGT-A, except for the delivery of the
inventory described in Section 2.1(a) above, and all
warranties of the Seller to the Purchaser and KGT-A for the Xonon Modules shall
be null and void.

Non-competition.

The Seller hereby acknowledges and agrees that (i) the Purchaser
would not have entered into this Agreement or the License Agreement if the
Seller had not agreed to this non-competition covenant; and (ii) Seller
has had access to information that is confidential to the Purchaser, which
constitutes a valuable, special and unique asset of the Purchaser, and with
respect to which the Purchaser is entitled to the protections afforded by this
Agreement and to the remedies for enforcement of this Agreement provided by law
or in equity (including, without limitation, those remedies the availability of
which may be within the discretion of the court or arbitrator that presides
over any action for enforcement of this Agreement is brought).

 16

 

 

For a period of five (5) years following the Closing Date (the “Covenant
Period”), the Seller agrees that it will not, directly or indirectly
(through any entity or other Person), and shall cause each of its Subsidiaries
not to, directly or indirectly, acting alone or as a member of a partnership,
as a holder or owner of any security, as an employee, agent, advisor,
consultant to, independent contractor to, representative, or in any other
capacity within North America, South America or Central America (collectively,
the “Territory”), engage in the Business. Notwithstanding anything else
to the contrary in this Agreement, none of the restrictions or limitations in
this Section 6.9 shall be applicable to (i) any Person that
acquires Seller, by merger, consolidation, sale of all or substantially all of
its assets, purchase or other acquisition of a majority of Seller’s outstanding
voting securities or otherwise, which Person was not an Affiliate of Seller
prior to such acquisition, or (ii) any Person that acquires any of Seller’s
assets, whether by purchase or by sale in connection with any reorganization or
liquidation of Seller, which Person was not an Affiliate of Seller prior to
such acquisition.

Seller agrees that it will not (directly or indirectly through any
entity or other Person), and shall cause each of its Subsidiaries not to,
directly or indirectly, acting alone or as a member of a partnership, as a
holder or owner of any security, as an employee, agent, advisor, consultant to,
representative, or in any other capacity (i) cause or attempt to cause to
leave the employment or service of the Purchaser or its Subsidiaries, any
person who is then employed by the Purchaser or its Subsidiaries in a business
unit that engages in the Business, provided that the foregoing shall not be
deemed to prevent general employment solicitations by Seller, or (ii) request
that any such person, or any agent or independent contractor of the Purchaser
or its Subsidiaries curtail or cancel its business or refrain from doing business
with the Purchaser or its Subsidiaries. For purposes of this Section 6.9(c),
“Subsidiaries” of Purchaser shall include (i) those Subsidiaries of
Purchase whose corporate name includes the name “Kawasaki,” (ii) those
Subsidiaries of Purchaser that Purchaser has informed Seller in writing are
Subsidiaries of Purchaser and (iii) those Subsidiaries of Purchaser that
Seller is aware are Subsidiaries of Purchaser.

Without limiting the generality of the provisions of this Section 6.9,
the Seller shall be deemed to be carrying on or engaged in a particular
business if it (whether alone or in association with one or more other Persons)
is a partner, owner, stockholder, independent contractor or joint venturer of,
or a consultant or lender to, or an investor in any manner in, any Person who
or which is directly engaged in the Business.

Notwithstanding the foregoing provisions of this Section 6.9,
the Seller may own, solely as an investment, securities if the Seller (A) is
not an Affiliate of the issuer of such securities and (B) does not,
directly or indirectly, beneficially own more than 5%, in the aggregate, of the
class of which securities are a part.

The Seller acknowledges and agrees that the limitations imposed by this
non-competition covenant as to time, geographical area, and scope of activity
being restrained are reasonable and do not impose a greater restraint than is
necessary to 

 17
 

 

protect the
goodwill or other business interest of the Purchaser. If any court of competent
jurisdiction determines that any of such covenants, provisions, or portions of
the Agreement, or any part thereof, are unenforceable and invalid, then (a) the
validity and enforceability of any remaining covenants, provisions or portions
thereof shall not be affected by such determination, (b) those of such
covenants, provisions, or portions that are determined to be unenforceable
because of the duration or scope thereof shall be severed and/or reformed by
the court to reduce there duration or scope so as to render the same
enforceable against Seller, and (c) all remaining covenants, provisions,
portions and terms of the Agreement shall be valid and enforceable to the
fullest extent permitted by law.

Conduct
of Business by Seller after Closing. Except upon the prior
written consent of the Purchaser (which shall not be unreasonably withheld) to
the Seller’s provision of an escrow of funds, irrevocable letter of credit or
other arrangement acceptable to the Purchaser that provides assurances that
Seller’s indemnification obligations under Article 8 will be
satisfied, after the Closing Date, Seller shall:

maintain an amount of not less than $2,000,000 in immediately available
funds with the Seller until the later of (a) one (1) year following
the Closing Date, or (b) the date that any action commenced by a Purchaser
Indemnified Party against the Seller pursuant to Section 8.3 hereof
no later than one (1) year following the Closing Date has been resolved;
and

following the period covered by clause (a) above, maintain an
amount of not less than $1,900,000 in immediately available funds with the
Seller until the later of (a) two (2) years following the Closing
Date, or (b) the date that any action commenced by a Purchaser Indemnified
Party against the Seller pursuant to Section 8.3 hereof no later than
two (2) years following the Closing Date has been resolved.

Specific
Performance. The Purchaser and the Seller hereby agree that
if the Seller violates or threatens to violate any of the provisions of Section 6.9,
it would be difficult to determine the entire cost, damage or injury which the
Purchaser would sustain. The Seller acknowledges that if it violates or
threatens to violate any of the provisions of Section 6.9  of this Agreement, the Purchaser may have no
adequate remedy at law. In that event, the Purchaser shall have the right, in
addition to any other rights that may be available to it, to seek in any court
of competent jurisdiction injunctive relief to restrain any violation or
threatened violation by the Seller of Section 6.9  this Agreement or to compel specific
performance by the Seller of its obligations under Section 6.9  of this Agreement. The seeking or obtaining
by the Purchaser of such injunctive relief shall not foreclose or in any way
limit the right of the Purchaser to obtain a money judgment against the Seller
for any damage to the Purchaser that may result from any breach by the Seller
of any provision of Section 6.9 of this Agreement.

Intellectual
Property. Whether the Assigned Patents shall be preserved and
maintained or registered in the U.S. or any foreign country shall be at the
sole discretion of the Purchaser. Subject to the terms and conditions of this
Agreement, Seller agrees that it retains no rights in the Assigned Patents or
the associated Technical Information that is applicable solely to Small Gas
Turbines and not applicable to other products or technologies.  Except as provided in Section 6.4,

 18
 

 

Seller shall be responsible for procuring, prior to
the Closing, any and all consents necessary to permit the assignment of the
Assigned Patents as contemplated by this Agreement.

Confidentiality.
Each Party shall protect the confidentiality of the terms and conditions of
this Agreement using the same level of care that it uses to protect its own
similar confidential information, but in no event less than reasonable care. Further,
the Parties agree that the Confidentiality Agreement by and between the Parties
dated November 2, 2005 shall continue in full force and effect. The
Parties understand that the Seller is subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended, and that a copy of this
Agreement and the License Agreement shall be filed by the Seller with the
Securities and Exchange Commission promptly following the execution and
delivery of this Agreement.

ARTICLE
7

CONDITIONS
TO CLOSING; TERMINATION

Conditions
to Obligation of the Purchaser. The obligation of the
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction or waiver in writing of the
following conditions:

the representations and warranties of the Seller set forth in Article 5
shall be true and correct in all respects at and as of the Closing Date;

the Seller shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;

since the date of this Agreement, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted in
or constitute, or would reasonably be expected to result in or constitute, a
material adverse effect with respect to the Acquisition Assets;

the Seller shall have delivered to the Purchaser a certificate to the
effect that each of the conditions specified above in Section 7.1(a) through
(c) is satisfied in all respects;

no action, suit or proceeding shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state or local
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling or charge would (i) prevent consummation
of any of the transactions contemplated by this Agreement, (ii) cause any
of the transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Purchaser to own
and operate the Acquisition Assets (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect);

the Seller shall have delivered, or be standing ready to deliver, to
the Purchaser, the documents required to be delivered by the Seller Parties
pursuant to Section 2.6(a);

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Seller shall have delivered to the Purchaser the documents described in
clauses (ix) and (x) of Section 2.6(a);

the consent of TKK referenced in clause (xi) of Section 2.6(a) shall
not have been revoked;

the CEC shall have delivered a consent to the assignment and assumption
of the CEC Agreements in form and substance satisfactory to the Purchaser; and

Seller shall have received evidence from the appropriate Japanese tax
authority that the payments contemplated under this Agreement are not subject
to withholding taxes.

Conditions
to Obligations of the Seller. The obligation of the Seller to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction or waiver in writing of the following
conditions:

the representations and warranties of the
Purchaser set forth in Article 4 shall be true and correct in all
respects at and as of the Closing Date;

the Purchaser shall have performed and
complied with all of its covenants hereunder in all material respects through
the Closing;

the Purchaser shall have delivered to the
Seller a certificate to the effect that each of the conditions specified in Section 7.2(a) and
(b) is satisfied in all respects;

no action, suit or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state or local jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling or charge
would (i) prevent consummation of any of the transactions contemplated by
this Agreement or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling or charge shall be in effect);

the consent of TKK referenced in clause (xi)
of  Section 2.6(a) shall
not have been revoked;

the CEC shall have delivered a consent to the
assignment and assumption of the CEC Agreements in form and substance
satisfactory to the Seller;

the Purchaser shall have delivered the State
of Arizona transaction privilege tax exemption certificate provided for in
clause (vi) of Section 2.6(b);

Seller shall have received evidence from the appropriate Japanese tax
authority that the payments contemplated under this Agreement are not subject
to withholding taxes; and

 20
 

 

the Purchaser shall have delivered, or be
standing ready to deliver, to the Seller, the items required to be delivered by
the Purchaser pursuant to Section 2.6(b).

Other Agreements.
The Purchaser agrees to submit the
documents described in clauses (ix) and (x) of Section 2.6(a) with
the applicable Japanese tax authority as soon as reasonably possible after
receipt of same from Seller and thereafter to use its commercially reasonable
efforts to follow up with the applicable Japanese tax authority; the Purchaser
further agrees to notify Seller in writing promptly upon receipt of evidence
from the applicable Japanese tax authority that the payments contemplated
hereunder are not subject to withholding taxes and, if such evidence has not
been obtained within ten (10) days of the Purchaser’s submission of the
application therefor, the Purchaser shall use commercially reasonably efforts
to obtain a status report thereon from the applicable Japanese tax authority
and shall promptly update Seller as to the status of the application.

Termination.
The Parties may terminate this Agreement as provided below:

the Parties may terminate this Agreement by mutual written consent at
any time prior to the Closing;

the Purchaser may terminate this Agreement by giving written notice to
the Seller at any time prior to the Closing (i) in the event Seller has
breached any representation, warranty or covenant contained in this Agreement
in any material respect, the Purchaser has notified the Seller of the breach,
and the breach has continued without cure for a period of five (5) days
after the notice of breach, or (ii) if the Closing shall not have occurred
on or before August 31, 2006, by reason of the failure of any condition
precedent under Section 7.1 (unless the failure results primarily
from the Purchaser breaching any representation, warranty or covenant
applicable to it contained in this Agreement);

the Seller may terminate this Agreement by giving written notice to the
Purchaser at any time prior to the Closing (i) in the event the Purchaser
has breached any representation, warranty or covenant contained in this
Agreement in any material respect, the Seller has notified the Purchaser of the
breach, and the breach has continued without cure for a period of five (5) days
after the notice of breach or (ii) if the Closing shall not have occurred
on or before August 31, 2006, by reason of the failure of any condition
precedent under Section 7.2 (unless the failure results primarily
from Seller breaching any representation, warranty or covenant applicable to it
contained in this Agreement); and

either Party may terminate this Agreement by giving written notice to
the other Party at any time prior to the Closing if the Closing shall not have
occurred on or before September 30, 2006.

Effect
of Termination. Except with respect to the obligations set
forth in Section 6.13, if this Agreement is terminated by either
Party in accordance with Section 7.4, this Agreement shall
forthwith become void and all other rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other
Party.

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ARTICLE
8

INDEMNIFICATION

The
Seller’s Indemnity Obligations.  The Seller shall indemnify, defend and hold
harmless the Purchaser and its officers, directors, stockholders, employees,
agents, representatives and Affiliates (each a “Purchaser Indemnified Party”)
from and against any and all claims, actions, causes of action, arbitrations, Proceedings,
losses, damages, judgments, fines, penalties and expenses (including, without
limitation, reasonable attorneys’ fees) (collectively, the “Indemnified
Amounts”) paid, imposed on, required by statutory or other legal authority,
or incurred by a Purchaser Indemnified Party, directly or indirectly, relating
to, resulting from or arising out of (a) any breach or misrepresentation
in any of the representations and warranties made by the Seller in this
Agreement or in any certificate, instrument or agreement delivered in
connection with this Agreement, including without limitation, the License
Agreement, (b) any violation or breach by Seller of, or default by Seller
under, the terms of this Agreement or of any certificate, instrument or
agreement delivered in connection with this Agreement, including without
limitation, the License Agreement, (c) any act or omission by the Seller
or any director, officer, employee, agent or representative of the Seller
occurring or commencing on or prior to the Closing Date (including any claim by
a third party, including employees and customers arising out of or related to
any act or omission by the Seller or any director, officer, employee, agent or
representative of the Seller occurring on or prior to the Closing Date), (d) any
and all Taxes (including, without limitation, the Seller’s pro rata
portion of ad valorem Taxes and any and all Taxes relating to the consummation
of this Agreement and the transactions contemplated hereby) involving,
affecting, arising out of or relating to the ownership or operation of the
Acquisition Assets for periods ending on or prior to the Closing Date, (e) the
Excluded Liabilities and (f) in the event of an action by any third party
against the Purchaser Indemnified Parties or Purchaser’s sublicensees
containing a claim that, if proven, would constitute a breach of Seller’s
Non-Infringement Representation, Seller shall defend, indemnify, and hold
harmless the Purchaser Indemnified Parties and the Purchaser’s sublicensees but
only as to that claim. The foregoing subsection (f) shall not apply to
claims arising out of (i) modifications after the Effective Date to the
Xonon Modules, Technical Information associated therewith, Licensed Technical
Materials (as such terms are defined in the License Agreement) or other
Acquisition Assets that without such modifications would not constitute such a
breach, or (ii) combinations after the Effective Date of the Xonon
Modules, Technical Information associated therewith, Licensed Technical
Materials or other Acquisition Assets with other products or technologies that
without such combinations would not constitute such a breach. Notwithstanding
anything herein to the contrary, Seller shall be entitled to control the
defense and settlement of that portion of the action constituting a claim
described in this Section 8.1(f), provided that such a settlement would
not result in an admission of liability by any member of the aforementioned
indemnitees. Any settlement that would restrict the rights of such indemnitees
in or to the Assigned Patents or Technical Information associated therewith,
Licensed Patents, or Licensed Technical Materials or result in a financial
obligation by any member of such indemnities shall require the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld.

Purchaser’s
Indemnity Obligations. The Purchaser shall indemnify, defend
and hold harmless the Seller and the Seller’s officers, directors,
stockholders, employees, agents, representatives and Affiliates (each a “Seller
Indemnified Party”) from and against any and all 

 22
 

 

Indemnified Amounts paid, imposed on, required by
statutory or other legal authority, or incurred by a Seller Indemnified Party,
directly or indirectly, relating to, resulting from or arising out of (a) any
breach or misrepresentation in any of the representations and warranties made
by or on behalf of the Purchaser in this Agreement or in any certificate or
instrument delivered in connection with this Agreement, , including without
limitation, the License Agreement, (b) any violation or breach by the
Purchaser of, or default by the Purchaser under the terms of, this Agreement or
of any certificate or instrument delivered in connection with this Agreement, (c) any
act or omission by the Purchaser or any of its directors, officers, employees,
agents or representatives, occurring or commencing after the Closing Date,
including any claim by a third party, including employees and customers arising
out of or related to any act or omission by the Purchaser or any of its
directors, officers, employees, agents or representatives occurring after the
Closing Date, and (d) the Assumed Liabilities.

Indemnification
Procedures. All claims for indemnification under this
Agreement shall be asserted and resolved as follows:

Any of the Parties claiming indemnification under this Agreement (an “Indemnified
Party”) shall with reasonable promptness (i) notify the Party from
whom indemnification is sought (the “Indemnifying Party”) of the basis
for the indemnity demand, including without limitation, any Indemnity Claim or
claims asserted against the Indemnified Party or statutory or regulatory basis
for supporting the demand for indemnification (“Indemnity Claim”) for
which indemnification is sought and (ii) transmit to the Indemnifying
Party a copy of all papers served with respect to such claim (if any) and a
written notice (“Claim Notice”) containing a description in reasonable
detail of the nature of the Indemnity Claim, an estimate of the amount of
damages attributable to the Indemnity Claim to the extent feasible (which
estimate shall not be conclusive of the final amount of such claim) and the
basis of the Indemnified Party’s request for indemnification under this
Agreement. It shall not be necessary for any Party to expend any sum of money
or pursue any third party to final judgment to enforce the indemnity provisions
hereof.

Within 15 days after receipt of any Claim Notice (the “Election
Period”), the Indemnifying Party shall notify the Indemnified Party (i) whether
the Indemnifying Party disputes its potential Liability to the Indemnified
Party with respect to such Indemnity Claim and (ii) whether the
Indemnifying Party desires, at the sole cost and expense of the Indemnifying
Party, to defend the Indemnified Party against such Indemnity Claim.

If the Indemnifying Party notifies the Indemnified
Party within the Election Period that the Indemnifying Party elects to assume
the defense of the Indemnity Claim, then the Indemnifying Party shall have the
right to defend, at its sole cost and expense, such Indemnity Claim by all
appropriate Proceedings, which Proceedings shall be prosecuted diligently by
the Indemnifying Party to a final conclusion or settled at the discretion of
the Indemnifying Party in accordance with this Section 8.3(a). The
Indemnifying Party shall have full control of such defense and Proceedings. To
the extent the Indemnifying Party fails to defend the Indemnified Party, the
Indemnified Party is hereby authorized, at the sole cost and expense of the
Indemnifying Party, to file, within fifteen (15) days after expiration of the
Election Period, any motion, answer or other pleadings that the Indemnified
Party shall reasonably deem necessary or appropriate to 

 23
 

 

protect its interests. If requested by the
Indemnifying Party, the Indemnified Party agrees to cooperate with the
Indemnifying Party and its counsel in contesting any Indemnity Claim that the
Indemnifying Party elects to contest, including, without limitation, the making
of any related counterclaim against the person asserting the Indemnity Claim or
any cross complaint against any person; provided, however, that the
Indemnifying Party shall be responsible for the costs of such cooperation
incurred by the Indemnified Party. Except as otherwise provided herein, the
Indemnified Party may participate in, but not control, any defense or
settlement of any Indemnity Claim controlled by the Indemnifying Party pursuant
to this Section 8.3 and shall bear its own costs and expenses with
respect to such participation.

If the Indemnifying Party fails to notify the
Indemnified Party within the Election Period that the Indemnifying Party elects
to defend the Indemnified Party pursuant to the preceding paragraph, or if the
Indemnifying Party elects to defend the Indemnified Party but fails to
vigorously prosecute or settle the Indemnity Claim as herein provided or if the
Indemnified Party reasonably objects to such election on the grounds that
counsel for such Indemnifying Party cannot represent both the Indemnified Party
and the Indemnifying Parties because such representation would be reasonably
likely to result in a conflict of interest, then the Indemnified Party shall
have the right to defend, at the sole cost and expense of the Indemnifying
Party, the Indemnity Claim by all appropriate Proceedings, which Proceedings
shall be promptly and vigorously prosecuted by the Indemnified Party to a final
conclusion or settled. In such a situation, the Indemnified Party shall have
full control of such defense and Proceedings and the Indemnifying Party may
participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 8.3, and the
Indemnifying Party shall bear its own costs and expenses with respect to such
participation.

The Indemnifying Party shall not settle or compromise
any Indemnity Claim unless (i) the terms of such compromise or settlement
require no more than the payment of money (i.e., such compromise or settlement
does not require the Indemnified Party to admit any wrongdoing or take or
refrain from taking any action), (ii) the full amount of such monetary
compromise or settlement will be paid by the Indemnifying Party, and (iii) the
Indemnified Party receives as part of such settlement a legal, binding and enforceable
unconditional satisfaction and/or release, in form and substance reasonably
satisfactory to it, providing that such Indemnity Claim and any claimed
Liability of the Indemnified Party with respect thereto is being fully
satisfied by reason of such compromise or settlement and that the Indemnified
Party is being released from any and all obligations or liabilities it may have
with respect thereto. The Indemnified Party shall not settle or admit Liability
to any Indemnity Claim without the prior written consent of the Indemnifying
Party unless (x) the Indemnifying Party has disputed its potential
Liability to the Indemnified Party, and such dispute either has not been
resolved or has been resolved in favor of the Indemnifying Party or (y) the
Indemnifying Party has failed to respond to the Indemnified Party’s Claim
Notice.

Notwithstanding anything to the contrary within this Section 8.3
or Agreement, both the Indemnifying Party and the Indemnified Party agree to
reasonably cooperate in resolving any dispute or claim that triggers this
Indemnification provision.

 24

 

 

Limitations
on Defense to the Claims of the Purchaser. TO THE EXTENT THAT
THE PURCHASER MAKES ANY CLAIMS AGAINST THE SELLER UNDER THE PROVISIONS OF SECTION 8.1,
THE SELLER MAY NOT ASSERT AND HEREBY EXPRESSLY WAIVE AS A DEFENSE,
COUNTERCLAIM, OR OTHERWISE THAT THE PURCHASER HAS BEEN NEGLIGENT IN CONDUCTING
ITS DUE DILIGENCE OF ANY ASPECT OF THE SELLER OR HAS FAILED TO CONDUCT ITS DUE
DILIGENCE IN A PROPER OR ADEQUATE MANNER.

Limitation
of Liability.

Notwithstanding anything to the contrary contained in  Article 8, except as set forth in
clause (c) below, the aggregate liability of Seller or the Purchaser for
all events or occurrences giving rise to a right of indemnification under Section 8.1
or 8.2 of this Agreement or the License Agreement shall be limited to
the Purchase Price.  In addition, the
aggregate liability of Seller for all events or occurrences giving rise to a
right of indemnification under Section 8.1 of this Agreement shall
be limited as follows: (1) with respect to any breach of a representation
or warranty in Section 5.9, that portion of $400,000 attributable
to the item of inventory at issue, as determined by reference to Schedule
2.4; (2) with respect to any breach of covenant by Seller in
connection with the training services to be provided by Seller to the Purchaser
pursuant to the License Agreement, $100,000; and (3) for all other
matters, $1,600,000; provided, however,
that the aggregate liability of Seller for any breach of Seller’s
Non-Infringement Representation with respect to Intellectual Property shall be
$1,600,000 and with respect to any item of inventory described on Schedule
2.1 shall be that portion of $400,000 attributable to such item, as
determined by reference to Schedule 2.4.

An indemnified party is entitled to indemnification pursuant to Section 8.1
or Section 8.2, as applicable, only to the extent that the
Indemnified Amount, individually or in the aggregate, exceeds $50,000, subject
to the limitation set forth in Section 8.5(a).

Notwithstanding anything to the contrary contained in this Agreement,
the foregoing cap in clause (a) above shall not apply to (i) Excluded
Liabilities; (ii) only with respect to liabilities arising after the
Closing Date, Assumed Liabilities; (iii) liabilities arising out of or in
connection with any breach by the Purchaser of Sections 2 (License) or 3
(Xonon Trademark) of the License Agreement; or (iv) any Indemnified Amount
arising from fraud or any knowing breach by Seller or the Purchaser, provided
that such party has (x) been notified in writing by the other party of
such breach and (y) has failed to remedy such breach within thirty (30)
days after receipt of such notice.

Remedies
Exclusive. Except for (i) equitable remedies, including
specific performance (ii) cases of fraud and (iii) cases of knowing
breach of a Party’s covenants or obligations hereunder (including any failure
to pay an amount required to be paid hereunder) in cases where such party has (x) been
notified in writing by the other party of such breach and (y) has failed
to remedy such breach within thirty (30) days after receipt of such notice, the
remedies provided for 

 25
 

 

in this Article 8 shall constitute the
sole and exclusive remedy for any post-Closing claims made for breach of the
representations and warranties contained in this Agreement or any of the
Schedules or Exhibits attached hereto or in any of the certificates or other
instruments or documents furnished by any Party pursuant to this Agreement.

ARTICLE
9

GENERAL
PROVISIONS

Survival.
The representations and warranties set forth in this Agreement and in any
certificate or instrument delivered in connection herewith shall be continuing
and shall survive the Closing for a period of one (1) year following the
Closing Date; provided, however, that there shall be no such termination
with respect to any such representation or warranty as to which a
bona fide claim has been asserted by written notice of such claim
delivered to the Party or Parties making such representation or warranty prior
to the expiration of the survival period; provided,
further, that the representations
and warranties set forth in Sections 4.1  (Organization and Qualification), 4.2
(Authority; Consents; Binding Agreement), 5.1 (Organization and
Qualification), 5.2 (Authority; Non-Contravention; Consents and
Approvals), and 5.5 (Title to Assets) shall survive the Closing Date for
the applicable statute of limitations and Seller’s Non-Infringement
Representation shall survive the Closing for a period of two (2) years
following the Closing Date. The covenants and agreements set forth in this
Agreement, including, without limitation, those reflected in Section 3.1
(Limited Liabilities Assumed by Purchaser), Section 6.2 (Woodward
Agreement), Section 6.3 (CEC Agreements), Section 6.9
(Non-competition) and Section 6.13 (Confidentiality), and the
covenants and agreements in the License Agreement, shall survive the Closing
for so long as the obligations thereunder continue.

Notices.
All notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally, mailed by registered or certified mail
(return receipt requested) or sent via recognized overnight delivery service to
the Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice):

If to the Purchaser, to:

Kawasaki Heavy Industries, Ltd.

1-1 Kawasaki-Cho

Akashi City, 673-8666

Japan

Attention:  Shin-Ichiro Noumi

with a copy to (which shall not constitute notice):

Kawasaki Motors Corp., U.S.A.

9950 Jeronimo Road

Irvine, California 92618-2084

Attention:  Donald J. Koprowski — General
Counsel

 26
 

 

If to the Seller, to:

Catalytica Energy Systems, Inc.

c/o Wilson Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, California  94304

Attention:  Larry Sonsini

with a copy to (which shall not constitute notice):

Morrison & Foerster LLP

755 Page Mill Road

Palo Alto, CA  94304-1018

Attention: Chuck Holland

Interpretation.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the interpretation of this Agreement. In this
Agreement, unless a contrary intention is specifically set forth, (i) the
words “herein”, “hereof” and “hereunder” and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (ii) reference to any Article or
Section means such Article or Section hereof. No provision of
this Agreement shall be interpreted or construed against any Party solely
because such Party or its legal representative drafted such provision.

Miscellaneous.
This Agreement (including the documents and instruments referred to herein and
the Disclosure Schedule and Exhibits attached hereto) (a) constitutes the
entire agreement and supersedes all other prior agreements and understandings,
both written and oral, among the Parties, or any of them, with respect to the
subject matter hereof, and (b) shall not be assigned by operation of law
or otherwise except that (i) the Purchaser may assign this Agreement to
one or more of its Affiliates, but no such assignment shall relieve the
Purchaser of its obligations hereunder, and (ii) the Seller may assign
this Agreement to any party that acquires all or substantially all of the
assets of the Seller or all or substantially all of the intellectual property
rights licensed to the Purchaser under the License Agreement, but no such
assignment shall relieve the Seller of its obligations hereunder.

Governing
Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS,
INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN
SUCH STATE.

Process
and Venue. Any process against the Purchaser or the Seller
in, or in connection with, any suit, action or Proceeding arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement may be served personally or by certified mail at the address set
forth in Section 9.2 with the same effect as though served on it
personally. The Purchaser and the Seller hereby irrevocably submit in any suit,
action or Proceeding arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement to the exclusive jurisdiction and
venue of the United States District Court for the Northern District of
California and the jurisdiction and venue of any court of the State of
California located in Santa Clara County and waive any and all objections to
jurisdiction and review or venue that it or he may have under the laws of
California or the United States.

 27
 

 

Disclosure
Schedules.  The
disclosures in the Disclosure Schedules, and those in any supplement thereto,
relate only to the representations and warranties in the Section or
paragraph of the Agreement to which they expressly relate and not to any other
representation or warranty in the Agreement, unless otherwise set forth therein.
If there is any inconsistency between the statements in the body of the
Agreement and those in the Disclosure Schedules, the statements in the
Disclosure Schedules will control.

Independent
Obligations. The Parties hereby expressly agree that their
respective obligations and covenants under this Agreement and the License
Agreement, including without limitation, covenants regarding non-competition,
waivers and indemnification obligations, shall be independent of each other and
are made in addition to the obligations and covenants made in the other.

Attorney’s
Fees. In the event any Party hereto institutes a Proceeding
against any other Party hereto for a claim arising out of or to enforce this
Agreement, the Parties agree that the prevailing party shall be entitled to
recovery of its reasonable attorney’s fees and litigation expenses in
connection with such Proceeding.

Amendment.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all of the Parties.

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

Parties
in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each Party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.

Validity.
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.

[Remainder of Page Intentionally Left Blank]

 28

 

 

IN WITNESS WHEREOF, the Purchaser and the Seller have
executed and delivered this Agreement effective as of the date first written
above.

	
  

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
  KAWASAKI HEAVY INDUSTRIES, LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ KAZUTOYO
  DAIKOKU

  
	
   

  	
  Name:

  	
  Kazutoyo Daikoku

  
	
   

  	
  Title:

  	
  Deputy General Manager, Gas Turbine Division

  
	
   

  	
   

  
	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  CATALYTICA ENERGY SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ROBERT W.
  ZACK

  
	
   

  	
  Name:

  	
  Robert W. Zack

  
	
   

  	
  Title:

  	
  President, Chief Executive Officer and Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
  For purposes of Section 6.8
  only:

  
	
   

  	
   

  
	
   

  	
  KAWASAKI GAS TURBINES — AMERICAS, a division of
  KAWASAKI MOTORS CORP., U.S.A.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ HIRO
  MATSUMURA

  
	
   

  	
  Name:

  	
  Hiro Matsumura

  
	
   

  	
  Title:

  	
  President

  
					

 

 

Schedule
2.1(a)

Inventory

1.             6 Xonon Modules 1 of which is only partially manufactured;

2.             Approximately 650 pounds of aluminized H214 foil; and

3.             Approximately 1,050 pounds of non-aluminized H214 foil.

 

Schedule
2.1(b)

Assigned
Patents

 

	
  TITLE

  	
   

  	
  COUNTRY

  	
   

  	
  PATENT, PUBLICATION, 

  OR APPLICATION NUMBER

  
	
  Multistage Process for Combusting Fuel Mixtures

  	
   

  	
  DE

  	
   

  	
  EP0558669

  
	
  Multistage Process for Combusting Fuel Mixtures

  	
   

  	
  FR

  	
   

  	
  EP0558669

  
	
  Multistage Process for Combusting Fuel Mixtures

  	
   

  	
  GB

  	
   

  	
  EP0558669

  
	
  Multistage Process for Combusting Fuel Mixtures

  	
   

  	
  IT

  	
   

  	
  EP0558669

  
	
  (*) Multistage Process for Combusting Fuel Mixtures

  	
   

  	
  JP

  	
   

  	
  3364492

  
	
  Process for Burning Combustible Mixtures

  	
   

  	
  US

  	
   

  	
  5,425,632

  
	
  Multistage Process for Combusting Fuel Mixtures

  	
   

  	
  US

  	
   

  	
  5,281,128

  
	
  Multistage Process for Combusting Fuel Mixtures
  Using Oxide Catalysts in the Hot Stage

  	
   

  	
  US

  	
   

  	
  5,232,357

  
	
  Two Stage Process for Combusting Fuel Mixtures

  	
   

  	
  US

  	
   

  	
  5,183,401

  
	
  Cooled Support Structure for a Catalyst

  	
   

  	
  US

  	
   

  	
  5,461,864

  
	
  Improved Support Structures for a Catalyst

  	
   

  	
  DE

  	
   

  	
  EP1075628

  
	
  Improved Support Structures for a Catalyst

  	
   

  	
  DK(1)

  	
   

  	
  EP1075628

  
	
  Improved Support Structures for a Catalyst

  	
   

  	
  FR

  	
   

  	
  EP1075628

  
	
  Improved Support Structures for a Catalyst

  	
   

  	
  GB

  	
   

  	
  EP1075628

  
	
  Improved Support Structures for a Catalyst

  	
   

  	
  JP

  	
   

  	
  2002513132

  
	
  Improved Support Structures for a Catalyst

  	
   

  	
  US

  	
   

  	
  6,217,832

  
	
  Thermally Tolerant Support Structure for a Catalytic
  Combustion Catalyst

  	
   

  	
  EP

  	
   

  	
  1336068

  
	
  Thermally Tolerant Support Structure for a Catalytic
  Combustion Catalyst

  	
   

  	
  JP

  	
   

  	
  2004525327

  

 

 

 

	
  TITLE

  	
   

  	
  COUNTRY

  	
   

  	
  PATENT, PUBLICATION, 

  OR APPLICATION NUMBER

  
	
  Thermally Tolerant Support Structure for a Catalytic
  Combustion Catalyst

  	
   

  	
  KR

  	
   

  	
  2003-7006485

  
	
  Thermal Tolerant Support Structure for a Catalytic
  Combustion Catalyst

  	
   

  	
  US

  	
   

  	
  2002110501

  
	
  (***) Control Strategy for Flexible Catalytic
  Combustion System

  	
   

  	
  EP

  	
   

  	
  1352196

  
	
  (***) Control Strategy for Flexible Catalytic Combustion
  System

  	
   

  	
  JP

  	
   

  	
  2004525331

  
	
  (***) Control Strategy for Flexible Catalytic
  Combustion System

  	
   

  	
  TW

  	
   

  	
  505764

  
	
  (***) General Control Strategy for a Flexible
  Catalytic Control System

  	
   

  	
  US

  	
   

  	
  2004206090

  
	
  Process and Apparatus for Control of Nox In
  Catalytic Combustion Systems

  	
   

  	
  US

  	
   

  	
  6,595,003

  
	
  Method of Thermal Nox Reduction in Catalytic
  Combustion Systems

  	
   

  	
  EP

  	
   

  	
  1334307

  
	
  Method of Nox Reduction in Catalytic Combustion
  Systems

  	
   

  	
  JP

  	
   

  	
  2004519651

  
	
  Method of Thermal Nox Reduction in Catalytic
  Combustion Systems

  	
   

  	
  US

  	
   

  	
  6,718,772

  
	
  (***) Design and Control Strategy for Catalytic
  Combustion System with a Wide Operating System

  	
   

  	
  EP

  	
   

  	
  1427965

  
	
  (***) Design and Control Strategy for Catalytic
  Combustion System with a Wide Operating System

  	
   

  	
  JP

  	
   

  	
  2005502021

  
	
  (***) Design and Control Strategy for Catalytic
  Combustion System with a Wide Operating Range

  	
   

  	
  US

  	
   

  	
  6,796,129

  
	
  Fuel-Air Premixing System For a Catalytic Combustor

  	
   

  	
  US

  	
   

  	
  2004021235

  
	
  (***) Dynamic Control System for Catalytic
  Combustion Process and Gas Turbine Engine Utilizing Same

  	
   

  	
  CA

  	
   

  	
  2344210

  
	
  (***) Dynamic Control System for Catalytic
  Combustion Process and Gas Turbine Engine utilizing Same (WGC)

  	
   

  	
  DE

  	
   

  	
  1114279

  
	
  (***) Dynamic Control System for Catalytic
  Combustion Process and Gas Turbine Engine utilizing Same (WGC)

  	
   

  	
  FR

  	
   

  	
  1114279

  

 

 

 

	
  TITLE

  	
   

  	
  COUNTRY

  	
   

  	
  PATENT, PUBLICATION, 

  OR APPLICATION NUMBER

  
	
  (***) Dynamic Control System for Catalytic
  Combustion Process and Gas Turbine Engine utilizing Same (WGC)

  	
   

  	
  GB

  	
   

  	
  1114279

  
	
  (***) Dynamic Control System for Catalytic
  Combustion Process and Gas Turbine Engine utilizing Same (WGC)

  	
   

  	
  IT

  	
   

  	
  1114279

  
	
  (***) Dynamic Control System for Catalytic
  Combustion Process and Gas Turbine Engine utilizing Same

  	
   

  	
  JP

  	
   

  	
  2002525490

  
	
  (***) Dynamic Control System for Catalytic
  Combustion Process and Gas Turbine Engine Utilizing Same (WGC)

  	
   

  	
  US

  	
   

  	
  6095793

  
	
  Dynamic Control System and Method for Multiple
  Combustor Catalytic Gas Turbine Engine

  	
   

  	
  BR

  	
   

  	
  PI0406806-8

  
	
  Dynamic Control System and Method for Multiple
  Combustor Catalytic Gas Turbine Engine

  	
   

  	
  EP

  	
   

  	
  1592924

  
	
  Dynamic Control System and Method for Multiple
  Combustor Catalytic Gas Turbine Engine

  	
   

  	
  JP

  	
   

  	
  2006501010

  
	
  Dynamic Control System and Method for Multiple
  Combustor Catalytic Gas Turbine Engine

  	
   

  	
  US

  	
   

  	
  2004206091

  
	
  Catalyst Module Overheating Detection and Methods of
  Response

  	
   

  	
  EP

  	
   

  	
  04782983.3

  
	
  Catalyst Module Overheating Detection and Methods of
  Response

  	
   

  	
  US

  	
   

  	
  10/571,798

  
	
  Catalyst Module Overheating Detection and Methods of
  Response

  	
   

  	
  US

  	
   

  	
  11/376,726

  
	
  (**) Bypass Air Injection Method and Apparatus for
  Gas Turbines

  	
   

  	
  US

  	
   

  	
  6,568,188

  
	
  (**) Bypass Air Injection Method and Apparatus for
  Gas Turbines

  	
   

  	
  US

  	
   

  	
  6,449,956

  

(1)             It
is CESI’s understanding that the noted patent has been abandoned due to
nonpayment of an annuity and CESI is transferring whatever rights, if any, in
and to such patent, which may be none.

 

Schedule
2.4

Allocation
of Asset Values

1.             $400,000 allocated to the inventory
set forth on Schedule 2.1(a), $300,000 of which shall be allocated to
the Xonon Modules described therein and $100,000 of which shall be allocated to
the H214 foil described therein. Of the $300,000 allocated to the Xonon
Modules, that amount shall be allocated equally among the individual Xonon
Modules.

2.             $1,600,000 for the assignments and
licenses granted by Seller to the Purchaser pursuant to the License Agreement,
allocated to such rights and obligations as follows:

(a)           $1,300,000 for the Assigned Patents;

(b)           $50,000 for the right to acquire
Abandoned Multi-Use Patents as described in Section 2.1 of the License
Agreement;

(c)           $240,000 for the license of Licensed
Patents and Licensed Technical Materials as described in Section 2.2 of
the License Agreement; and

(d)           $10,000 for the license of the CESI
Trademarks as described in Section 4 of the License Agreement.

3.             $100,000 for the training services
to be provided by Seller to the Purchaser pursuant to the License Agreement.

Any capitalized
terms above not otherwise defined in this Agreement shall have the meaning
ascribed to such terms in the License Agreement.

 

Schedule 3.1

Assumed
Liabilities

The Purchaser
shall assume all obligations of the Seller under the CEC Agreements and the
Woodward Agreement effective as of the Closing Date.

The Purchaser
agrees to maintain accurate records for the purposes of tracking components of
sales, fees and royalties due pursuant to this Schedule.

 

Schedule 5.2(b)

Pursuant to Seller’s
agreements with the California Energy Commission (“CEC”), the CEC may have
march-in rights with respect to the following patents/patent applications:

EP 1336068

JP 2004/525327

US 2002/110501

KR 2003/7006485

 

 

Schedule 5.2(c)

Approval is required from
the CEC to assign the CEC Agreements to the Purchaser. Consent of TKK is
required for the transfer and license of certain patents issued under the laws
of Japan in which TKK has joint ownership with Seller.

 

Schedule 5.3

The Purchaser and KGT-A
have threatened litigation against the Seller in connection with the Xonon
Module Supply Agreement by and among the Seller, the Purchaser and KGT-A dated December 13,
2000 as amended as of July 2, 2003.

 

Schedule 5.5

In addition to the
exceptions listed on Schedule 5.7, certain portions of the Intellectual
Property may be subject to march-in rights as described in Schedule 5.2(b).

Pursuant to Article 3 of the Woodward Agreement, Seller has granted
Woodward Governor Company a non-exclusive license to certain of the Assigned
Patents, as described on Schedule 5.7.

 

Schedule
5.7

Intellectual
Property

The licenses of
the Multi-Use Patents marked with “(*)” in Exhibit A of the License
Agreement are subject to the prior consent of TKK, which consent has been
delivered by TKK as of the date of this Agreement. The Multi-Use Patents marked
with “(**)” in Exhibit A of the License Agreement are jointly owned by
Seller and General Electric Company.

The Assigned
Patents marked with “(*)” in Schedule 2.1(b) are jointly owned by
Seller and TKK. The Assigned Patents marked with “(**)” in Schedule 2.1(b) are
jointly owned by Seller and General Electric Company.

The Assigned
Patents marked with “(***)” in Schedule 2.1(b) are those that currently correspond
to Exhibit D to the Woodward Agreement and Section 3.2 thereof. To
the extent that any other Assigned Patents fall within the definition of “CESI
Patents” or “CESI Improvement Patents” in the Woodward Agreement, those other
Assigned Patents would also be licensed to the Woodward Governor Company (“Woodward”)
pursuant to Article 3 of the Woodward Agreement.

 

Schedule
5.8

1.                                       Control
Patent Assignment and Cross-License Agreement dated 19 December 2001
between Woodward Governor Company and Catalytica Energy Systems, Inc., as
amended by the Settlement and Release of Claims letter dated April 24,
2002 from John Holbrook of Woodward Governor Company to Craig Kitchen of
Seller.

a.             Payment records in
respect of the Woodward Agreement.

2.                                       Royalty
Agreement No. ROY-05-002 between Catalytica Energy Systems, Inc.
and the California Energy Commission for Contract No. 500-97-033.

a.             Payment records in
respect of Royalty Agreement No. ROY-05-002.

3.                                       Royalty
Agreement No. ROY-05-001 between Catalytica Energy Systems, Inc.
and the California Energy Commission for Contract No. 500-01-030.

a.             Payment records in
respect of Royalty Agreement No. ROY-05-001.

4.             Approval is required from the CEC to assign the CEC
Agreements to Purchaser.

 

Schedule
5.9

Xonon Module Exceptions

Two of the Xonon Modules have a significant shelf
life, and there may be material degradation as a result of the storage period. Xonon
Module AA023 is partially assembled.

Module Data

Foil Exceptions

For the 2-mil thick Haynes 214 foil which is
used in the outlet stage of the module, the usable Aluminized H214 is spread
out through 20 4” wide rolls of varying weights and usability. In general, each
roll has some portion of unusable foil at each end and some may have slits or
burns within the roll. The Seller estimates that approximately 75% of the foil
(650 of 883 lbs) to be usable. With respect to the un-aluminized H214 foil,
there are 10 rolls of 12” wide foil of varying weights. The Seller estimates
that approximately 80% of the foil (1050 of 1346) to be usable.

The following is the specific information with respect
to the foil:

	
  Stock Number

  	
   

  	
  Foil Type

  	
   

  	
  Thickness

  	
   

  	
  Width (in)

  	
   

  	
  Core

  Weight (lbs)

  	
   

  	
  Gross

  Weight (lbs)

  	
   

  	
  Net

  Weight (lbs)

  
	
  10676

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.6

  	
   

  	
  65

  	
   

  	
  58.4

  
	
  10853

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.05

  	
   

  	
  24

  	
   

  	
  17.95

  
	
  10855

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.1

  	
   

  	
  10.4

  	
   

  	
  4.3

  
	
  10856

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.05

  	
   

  	
  61

  	
   

  	
  54.95

  
	
  10858

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.05

  	
   

  	
  29

  	
   

  	
  22.95

  
	
  10982

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.14

  	
   

  	
  63

  	
   

  	
  56.86

  
	
  10984

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.14

  	
   

  	
  16.3

  	
   

  	
  10.16

  
	
  10993

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.6

  	
   

  	
  59

  	
   

  	
  52.4

  
	
  10994

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  6.6

  	
   

  	
  60

  	
   

  	
  53.4

  
	
  11064

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  60

  	
   

  	
  54.05

  
	
  11065

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  52

  	
   

  	
  46.05

  
	
  11066

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  62

  	
   

  	
  56.05

  
	
  11067

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  62

  	
   

  	
  56.05

  
	
  11068

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  53

  	
   

  	
  47.05

  
	
  11069

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  10.3

  	
   

  	
  4.35

  

 

 

 

	
  11070

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  60

  	
   

  	
  54.05

  
	
  11071

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  65

  	
   

  	
  59.05

  
	
  11072

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  66

  	
   

  	
  60.05

  
	
  11073

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  66

  	
   

  	
  60.05

  
	
  11074

  	
   

  	
  AL-H214

  	
   

  	
  2-mil

  	
   

  	
  4

  	
   

  	
  5.95

  	
   

  	
  61

  	
   

  	
  55.05

  
	
  20
  4” wide, 2-mil thick Al-H214 Rolls

  	
   

  	
  Total

  	
   

  	
  883.22
  lbs

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10670

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  11

  	
   

  	
  102

  	
   

  	
  91

  
	
  10671

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  11

  	
   

  	
  276

  	
   

  	
  265

  
	
  10674

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  11

  	
   

  	
  258

  	
   

  	
  247

  
	
  10678

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  12

  	
   

  	
  108

  	
   

  	
  96

  
	
  10680

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  11

  	
   

  	
  92

  	
   

  	
  81

  
	
  10682

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  11

  	
   

  	
  99.6

  	
   

  	
  88.6

  
	
  10683

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  11

  	
   

  	
  131

  	
   

  	
  120

  
	
  10684

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  11

  	
   

  	
  142.4

  	
   

  	
  131.4

  
	
  10686

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  14

  	
   

  	
  144

  	
   

  	
  130

  
	
  11035

  	
   

  	
  H214

  	
   

  	
  2-mil

  	
   

  	
  12

  	
   

  	
  11

  	
   

  	
  107

  	
   

  	
  96

  
	
  10
  12” wide, 2-mil thick H214 Rolls

  	
   

  	
  Total

  	
   

  	
  1,346
  lbs

  

 

 

 

EXHIBIT A

Form of
Bill of Sale and Assignment

This
Bill of Sale, Assignment and Assumption Agreement (this “Agreement”) is
made and entered into effective as of the       day
of             ,
2006 by and between CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation
(the “Assignor”), and KAWASAKI HEAVY INDUSTRIES, LTD.,  Japanese corporation (the “Assignee”).

RECITALS

WHEREAS,
the Assignor and the Assignee have executed that certain Asset Purchase
Agreement dated as of               ,
2006 (the “Asset Purchase Agreement”);

WHEREAS,
the Assignor desires to sell to the Assignee, and the Assignee desires to
purchase from the Assignor the Acquisition Assets (as defined in the Asset
Purchase Agreement);

WHEREAS,
the Assignee has agreed to assume from Assignor and agrees to pay, perform and
discharge all of the Assumed Liabilities as defined in the Asset Purchase
Agreement; and

WHEREAS,
any capitalized term used herein or in the exhibits attached hereto and not
otherwise defined shall have the meaning ascribed to it in the Asset Purchase
Agreement.

AGREEMENT

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Assignor sells, transfers, assigns, conveys
and delivers unto the Assignee and its successors and assigns all of the
Assignor’s right, title and interest in and to the Acquisition Assets, free and
clear of all Encumbrances, except as described in the Asset Purchase Agreement
and other than with respect to the Assumed Liabilities. The Assignor also
assigns, conveys, transfers and sets over unto the Assignee and its successors
and assigns, all right, title and interest of the Assignor in and to each of
the Assumed Liabilities.

The
Assignee accepts, assumes and agrees to pay, discharge or perform, as
appropriate, the Assumed Liabilities. Other than the Assumed Liabilities, the
Assignee shall not assume or be responsible for any claims against, or
liabilities, commitments, contracts, agreements or obligations whatsoever of
the Assignor.

This
Agreement is subject and subordinate to all of the terms and provisions of the
Asset Purchase Agreement, and in the event of any conflict between any term or
provision hereof and any term or provision of the Asset Purchase Agreement, the
latter shall control.

Each
party agrees to execute, acknowledge and deliver such further documents and
instruments and to take other actions as may be reasonably necessary to convey
to and vest in 

 A-1
 

 

Assignee and
protect its right, interest in and enjoyment of the Acquisition Assets and
Assumed Liabilities.

Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law. If any provision of this
Agreement shall be invalid, illegal or unenforceable in any respect under any
applicable law, the validity, legality and enforceability of the remaining
provisions hereof shall not be affected or impaired thereby.

This
Agreement shall bind and inure to the benefit of the Assignee and the Assignor
and their respective successors and assigns.

This
Agreement may not be amended except by an instrument in writing signed on
behalf of all of the parties.

THIS
AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING VALIDITY, INTERPRETATION
AND EFFECT, BY THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

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

[Signature
Page Follows]

 A-2
 

 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the day and year first above
written.

	
  

  	
  ASSIGNOR

  
	
   

  	
   

  
	
   

  	
  CATALYTICA ENERGY SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
   

  
	
   

  	
  KAWASAKI HEAVY INDUSTRIES, LTD.

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

 A-3

 

 

EXHIBIT B

Form of
License Agreement

THIS LICENSE AGREEMENT (“Agreement”) is made
effective as of June       , 2006 (“Effective
Date”), by and between Catalytica Energy Systems, Inc., a Delaware
corporation (“CESI”), and Kawasaki Heavy Industries, Ltd., a Japanese
corporation (“Kawasaki”).

WHEREAS, CESI and Kawasaki have entered into that
certain Asset Purchase Agreement dated simultaneously herewith (“Asset
Purchase Agreement”);

WHEREAS, CESI has developed expertise and technology
of a catalytic combustion system that incorporates catalytic modules that are
utilized to oxidize hydrocarbon fuels in the combustion system of gas turbines;

WHEREAS, Kawasaki desires to obtain from CESI certain
patents and technical materials associated with such CESI catalytic combustion
system that are necessary or useful in the manufacturing, operation,
distribution, sales, and support of such catalytic combustion systems for Small
Gas Turbines; and

WHEREAS, CESI desires to grant a license of such
patents and technical materials to Kawasaki.

NOW, THEREFORE, in consideration of the covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:

1.             Definitions. Capitalized
terms not otherwise defined herein shall have the meanings specified in the
Asset Purchase Agreement.

1.1.          “Affiliate” shall have the
meaning set forth in the Asset Purchase Agreement.

1.2.          “Assigned Patents” shall have
the meaning set forth in the Asset Purchase Agreement.

1.3.          “Patents” means patents
(including utility models, as well as divisions, reissues, continuations,
continuations-in-part, renewals and extensions of any of the foregoing) and
provisional and regular applications therefor, and patents which may be issued
on such applications.

1.4.          “SGT Catalytic Module” means a
catalytic container module designed for use solely with Small Gas Turbines to
reduce the nitrous oxide emissions of such Small Gas Turbines.

1.5.          “Small Gas Turbines” shall have
the meaning set forth in the Asset Purchase Agreement and shall include the
term “SGT.”

 B-1
 

 

1.6.          “Technical Information” means
all technical information, know-how, trade secrets, manufacturing techniques,
software and other copyrightable works, engineering and other data, drawings,
material and process specifications (whether patented or unpatented, whether in
written, printed, oral or other form) that are required or reasonably necessary
for Kawasaki to continue the manufacturing of SGT Catalytic Modules from and
after the Closing Date.

2.             License.

2.1.          Multi-Use Patents. The parties
acknowledge that the patents listed in Exhibit A (“Multi-Use Patents”
or “Licensed Patents”) are applicable to both Small Gas Turbines and to
other products and technologies, including, without limitation, gas turbines
that are not Small Gas Turbines. Kawasaki may request in writing from time to
time that CESI identify which Multi-Use Patents, if any, that it has decided to
abandon, and CESI shall respond in writing to such requests. Subject to the
terms and conditions of this Agreement, with respect to any Multi-Use Patents
that CESI indicates in any such response that it has decided to abandon (“Abandoned
Multi-Use Patents”), CESI shall, upon Kawasaki’s written request, and
without additional consideration, assign such Abandoned Multi-Use Patents to
Kawasaki. Notwithstanding anything to the contrary, the obligations of CESI
under this Section 2.1 (a) shall not apply to any third parties,
including, without limitation, any successors or assigns of CESI or any
acquirers or other assignees of any Multi-Use Patents, and (b) shall
terminate with respect to any Multi-Use Patent upon the acquisition or other
transfer of such Multi-Use Patent (including, without limitation, as a result
of a voluntary assignment of such Multi-Use Patent to a third party, an
acquisition by a third party of CESI assets that include such Multi-Use Patent,
or a merger involving CESI).

2.2.          Licenses.

(a)           Patents. Subject to the terms
and conditions of this Agreement, CESI hereby grants to Kawasaki a perpetual,
fully paid-up, royalty-free, worldwide, irrevocable license, under the
Multi-Use Patents, to make, have made, test, use, sell, offer to sell, import,
export, distribute, market, promote, sublicense, create improvements, and
commercially exploit SGT Catalytic Modules.

(b)           Technical Materials. Subject
to the terms and conditions of this Agreement, CESI hereby grants to Kawasaki a
perpetual, fully paid-up, royalty-free, worldwide, irrevocable license to:

(i)            use, modify, create derivative works
of, and reproduce the technical materials listed in Exhibit B (“New
Technical Materials”), Technical Information associated with the Multi-Use
Patents (the “Multi-Use Technical Information”), and the Technical
Information and Xonon Control Algorithms (as such terms are defined in the
TDTA) owned by CESI and previously delivered by CESI to Kawasaki pursuant to
the TDTA (the New Technical Materials, Multi-Use Technical Information, and
such Technical Information and Xonon Control Algorithms, collectively, “Licensed
Technical Materials”) as reasonably necessary to design, develop,
manufacture, have made, test, use, sell, offer to sell, import, export, 

 B-2
 

 

distribute,
market, promote, sublicense, create improvements, and commercially exploit SGT
Catalytic Modules;

(ii)           distribute the Licensed Technical
Materials to Kawasaki’s Affiliates, and sublicense to such Affiliates the
rights granted in subsection (i) above;

(iii)          distribute the Licensed Technical
Materials to contractors and consultants of Kawasaki and its Affiliates
(collectively, “Kawasaki Contractors”), and sublicense to such
contractors and consultants the rights granted in subsection (i) above
solely on behalf of Kawasaki and its Affiliates; and

(iv)          distribute the Licensed Technical
Materials to customers and potential customers of SGT Catalytic Modules and
associated Small Gas Turbines (collectively, “Kawasaki Customers”) as
Kawasaki reasonably deems appropriate in the Small Gas Turbine market, and
sublicense to such customers and potential customers the right to use such
Licensed Technical Materials in the offering for sale, sale, service and repair
of SGT Catalytic Modules and associated Small Gas Turbines.

CESI shall use commercially reasonable efforts to
deliver the New Technical Materials to Kawasaki in both hardcopy and in
electronic form.

(c)           Authorized Users. Kawasaki
shall be responsible for compliance by its Affiliates, Kawasaki Contractors and
Kawasaki Customers (collectively, “Authorized Users”) with the terms and
conditions of Sections 2.2 and 2.3 of this Agreement to the same extent as
Kawasaki itself, and any act or omission of any Authorized User shall
constitute an act or omission of Kawasaki. Kawasaki and the Authorized Users
shall not use or disclose any Licensed Technical Information except as
permitted in Section 2.2.

(d)           Exclusivity. CESI agrees that
Kawasaki’s licenses as to the Licensed Patents and Licensed Technical Materials
under Sections 2.2(a) and 2.2(b) shall be EXCLUSIVE to Kawasaki as to SGT Catalytic Modules. CESI agrees
that as of the Effective Date, CESI shall have no right to manufacture, make,
have made, license, sublicense, distribute, or otherwise commercially exploit
the Licensed Technical Materials in connection with any SGT Catalytic Modules without
the prior written consent of Kawasaki.

(e)           Marking; Requests for Disclosure.
Kawasaki shall (and shall cause its Affiliates and Kawasaki Contractors to)
mark substantially permanently and legibly, and shall require the permanent and
legible marking of, all SGT Catalytic Modules and related documentation with
such patent notice as may be required under Title 35, United States Code or
other applicable rules or regulations in foreign jurisdictions. With
respect to the Licensed Patents, Kawasaki shall respond to any request for
disclosure under 35 U.S.C. § 287(b)(4)(B) only by notifying CESI of
the request for disclosure.

 B-3
 

 

2.3.          Sublicense Limitations. If Kawasaki grants any sublicense to the
Licensed Patents or the Licensed Technical Materials: (A) Kawasaki
shall be responsible for compliance by the sublicensee with the terms and
conditions of Sections 2.2 and 2.3 of this Agreement to the same extent as
Kawasaki itself, (B) any act or omission of a sublicensee shall constitute
an act or omission of Kawasaki, and (C) each sublicensee shall agree in
writing that it is subject to the terms and conditions of Sections 2.2 and 2.3
of this Agreement (without the right to further sublicense), and that CESI
shall be third party beneficiary of each such sublicense as necessary to
enforce its rights in the Licensed Patents and Licensed Technical Materials.
Notwithstanding subsection (C) to the contrary, Kawasaki shall have the
right to include in its specifications sheets, product data sheets, support
manuals and other marketing, sales and support materials for SGT Catalytic
Modules any Licensed Technical Materials that are customarily included in such
materials, without entering into any writing with the recipients of such
materials.

2.4.          No Implied Rights. Each party
hereby retains all rights not expressly granted by this Agreement. Each party
hereby disclaims any and all implied licenses, rights and obligations,
including any licenses, rights or obligations that may be deemed granted by
this Agreement or the activities of the parties hereunder.

3.             Xonon Trademark.

3.1.          License. During the term of
this Agreement, subject to the terms and conditions of this Agreement, CESI
hereby grants to Kawasaki the EXCLUSIVE right
to use the marks listed in Exhibit C (the “CESI Trademarks”) on and
in relation to its sale of the SGT Catalytic Modules. Kawasaki shall have the
right to sublicense the foregoing right to its Affiliates and contractors;
provided that (a) Kawasaki shall be responsible for compliance by its
sublicensees with the terms and conditions of Section 3 of this Agreement
to the same extent as Kawasaki itself, (b) any act or omission of any
sublicensee shall constitute an act or omission of Kawasaki, and (c) each
sublicensee shall agree in writing that it is subject to the terms and
conditions of Section 3 of this Agreement and that CESI shall have a right
of action against the sublicensee as necessary to enforce the terms and
conditions of this Section 3. Nothing in this Agreement requires Kawasaki
to use any CESI Trademarks.

3.2.          Quality Control.

(a)           Kawasaki shall ensure that all use of
the CESI Trademarks shall be in accordance with the reasonable instructions and
guidelines of CESI as provided to Kawasaki from time to time.

(b)           All SGT Catalytic Modules that are
marked using a CESI Trademark and are manufactured by Kawasaki or any of its
sublicensees (“Marked Modules”) shall be of such quality as will, in CESI’s
reasonable judgment, protect and enhance the goodwill, image and reputation
adhering to the CESI Trademarks. Kawasaki shall cooperate reasonably with CESI
in enabling CESI to ascertain that the Marked Modules meet CESI’s quality
standards. Such cooperation shall include, without limitation, upon CESI’s
written request, providing CESI with communications from third parties
regarding the quality of the Marked Modules, and upon at least ten (10) days
prior written notice, providing CESI with 

 B-4
 

 

access
to the Marked Module packaging and distribution facilities during normal
business hours for reasonable inspection by CESI.

(c)           From time to time and upon CESI’s
written request, Kawasaki shall submit to CESI samples of all materials bearing
any CESI Trademark, including, without limitation, any advertising, packaging
and other publicly disseminated materials. If CESI discovers any improper use
of any CESI Trademark on any such submission and delivers a writing describing
in detail the improper use to Kawasaki, Kawasaki shall promptly remedy the
improper use.

3.3.          Protection of Mark.

(a)           Kawasaki shall conduct its business
associated with Marked Modules in a manner that will reflect positively on the
CESI Trademarks.

(b)           Kawasaki shall use the CESI
Trademarks in a manner that does not derogate CESI’s rights in the CESI
Trademarks or the value of the CESI Trademarks, and shall take no action that
would interfere with, diminish or tarnish those rights or value.

(c)           On each product, document,
advertisement or other material on which Kawasaki uses a CESI Trademark,
Kawasaki shall mark the first prominent use of the CESI Trademark with a “TM” or
“®” trademark legend, as applicable, and include a trademark notice in a form
reading, “[CESI Trademark] is a trademark
of Catalytica Energy Systems, Incorporated” at least once on such document,
advertisement or other material.

(d)           Kawasaki shall not use as its own any
service mark, service name, trade name or trademark confusingly similar to any
CESI Trademark.

(e)           Kawasaki shall reasonably cooperate
with CESI’s preparation and filing of any applications, renewals or other
documentation necessary or useful to protect CESI’s intellectual property
rights in the CESI Trademarks. Kawasaki shall not register any CESI Trademark
without CESI’s express prior written consent, and CESI shall retain the
exclusive right to apply for and obtain registrations for the CESI Trademarks
throughout the world.

(f)            Kawasaki shall notify CESI promptly
of any actual or threatened infringements, imitations or unauthorized uses of
any CESI Trademark of which Kawasaki becomes aware.

(g)           Kawasaki shall not challenge the
validity of any CESI Trademark, CESI’s ownership of any CESI Trademark, or the
enforceability of CESI’s rights therein.

3.4.          License Termination. CESI may
terminate the license granted to Kawasaki in Section 3.1, and all
sublicenses granted thereunder, upon any breach of Section 3 by Kawasaki
or any of its sublicensees if such breach is not cured within thirty (30) days
of CESI notifying Kawasaki of such breach.

3.5.          Reservation of Rights. All
rights of CESI in and to the CESI Trademarks not expressly granted under Section 3.1
are reserved by CESI. Kawasaki shall not, and shall have 

 B-5
 

 

no right to, reproduce or
use (or authorize the reproduction or use of) any CESI Trademark in any manner
whatsoever other than as expressly authorized by Section 3.1. All use of
the CESI Trademarks by Kawasaki and its sublicensees, and all goodwill
associated with such use, shall inure to the benefit of CESI.

4.             Training. In consideration
of the Training Fee (defined below), CESI agrees to provide the training
services described on Exhibit D to Kawasaki, its Affiliates, and its and
their subcontractors or sublicensees (including, without limitation, Tanaka
Kikinzoku Kogyo K.K.).

5.             Purchase Price. As
consideration of the assignment, license, and training described in this
Agreement, Kawasaki agrees to pay CESI, as part of the Purchase Price provided
under the Asset Purchase Agreement, a one time payment as allocated in the
Asset Purchase Agreement.

6.             Disclaimer of Warranties.
The Asset Purchase Agreement sets forth all of the representations and
warranties made by the parties in connection with this Agreement. Except as
otherwise set forth in the Asset Purchase Agreement, neither party makes any
representations or warranties in connection with the Assigned Patents,
Multi-Use Patents, Licensed Technical Materials or any other aspects of this
Agreement, whether express or implied, including, without limitation, any
implied warranties of merchantability, fitness for a particular purpose, title
or non-infringement, or any warranties that may arise from course of
performance, course of dealing or usage of trade.

7.             Limitation of Liability.

7.1.          NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, EXCEPT FOR LIABILITY FOR INFRINGEMENT, MISAPPROPRIATION OR OTHER
UNAUTHORIZED USE OF THE OTHER PARTY’S INTELLECTUAL PROPERTY, NEITHER PARTY
SHALL HAVE ANY LIABILITY WHATSOEVER FOR ANY INCIDENTAL, INDIRECT,
CONSEQUENTIAL, PUNITIVE, OR SPECIAL DAMAGES OF ANY KIND, OR ANY LOSS OF REVENUE
OR PROFITS, LOSS OF BUSINESS, OR LOSS OF DATA, ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, HOWEVER CAUSED AND REGARDLESS OF
THE THEORY OF LIABILITY (INCLUDING CONTRACT, TORT, OR OTHERWISE), EVEN IF
INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.

7.2.          Each party’s liability arising out of
or in connection with this Agreement shall be subject to the limits set forth
in Section 8.5 of the Asset Purchase Agreement.

8.             Confidentiality. The terms
and conditions of Section 6.6 and 6.13 of the Asset Purchase Agreement
shall apply to this Agreement and the terms and conditions hereof.

9.             Waiver. The waiver by either
party of a breach of any provision of this Agreement by the other party will
operate or be construed as a waiver of any other or subsequent breach by the
other party. No failure or delay by either party in exercising any right,
remedy, power or privilege hereunder, nor any single or partial exercise
thereof, shall operate as a waiver of any right, remedy, power or privilege
hereunder.

 B-6
 

 

10.           Severability. If any part of
this Agreement is found invalid or unenforceable, that part will be amended to
achieve as nearly as possible the same economic effect as the original
provision and the remainder of this Agreement will remain in full force.

11.           Governing Law. This Agreement,
and all the rights and duties of the parties arising out of, in connection
with, or relating in any way to the subject matter of this Agreement or the
transactions contemplated by it, shall be governed by, construed, and enforced
in accordance with the laws of the State of California (excluding its conflict
of laws rules which would refer to and apply the substantive laws of
another jurisdiction). Any suit or proceeding hereunder shall be brought
exclusively in the United States District Court for the Northern District of
California and state courts located in Santa Clara County, California. Each
party consents to the personal jurisdiction of such courts and waives any
objection that such courts are an inconvenient forum.

12.           Injunctive Relief. Each party
acknowledges that a breach of its obligations under this Agreement would cause
the other party irreparable damage. Accordingly, each party agrees that in the
event of such breach or threatened breach by the other party, in addition to
remedies at law, the non-breaching party shall have the right to injunctive or
other equitable relief to prevent violations by the breaching party of the
terms and conditions of this Agreement, without the necessity of posting bond
or other security.

13.           Assignment. Neither party
shall, or shall have the right to, assign, delegate or otherwise transfer
(whether voluntarily, by operation of law, or otherwise) this Agreement, or any
of its rights or obligations hereunder, without the prior written consent of
the other party, which consent shall not be unreasonably withheld or delayed. Any
purported assignment, delegation or other transfer made in contravention of
this Section shall be null and void for all purposes. Notwithstanding the
foregoing, (a) either party may assign this Agreement to any Affiliate or
third party that acquires all or substantially all of such party’s assets, (b) CESI
may assign this Agreement to any Affiliate or third party that acquires all or
substantially all of the intellectual property rights licensed to Kawasaki
under this Agreement, and (c) Kawasaki may assign this Agreement to any
Affiliate, or third party that acquires all or substantially all of its Small
Gas Turbine business and assets.

14.           Entire Agreement. This
Agreement, together with the Asset Purchase Agreement, including all Exhibits
to any of the foregoing, constitutes the entire agreement between the parties
relating to this subject matter and supersedes all prior or simultaneous
representations, discussions, negotiations, and agreements, whether written or
oral. This Agreement may be amended or modified only with the written consent
of both Kawasaki and CESI. No oral waiver, amendment or modification will be
effective under any circumstances whatsoever.

 B-7
 

 

In WITNESS WHEREOF, the parties hereto have caused
this Agreement to be signed by their respective duly authorized
representatives.

	
  Kawasaki:

  	
  CESI:

  
	
   

  	
   

  
	
  Kawasaki Heavy
  Industries, Ltd.

  	
  Catalytica Energy Systems, Incorporated

  

 

	
  By:

  	
   

  	
   By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   Title:

  	
   

  
							

 

 B-8

 

 

EXHIBIT A

MULTI-USE PATENTS

	
  TITLE

  	
   

  	
  COUNTRY

  	
   

  	
  PATENT, APPLICATION,

  OR PUBLICATION NUMBER

  
	
  Graded Palladium Containing Partial Combustion
  Catalyst and a Process for Using It

  	
   

  	
  US

  	
   

  	
  5,248,251

  
	
  Graded Palladium Containing Partial Combustion
  Catalyst

  	
   

  	
  US

  	
   

  	
  5,258,349

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  CA

  	
   

  	
  2,096,950

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  CH

  	
   

  	
  EP0559808

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  DE

  	
   

  	
  EP0559808

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  ES

  	
   

  	
  EP0559808

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  FR

  	
   

  	
  EP0559808

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  GB

  	
   

  	
  EP0559808

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  IT

  	
   

  	
  EP0559808

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  KR

  	
   

  	
  234887

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  NL

  	
   

  	
  EP0559808

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  RU

  	
   

  	
  2065766

  
	
  (*) Catalyst Structure Having Integral Heat Exchange

  	
   

  	
  US

  	
   

  	
  5,250,489

  
	
  Palladium Partial Combustion Catalysts and a Process
  for Using Them

  	
   

  	
  DE

  	
   

  	
  EP0559844

  
	
  Palladium Partial Combustion Catalysts and a Process
  for Using Them

  	
   

  	
  FR

  	
   

  	
  EP0559844

  
	
  Palladium Partial Combustion Catalysts and a Process
  for Using Them

  	
   

  	
  GB

  	
   

  	
  EP0559844

  
	
  Palladium Partial Combustion Catalysts and a Process
  for Using Them

  	
   

  	
  IT

  	
   

  	
  EP0559844

  
	
  (*) Palladium Partial Combustion Catalysts and a
  Process for Using Them

  	
   

  	
  JP

  	
   

  	
  3191013

  

 

 B-9
 

 

 

	
  TITLE

  	
   

  	
  COUNTRY

  	
   

  	
  PATENT, APPLICATION,

  OR PUBLICATION NUMBER

  
	
  Palladium Partial Combustion Catalysts and a Process
  for Using Them

  	
   

  	
  KR

  	
   

  	
  261782

  
	
  Partial Combustion Process and a Structure for Use
  in the Process

  	
   

  	
  US

  	
   

  	
  5,326,253

  
	
  Partial Combustion Process and a Structure for Use
  in the Process

  	
   

  	
  US

  	
   

  	
  5,511,972

  
	
  (*) Partial Combustion of Palladium on a Zirconia
  Support and a Process for Using it

  	
   

  	
  US

  	
   

  	
  5,259,754

  
	
  (*) Partial Combustion of Palladium on a Zirconia
  Support and a Process for Using it

  	
   

  	
  US

  	
   

  	
  5,405,260

  
	
  Improved Process and Catalyst Structure Employing
  Integral Heat Exchange With Optional Downstream Flameholder

  	
   

  	
  DE

  	
   

  	
  EP0745180

  
	
  Improved Catalyst Structure Employing Integral Heat
  Exchange

  	
   

  	
  DE

  	
   

  	
  EP0746674

  
	
  Improved Process and Catalyst Structure Employing
  Integral Heat Exchange With Optional Downstream Flameholder

  	
   

  	
  FR

  	
   

  	
  EP0745180

  
	
  Improved Catalyst Structure Employing Integral Heat
  Exchange

  	
   

  	
  FR

  	
   

  	
  EP0746674

  
	
  Improved Process and Catalyst Structure Employing
  Integral Heat Exchange With Optional Downstream Flameholder

  	
   

  	
  GB

  	
   

  	
  EP0745180

  
	
  Improved Catalyst Structure Employing Integral Heat
  Exchange

  	
   

  	
  GB

  	
   

  	
  EP0746674

  
	
  Improved Process and Catalyst Structure Employing
  Integral Heat Exchange With Optional Downstream Flameholder

  	
   

  	
  IT

  	
   

  	
  EP0745180

  
	
  Improved Catalyst Structure Employing Integral Heat
  Exchange

  	
   

  	
  IT

  	
   

  	
  EP0746674

  
	
  (*) Improved Catalyst Structure Employing Integral
  Heat Exchange

  	
   

  	
  JP

  	
   

  	
  3705298

  
	
  (*) Improved Catalyst Structure Employing Integral
  Heat Exchange

  	
   

  	
  JP

  	
   

  	
  3705299

  
	
  Improved Catalyst Structure Employing Integral Heat
  Exchange

  	
   

  	
  KR

  	
   

  	
  373887

  
	
  Improved Catalyst Structure Employing Integral Heat
  Exchange

  	
   

  	
  SE

  	
   

  	
  EP0746674

  
	
  Improved Catalyst Structure Employing Integral Heat
  Exchange

  	
   

  	
  TW

  	
   

  	
  295551

  

 

 B-10
 

 

 

	
  TITLE

  	
   

  	
  COUNTRY

  	
   

  	
  PATENT, APPLICATION,

  OR PUBLICATION NUMBER

  
	
  (*) Process and Catalyst Structure for Employing
  Integral Heat Exchange with Optional Downstream Flameholder

  	
   

  	
  US

  	
   

  	
  5,512,250

  
	
  Process and Catalyst Structure for Employing
  Integral Heat Exchange with Optional Downstream Flameholder

  	
   

  	
  US

  	
   

  	
  5,518,697

  
	
  (**) Support Structure for a Catalyst

  	
   

  	
  US

  	
   

  	
  6,116,014

  
	
  Mixed Oxide Solid Solutions

  	
   

  	
  US

  	
   

  	
  6,521,566

  

 

 B-11

 

EXHIBIT B

NEW TECHNICAL MATERIALS

	
  Media

  	
   

  	
  Rev

  	
   

  	
  Title

  
	
  MaterialSpec-001

  	
   

  	
  C

  	
   

  	
  Kawasaki River Lite 20-5USR Foil (BM-012)
  Specification

  
	
  MaterialSpec-002

  	
   

  	
  B

  	
   

  	
  RC-100P Zirconium Oxide Powder (BM-005)
  Specification

  
	
  MaterialSpec-003

  	
   

  	
  B

  	
   

  	
  Pt Diammine Nitrate Solution (BM-001)
  Specification

  
	
  MaterialSpec-004

  	
   

  	
  B

  	
   

  	
  Pd Dissolved in Nitrate Acid (BM-002)
  Specification

  
	
  MaterialSpec-005

  	
   

  	
  C

  	
   

  	
  Al Coated Haynes 214 Foil (BM-013)
  Specification

  
	
  MaterialSpec-006

  	
   

  	
  B

  	
   

  	
  Haynes 214 2B #3 Edge Foil (BM-014)
  Specification

  
	
  MaterialSpec-007

  	
   

  	
  new

  	
   

  	
  Tetraethyl Orthosilicate (BM-006)
  Specification

  
	
  MaterialSpec-008

  	
   

  	
  new

  	
   

  	
  Nitric Acid (BM-007) Specification

  
	
  MaterialSpec-010

  	
   

  	
  new

  	
   

  	
  Sulfuric Acid (BM-009) Specification

  
	
  MaterialSpec-011

  	
   

  	
  new

  	
   

  	
  0.25N Sulfuric Acid (BM-011) Specification

  
	
  MaterialSpec-012

  	
   

  	
  B

  	
   

  	
  Zirconium Oxide, grade DK-2 (BM-019)
  Specification

  
	
  MaterialSpec-013

  	
   

  	
  B

  	
   

  	
  Zirconium Acetate (BM-003) Specification

  
	
  MaterialSpec-017

  	
   

  	
  new

  	
   

  	
  Lattice Specification

  
	
  Mfg-001

  	
   

  	
  C

  	
   

  	
  Corrugation Machine Operating Procedure

  
	
  Mfg-002

  	
   

  	
  B

  	
   

  	
  Foil Cleaning Procedure

  
	
  Mfg-003

  	
   

  	
  F

  	
   

  	
  Operation Procedure for Furnace #2

  
	
  Mfg-004

  	
   

  	
  B

  	
   

  	
  Coating Line 1 Operating Procedure

  
	
  Mfg-005

  	
   

  	
  B

  	
   

  	
  Rolling Machine Operation Procedure

  
	
  Mfg-006

  	
   

  	
  new

  	
   

  	
  Spot Welding Procedure

  
	
  Mfg-008

  	
   

  	
  E

  	
   

  	
  Operation Procedure for Furnace #1

  
	
  Mfg-010

  	
   

  	
  A

  	
   

  	
  Zirconia Sol Production Procedure

  
	
  Mfg-011

  	
   

  	
  C

  	
   

  	
  Prepared Sol Procedure

  
	
  Mfg-012

  	
   

  	
  A

  	
   

  	
  Mixed Metals Preparation Procedure

  
	
  Mfg-018

  	
   

  	
  new

  	
   

  	
  PIFT Powder Procedure

  
	
  Mfg-019

  	
   

  	
  new

  	
   

  	
  PIFT Base Sol Production Procedure

  
	
  Mfg-022

  	
   

  	
  new

  	
   

  	
  Coating Line Operating Procedure

  
	
  Quality-001

  	
   

  	
  B

  	
   

  	
  Process and Manufactured Materials Acceptance
  Criteria

  
	
  ATP-001

  	
   

  	
  A

  	
   

  	
  Kawasaki M1A-13X Acceptance Test Procedure

  
	
  PartSpec-0001

  	
   

  	
  A

  	
   

  	
  Thermally Free Axial (TFA) Support Part Spec

  
	
  PartSpec-0004

  	
   

  	
  B

  	
   

  	
  Kawasaki M1A-13X Module Foilpack Definition

  
	
  PartSpec-0007

  	
   

  	
  new

  	
   

  	
  Catalyst Rings and Seals Qualification Procedure

  
	
  Test-001

  	
   

  	
  D

  	
   

  	
  Testing SQP Procedure

  
	
  Test-002

  	
   

  	
  D

  	
   

  	
  Air Compressor Operating Procedure

  
	
  Test-003

  	
   

  	
  D

  	
   

  	
  Auxillary Gas System Operating Procedure

  
	
  Test-004

  	
   

  	
  D

  	
   

  	
  LEWA Pump Operating Procedure

  
	
  Test-005

  	
   

  	
  D

  	
   

  	
  ISCO Pump Operating Procedure

  
	
  Test-006

  	
   

  	
  D

  	
   

  	
  Low Pressure Reactor Operating Procedure

  
	
  Test-007

  	
   

  	
  D

  	
   

  	
  Catalyst Rolling Procedure

  
	
  Test-008

  	
   

  	
  D

  	
   

  	
  Gas Analyzer Operating Procedure

  
	
  Test-009

  	
   

  	
  D

  	
   

  	
  High Pressure Reactor Operating Procedure

  

 

 B-12
 

 

 

	
  Media

  	
   

  	
  Rev

  	
   

  	
  Title

  
	
  Test-010

  	
   

  	
  D

  	
   

  	
  Testing Documentation Procedure

  
	
  Test-011

  	
   

  	
  C

  	
   

  	
  Common Testing Procedure

  
	
  Test-012

  	
   

  	
  C

  	
   

  	
  Flow Calibration Procedure

  
	
  Test-013

  	
   

  	
  D

  	
   

  	
  Rig Calibration Procedure

  
	
  Test-014

  	
   

  	
  D

  	
   

  	
  Catalyst Handling and Storage Procedure

  
	
  Test-015

  	
   

  	
  B

  	
   

  	
  House Air Compressor Operating Procedure

  
	
  ProductSpec-0005

  	
   

  	
  A

  	
   

  	
  Kawasaki M1A-13X Product Specification

  
	
  OperSpec-0001

  	
   

  	
  A

  	
   

  	
  M1A-13X Fuel Composition Specification

  
	
  OperSpec-0002

  	
   

  	
  B

  	
   

  	
  M1A-13X Air Filtration Specification

  
	
  OperSpec-0003

  	
   

  	
  A

  	
   

  	
  M1A-13X Fuel Filtration Specification

  
	
  OperSpec-0005

  	
   

  	
  A

  	
   

  	
  Lubricating Oil Specification

  
	
  02100100-1

  	
   

  	
  D

  	
   

  	
  Catalyst Module Assy

  
	
  02100101-1

  	
   

  	
  F

  	
   

  	
  Interface ring assy, outlet

  
	
  22010030-1

  	
   

  	
  new

  	
   

  	
  Guide ring, seal assy, outlet

  
	
  02100102-1

  	
   

  	
  F

  	
   

  	
  Guide ring assy, outlet

  
	
  02100119-1

  	
   

  	
  B

  	
   

  	
  Spring seal, outer

  
	
  02100119-2

  	
   

  	
  B

  	
   

  	
  Spring seal, inner

  
	
  22010031-1

  	
   

  	
  new

  	
   

  	
  Guide ring, seal assy, inlet

  
	
  02100103-1

  	
   

  	
  F

  	
   

  	
  Guide ring assy, inlet

  
	
  22010032-1

  	
   

  	
  new

  	
   

  	
  Interface ring, seal assy, inlet

  
	
  02100104-1

  	
   

  	
  C

  	
   

  	
  Interface ring assy, inlet

  
	
  02100118-1

  	
   

  	
  B

  	
   

  	
  Hula seal, outer

  
	
  02100118-2

  	
   

  	
  B

  	
   

  	
  Hula seal, inner

  
	
  02100120-1

  	
   

  	
  C

  	
   

  	
  Axial supports

  
	
  02100115-1

  	
   

  	
  B

  	
   

  	
  Shaft assy, inner support

  
	
  02100116-1

  	
   

  	
  B

  	
   

  	
  Cap, inner support

  
	
  02100114

  	
   

  	
  B

  	
   

  	
  Spindle, 3”

  
	
  02100112

  	
   

  	
  B

  	
   

  	
  Spindle, 4”

  
	
  22010040-02

  	
   

  	
  A

  	
   

  	
  Assembly Operation Sheets

  
	
  22010044

  	
   

  	
  new

  	
   

  	
  Disassembly Operation Sheets

  
	
  08021000

  	
   

  	
  B

  	
   

  	
  Specification, Nameplate

  
	
  EL22010016

  	
   

  	
  A

  	
   

  	
  Equipment List Catalyst Module Assembly

  
	
  22010017

  	
   

  	
  B

  	
   

  	
  Interface Control Definition, Catalyst Module

  
	
  T22010041

  	
   

  	
  A

  	
   

  	
  Lifting Assembly Tool

  
	
  T22010042

  	
   

  	
  new

  	
   

  	
  Spring Seal Check Tool

  
	
  T22010043

  	
   

  	
  new

  	
   

  	
  Spring Seal Wedge Tool

  
	
  Mfg Programs

  	
   

  	
  new

  	
   

  	
  Coating Line Washcoat Loading Worksheet (excel)

  
	
  Mfg Programs

  	
   

  	
  new

  	
   

  	
  DataLogger Plot.xls (excel)

  
	
  Mfg Programs

  	
   

  	
  new

  	
   

  	
  CorrData 1.0 xls (excel)

  
	
  Mfg Programs

  	
   

  	
  new

  	
   

  	
  Simplified Corrugation 062601.vi (labview)

  
	
  Mfg Programs

  	
   

  	
  new

  	
   

  	
  Tracking.mdb (access)

  
	
  Mfg Programs

  	
   

  	
  new

  	
   

  	
  PM SprayCalcs CL2.xls (excel)

  
	
  Mfg Programs

  	
   

  	
  new

  	
   

  	
  Foil Pack Sizing Instructions.xls (excel)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Catalyst Performance and Life Modeling (mathcad)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Operating Window Analysis (excel)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Fuel Assessment (excel)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Operational Tracking Guide (excel)

  

 

 B-13
 

 

 

	
  Media

  	
   

  	
  Rev

  	
   

  	
  Title

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Control Schedule Development (excel)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Combustion System Cycle Analysis (excel)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Adiabatic Combustion Temperature (Tad) calculation
  (excel)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Catalyst Pressure Drop (excel)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Burnout Zone Sizing (excel)

  
	
  Design Tools

  	
   

  	
  new

  	
   

  	
  Ignition Delay and CO Burnout (excel)

  
	
  Summaries

  	
   

  	
  n/a

  	
   

  	
  Design Tool summary sheets

  
	
  Build Records

  	
   

  	
  n/a

  	
   

  	
  Fielded and inventoried module mfg, test and
  assembly records

  
	
  Part Records

  	
   

  	
  n/a

  	
   

  	
  Life tracking data for container hardware in use

  
	
  Specification Sheet

  	
   

  	
  n/a

  	
   

  	
  ISOPAR E specification sheet

  

 

 B-14

 

EXHIBIT C

CESI TRADEMARKS

XONON

COOL COMBUSTION

XONON COOL COMBUSTION

 B-15
 

 

 

EXHIBIT D

TRAINING
SERVICES

A   M1A-13X
Module Manufacturing

	
  Topic

  	
   

  	
  Attending

  	
   

  	
  Location

  	
   

  	
  Days

  
	
  a.   Powder
  Prep, Stage 1 WC & Stage 2 WC (PIFT)

  	
   

  	
  KHI & TKK

  	
   

  	
  MV

  	
   

  	
  0.5

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  b.   Sol
  Prep, Stage 2 WC (PIFT)

  	
   

  	
  KHI & TKK

  	
   

  	
  G

  	
   

  	
  0.5

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  c.   Coating
  Operation

  	
   

  	
  KHI & TKK

  	
   

  	
  G

  	
   

  	
  3

  
	
  o   Settings

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Spraying of WC, PM, DBL - Stage 1

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Spraying of WC, DBL - Stage 2

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  d.   Rolling
  Machine Operation

  	
   

  	
  KHI & TKK

  	
   

  	
  G

  	
   

  	
  0.5

  
	
  o   Utilize bare foil

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Tension, speed, alignment, etc.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  e.   Assemble
  One Module, including shipping container

  	
   

  	
  KHI & TKK

  	
   

  	
  G

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  f.   Al-H214
  Development Review

  	
   

  	
  KHI & TKK

  	
   

  	
  G

  	
   

  	
  0.5

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

B.   M1A-13X
Design and Technology

	
  Topic

  	
   

  	
  Attending

  	
   

  	
  Location

  	
   

  	
  Days

  
	
  a.   Introduction
  to Xonon Catalyst Technology with respect to M1A-13X platform

  	
   

  	
  KHI & TKK

  	
   

  	
  MV

  	
   

  	
  2

  
	
  o   Channel structure

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   IHE concept

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Foil geometry

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Catalyst material

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Operation

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  b.   Instruction
  for use of the following design tools with respect to M1A-13X

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  platform:

  	
   

  	
  KHI

  	
   

  	
  MV

  	
   

  	
  2

  
	
  –   Performance and life modeling 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  –   Operating window analysis

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  –   Fuel assessment

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  –   Operational tracking guide

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  –   Control schedule development

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Use of tools

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Inputs and outputs

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  c.   Description
  of current M1A-13X Catalyst Design

  	
   

  	
  KHI

  	
   

  	
  MV

  	
   

  	
  1

  
	
  o   Design features and specifications

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Production Acceptance (catalyst analytical)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Operational requirements

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o   Safety and performance limits

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 B-16
 

 

 

	
  d.   Description of
  current M1A-13X Container Design Critical Features — 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  overview only, not
  structural analysis information

  	
   

  	
  KHI

  	
   

  	
  MV

  	
   

  	
  0.5

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  e.   Q&A/Open
  Discussion of Control Logic (KHI to provide a list of questions two

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  weeks prior to training,
  CESI to prepare materials and answers within current

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  resources and capabilities)

  	
   

  	
  KHI

  	
   

  	
  MV

  	
   

  	
  0.5

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  f.   Q&A/Open
  Discussion of Field Experience (KHI to provide a list of questions 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  two weeks prior to training,
  CESI to prepare materials and answers within 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  current resources and
  capabilities)

  	
   

  	
  KHI

  	
   

  	
  MV

  	
   

  	
  0.5

  

 

 

 B-17

 

EXHIBIT C

Application
for Income Tax Convention

To be attached.

 C-1

 

EXHIBIT D

State of
Arizona Transaction Privilege Tax Exemption Certificate

To be attached.

 D-1Exhibit
10.1

 

FIRST AMENDMENT AND
COMMITMENT INCREASE AGREEMENT

Dated as of June 30, 2006

among

MERITAGE HOMES CORPORATION,

as the Borrower,

GUARANTY BANK

as Administrative Agent and Swing Line Lender,

JPMORGAN CHASE BANK, N.A.,

as Syndication Agent,

WACHOVIA BANK, NATIONAL ASSOCIATION and BANK OF
AMERICA, N.A.,

as Co-Documentation Agents,

U. S. BANK NATIONAL ASSOCIATION,

WELLS FARGO BANK, NATIONAL
ASSOCIATION,

CITICORP NORTH AMERICA, INC.,

DEUTSCHE BANK TRUST COMPANY
AMERICAS,

UBS SECURITIES LLC, and PNB
PARBIAS

as Managing Agents,

PNC BANK, NATIONAL ASSOCIATION and SUNTRUST BANK,

as Co-Agents,

and

The Other Lenders Party
Hereto

 

 

 

GUARANTY BANK,

as Joint Lead Arranger and 
Joint Book Manager

and

J. P. MORGAN SECURITIES, INC.,

as Joint Lead Arranger and Joint Book Manager

 1
 

 

FIRST AMENDMENT AND COMMITMENT INCREASE AGREEMENT

This First Amendment and Commitment Increase Agreement
(this “First Amendment”) dated as of June 30, 2006, is entered into
among Meritage Homes Corporation, a Maryland corporation (the “Borrower”),
the lenders listed on the signature pages hereof as Lenders (the “Lenders”),
BNP Paribas, in its capacity as a Lender (the “New Lender”), and
Guaranty Bank, in its capacity as Administrative Agent and Swing Line Lender
(the “Administrative Agent”). Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement (as defined below).

BACKGROUND

A.            The Borrower, Lenders and the Administrative Agent are
parties to that certain First Amended and Restated Credit Agreement dated as of
May 16, 2006 (as amended, modified, supplemented or restated, the “Credit
Agreement”).

B.            The Borrower has requested an amendment to Section 7.09
of the Credit Agreement.

C.            Pursuant to Section 2.15 of the Credit
Agreement, the Borrower has requested an increase in the Aggregate Commitments
from $800,000,000 to $850,000,000.  The
New Lender has agreed to extend a Commitment in the amount of $50,000,000. Such
increase in the Aggregate Commitments is to become effective on June 30,
2006 (the “Increase Closing Date”), subject to satisfaction of the
conditions to effectiveness set forth in Section 7(a) of this First
Amendment.

NOW, THEREFORE, in consideration of the covenants,
conditions and agreements hereafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are all hereby acknowledged,
the Borrower, the Lenders, the New Lender, the Swing Line Lender and the
Administrative Agent covenant and agree as follows:

1.             AMENDMENT. Section 7.09 of the Credit
Agreement is hereby amended to read as follows:

7.09        Burdensome
Agreements. Enter into any Contractual Obligation that (a) limits
the ability (i) of any Restricted Subsidiary to make Restricted Payments
to the Borrower or any Guarantor or to otherwise transfer property to the
Borrower or any Guarantor, (ii) of any Restricted Subsidiary to Guarantee
the Indebtedness of the Borrower or (iii) of the Borrower or any
Restricted Subsidiary to create, incur, assume or suffer to exist Liens on
property of such Person to secure its obligations under the Loan Documents to
which it is a party; provided, however, that this clause (iii) shall
not prohibit (1) any negative pledge incurred or provided in favor of any
holder of Indebtedness permitted under Section 7.03(f) solely to
the extent any such negative pledge relates to the property financed by or the
subject of such Indebtedness or (2) any negative pledge incurred or
provided in favor of any holder of any Public Indebtedness permitted under Section 7.03(e);
or (b) requires the grant of a Lien to secure an

 2
 

 

obligation of such Person if a Lien is granted to
secure another obligation of such Person, provided that this clause (b) shall
not prohibit the requirement of granting a pari passu Lien in favor of any
holder of any Public Indebtedness permitted under Section 7.03(e) if the Obligations hereunder are required to be
secured; provided, further, however, the foregoing shall not apply to (w) restrictions
imposed by Law, this Agreement or any other Loan Documents or the Senior Notes,
(x) customary restrictions and conditions contained in agreements relating
to a sale of a Subsidiary or all or substantially all of its assets pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is sold and such sale is permitted hereunder, (y) customary
provisions in leases, partnership agreements, limited liability company
organizational governance documents, joint venture agreements and other similar
agreements entered into in the ordinary course of business that restrict the
transfer or encumbrance of leasehold interests or ownership interests in such
partnership, limited liability company, joint venture or similar Person and (z) with
respect to clause (iii) customary provisions in leases restricting
the assignment thereof.

2.             WAIVER. Subject to the
satisfaction of the conditions to effectiveness set forth in Section 7
hereof, the Lenders hereby waive any Events of Default that may have occurred
prior to the effectiveness of this First Amendment with respect to any
limitation set forth Section 7.09 of the Credit Agreement that
restricts the transfer or encumbrance of leasehold interests or ownership
interests in a partnership, limited liability company, joint venture or similar
Person. The waiver herein is limited and does not affect any other covenant or
provision of the Credit Agreement or any other Loan Document.

3.             AGGREGATE COMMITMENTS INCREASE.
On the Increase Closing Date and subject to the satisfaction of the conditions
to effectiveness set forth in Section 7(a) of this First Amendment,
the New Lender agrees to extend a Commitment in the amount of $50,000,000.

4.             SCHEDULE 2.01. As of
the Increase Closing Date and subject to the satisfaction of the conditions to
effectiveness set forth in Section 7(a) of this First Amendment, Schedule 2.01
to the Credit Agreement shall be replaced by the form of Schedule 2.01
to this First Amendment.

5.             NEW LENDER.

(a)           The New Lender
represents and warrants to the Administrative Agent as follows:

(i)            it has received a
copy of the Credit Agreement and all amendments thereto, together with copies
of the most recent financial statements of the Borrower delivered pursuant
thereto;

(ii)           it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business,

 3
 

 

prospects,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their respective Subsidiaries, and all applicable bank or
other regulatory Laws relating to the transactions contemplated by the Credit
Agreement, and made its own decision to enter into the Credit Agreement and to
extend credit to the Borrower and the other Loan Parties under the Credit
Agreement;

(iii)          it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under the Credit Agreement and the other Loan Documents, and
to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, and other condition and
creditworthiness of the Borrower and the other Loan Parties.

(b)           The New Lender
acknowledges as follows:

(i)            no Agent-Related
Person has made any representation or warranty to it, and no act by the
Administrative Agent hereafter taken, including any consent to and acceptance
of any assignment or review of the affairs of any Loan Party or any Affiliate
thereof, shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Lender as to any matter, including whether
Agent-Related Persons have disclosed material information in their possession;

(ii)           except for notices,
reports and other documents expressly required to be furnished to the Lenders
by the Administrative Agent pursuant to the Credit Agreement, the Administrative
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of any of the Loan
Parties or any of their respective Affiliates which may come into the
possession of any Agent-Related Person; and

(iii)          on the Increase
Closing Date and subject to the satisfaction of the conditions to effectiveness
set forth in this Section 7(a) of this First Amendment, it shall be
deemed automatically to have become a party to the Credit Agreement and have
all rights and obligations of a Lender under the Credit Agreement and the other
Loan Documents as if it were an original Lender signatory thereto.

(c)           On the Increase
Closing Date and subject to the satisfaction of the conditions to effectiveness
set forth in Section 7(a) of this First Amendment, the New Lender
agrees to be bound by the terms and conditions set forth in the Credit
Agreement and the other Loan Documents applicable to the Lenders as if it were
an original Lender signatory thereto (and expressly makes the appointment set
forth in, and agrees to the obligations imposed under, Article IX
of the Credit Agreement).

 4
 

 

6.             REPRESENTATIONS AND WARRANTIES.
By its execution and delivery hereof, the Borrower represents and warrants
that, as of the date hereof, and after giving effect to the increase in the
Aggregate Commitments provided for in this First Amendment and the waiver set
forth in the foregoing Section 2:

(a)           the representations
and warranties contained in the Credit Agreement and the other Loan Documents
are true and correct on and as of the date hereof as made on and as of such
date, except to the extent that such representations and warranties specifically
refer to an earlier date, in which case they are true and correct as of such
earlier date, and except that the representatio                ns
contained in subsections (a) and (b) of Section 5.05
of the Credit Agreement shall be deemed to refer to the most recent statements
furnish pursuant to subsections (a) and (b), respectively, of Section 6.01
of the Credit Agreement;

(b)           no event has
occurred and is continuing which constitutes a Default or an Event of Default;

(c)           (i) the
Borrower has full power and authority to execute and deliver this First
Amendment, and a Note payable to the order of the New Lender in the amount of
such Lender’s Commitment as established pursuant to this First Amendment (the “New
Note”), (ii) this First Amendment and the New Note have been duly
executed and delivered by the Borrower and (iii) this First Amendment, the
New Note, and the Credit Agreement, as amended hereby, constitute the legal,
valid and binding obligations of the Borrower, enforceable in accordance with
their respective terms, except as enforceability may be limited by applicable
Debtor Relief Laws and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law) and except as rights
to indemnity may be limited by federal or state securities laws;

(d)           neither the
execution, delivery and performance of this First Amendment, the New Note, or
the Credit Agreement, as amended hereby, nor the consummation of any
transactions contemplated herein or therein, will violate any Law or conflict
with any Organization Documents of the Borrower, or any indenture, agreement or
other instrument to which the Borrower or any of it property is subject; and

(e)           no authorization, approval, consent, or other
action by, notice to, or filing with, any Governmental Authority or other
Person not previously obtained is required for (i) the execution, delivery
or performance by the Borrower, of this First Amendment or the New Note or (ii) the
acknowledgement by each Guarantor of this First Amendment.

7.             CONDITIONS TO EFFECTIVENESS.

(a)           All provisions of
this First Amendment except Sections 1 and 2 shall be effective on the Increase
Closing Date, subject to the satisfaction or completion of the following:

(i)            the Administrative
Agent shall have received counterparts of this First Amendment executed by the
New Lender;

 5
 

 

(ii)           the Administrative
Agent shall have received counterparts of this First Amendment executed by the
Borrower and acknowledged by each Guarantor;

(iii)          the Administrative
Agent shall have received an opinion of the Borrower’s counsel, in form and
substance satisfactory to the Administrative Agent, with respect to matters set
forth in Sections 6(c), (d), and (e) of this First Amendment;

(iv)          the Administrative
Agent shall have received from the Borrower a duly executed New Note for the
New Lender;

(v)           the Administrative
Agent shall have received the certificate of each Loan Party required by Section 2.15(b)
of the Credit Agreement; and

(vi)          the Administrative
Agent shall have received, in form and substance satisfactory to the
Administrative Agent and its counsel, such other documents, certificates and
instruments as the Administrative Agent shall require.

(b)           Sections 1 and
2 of this First Amendment shall be effective as of June 30, 2006, subject
to satisfaction of, or completion of, the following:

(i)            the Administrative
Agent shall have received counterparts of this First Amendment executed by the
Required Lenders; and

(ii)           the Administrative
Agent shall have received counterparts of this First Amendment executed by the
Borrower and acknowledged by each Guarantor.

8.             PREPAYMENT. On the Increase
Closing Date and subject to the satisfaction of the conditions to effectiveness
set forth in Section 7(a) of this First Amendment, each Lender shall,
to the extent necessary as set forth in Section 2.15(b) of the
Credit Agreement, make a payment to the Administrative Agent in an amount
sufficient, upon the application of such payments by all Lenders to the
reduction of outstanding Revolving Loans held by the Lenders to cause the
principal amount of Revolving Loans made by each Lender to be in the amount of
its Pro Rata Share (after giving effect to the increase in the Aggregate
Commitments in accordance with this First Amendment) of all outstanding
Revolving Loans. If, as a result of the repayment of Revolving Loans provided
for in this Section 8, any payment of Eurodollar Rate Loans occurs on a
day which is not the last day of the applicable Interest Period, the Borrower
will pay to the Administrative Agent for the benefit of any Lender holding a
Eurodollar Rate Loan any loss or cost incurred by such Lender resulting
therefrom in accordance with Section 3.05 of the Credit Agreement. Upon
the Increase Closing Date and the making of the payments described in this Section 8,
the New Lender shall be deemed to have irrevocably and unconditionally
purchased and received, without recourse or warranty, an undivided
participation in all outstanding Swing Line Loans and L/C Obligations in
accordance with its Pro Rata Share (after giving effect to the increase in the
Aggregate Commitments in accordance with this First Amendment).

 6
 

 

9.             REFERENCE TO THE CREDIT
AGREEMENT.

(a)           Upon the
effectiveness of this First Amendment, each reference in the Credit Agreement
to “this Agreement”, “hereunder”, or words of like import shall mean and be a
reference to the Credit Agreement, as modified hereby. This First Amendment
shall be a Loan Document.

(b)           The Credit
Agreement, as modified herein, shall remain in full force and effect and is hereby
ratified and confirmed.

10.           COSTS, EXPENSES AND TAXES. The
Borrower agrees to pay on demand all costs and expenses of the Administrative
Agent in connection with the preparation, reproduction, execution and delivery
of this First Amendment and the other instruments and documents to be delivered
hereunder (including the reasonable fees and out-of-pocket expenses of counsel
for the Administrative Agent with respect thereto).

11.           GUARANTORS ACKNOWLEDGMENT. By
signing below, each Guarantor (a) acknowledges, consents and agrees to the
execution, delivery and performance by the Borrower of this First Amendment, (b) acknowledges
and agrees that its obligations in respect of its Guaranty (i) are not
released, diminished, waived, modified, impaired or affected in any manner by
this First Amendment or any of the provisions contemplated herein and (ii) cover
the Aggregate Commitments as increased by this First Amendment, (c) ratifies
and confirms its obligations under its Guaranty, and (d) acknowledges and
agrees that it has no claims or offsets against, or defenses or counterclaims
to, its Guaranty.

12.           EXECUTION IN COUNTERPARTS. This
First Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which when taken
together shall constitute but one and the same instrument. For purposes of this
First Amendment, a counterpart hereof (or signature page thereto) signed
and transmitted by any Person party hereto to the Administrative Agent (or its
counsel) by facsimile machine, telecopier or electronic mail is to be treated
as an original. The signature of such Person thereon, for purposes hereof, is
to be considered as an original signature, and the counterpart (or signature page thereto)
so transmitted is to be considered to have the same binding effect as an
original signature on an original document.

13.           GOVERNING LAW; BINDING EFFECT.
This First Amendment shall be deemed to be a contract made under and governed
by and continued in accordance with the internal laws of the State of Texas
applicable to agreements made and to be performed entirely within such state,
provided that each party shall retain all rights arising under federal law. This
First Amendment shall be binding upon the parties hereto and their respective
successors and assigns.

14.           HEADINGS. Section headings
in this First Amendment are included herein for convenience of reference only
and shall not constitute a part of this First Amendment for any other purpose.

 7
 

 

15.           ENTIRE AGREEMENT. THE CREDIT
AGREEMENT, AS AMENDED BY THIS FIRST AMENDMENT, AND THE OTHER LOAN DOCUMENTS,
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL  AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO
UNWRITTEN ORAL  AGREEMENTS BETWEEN THE
PARTIES.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

 8
 

 

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

 

	
  

  	
   

  	
  MERITAGE HOMES CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Larry W. Seay

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Executive Vice President and

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 9
 

 

 

	
  

  	
   

  	
  GUARANTY BANK, as
  Administrative Agent

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Robert A. Miller, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Robert A. Miller, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
								

 

	
  

  	
   

  	
  GUARANTY BANK, as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Robert A. Miller, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Robert A. Miller, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
								

 

 

 10

 

	
  

  	
   

  	
  JPMORGAN CHASE BANK, N.A., as
  a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Kent A. Kaiser

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Kent A. Kaiser

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
								

 

 11
 

 

 

	
  

  	
   

  	
  BANK OF AMERICA, N.A.,

  as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Mark W. Lariviere

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Mark W. Lariviere

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
								

 12
 

 

 

	
  

  	
   

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION,

  as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ William Scargle

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  William Scargle

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
								

 

 13
 

 

 

	
  

  	
   

  	
  U. S. BANK NATIONAL ASSOCIATION,
  as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Adrian Montero

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Name:     Adrian Montero

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Title:       Vice President

  
								

 

 14
 

 

 

	
  

  	
   

  	
  WELLS FARGO BANK, NATIONAL ASSOCIATION,
  

  as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Rick Williams

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Rick Williams

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Banker

  
								

 

 15
 

 

 

	
  

  	
   

  	
  CITICORP NORTH AMERICA, INC.,
  as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Malau Kakad

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Malau Kakad

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
								

 

 

 16
 

 

 

	
  

  	
   

  	
  DEUTSCHE BANK TRUST COMPANY AMERICAS,

  as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Scottye Lindsey

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Scottye Lindsey

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Diane F. Rolfe

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Diane F. Rolfe

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
								

 

 17
 

 

 

	
  

  	
   

  	
  UBS LOAN FINANCE LLC, as a
  Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Richard L. Tavrow

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Richard L. Tavrow

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Director Banking Products

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Services, US

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Irja R. Otsa

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Irja R. Otsa

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Associate Director Banking Products

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Services, US

  
								

 

 18
 

 

 

	
  

  	
   

  	
  PNC BANK, NATIONAL ASSOCIATION,
  as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Douglas G. Paul

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Douglas G. Paul

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
								

 19
 

 

 

	
  

  	
   

  	
  SUNTRUST BANK, as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ W. John Wendler

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  W. John Wendler

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
								

 

 20
 

 

 

	
  

  	
   

  	
  COMERICA BANK, as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Casey L. Ostrander

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Casey L. Ostrander

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
								

 

 21
 

 

 

	
  

  	
   

  	
  COMPASS BANK, as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Steven J. Heslep

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Steven J. Heslep

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
								

 22
 

 

 

	
  

  	
   

  	
  AMSOUTH BANK, as a Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Ronny Hudspeth

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Ronny Hudspeth

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Senior Vice President

  
								

 

 23
 

 

 

	
  

  	
   

  	
  BANK OF OKLAHOMA, N.A., as a
  Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Patricia A. Richards

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Patricia A. Richards

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
								

 

 24
 

 

 

	
  

  	
   

  	
  LASALLE BANK, N.A., as a
  Lender

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Nathaniel Dever

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  Nathaniel Dever

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
  Vice President

  
								

 

 25

 

 

	
  

  	
  KEYBANK NATIONAL ASSOCIATION, as
  a Lender

  
	
   

  	
   

  
	
  

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Daniel L. Silbert

  
	
   

  	
   

  	
  Name:

  	
  Daniel L. Silbert

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 26
 

 

 

	
  

  	
  NORTHERN TRUST COMPANY, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Morgan A. Lyons

  
	
   

  	
   

  	
  Name:

  	
  Morgan A. Lyons

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 27
 

 

 

	
  

  	
  CALIFORNIA BANK & TRUST COMPANY,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Stephanie Lantz

  
	
   

  	
   

  	
  Name:

  	
  Stephanie Lantz

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

 28
 

 

 

	
  

  	
  BNP PARIBAS, as a Managing
  Agent and the New Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Duane Helkowski

  
	
   

  	
   

  	
  Name:

  	
  Duane Helkowski 

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
  

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Angela B. Arnold

  
	
   

  	
   

  	
  Name:

  	
  Angela B. Arnold

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

 29
 

 

 

	
  

  	
  ACKNOWLEDGED AND AGREED TO:

  
	
   

  	
   

  
	
   

  	
  MERITAGE HOMES OF ARIZONA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE PASEO CROSSING, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Arizona, Inc., its Sole Member

  
	
  

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE HOMES CONSTRUCTION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE PASEO CONSTRUCTION, LLC

  
	
  

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes Construction, Inc., its Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

 30
 

 

 

	
  

  	
  MERITAGE HOMES OF TEXAS GP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE HOMES OF TEXAS LP HOLDING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE HOMES OF TEXAS, LP

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas GP, Inc., its General
  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

 31
 

 

 

	
  

  	
  MERITAGE HOLDINGS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas, L.P., its Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas GP, Inc., its General
  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE HOMES OPERATING COMPANY, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Holdings, L.L.C., its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas, L.P., its Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas GP, Inc., its General
  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

 32
 

 

 

	
  

  	
  MERITAGE HOMES OF TEXAS JOINT VENTURE HOLDING
  COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas, L.P., its Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of Texas GP, Inc., its General
  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE HOMES OF CALIFORNIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE HOMES OF NEVADA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

 33
 

 

 

	
  

  	
  MTH-CAVALIER, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes Construction, Inc., its Sole
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MTH GOLF, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes Construction, Inc., its Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE HOMES OF COLORADO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  MERITAGE HOMES OF FLORIDA, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

 34
 

 

 

	
  

  	
  CALIFORNIA URBAN BUILDERS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  CALIFORNIA URBAN HOMES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Meritage Homes of California, Inc., its Sole Member
  and Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

	
  

  	
  GREATER HOMES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Larry W. Seay

  
	
   

  	
   

  	
  Name:

  	
  Larry W. Seay

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President - 

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  

 

 35
 

 

SCHEDULE 2.01

COMMITMENTS

AND PRO RATA SHARES

	
  Lender

  	
   

  	
   

  	
   

  	
  Commitment

  	
   

  	
  Pro Rata Share

  	
   

  
	
  Guaranty Bank

  	
   

  	
  $

  	
  100,000,000

  	
   

  	
  11.764710000

  	
  %

  
	
  JPMorgan Chase Bank,
  N.A., a national banking association

  	
   

  	
  $

  	
  80,000,000

  	
   

  	
  9.411760000

  	
  %

  
	
  Wachovia Bank, National
  Association

  	
   

  	
  $

  	
  70,000,000

  	
   

  	
  8.235290000

  	
  %

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  60,000,000

  	
   

  	
  7.058820000

  	
  %

  
	
  U. S. Bank
  National Association

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  5.882350000

  	
  %

  
	
  Wells Fargo Bank,
  National Association

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  5.882350000

  	
  %

  
	
  Citicorp North
  America, Inc.

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  5.882350000

  	
  %

  
	
  Deutsche Bank Trust
  Company Americas

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  5.882350000

  	
  %

  
	
  UBS Loan Finance, LLC

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  5.882350000

  	
  %

  
	
  BNP Paribas

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  5.882350000

  	
  %

  
	
  PNC Bank, National
  Association

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  4.117650000

  	
  %

  
	
  SunTrust Bank

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  4.117650000

  	
  %

  
	
  Comerica Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  2.941180000

  	
  %

  
	
  Compass Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  2.941180000

  	
  %

  
	
  AmSouth Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  2.941180000

  	
  %

  
	
  Bank of Oklahoma, N.A.

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  2.941180000

  	
  %

  
	
  LaSalle Bank, N.A.

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  2.941180000

  	
  %

  
	
  KeyBank, National
  Association

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  2.352940000

  	
  %

  
	
  Northern Trust Company

  	
   

  	
  $

  	
  15,000,000

  	
   

  	
  1.764710000

  	
  %

  
	
  California
  Bank & Trust Company

  	
   

  	
  $

  	
  10,000,000

  	
   

  	
  1.176470000

  	
  %

  
	
  Total

  	
   

  	
  $

  	
  850,000,000.00

  	
   

  	
  100.000000000

  	
  %

  

 

 36

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}]]