Document:

Exhibit 10.36

 

	
  

  	
  UBS Bank
  USA

  
	
   

  	
   

  	
  Variable Credit Line
  Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Account Application
  and

  Agreement for Organizations and Businesses

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS#
  / TIN

  	
   

  	
   

  
	
  HB

  	
   

  	
   

  	
   

  	
  Internal
  Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  For Internal Use Only

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Variable Credit Line Account at UBS Bank USA

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   CONCEPTUS INC

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fixed Credit Line Account
  at UBS Bank USA

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Collateral Account(s) at
  UBS Financial Services Inc.

  
	
  Insert the information below for each UBS
  Financial Services Inc. account to be pledged to secure the Borrower’s credit
  line.

  
	
  Full Collateral (Securities) Account Title 

  	
  Branch

  	
  Account
  Number

  	
   

  	
  FA#

  	
   

  
	
  1)        CONCEPTUS INC

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Account

  	
   

  	
   

  
	
  Select the type of credit line account:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
      Variable
  Credit Line Account

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
      Fixed
  Credit Line Account

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
      Both

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If you do not indicate your preference you will be deemed to have

  selected the “Both” option.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
  Account Ownership

  	
   

  	
  Select the Organization/Business Structure:

  	
   

  	
   

  
	
  Is this entity /
  organization a business that provides commercial goods or services (i.e., an
  operating entity)?

   

    Yes       o  No

  	
  

  	
    Corporation

    Corp-
  Subchapter ‘S’

    Limited
  Liability Company (LLC)

    Limited
  Liability Partnership (LLP)

    Limited
  Liability-Limited

  	
   

    Fed
  Charter-Credit Union

    Foundation-not
  for profit 

    Endowment-not
  for profit

    State
  Charter-S&L Bank

  	
   

    Fed
  Charter-Trust Co. 

    Govt
  Agency-Federal 

    Govt
  Agency-Local Ent 

    Govt
  Agency-State

  
	
   

  	
   

  	
   Partnership (LLLP)

  	
    State
  Charter-Savings Bank

  	
   

  
	
  Any changes or corrections to
  the information on this application must be initialed by you.  

  	
   

  	
    Sole
  Proprietorship

    Partnership-General

    Partnership-Limited

    Association

    Partnership-Invest
  Club

    Invest
  Club Membership

  	
    State
  Charter-Comm Bank

    State
  Charter-Trust Co.

    State
  Charter-Credit Union

    State
  Charter-Indus Loan 

    Fed
  Charter-Savings Assoc

    Fed
  Charter-Nat’l Bank

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
																													

 

	
  Borrower Information

  	
   

  	
   

  
	
  This section should be
  completed by the Organization/Business.

  	
   

  	
   

  
	
  Borrower

  	
   

  	
   

  
	
  Organization / Business
  Name CONCEPTUS INC

  	
   Location of Address

  	
   

  
	
  Organization/Business
  is (please complete each item that applies):

  	
              Business
  - Primary

  	
         Other
  ( please specify )

  
	
  1)       Incorporated

  	
     Unincorporated

  	
   

  	
   

  
	
  2)       For
  Profit

  	
     Not
  For Profit

  	
  Street Address (If a P.O. Box, complete the Additional Address
  Information on page 4.):

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Industry Group (e.g., Construction, Service,
  etc.): 

  	
  331 E. Evelyn Avenue

  	
   

  
	
  Health Care & Social Asst.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  City:

  	
  State:

  	
  ZIP:

  
	
  Is the Organization/Business publicly listed?

  	
     No     o  Yes;    specify:

  	
   

  	
  Mountain View

  	
  CA

  	
  94041-1530

  
	
   

  	
   

  	
  USA

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Business Telephone Number:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exchange (NYSE, AMEX, or NASDAQ)

  	
   

  	
  Ticker Symbol

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Place of Formation / Incorporation

  	
   

  	
   

  	
   

  	
   

  
	
    USA
  (if formed/incorporated, specify

  	
  Delaware 

  	
   

  	
   

  	
   

  
	
  State): 

  	
   

  	
   

  	
   

  	
   

  
	
    Other
  (specify)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TIN:

  	
  Date of Incorporation / Establishment:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
														

 

©2008 UBS Bank USA. All
rights reserved.

Sign and date the
application on page 5

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  Borrower Financial and Ownership Information

  	
   

  	
   

  	
   

  
	
  Annual
  Income:

  	
   

  	
  Liquid Assets:

  	
   

  	
   

  	
  Is the
  Borrower an officer or member of the board of directors of UBS AG, its
  subsidiaries or affiliates?*

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net Worth

  	
   

  	
  Fiscal Year
  End (indicate month)

  	
   

  	
   

  	
  o     Yes     o     No     If
  yes, please specify:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  Do you
  receive a substantial amount of your revenue/wealth (over 50%) (trade/export)
  from a country outside of the United States?

  	
   

  	
   

  	
  Subsidiary or Affiliate

  	
   

  	
  Employee Name and SS#

  
	
   

  o     Yes     o     No     If
  yes specify:

  	
   

  	
   

  	
  Is the
  Borrower an immediate family member of an executive officer or member of the
  board of directors of UBS AG? Immediate
  family member means a spouse or any other relative residing in the Borrower’s
  household to whom the Borrower lends financial support.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Country(ies):

  	
   

  	
   

  
	
  Does the
  Borrower own 10% or more of the shares of any publicly traded company? 

   

  o     Yes     o     No     If
  yes, please specify company and%:

  	
   

  	
   

  	
  o     Yes     o     No     If
  yes, please specify:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Subsidiary or Affiliate

  	
   

  	
  Employee Name and SS#

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  %

  	
   

  	
   

  	
   

  Will any of
  the loan proceeds be used to repay any debt or obligation owed to, or
  purchase an asset from, UBS AG or its subsidiaries or affiliates?

   

  o     Yes     o     No     If
  yes, please specify:

   

   

  
	
  Are any of
  the Borrowers, business owners or directors/principal officers a 

  control
  person of UBS AG or its subsidiaries or affiliates?*

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Subsidiary or Affiliate

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o     Yes     o     No     If
  yes, please specify company and%:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  *For purposes
  these questions, “control” means a person or entity that either
  (a) owns, controls or has the power to vote 25% or more of any class of
  voting securities, (b) has the ability to control the election of the
  majority of the directors of a company, or (c) has the power to exercise
  a controlling influence over management policies. A person or entity is
  presumed to have control of a company if the person or entity owns, controls
  or has the power to vote 10% or more of any class of voting securities of the
  company and (i) the person is an executive officer or director of the
  company or (ii) no other person has a greater percentage of that class
  of voting securities.

  
	
   

  
	
   

  
	
  Principal Officer/Beneficial Owner

  
	
  Complete this section for the Principal Officer(s) of
  the borrower, or beneficial owner for an LLC. To include additional principal
  officers please photocopy this page and submit it with the application.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Principal Officer Name

  	
   

  	
  SS#

  	
   

  	
   

  	
   

  	
  Principal Officer Name

  	
   

  	
  SS#

  
	
  Gregory E
  Lichtwardt

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Mark Sieczkarek

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Country of Citizenship:

  	
  Date of Birth

  	
   

  	
   

  	
   

  	
  Country of
  Citizenship:

  	
  Date of Birth

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  x     USA

  	
  o     

  	
  Other
  (specify)

  	
   

  	
   

  	
   

  	
  x     USA

  	
  o     

  	
  Other
  (specify)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Passport/CEDULA
  and Green Card#: (If non-U.S. and no SS# specified)

  	
   

  	
   

  	
  Passport/CEDULA and Green Card#: (If non-U.S. and no SS#
  specified)

  
	
   

  	
   

  	
   

  	
   

  
	
  /

  	
   

  	
   

  	
   

  	
   

  	
  /

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Passport/CEDULA Country of Issuance:

  	
   

  	
   

  	
   

  	
  Passport/CEDULA Country of Issuance:

  
	
  USA

  	
   

  	
   

  	
   

  	
  USA

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Street Address:

  	
   

  	
   

  	
   

  	
  Street
  Address:

  
	
  331 E.
  Evelyn Avenue

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  331 E.
  Evelyn Avenue

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  City:

  	
  State:

  	
  ZIP

  	
   

  	
   

  	
   

  	
  City:

  	
  State:

  	
  ZIP

  
	
  Mountain
  View

  	
  CA

  	
  94041-1530

  	
   

  	
   

  	
   

  	
  Mountain
  View

  	
  CA

  	
  94041-1530

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  USA

  	
   

  	
   

  	
   

  	
   

  	
  USA

  
	
  Telephone
  Number:

  	
   

  	
   

  	
   

  	
  Telephone
  Number:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2

  	
   

  	
  ©2008 UBS Bank USA. All rights reserved.

  
	
   

  	
   

  	
   

  	
  Sign and date the application on page 5

  
																									

 

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Account Features

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
												

 

	
  Check Writing

  	
   

  	
   

  	
  Alternate Mailing Address for Checks

  
	
  If you would like to receive Credit Line checks for your
  credit line account,

  	
   

  	
   

  	
  Print the mailing address for the delivery of checks if
  different from the

  
	
  please enroll below:

  	
   

  	
   

  	
  address on the checks:

  
	
   

  	
   

  	
   

  	
   

  
	
  

  	
  Check here if you would like Credit Line checks.

  	
   

  	
   

  	
   

  
	
  Checks will be in the name of the Borrower.

  	
   

  	
   

  	
   

  
	
  Please print the address that you would like to appear on
  your checks.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Wire Instructions for Loan Payment:  (In US Dollars)

  
	
   

  	
   

  	
   

  	
   

  	
  Bank Name: UBS AG

  
	
   

  	
   

  	
   

  	
   

  	
  Wire System Address: ABA
  026007993

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  For Further Credit to the Account of: UBS Bank
  USA

  
	
   

  	
   

  	
   

  	
  Account Number:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  For the Benefit of: Full Name

  
	
   

  	
   

  	
   

  	
  Account Number:

  
	
   

  	
   

  
	
  Alternate Mailing Address for Checks

  	
   

  
	
  Print the mailing address for the delivery of checks if
  different from the

  	
   

  
	
  address on the checks:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  UBS Credit Corp Wire Instructions are as
  follows:

  	
   

  
	
  UBS AG

  	
   

  
	
  ABA # 026007993

  	
   

  
	
   

  	
   

  
	
  A/C # 

  	
   

  
	
   

  	
   

  
	
  A/C Name:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
						

 

Senior Political
Affiliation

Are you, any authorized signatories, beneficial owners,
trustees, powers of attorney or other individuals with authority to effect
transactions, or any of their immediate family members or close associates a:

 

	
  I)

  	
  Current U.S. political official (as defined in section B
  below)?

  	
  o  No     o  Yes;    complete:

  
	
   

  	
   

  
	
   

  	
     A) Political Official’s Name:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    B) Current Position:

  	
  o  President

  	
  o  Vice
  President

  	
  o  US
  Cabinet Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o  Speaker
  of the House of Representatives

  	
  o  Supreme
  Court Justice

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o  Chairman
  of the Joint Chiefs of Staff

  	
  o  Ambassador

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
    C) Relationship to Client(s):

  	
  o  Self

  	
  o  Immediate
  family member

  	
  o  Close
  associate

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o  Associated
  with business or trust

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  II)

  	
  Current or former Senior non-U.S. political official,
  non-U.S. Religious Group/Organization, or Senior/Influential 

  	
  o  No    o  Yes;   complete:

  
	
   

  	
  representative of a non-U.S. Religious Group/Organization?

  
	
   

  	
   

  
	
   

  	
   

  	
  Political Official’s Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Current or Former Position:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Relationship to Client(s):

  	
  o  Self

  	
  o  Immediate
  family member

  	
  o  Close
  associate

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  o  Associated
  with business or trust

  	
   

  
													

 

	
   

  	
  3

  	
   

  	
  ©2008 UBS Bank
  USA. All rights reserved.

  Sign and date the
  application on page 5

  

 

 

	
  

  	
  UBS Bank
  USA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Variable Credit Line
  Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

   

  	
   

  	
  Fixed Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Internal
  Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  Duplicate Party Addendum

  	
   

  	
   

  
	
  Complete this section for each Duplicate Party to
  receive a duplicate credit line account statement.

  
	
   

  
	
   

  	
  Internal Location Code (UBS Financial Services
  Inc. Use Only)

  
	
   

  	
   

  
	
  Name:

  	
   

  	
  Country of Citizenship:

  
	
   

  	
   

  	
  o    USA      o    Other
  (specify):

  	
   

  
	
  Street Address:

  	
   

  	
  City:

  	
  State:

  	
  ZIP:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Additional Address Information

  	
   

  	
   

  
	
  If the Borrower’s mailing address is a P.O. Box
  please provide a legal residence address below.

  
	
   

  
	
  First Name:

  	
   

  	
  Last Name:

  	
   

  	
  Street Address:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Location of Address:

  
	
  o     Business
  - Primary

  	
   

  
	
  o     Business
  - Secondary

  	
   

  	
  City:

  	
  State:

  	
  ZIP:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o     Other
  (Specify):

  	
   

  	
   

  	
   

  	
   

  
												

 

	
   

  	
  4

  	
  ©2008 UBS Bank USA. All
  rights reserved.

  Sign and
  date the application on page 5

  

 

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

Borrower Agreement

 

BY SIGNING BELOW, THE BORROWER UNDERSTANDS,
ACKNOWLEDGES AND AGREES THAT:

 

	
  A     The
  Borrower has received and read a copy of this Borrower Agreement, the
  attached Credit Line Account Application and Agreement (including the Credit
  Line Agreement following this Borrower Agreement) and the Loan Disclosure
  Statement explaining the risk factors that the Borrower should consider
  before obtaining a loan secured by the Borrower’s securities account. The
  Borrower agrees to be bound by the terms and conditions contained in the
  Credit Line Account Application and Agreement (including the Credit Line
  Agreement following this Borrower Agreement) (which terms and conditions are
  incorporated by reference). Capitalized terms used in this Borrower Agreement
  have the meanings set forth in the Credit Line Agreement.

  B     THE BORROWER UNDERSTANDS AND AGREES THAT UBS BANK USA MAY DEMAND FULL OR PARTIAL PAYMENT OF THE CREDIT LINE OBLIGATIONS, AT ITS SOLE OPTION AND WITHOUT CAUSE, AT ANY TIME,
  AND THAT NEITHER FIXED RATE ADVANCES NOR VARIABLE RATE ADVANCES ARE EXTENDED
  FOR ANY SPECIFIC TERM OR DURATION. THE BORROWER UNDERSTANDS AND AGREES THAT
  ALL ADVANCES ARE SUBJECT TO COLLATERAL MAINTENANCE REQUIREMENTS. THE BORROWER
  UNDERSTANDS THAT UBS BANK USA MAY, AT ANY TIME, IN ITS DISCRETION, TERMINATE
  AND CANCEL THE CREDIT LINE REGARDLESS OF WHETHER OR NOT AN EVENT HAS
  OCCURRED.

  C      UNLESS DISCLOSED IN WRITING TO UBS BANK USA AT THE TIME OF THIS
  AGREEMENT, AND APPROVED BY UBS BANK USA, THE BORROWER AGREES NOT TO USE THE
  PROCEEDS OF ANY ADVANCE EITHER TO PURCHASE, CARRY OR TRADE IN SECURITIES OR
  TO REPAY ANY DEBT (I) USED TO PURCHASE, CARRY OR TRADE IN SECURITIES OR
  (II) TO ANY AFFILIATE OF UBS BANK USA. THE BORROWER WILL BE DEEMED TO
  REPEAT THIS AGREEMENT EACH TIME THE BORROWER REQUESTS AN ADVANCE.

  D      THE BORROWER UNDERSTANDS THAT BORROWING USING SECURITIES AS COLLATERAL
  ENTAILS RISKS. SHOULD THE VALUE OF THE SECURITIES IN THE COLLATERAL ACCOUNT
  DECLINE BELOW THE REQUIRED COLLATERAL MAINTENANCE REQUIREMENTS, UBS BANK USA
  MAY REQUIRE THAT THE BORROWER POST ADDITIONAL COLLATERAL, REPAY
  PART OR ALL OF THE BORROWER’S LOAN AND/OR SELL THE BORROWER’S
  SECURITIES. ANY REQUIRED LIQUIDATIONS MAY INTERRUPT THE BORROWER’S
  LONG-TERM INVESTMENT STRATEGIES AND MAY RESULT IN ADVERSE TAX
  CONSEQUENCES.

  E      Neither UBS Bank USA nor UBS Financial Services Inc. provides legal or
  tax advice and nothing herein shall be construed as providing legal or tax
  advice.

  F      Upon
  execution of this Credit Line Account Application and Agreement, the Borrower
  declares that all of the information requested in the Application and
  supplied by the Borrower is true and accurate and further agrees to promptly
  notify UBS Bank USA in writing of any material changes to any or all of the
  information contained in the Application including information relating to the
  Borrower’s financial situation.

  G      Subject to
  any applicable financial privacy laws and regulations, data regarding the
  Borrower and the Borrower’s securities accounts may be shared with UBS Bank
  USA affiliates. Subject to any applicable financial privacy laws and
  regulations, the Borrower requests that UBS Bank USA share such personal
  financial data with non-affiliates of UBS Bank USA as is necessary or
  advisable to effect, administer or enforce, or to service, process or
  maintain, all transactions and accounts contemplated by this Agreement.

  H      The
  Borrower authorizes UBS Bank USA and UBS Financial Services Inc. to obtain a
  credit report or other credit references concerning the Borrower (including
  making verbal or written inquiries concerning credit history) or to otherwise
  verify or update credit information given to UBS Bank USA at any time. The
  Borrower authorizes the release of this credit report or other credit
  information to UBS Bank USA affiliates as it deems necessary or advisable to
  effect, administer or enforce, or to service, process or maintain all
  transactions and accounts contemplated by this Agreement, and for the purpose
  of offering additional products, from time to time, to the Borrower. The
  Borrower authorizes UBS Bank USA 

  	
   

  	
  to exchange Borrower information with any party it
  reasonably believes is conducting a legitimate credit inquiry in accordance
  with the Fair Credit Reporting Act. UBS Bank USA may also share credit or
  other transactional experience with the Borrower’s designated UBS Financial
  Services Inc. Financial Advisor or other parties designated by the Borrower. 

  I       UBS Bank
  USA is subject to examination by various federal, state and self-regulatory
  organizations and the books and records maintained by UBS Bank USA are
  subject to inspection and subpoena by these regulators and by federal, state,
  and local law enforcement officials. The Borrower also acknowledges that such
  regulators and officials may, pursuant to treaty or other arrangements, in
  turn disclose such information to the officials or regulators of other
  countries, and that U.S. courts may be required to compel UBS Bank USA to
  disclose such information to the officials or regulators of other countries.
  The Borrower agrees that UBS Bank USA may disclose to such regulators and officials
  information about the Borrower and transactions in the credit line account or
  other accounts at UBS Bank USA without notice to the Borrower. In addition,
  UBS Bank USA may in the context of a private dispute be required by subpoena
  or other judicial process to disclose information or produce documentation
  related to the Borrower, the credit line account or other accounts at UBS
  Bank USA. The Borrower acknowledges and agrees that UBS Bank USA reserves the
  right, in its sole discretion, to respond to subpoenas and judicial process
  as it deems appropriate.

  J      To help the
  government fight the funding of terrorism and money laundering activities,
  Federal law requires all financial institutions to obtain, verify, and record
  information that identifies each person who opens an account. When the
  Borrower opens an account with UBS Bank USA, UBS Bank USA will ask for the
  Borrower’s name, address, and other information that will allow UBS Bank USA
  to identify the Borrower. UBS Bank USA may also ask to see other identifying
  documents. UBS Financial Services Inc. and UBS Bank USA are firmly committed
  to compliance with all applicable laws, rules and regulations, including
  those related to combating money laundering. The Borrower understands and
  agrees that the Borrower must take all necessary steps to comply with the
  anti-money laundering laws, rules and regulations of the Borrower’s
  country of origin, country of residence and the situs of the Borrower’s
  transaction.

  K      UBS Bank
  USA and its affiliates will act as creditors and, accordingly, their
  interests may be inconsistent with, and potentially adverse to, the
  Borrower’s interests. As a lender and consistent with normal lending
  practice, UBS Bank USA may take any steps necessary to perfect its interest
  in the Credit Line, issue a call for additional collateral or force the sale
  of the Borrower’s securities if the Borrower’s actions or inactions call the
  Borrower’s creditworthiness into question. Neither UBS Bank USA nor UBS
  Financial Services Inc. will act as Client’s investment advisor with respect
  to any liquidation. In fact UBS Bank USA will act as a creditor and UBS
  Financial Services Inc. will act as a securities intermediary.

  L      The
  Borrower understands that, if the Collateral Account is a managed account
  with UBS Financial Services Inc., (i) in addition to any fees payable to
  UBS Financial Services Inc. in connection with the Borrower’s managed
  account, interest will be payable to the Bank on an amount advanced to the
  Borrower in connection with the Credit Line Account, and (ii) the
  performance of the managed account might not exceed the managed account fees
  and the interest expense payable to the Bank in which case the Borrower’s
  overall rate of return will be less than the costs associated with the managed
  account.

  M     UBS Bank USA may provide copies of all credit line
  account statements to UBS Financial Services Inc. and to any Guarantor. The
  Borrower acknowledges and agrees that UBS Bank USA may share any and all
  information regarding the Borrower and the Borrower’s accounts at UBS Bank
  USA with UBS Financial Services Inc. UBS Financial Services Inc. may provide
  copies of all statements and confirmations concerning each Collateral Account
  to UBS Bank USA at such times and in such manner as UBS Bank USA may request
  and may share with UBS Bank USA any and all information regarding the
  Borrower and the Borrower’s accounts with UBS Financial Services Inc.

  

 

	
  IN WITNESS WHEREOF, the undersigned (“Borrower”) has
  signed this Agreement, or has caused this Agreement to be signed in its name
  by its duly authorized 

  
	
  representatives, as of the date indicated below.

  	
   

  	
  DATE:   

  	
   

  

 

Name of Borrower: CONCEPTUS
INC

 

	
  By:

  	
   

  	
   

  	
  Title: Chief Financial Officer/CFO

  
	
   

  	
  (Signature of Authorized Signatory of Borrower)* Gregory E
  Lichtwardt

  	
   

  	
  (Title of
  Authorized Signatory of Borrower)

  
	
  By:

  	
   

  	
   

  	
  Title: President and CEO

  
	
   

  	
  (Signature of Authorized Signatory of Borrower)* Mark
  Sieczkarek

  	
   

  	
  (Title of
  Authorized Signatory of Borrower)

  

 

The authorized signatory of the Borrower
must be one of the Authorized Persons designated on the applicable UBS Bank USA
supplemental form excecuted by the Borrower (e.g., the Supplemental Corporate
Resolution Form (HP Form)).

 

	
   

  	
  5

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  Sign and date the
  application on page 5

  

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

Credit Line Agreement - Demand Facility

 

THIS CREDIT LINE AGREEMENT (as it may
be amended, supplemented or otherwise modified from time to time, this “Agreement”)
is made by and between the party or parties signing as the Borrower on the
Application to which this Agreement is attached (together and individually, the
“Borrower”) and UBS Bank USA (the “Bank”) and, together with the Application,
establishes the terms and conditions that will govern the uncommitted demand
loan facility made available to the Borrower by the Bank. This Agreement
becomes effective upon the earlier of (i) notice from the Bank (which
notice may be oral or written) to the Borrower that the Credit Line has been
approved and (ii) the Bank making an Advance to the Borrower.

 

	
  1)     Definitions

   

  -       “Advance”
  means any Fixed Rate Advance or Variable Rate Advance made by the Bank
  pursuant to this Agreement.

   

  -       “Advance
  Advice” means a written or electronic notice by the Bank, sent to the
  Borrower, the Borrower’s financial advisor at UBS Financial Services Inc. or
  any other party designated by the Borrower to receive the notice, confirming
  that a requested Advance will be a Fixed Rate Advance and specifying the
  amount, fixed rate of interest and Interest Period for the Fixed Rate
  Advance.

   

  -       “Application”
  means the Credit Line Account Application and Agreement that the Borrower has
  completed and submitted to the Bank and into which this Agreement is
  incorporated by reference.

   

  -       “Approved
  Amount” means the maximum principal amount of Advances that is permitted to
  be outstanding under the Credit Line at any time, as specified in writing by
  the Bank.

   

  -       “Breakage
  Costs” and “Breakage Fee” have the meanings specified in Section 6(b).

   

  -       “Business
  Day” means a day on which both of the Bank and UBS Financial Services Inc.
  are open for business. For notices and determinations of LIBOR, Business Day
  must also be a day for trading by and between banks in U.S. dollar deposits
  in the London interbank market.

   

  -       “Collateral”
  has the meaning specified in Section 8(a).

   

  -       “Collateral
  Account” means, individually and collectively, each account of the Borrower
  or Pledgor at UBS Financial Services Inc. or UBS International Inc., as
  applicable, that is either identified as a Collateral Account on the
  Application to which this Agreement is attached or subsequently identified as
  a Collateral Account by the Borrower or Pledgor, either directly or
  indirectly through the Borrower’s or Pledgor’s UBS Financial Services Inc.
  financial advisor, together with all successors to those identified accounts,
  irrespective of whether the successor account bears a different name or
  account number.

   

  -       “Credit
  Line” has the meaning specified in Section 2(a).

   

  -       “Credit
  Line Account” means each Fixed Rate Account and each Variable Rate Account of
  the Borrower that is established by the Bank in connection with this
  Agreement and either identified on the Application or subsequently identified
  as a Credit Line Account by the Bank by notice to the Borrower, together with
  all successors to those identified accounts, irrespective of whether any
  successor account bears a different name or account number.

   

  -       “Credit
  Line Obligations” means, at any time of determination, the aggregate of the
  outstanding principal amounts of all Advances, together with all accrued but
  unpaid interest on the outstanding principal amounts, any and all fees or
  other charges payable in connection with the Advances and any costs of
  collection (including reasonable attorneys’ fees) and other amounts payable
  by the Borrower under this Agreement, and any and all other present or future
  obligations of the Borrower and the other respective Loan 

  	
   

  	
  Parties under this
  Agreement and the related agreements, whether absolute or contingent, whether
  or not due or mature.

   

  -       “Event”
  means any of the events listed in Section 10.

   

  -       “Fixed Rate
  Advance” means any advance made under the Credit Line that accrues interest
  at a fixed rate.

   

  -       “Guarantor”
  means any party who guaranties the payment and performance of the Credit Line
  Obligations.

   

  -       “Guaranty
  Agreement” means an agreement pursuant to which a Guarantor agrees to
  guaranty payment of the Credit Line Obligations.

   

  -       “Interest
  Period” means, for a Fixed Rate Advance, the number of days, weeks or months
  requested by the Borrower and confirmed in the Advance Advice relating to the
  Fixed Rate Advance, commencing on the date of (i) the extension of the
  Fixed Rate Advance or (ii) any renewal of the Fixed Rate Advance and, in
  each case, ending on the last day of the period. If the last day is not a
  Business Day, then the Interest Period will end on the immediately succeeding
  Business Day. If the last Business Day would fall in the next calendar month,
  the Interest Period will end on the immediately preceding Business Day. Each
  monthly or longer Interest Period that commences on the last Business Day of
  a calendar month (or on any day for which there is no numerically
  corresponding day in the appropriate subsequent calendar month) will end on
  the last Business Day of the appropriate calendar month.

   

  -       “Joint
  Borrower” has the meaning specified in Section 7(a).

   

  -       “LIBOR”
  means, as of any date of determination for Variable Rate Advances, the
  prevailing London Interbank Offered Rate for deposits in U.S. dollars having
  a maturity of 30 days as published in The Wall Street Journal “Money Rates”
  Table on the date of the Advance.

   

  If the rate ceases
  to be regularly published by The Wall Street Journal, LIBOR will be
  determined by the Bank in its sole and absolute discretion. For any day that
  is not a Business Day, LIBOR will be the applicable LIBOR in effect
  immediately prior to that day.

   

  -       “Loan
  Party” means each Borrower, Guarantor and Pledgor, each in their respective
  capacities under this Agreement or any related agreement.

   

  -       “Person”
  means any natural person, company, corporation, firm, partnership, joint
  venture, limited liability company or limited liability partnership,
  association, organization or any other legal entity.

   

  -       “Pledgor”
  means each Person who pledges to the Bank any Collateral to secure the Credit
  Line Obligations (or to secure the obligations of any Guarantor with respect
  to the guaranty of the Credit Line Obligations). Pledgors will include
  (i) each Borrower who pledges Collateral to secure the Credit Line
  Obligations, (ii) each Guarantor who has pledged collateral to secure
  the Credit Line Obligations or its obligations under a Guaranty Agreement,
  (iii) any spouse of a Borrower who executes a spouse’s pledge and
  consent agreement with respect to a jointly held collateral account, (iv) any
  other joint account holder who executes a joint account holder pledge and
  consent agreement with respect to a jointly held

  

 

	
   

  	
  6

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  Sign and date the
  application on page 5

  

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  collateral
  account, and (v) any other Person who executes a pledge agreement with
  respect to the Credit Line.

   

  -       “Premier
  Credit Line” means any Credit Line with an Approved Amount equal to or
  greater than $100,000.

   

  -       “Prime
  Credit Line” means any Credit Line with an Approved Amount less than
  $100,000.

   

  -       “Prime
  Rate” means the floating “Prime Rate” as published in The Wall Street Journal
  “Money Rates” Table from time to time. The Prime Rate will change as and when
  the Prime Rate as published in The Wall Street Journal changes. In the event
  that The Wall Street Journal does not publish a Prime Rate, the Prime Rate
  will be the rate as determined by the Bank in its sole and absolute
  discretion.

   

  -       “Securities
  Intermediary” has the meaning specified in Section 9.

   

  -       “UBS Bank
  USA Fixed Funding Rate” means, as of any date of determination for Fixed Rate
  Advances, an internally computed rate established from time-to-time by the
  Bank, in its sole discretion, based upon the LIBOR swap curve for a
  corresponding period as well as the Bank’s assessment of other lending rates
  charged in the financial markets.

   

  -       “UBS
  Financial Services Inc.” means UBS Financial Services Inc. and its
  successors.

   

  -       “UBS-I”
  means UBS International Inc. and its successors. 

   

  -       “Variable
  Rate Advance” means any advance made under the Credit Line that accrues
  interest at a variable rate.”

   

  2)     Establishment of Credit Line; Termination

   

  a)     Upon the
  effectiveness of this Agreement, the Bank establishes an UNCOMMITTED, DEMAND revolving line of
  credit (the “Credit Line”) in an amount up to the Approved Amount. The Bank
  may, from time to time upon request of the Borrower, without obligation and
  in its sole and absolute discretion, authorize and make one or more Advances
  to the Borrower. The Borrower acknowledges that the Bank has no obligation to
  make any Advances to the Borrower. The Bank may carry each Variable Rate
  Advance in a Variable Rate Account and may carry each Fixed Rate Advance in a
  Fixed Rate Account, but all Advances will constitute extensions of credit
  pursuant to a single Credit Line. The Approved Amount will be determined, and
  may be adjusted from time to time, by the Bank in its sole and absolute
  discretion.

   

  b)    THE BORROWER AND EACH OTHER LOAN PARTY UNDERSTAND AND AGREE THAT THE
  BANK MAY DEMAND FULL OR PARTIAL PAYMENT OF THE CREDIT LINE OBLIGATIONS,
  AT ITS SOLE AND ABSOLUTE DISCRETION AND WITHOUT CAUSE, AT ANY TIME, AND THAT
  NEITHER FIXED RATE ADVANCES NOR VARIABLE RATE ADVANCES ARE EXTENDED FOR ANY
  SPECIFIC TERM OR DURATION.

   

  c)     UNLESS
  DISCLOSED IN WRITING TO THE BANK AT THE TIME OF THE APPLICATION, AND APPROVED
  BY THE BANK, THE BORROWER AGREES NOT TO USE THE PROCEEDS OF ANY ADVANCE
  EITHER TO PURCHASE, CARRY OR TRADE IN SECURITIES OR TO REPAY ANY DEBT
  (I) USED TO PURCHASE, CARRY OR TRADE IN SECURITIES OR (II) TO ANY
  AFFILIATE OF THE BANK. THE BORROWER WILL BE DEEMED TO REPEAT THE AGREEMENT IN
  THIS SECTION 2(C) EACH TIME IT REQUESTS AN ADVANCE.

  	
   

  	
  d)     Prior to the first
  Advance under the Credit Line, the Borrower must sign and deliver to the Bank
  a Federal Reserve Form U-1 and all other documentation as the Bank may
  require. The Borrower acknowledges that neither the Bank nor any of its
  affiliates has advised the Borrower in any manner regarding the purposes for
  which the Credit Line will be used.

   

  e)    The
  Borrower consents and agrees that, in connection with establishing the Credit
  Line Account, approving any Advances to the Borrower or for any other purpose
  associated with the Credit Line, the Bank may obtain a consumer or other
  credit report from a credit reporting agency relating to the Borrower’s
  credit history. Upon request by the Borrower, the Bank will inform the
  Borrower: (i) whether or not a consumer or other credit report was
  requested; and (ii) if so, the name and address of the consumer or other
  credit reporting agency that furnished the report.

   

  f)     The
  Borrower understands that the Bank will, directly or indirectly, pay a
  portion of the interest that it receives to the Borrower’s financial advisor
  at UBS Financial Services Inc. or one of its affiliates. To the extent
  permitted by applicable law, the Bank may also charge the Borrower fees for
  establishing and servicing the Credit Line Account.

   

  g)     Following each
  month in which there is activity in the Borrower’s Credit Line Account in
  amounts greater than $1, the Borrower will receive an account statement
  showing the new balance, the amount of any new Advances, year to date
  interest charges, payments and other charges and credits that have been
  registered or posted to the Credit Line Account.

   

  h)     Each of the Loan
  Parties understands and agrees that the Bank may, at any time, in its sole
  and absolute discretion, terminate and cancel the Credit Line regardless of
  whether or not an Event has occurred. In the event the Bank terminates and
  cancels the Credit Line the Credit Line Obligations shall be immediately due
  and payable in full. If the Credit Line Obligations are not paid in full, the
  Bank shall have the right, at its option, to exercise any or all of its
  remedies described in Section 10 of this Agreement.

   

  3)     Terms of Advances

   

  a)     Advances made
  under this Agreement will be available to the Borrower in the form, and
  pursuant to procedures, as are established from time to time by the Bank in
  its sole and absolute discretion. The Borrower and each Loan Party agree to
  promptly provide all documents, financial or other information in connection
  with any Advance as the Bank may request. Advances will be made by wire
  transfer of funds to an account as specified in writing by the Borrower or by
  any other method agreed upon by the Bank and the Borrower. The Borrower
  acknowledges and agrees that the Bank will not make any Advance to the
  Borrower unless the collateral maintenance requirements that are established
  by the Bank in its sole and absolute discretion have been satisfied.

   

  b)    Each
  Advance made under a Premier Credit Line will be a Variable Rate Advance
  unless otherwise designated as a Fixed Rate Advance in an Advance Advice sent
  by the Bank to the Borrower. The Bank will not designate any Advance as a
  Fixed Rate Advance unless it has been requested to do so by the Borrower
  (acting directly or indirectly through the Borrower’s UBS Financial Services
  Inc. financial advisor or other agent designated by the Borrower and
  acceptable to the Bank). Each Advance Advice will be conclusive and binding
  upon the Borrower, absent manifest error, unless the Borrower otherwise
  notifies the Bank in writing no later than the close of business, New York
  time, on the third Business Day after the Advance Advice is received by the
  Borrower.

  

 

	
   

  	
  7

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  Sign and date the
  application on page 5

  

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  c)     Each Advance made
  under a Prime Credit Line will be a Variable Advance.

   

  d)    Unless
  otherwise agreed by the Bank: (i) all Fixed Rate Advances must be in an
  amount of at least $100,000; and (ii) all Variable Rate Advances taken
  by wire transfer must be in an amount of at least $2,500. If the Borrower is
  a natural person, the initial Variable Rate Advance under the Credit Line
  must be in an amount equal to at least $25,001 (the “Initial Advance
  Requirement”). If the initial Advance requested by the Borrower is made in
  the form of a check drawn on the Credit Line that does not satisfy the
  Initial Advance Requirement, then, in addition to and not in limitation of
  the Bank’s rights, remedies, powers or privileges under this Agreement or
  applicable law, the Bank may, in its sole and absolute discretion:

   

  (i)     pay the check
  drawn by the Borrower if, prior to paying that check, the Bank makes another
  Advance to the Borrower, which Advance shall be in an amount not less than
  $25,001; or

  (ii)    pay the check
  drawn by the Borrower; or

  (iii)   decline to pay
  (bounce) the check.

   

  If the Bank elects option (ii), no interest shall accrue
  on the amount of the Advance made by paying the check, and the amount of that
  Advance shall be due and payable to the Bank immediately (with or without
  demand by the Bank).

   

  4)     Interest

   

  a)     Each Fixed Rate
  Advance will bear interest at a fixed rate and for the Interest Period each
  as specified in the related Advance Advice. The rate of interest payable on
  each Fixed Rate Advance will be determined by adding a percentage rate to the
  UBS Bank USA Fixed Funding Rate, as of the date that the fixed rate is
  determined.

   

  b)     Each Variable Rate
  Advance under a Premier Credit Line will bear interest at a variable rate
  equal to LIBOR, adjusted daily, plus the percentage rate that (unless
  otherwise specified by the Bank in writing) is shown on Schedule I below for
  the Approved Amount of the Credit Line. For Premier Credit Lines, the rate of
  interest payable on Variable Rate Advances is subject to change without
  notice in accordance with fluctuations in LIBOR and in the Approved Amount.
  On each day that LIBOR changes or the Approved Amount crosses one of the thresholds
  that is indicated on Schedule I (or that is otherwise specified by the Bank
  in writing), the interest rate on all Variable Rate Advances will change
  accordingly.

   

  c)     Each Variable Rate
  Advance under a Prime Credit Line will bear interest at a variable rate equal
  to the Prime Rate, adjusted daily, plus the percentage rate that (unless
  otherwise specified by the Bank in writing) is shown on the attached Schedule
  II and that corresponds to the aggregate principal amount outstanding under
  the Prime Credit Line on that day. For Prime Credit Lines, the rate of
  interest payable on Variable Rate Advances is subject to change without
  notice in accordance with fluctuations in the Prime Rate and in the aggregate
  amount outstanding under the Prime Credit Line. On each date that the Prime
  Rate changes or the aggregate principal amount outstanding under the Prime
  Credit Line crosses one of the thresholds that is indicated on Schedule II
  (or that is otherwise specified by the Bank in writing), the interest rate on
  all Variable Rate Advances will change accordingly.

   

  5)     Payments

   

  a)     Each Fixed Rate Advance will be due and payable in full ON DEMAND or,
  if not earlier demanded by the Bank, on the last day of the applicable
  Interest Period. Any Fixed Rate Advance as to which
  the Bank has not made a demand for payment and 

  	
   

  	
  that is not paid in full or renewed, which renewal is in
  the sole and absolute discretion of the Bank, (pursuant to procedures as may
  be established by the Bank) as another Fixed Rate Advance on or before the
  last day of its Interest Period, will be automatically renewed on that date
  as a U.S. dollar denominated, Variable Rate Advance in an amount (based, in
  the case of any conversion of a non-U.S. dollar denominated Fixed Rate
  Advance, upon the applicable, spot currency exchange rate as of the maturity
  date, as determined by the Bank) equal to the unpaid principal balance of the
  Fixed Rate Advance plus any accrued but unpaid interest on the Fixed Rate
  Advance, which Variable Rate Advance will then accrue additional interest at
  a variable rate as provided in this Agreement.

   

  b)     Each Variable Rate Advance will be due and payable ON DEMAND.

   

  c)     The Borrower
  promises to pay the outstanding principal amount of each Advance, together
  with all accrued but unpaid interest on each Advance, any and all fees or
  other charges payable in connection with each Advance, on the date the
  principal amount becomes due (whether by reason of demand, the occurrence of
  a stated maturity date, by reason of acceleration or otherwise). The Borrower
  further promises to pay interest in respect of the unpaid principal balance
  of each Advance from the date the Advance is made until it is paid in full.
  All interest will be computed on the basis of the number of days elapsed and
  a 360-day year. Interest on each Advance will be payable in arrears as
  follows:

   

  (i)     for Fixed Rate
  Advances - on the last day of the Interest Period (or if the Interest Period
  is longer than three months, on the last day of each three month period
  following the date of the Advance) and on each date that all or any portion
  of the principal amount of the Fixed Rate Advance becomes due or is paid; and

  (ii)    for Variable Rate
  Advances - on the twenty-second day of each month other than December, and on
  the thirty-first day of December, and on each date that all or any portion of
  the principal amount of the Variable Rate Advance becomes due or is paid.

   

  To the extent permitted by law, and without limiting any
  of the Bank’s other rights and remedies under the Agreement, interest charges
  on any Advance that are not paid when due will be treated as principal and
  will accrue interest at a variable rate from the date the payment of interest
  was due until it is repaid in full.

   

  d)     All payments of
  principal, interest or other amounts payable under this Agreement will be
  made in immediately available funds and in the same currency in which the
  Advance was made, which unless otherwise agreed by the Bank, will be U.S.
  dollars. UBS Financial Services Inc. or UBS International Inc., as applicable,
  may act as collecting and servicing agent for the Bank for the Advances. All
  payments will be made by wire transfer of funds to an account specified by
  the Bank or by another method agreed upon by the Bank and the Borrower. Upon
  receipt of all payments, the Bank will credit the same to the Credit Line
  Account. The Bank shall apply the proceeds of any payments in the following
  order; first to any Breakage Costs, Breakage Fee, other fees, costs of
  collection and expenses, second to the outstanding principal amount of the
  related Advance and third to accrued interest.

   

  e)     All payments must
  be made to the Bank free and clear of any and all present and future taxes
  (including withholding taxes), levies, imposts, duties, deductions, fees,
  liabilities and similar charges other than those imposed on the overall net
  income of the Bank. If so requested by the Bank, the Borrower will deliver to
  the Bank the original or a certified copy of each receipt evidencing payment
  of any taxes or, if no taxes are payable in respect of any payment

  

 

	
   

  	
  8

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  Sign and date the
  application on page 5

  

 

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  under this Agreement, a certificate from each appropriate
  taxing authority, or an opinion of counsel in form and substance and from
  counsel acceptable to the Bank in its sole and absolute discretion, in either
  case stating that the payment is exempt from or not subject to taxes. If any
  taxes or other charges are required to be withheld or deducted from any
  amount payable by the Borrower under this Agreement, the amount payable will
  be increased to the amount which, after deduction from the increased amount
  of all taxes and other charges required to be withheld or deducted from the
  amount payable, will yield to the Bank the amount stated to be payable under
  this Agreement. If any of the taxes or charges are paid by the Bank, the
  Borrower will reimburse the Bank on demand for the payments, together with
  all interest and penalties that may be imposed by any governmental agency.
  None of the Bank, UBS Financial Services Inc., UBS-I or their respective
  employees has provided or will provide legal advice to the Borrower or any
  Loan Party regarding compliance with (or the implications of the Credit Line
  and the related guaranties and pledges under) the laws (including tax laws)
  of the jurisdiction of the Borrower or any Loan Party or any other
  jurisdiction. The Borrower and each Loan Party are and shall be solely
  responsible for, and the Bank shall have no responsibility for, the
  compliance by the Loan Parties with any and all reporting and other
  requirements arising under any applicable laws.

   

  f)     In no event will
  the total interest and fees, if any, charged under this Agreement exceed the
  maximum interest rate or total fees permitted by law. In the event any excess
  interest or fees are collected, the same will be refunded or credited to the
  Borrower. If the amount of interest payable by the Borrower for any period is
  reduced pursuant to this Section 5(f), the amount of interest payable for
  each succeeding period will be increased to the maximum rate permitted by law
  until the amount of the reduction has been received by the Bank.

   

  6)     Prepayments; Breakage Charges

   

  a)     The Borrower may repay any Variable
  Rate Advance at any time, in whole or in part, without penalty.

   

  b)     The Borrower may
  repay any Fixed Rate Advance, in whole or in part. The Borrower agrees to
  reimburse the Bank, immediately upon demand, for any loss or cost (“Breakage
  Costs”) that the Bank notifies the Borrower has been incurred by the Bank as
  a result of (i) any payment of the principal of a Fixed Rate Advance
  before the expiration of the Interest Period for the Fixed Rate Advance
  (whether voluntarily, as a result of acceleration, demand or otherwise), or
  (ii) the Customer’s failure to take any Fixed Rate Advance on the date
  agreed upon, including any loss or cost (including loss of profit or margin)
  connected with the Bank’s re-employment of the amount so prepaid or of those
  funds acquired by the Bank to fund the Advance not taken on the agreed upon
  date.

   

  Breakage Costs will be calculated by determining the
  differential between the stated rate of interest (as determined in accordance
  with Section 4(a) of the Agreement) for the Fixed Rate Advance and
  prevailing LIBOR and multiplying the differential by the sum of the
  outstanding principal amount of the Fixed Rate Advance (or the principal
  amount of Fixed Rate Advance not taken by the Borrower) multiplied by the
  actual number of days remaining in the Interest Period for the Fixed Rate
  Advance (based upon a 360-day year). The Borrower also agrees to promptly pay
  to the Bank an administrative fee (“Breakage Fee”) in connection with any
  permitted or required prepayment. The Breakage Fee will be calculated by
  multiplying the outstanding principal amount of the Fixed Rate Advance (or
  the principal amount of Fixed Rate Advance not taken by the Borrower) by two
  basis points (0.02%) (with a minimum Breakage Fee of $100.00). Any written
  notice from the Bank as to the amount of the loss or cost will be conclusive
  absent manifest error.

  	
   

  	
  7)     Joint
  Credit Line Account Agreement; Suspension and Cancellation

   

  a)     If more than one
  Person is signing this Agreement as the “Borrower”, each party (a “Joint
  Borrower”) will be jointly and severally liable for the Credit Line
  Obligations, regardless of any change in business relations, divorce, legal
  separation, or other legal proceedings or in any agreement that may affect
  liabilities between the parties. Except as provided below for the
  reinstatement of a suspended or cancelled Credit Line, and unless otherwise
  agreed by the Bank in writing, the Bank may rely on, and each Joint Borrower
  will be responsible for, requests for Advances, directions, instructions and
  other information provided to the Bank by any Joint Borrower.

   

  b)     Any Joint Borrower
  may request the Bank to suspend or cancel the Credit Line by sending the Bank
  a written notice of the request addressed to the Bank at the address shown on
  the Borrower’s periodic Credit Line Account statements. Any notice will
  become effective three Business Days after the date that the Bank receives
  it, and each Joint Borrower will continue to be responsible for paying:
  (i) the Credit Line Obligations as of the effective date of the notice,
  and (ii) all Advances that any Joint Borrower has requested but that
  have not yet become part of the Credit Line Obligations as of the effective
  date of the notice. No notice will release or in any other way affect the
  Bank’s interest in the Collateral. All subsequent requests to reinstate
  credit privileges must be signed by all Joint Borrowers comprising the
  Borrower, including the Joint Borrower requesting the suspension of credit
  privileges. Any reinstatement will be granted or denied in the sole and
  absolute discretion of the Bank.

   

  c)     All Credit Line
  Obligations will become immediately due and payable in full as of the
  effective date of any suspension or cancellation of the Credit Line. The
  borrower will be responsible for the payment of all charges incurred on the
  Advances after the effective date. The Bank will not release any Loan Party
  from any of the obligations under this Agreement or any related agreement
  until the Credit Line Obligations have been paid in full and this Agreement
  has been terminated.

   

  8)   Collateral; Grant of Security Interest; Set-off

   

  a)    To secure
  payment or performance of the Credit Line Obligations, the Borrower assigns,
  transfers and pledges to the Bank, and grants to the Bank a first priority
  lien and security interest in the following assets and rights of the
  Borrower, wherever located and whether owned now or acquired or arising in
  the future: (i) each Collateral Account; (ii) any and all money,
  credit balances, certificated and uncertificated securities, security
  entitlements, commodity contracts, certificates of deposit, instruments,
  documents, partnership interests, general intangibles, financial assets and
  other investment property now or in the future credited to or carried, held
  or maintained in any Collateral Account; (iii) any and all over-the- counter
  options, futures, foreign exchange, swap or similar contracts between the
  Borrower and either UBS Financial Services Inc. or any of its affiliates;
  (iv) any and all accounts of the Borrower at the Bank or any of its
  affiliates; (v) any and all supporting obligations and other rights
  ancillary or attributable to, or arising in any way in connection with, any
  of the foregoing; and (vi) any and all interest, dividends,
  distributions and other proceeds of any of the foregoing, including proceeds
  of proceeds (collectively, the “Collateral”).

   

  b)     The Borrower and
  if applicable, any Pledgor on the Collateral Account, will take all actions
  reasonably requested by the Bank to evidence, maintain and perfect the Bank’s
  first priority security interest in, and to enable the Bank to obtain control
  over, the Collateral and any additional collateral pledged by the Pledgors,
  including but not limited to making, executing, recording and delivering to
  the Bank (and authorizes the Bank to file, without

  

 

	
   

  	
  9

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  Sign and date the
  application on page 5

  

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  the signature of the Borrower and any Pledgor where
  permitted by applicable law) financing statements and amendments thereto,
  control agreements, notices, assignments, listings, powers, consents and
  other documents regarding the Collateral and the Bank’s security interest in
  the Collateral in such jurisdiction and in a form as the Bank reasonably may
  require. Each Loan Party irrevocably authorizes and appoints each of the Bank
  and UBS Financial Services Inc., as collateral agent, to act as their agent
  and attorney-in-fact to file any documents or to execute any documents in
  their name, with or without designation of authority. Each Loan Party
  acknowledges that it will be obligated in respect of the documentation as if
  it had executed the documentation itself.

   

  c)     The Borrower (and,
  if applicable, any other Pledgor on the Collateral Account) agrees to
  maintain in a Collateral Account, at all times, Collateral having an
  aggregate lending value as specified by the Bank from time to time.

   

  d)     The Bank’s sole
  duty for the custody, safe keeping and physical preservation of any
  Collateral in its possession will be to deal with the Collateral in the same
  manner as the Bank deals with similar property for its own account. The
  Borrower (and, if applicable, any other Pledgor on the Collateral Account)
  agrees that the Bank will have no responsibility to act on any notice of
  corporate actions or events provided to holders of securities or other investment
  property included in the Collateral. The Borrower (and, if applicable, any
  other Pledgor on the Collateral Account) agrees to (i) notify the Bank
  promptly upon receipt of any communication to holders of the investment
  property disclosing or proposing any stock split, stock dividend,
  extraordinary cash dividend, spin-off or other corporate action or event as a
  result of which the Borrower or Pledgor would receive securities, cash (other
  than ordinary cash dividends) or other assets in respect of the investment
  property, and (ii) immediately upon receipt by the Borrower or Pledgor
  of any of these assets, cause them to be credited to a Collateral Account or
  deliver them to or as directed by the Bank as additional Collateral.

   

  e)     The Borrower (and,
  if applicable, any other Pledgor on the Collateral Account) agrees that all
  principal, interest, dividends, distributions, premiums or other income and
  other payments received by the Bank or credited to the Collateral Account in
  respect of any Collateral may be held by the Bank as additional Collateral or
  applied by the Bank to the Credit Line Obligations. The Bank may create a
  security interest in any of the Collateral and may, at any time and at its
  option, transfer any securities or other investment property constituting
  Collateral to a securities account maintained in its name or cause any
  Collateral Account to be redesignated or renamed in the name of the Bank.

   

  f)     The Borrower (and,
  if applicable, any other Pledgor on the Collateral Account) agrees that if a
  Collateral Account has margin features, the margin features will be removed
  by UBS Financial Services Inc. or UBS International Inc., as applicable, so
  long as there is no outstanding margin debit in the Collateral Account.

   

  g)     If the Collateral
  Account permits cash withdrawals in the form of check writing, access card
  charges, bill payment and/ or electronic funds transfer services (for
  example, Resource Management Account®, Business Services Account BSA®,
  certain Basic Investment Accounts and certain accounts enrolled in UBS
  Financial Services Inc. Investment Consulting Services programs), the
  Borrower (and, if applicable, any other Pledgor on the Collateral Account)
  agrees that the “Withdrawal Limit” for the Collateral Account, as described
  in the documentation governing the account will be reduced on an ongoing
  basis so that the aggregate lending value of the Collateral remaining in the
  Collateral Account following the withdrawal may not be less than the amount
  required pursuant to Section 8(c).

  	
   

  	
  h)     In addition to the
  Bank’s security interest, the Borrower (and, if applicable, any other Pledgor
  on the Collateral Account) agrees that the Bank will at all times have a
  right to set off any or all of the Credit Line Obligations at or after the
  time at which they become due, whether upon demand, at a stated maturity
  date, by acceleration or otherwise, against all securities, cash, deposits or
  other property in the possession of or at any time in any account maintained
  with the Bank or any of its affiliates by or for the benefit of the Borrower,
  whether carried individually or jointly with others. This right is in
  addition to, and not in limitation of, any right the Bank may have at law or
  otherwise.

   

  i)      The Bank reserves
  the right to disapprove any Collateral and to require the Borrower at any
  time to deposit into the Borrower’s Collateral Account additional Collateral
  in the amount as the Bank requests or to substitute new or additional
  Collateral for any Collateral that has previously been deposited in the Collateral
  Account.

   

  9)     Control

   

  For the purpose of giving the Bank control over each
  Collateral Account and in order to perfect the Bank’s security interests in
  the Collateral, the Borrower and each Pledgor on the applicable Collateral
  Account consents to compliance by UBS Financial Services Inc., UBS-I or any
  other securities intermediary (in any case, the “Securities Intermediary”)
  maintaining a Collateral Account with entitlement orders and instructions
  from the Bank (or from any assignee or successor of the Bank) regarding the
  Collateral Account and any financial assets or other property held therein
  without the further consent of the Borrower or any other Pledgor on the
  applicable Collateral Account. Without limiting the foregoing, the Borrower
  and each Pledgor on the Collateral Account acknowledges, consents and agrees
  that, pursuant to a control agreement entered into between the Bank and the
  Securities Intermediary:

   

  a)     The Securities
  Intermediary will comply with entitlement orders originated by the Bank
  regarding any Collateral Account without further consent from the Borrower or
  any Pledgor. The Securities Intermediary will treat all assets credited to a
  Collateral Account, including money and credit balances, as financial assets
  for purposes of Article 8 of the Uniform Commercial Code.

   

  b)     In order to enable the Borrower and
  any Pledgor on the applicable Collateral Account to trade financial assets
  that are from time to time credited to a Collateral Account, the Securities
  Intermediary may comply with entitlement orders originated by the Borrower or
  any Pledgor on the applicable Collateral Account (or if so agreed by the
  Bank, by an investment adviser designated by the Borrower or any Pledgor on
  the applicable Collateral Account and acceptable to the Bank and the
  Securities Intermediary) regarding the Collateral Account, but only until the
  time that the Bank notifies the Securities Intermediary, that the Bank is
  asserting exclusive control over the Collateral Account. After the Securities
  Intermediary has received a notice of exclusive control and has had a
  reasonable opportunity to comply, it will no longer comply with entitlement
  orders originated by the Borrower or any Pledgor (or by any investment
  adviser designated by the Borrower or any Pledgor) concerning the Collateral
  Account. Notwithstanding the foregoing, however, and irrespective of whether
  it has received any notice of exclusive control, the Securities Intermediary
  will not comply with any entitlement order originated by the Borrower or any
  Pledgor (or by any investment adviser designated by the Borrower or any
  Pledgor) to withdraw any financial assets from a Collateral Account or to pay
  any money, free credit balance or other amount owing on a Collateral Account
  (other than cash withdrawals and payments not exceeding the “Withdrawal
  Limit” as contemplated in Section 8 (g)) without the prior consent of
  the Bank.

  

 

	
   

  	
  10

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  Sign and date the
  application on page 5

  

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  10)   Remedies

   

  a)     If any of the following events
  (each, an “Event”) occurs:

   

  (i)     the Borrower fails to pay any
  amount due under this Agreement;

   

  (ii)    the Borrower
  and/or any other relevant Loan Party fails to maintain sufficient Collateral
  in a Collateral Account as required by the Bank or any Guarantor fails to
  maintain collateral as required by the Bank under its Guaranty Agreement;

   

  (iii)   the Borrower or
  any other Loan Party breaches or fails to perform any other covenant,
  agreement, term or condition that is applicable to it under this Agreement or
  any related agreement, or any representation or other statement of the
  Borrower (or any Loan Party) in this Agreement or in any related agreement is
  incorrect in any material respect when made or deemed made;

   

  (iv)   the Borrower or
  any other Loan Party dies or is declared (by appropriate authority)
  incompetent or of unsound mind or is indicted or convicted of any crime or,
  if not an individual, ceases to exist;

   

  (v)   any
  voluntary or involuntary proceeding for bankruptcy, reorganization, dissolution
  or liquidation or similar action is commenced by or against the Borrower or
  any other Loan Party, or a trustee in bankruptcy, receiver, conservator or
  rehabilitator is appointed, or an assignment for the benefit of creditors is
  made, with respect to the Borrower or any other Loan Party or its property;

   

  (vi)   the Borrower or
  any Loan Party is insolvent, unable to pay its debts as they fall due, stops,
  suspends or threatens to stop or suspend payment of all or a material part of
  its debts, begins negotiations or takes any proceeding or other step with a
  view to readjustment, rescheduling or deferral of all or any part of its
  indebtedness, which it would or might otherwise be unable to pay when due, or
  proposes or makes a general assignment or an arrangement or composition with
  or for the benefit of its creditors;

   

  (vii)  a Collateral
  Account (or any account in which collateral provided by a Loan Party is
  maintained) or any portion thereof is terminated, attached or subjected to a
  levy;

   

  (viii) the Borrower or any
  Loan Party fails to provide promptly all financial and other information as
  the Bank may request from time to time;

   

  (ix)   any indebtedness
  of the Borrower or any other Loan Party in respect of borrowed money
  (including indebtedness guarantied by the Borrower or any other Loan Party)
  or in respect of any swap, forward, cap, floor, collar, option or other
  derivative transaction, repurchase or similar transaction or any combination
  of these transactions is not paid when due, or any event or condition causes
  the indebtedness to become, or permits the holder to declare the indebtedness
  to be, due and payable prior to its stated maturity;

   

  (x)   final judgment for
  the payment of money is rendered against Borrower (or any Loan Party) and,
  within thirty days from the entry of judgment, has not been discharged or
  stayed pending appeal or has not been discharged within thirty days from the
  entry of a final order of affirmance on appeal;

   

  (xi)   any legal
  proceeding is instituted or any other event occurs or condition exists that
  in the Bank’s judgment calls into question

  	
   

  	
  (A) the validity or binding effect of this Agreement or
  any related agreement or any of the Borrower’s (or any other Loan Party’s)
  obligations under this Agreement or under any related agreement or (B) the
  ability of the Borrower (or any Loan Party) to perform its obligations under
  this Agreement, or under any related agreement; or

   

  (xii)  the Bank otherwise
  deems itself or its security interest in the Collateral insecure or the Bank
  believes in good faith that the prospect of payment or other performance by
  any Loan Party is impaired.

   

  then, the Credit Line Obligations will become immediately
  due and payable (without demand) and the Bank may, in its sole and absolute
  discretion, liquidate, withdraw or sell all or any part of the Collateral and
  apply the same, as well as the proceeds of any liquidation or sale, to any
  amounts owed to the Bank, including any applicable Breakage Costs and
  Breakage Fee. The Bank will not be liable to any Loan Party in any way for
  any adverse consequences (for tax effect or otherwise) resulting from the
  liquidation of appreciated Collateral. Without limiting the generality of the
  foregoing, the sale may be made in the Bank’s sole and absolute discretion by
  public sale on any exchange or market where business is then usually
  transacted or by private sale, and the Bank may be the purchaser at any
  public or private sale. Any Collateral that may decline speedily in value or
  that customarily is sold on a recognized exchange or market may be sold
  without providing any Loan Party with prior notice of the sale. Each Loan
  Party agrees that, for all other Collateral, two calendar days notice to the
  Loan Party, sent to its last address shown in the Bank’s account records,
  will be deemed reasonable notice of the time and place of any public sale or
  time after which any private sale or other disposition of the Collateral may
  occur. Any amounts due and not paid on any Advance following an Event will
  bear interest from the day following the Event until fully paid at a rate per
  annum equal to the interest rate applicable to the Advance immediately prior
  to the Event plus 2.00%. In addition to the Bank’s rights under this
  Agreement, the Bank will have the right to exercise any one or more of the
  rights and remedies of a secured creditor under the Utah Uniform Commercial
  Code, as then in effect, or under any other applicable law.

   

  b)     Nothing contained
  in this Section 10 will limit the right of the Bank to demand full or
  partial payment of the Credit Line Obligations, in its sole and absolute
  discretion and without cause, at any time, whether or not an Event has
  occurred and is continuing.

   

  c)     All rights and
  remedies of the Bank under this Agreement are cumulative and are in addition
  to all other rights and remedies that the Bank may have at law or equity or
  under any other contract or other writing for the enforcement of the security
  interest herein or the collection of any amount due under this Agreement.

   

  d)     Any non-exercise
  of rights, remedies and powers by the Bank under this Agreement and the other
  documents delivered in connection with this Agreement shall not be construed
  as a waiver of any rights, remedies and powers. The Bank fully reserves its
  rights to invoke any of its rights, remedies and powers at any time it may
  deem appropriate.

   

  11)   Representations, Warranties and Covenants by the Loan Parties

   

  Each Borrower and each other Loan Party (if applicable)
  makes the following representations, warranties and covenants (and each
  Borrower will be deemed to have repeated each representation and warranty
  each time a Borrower requests an Advance) to the Bank:

  

 

	
   

  	
  11

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  Sign and date the
  application on page 5

  

 

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  a)     Except for the Bank’s rights under
  this Agreement and the rights of the Securities Intermediary under any
  account agreement, the Borrower and each relevant Pledgor owns the
  Collateral, free of any interest, lien or security interest in favor of any
  third party and free of any impediment to transfer;

   

  b)     Each Loan Party: (i) if a
  natural Person, is of the age of majority; (ii) is authorized to execute
  and deliver this Agreement and to perform its obligations under this
  Agreement and any related agreement; (iii) is not an employee benefit plan,
  as that term is defined by the Employee Retirement Income Security Act of
  1974, or an Individual Retirement Credit Line Account (and none of the
  Collateral is an asset of a plan or account); and (iv) unless the Loan
  Party advises the Bank to the contrary, in writing, and provides the Bank
  with a letter of approval, where required, from its employer, is not an
  employee or member of any exchange or of any corporation or firm engaged in
  the business of dealing, either as a broker or as principal, in securities,
  bills of exchange, acceptances or other forms of commercial paper;

   

  c)     Neither the Borrower nor any
  Pledgor on the Collateral Account has pledged or will pledge the Collateral
  or grant a security interest in the Collateral to any party other than the
  Bank or the Securities Intermediary, or has permitted or will permit the
  Collateral to become subject to any liens or encumbrances (other than those
  of the Bank and the Securities Intermediary), during the term of this
  Agreement;

   

  d)     No Loan Party is in default under
  any material contract, judgment, decree or order to which it is a party or by
  which it or its properties may be bound;

   

  e)     Each Loan Party
  has duly filed all tax and information returns required to be filed and has
  paid all taxes, fees, assessments and other governmental charges or levies
  that have become due and payable, except to the extent such taxes or other
  charges are being contested in good faith and are adequately reserved against
  in accordance with GAAP.

   

  f)     The Borrower and
  each relevant Pledgor (i) is and at all times will continue to be the
  legal and beneficial owner of all assets held in or credited to any
  Collateral Account or otherwise included in the Collateral, and
  (ii) does not hold any assets held in or credited to any Collateral
  Account or otherwise included in the Collateral in trust or subject to any
  contractual or other restrictions on use that would prevent the use of such
  assets to (a) repay the Bank or (b) be pledged as Collateral in
  favor of the Bank.

   

  The provisions of this Section 11 will survive the
  termination of this Agreement or any related agreement and the repayment of
  the Credit Line Obligations.

   

  12)   Indemnification;
  Limitation on Liability of the Bank and the Securities Intermediary

   

  Borrower agrees to indemnify and hold harmless the Bank
  and the Securities Intermediary, their affiliates and their respective
  directors, officers, agents and employees against any and all claims, causes
  of action, liabilities, lawsuits, demands and damages, for example, any and all
  court costs and reasonable attorneys fees, in any way relating to or arising
  out of or in connection with this Agreement, except to the extent caused by
  the Bank’s or Securities Intermediary’s breach of its obligations under this
  Agreement. Neither the Bank nor the Securities Intermediary will be liable to
  any party for any consequential damages arising out of any act or omission by
  either of them with respect to this Agreement or any Advance or Collateral
  Account. The provisions of this Section 12 will survive the termination
  of this Agreement or any related agreement and the repayment of the Credit
  Line Obligations.

   

  13)   Acceptance of Application and Agreement; Applicable Law

  	
   

  	
   

  THIS APPLICATION AND AGREEMENT WILL
  BE RECEIVED AND ACCEPTED BY BANK IN THE STATE OF UTAH, OR IF THIS APPLICATION
  AND AGREEMENT IS DELIVERED TO BANK’S AGENT, UBS FINANCIAL SERVICES INC., IT
  WILL BE RECEIVED AND ACCEPTED WHEN RECEIVED BY UBS FINANCIAL SERVICES INC.’S
  UNDERWRITING DEPARTMENT. DELIVERY OF THE APPLICATION AND AGREEMENT TO THE
  BORROWER’S FINANCIAL ADVISOR AT UBS FINANCIAL SERVICES INC. WILL NOT BE
  CONSIDERED RECEIPT OR ACCEPTANCE BY BANK. ALL DECISIONS MADE BY BANK
  REGARDING THE CREDIT LINE WILL BE MADE IN UTAH.

   

  THIS AGREEMENT WILL BE GOVERNED BY,
  AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF UTAH APPLICABLE TO
  AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY IN THE STATE OF UTAH AND, IN
  CONNECTION WITH THE CHOICE OF LAW GOVERNING INTEREST, THE FEDERAL LAWS OF THE
  UNITED STATES, EXCEPT THAT WITH RESPECT TO THE COLLATERAL ACCOUNT AND THE
  BANK’S SECURITY INTEREST THEREIN, THIS AGREEMENT SHALL BE GOVERNED BY AND
  CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING,
  WITHOUT LIMITATION, THE NEW YORK UNIFORM COMMERCIAL CODE, AND FOR
  PURPOSES OF THIS AGREEMENT, THE COLLATERAL ACCOUNT AND THE BANK’S SECURITY
  INTEREST THEREIN, THE JURISDICTION OF UBS FINANCIAL SERVICES INC. AND UBS-I
  SHALL BE DEEMED TO BE THE STATE OF NEW YORK.

   

  14)   Assignment

   

  This Agreement may not be assigned by the Borrower without
  the prior written consent of the Bank. This Agreement will be binding upon
  and inure to the benefit of the heirs, successors and permitted assigns of
  the Borrower. The Bank may assign this Agreement, and this Agreement will
  inure to the benefit of the Bank’s successors and assigns.

   

  15)   Amendment

   

  This Agreement may be amended only by the Bank, including,
  but not limited to, (i) the addition or deletion of any provision of
  this Agreement and (ii) the amendment of the (x) “Spread Over
  LIBOR/UBS Bank USA Fixed Funding Rate” in Schedule I or (y) “Spread Over
  Prime” in Schedule II to this Agreement, at any time by sending written
  notice, signed by an authorized officer of the Bank, of an amendment to the
  Borrower. The amendment shall be effective as of the date established by the
  Bank. This Agreement may not be amended orally. The Borrower or the Bank may
  waive compliance with any provision of this Agreement, but any waiver must be
  in writing and will not be deemed to be a waiver of any other provision of
  this Agreement. The provisions of this Agreement constitute the entire
  agreement between the Bank and the Borrower with respect to the subject
  matter hereof and supersede all prior or contemporaneous agreements,
  proposals, understandings and representations, written or oral, between the
  parties with respect to the subject matter hereof.

   

  16)   Severability

   

  If any provision of this Agreement is held to be invalid,
  illegal, void or unenforceable, by reason of any law, rule, administrative
  order or judicial or arbitral decision, the determination will not affect the
  validity of the remaining provisions of this Agreement.

   

  17)   Choice of Forum; Waiver of Jury Trial

   

  a)     ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
  AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY JUDGMENT
  ENTERED BY ANY COURT REGARDING THIS AGREEMENT OR THE TRANSACTIONS
  CONTEMPLATED BY THIS AGREEMENT WILL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN
  THE

  

 

	
   

  	
   

  	
   

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  
	
   

  	
   

  	
  12

  	
   

  	
  Sign and date the application on
  page 5

  
					

 

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

	
  THIRD JUDICIAL DISTRICT COURT FOR
  THE STATE OF UTAH OR IN THE UNITED STATES DISTRICT COURT FOR THE STATE OF
  UTAH. EACH OF THE LOAN PARTIES IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
  COURTS OF THE THIRD JUDICIAL DISTRICT COURT FOR THE STATE OF UTAH AND OF THE
  UNITED STATES DISTRICT COURT FOR THE STATE OF UTAH FOR THE PURPOSE OF ANY
  SUCH ACTION OR PROCEEDING AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE
  BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTION OR
  PROCEEDING. EACH OF THE LOAN PARTIES IRREVOCABLY WAIVES, TO THE FULLEST
  EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE NOW OR IN THE
  FUTURE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
  SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING
  HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

   

  b)    EACH OF THE LOAN PARTIES (FOR ITSELF, ANYONE CLAIMING THROUGH IT OR IN
  ITS NAME, AND ON BEHALF OF ITS EQUITY HOLDERS) IRREVOCABLY WAIVES ANY RIGHT
  IT MAY HAVE TO A TRIAL BY JURY REGARDING ANY CLAIM BASED UPON OR ARISING
  OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
  AGREEMENT.

   

  c)     Any arbitration proceeding between the Borrower (or any other Loan
  Party) and the Securities Intermediary, regardless of whether or not based on
  circumstances related to any court proceedings between the Bank and the
  Borrower (or the other Loan Party), will not provide a basis for any stay of
  the court proceedings.

   

  d)    Nothing in this Section 17 will be deemed to alter any agreement
  to arbitrate any controversies which may arise between the Borrower (or any
  other Loan Party) and UBS Financial Services Inc. or its predecessors, and
  any claims between the Borrower or the Loan Party, as applicable, and UBS Financial
  Services Inc. or its employees (whether or not they have acted as agents of
  the Bank) will be arbitrated as provided in any agreement between the
  Borrower or the Loan Party, as applicable, and UBS Financial Services Inc.

   

  18)   State Specific Provisions and Disclosures

   

  a)     For residents of Ohio:

  The Ohio laws against
  discrimination require that all creditors make credit equally available to
  all creditworthy customers, and that credit reporting agencies maintain
  separate credit histories on each individual upon request. The Ohio civil
  rights commission administers compliance with this law.

   

  b)    For residents of Oregon:

  NOTICE TO BORROWER: DO NOT SIGN
  THIS AGREEMENT BEFORE YOU READ IT. THIS AGREEMENT PROVIDES FOR THE PAYMENT OF
  A PENALTY IF YOU WISH TO REPAY A FIXED RATE ADVANCE PRIOR TO THE DATE
  PROVIDED FOR REPAYMENT IN THE AGREEMENT.

   

  c)     For residents of Vermont:

  NOTICE TO BORROWER: THE ADVANCES
  MADE UNDER THIS AGREEMENT ARE DEMAND LOANS AND SO MAY BE COLLECTED BY
  THE LENDER AT ANY TIME. A NEW LOAN MUTUALLY AGREED UPON AND SUBSEQUENTLY
  ISSUED MAY CARRY A HIGHER OR LOWER RATE OF INTEREST.

   

  NOTICE TO JOINT BORROWER: YOUR
  SIGNATURE ON THE AGREEMENT MEANS THAT YOU ARE EQUALLY LIABLE FOR 

  	
   

  	
  REPAYMENT OF THIS LOAN. IF THE
  BORROWER DOES NOT PAY, THE LENDER HAS A LEGAL RIGHT TO COLLECT FROM YOU.

   

  d)    For residents of California:

   

  (i)    Any
  person, whether married, unmarried, or separated, may apply for separate
  credit.

   

  (ii)   As required by law, you are notified that a negative credit
  report reflecting on your credit record may be submitted to a credit
  reporting agency if you fail to fulfill the terms of your credit obligations.

   

  (iii)  The Borrower will notify the Bank, within a reasonable time, of
  any change in the Borrower’s name, address, or employment.

   

  (iv)  The Borrower will not attempt to obtain any Advance if the
  Borrower knows that the Borrower’s credit privileges under the Credit Line
  have been terminated or suspended.

   

  (v)   The
  Borrower will notify the Bank by telephone, telegraph, letter, or any other
  reasonable means that an unauthorized use of the Credit Line has occurred or
  may occur as the result of the loss or theft of a credit card or other
  instrument identifying the Credit Line, within a reasonable time after the
  Borrower’s discovery of the loss or theft, and will reasonably assist the
  Bank in determining the facts and circumstances relating to any unauthorized
  use of the Credit Line.

   

  19)   Account
  Agreement

   

  Each Loan Party acknowledges and
  agrees that this Agreement supplements their account agreement(s) with
  the Securities Intermediary relating to the Collateral Account and, if
  applicable, any related account management agreement(s) between the Loan
  Party and the Securities Intermediary. In the event of a conflict between the
  terms of this Agreement and any other agreement between the Loan Party and
  the Securities Intermediary, the terms of this Agreement will prevail.

   

  20)   Notices

   

  Unless otherwise required by law,
  all notices to a Loan Party may be oral or in writing, in the Bank’s
  discretion, and if in writing, delivered or mailed by the United States mail,
  or by overnight carrier or by telecopy to the address of the Loan Party shown
  on the records of the Bank. Each Loan Party agrees to send notices to the
  Bank, in writing, at such address as provided by the Bank from time to time.

   

   

  

 

	
   

  	
   

  	
   

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  
	
   

  	
   

  	
  13

  	
   

  	
  Sign and date the application on
  page 5

  
					

 

	
  

  	
  UBS Bank USA

  
	
   

  	
   

  	
  Variable Credit Line Account
  Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Credit Line Agreement

  	
   

  	
   

  	
   

  	
  Fixed Credit Line Account Number: (if applicable)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  SS# / TIN

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Internal Use Only

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

 

 

Schedule I to UBS Bank USA Credit Line Agreement

Schedule
of Percentage Spreads Over LIBOR or the UBS Bank USA Fixed

Funding
Rate, as applicable

	
  Aggregate
  Approved Amount

  	
   

  	
  Spread Over
  LIBOR/UBS Bank

  	
   

  
	
   

  	
   

  	
  USA Fixed
  Funding Rate

  	
   

  
	
  $100,000 to
  $249,999

  	
   

  	
  5.00%

  	
   

  
	
  $250,000 to
  $499,999

  	
   

  	
  3.00%

  	
   

  
	
  $500,000 to
  $999,999

  	
   

  	
  2.00%

  	
   

  
	
  $1,000,000
  to $2,499,999

  	
   

  	
  1.75%

  	
   

  
	
  $2,500,000
  to $4,999,999

  	
   

  	
  1 .50%

  	
   

  
	
  $5,000,000
  and over

  	
   

  	
  1 .25%

  	
   

  

 

 

 

Schedule II to UBS Bank USA Credit Line Agreement

Schedule of
Percentage Spreads Over Prime

	
  Outstanding
  Amount under Credit Line

  	
   

  	
  Spread Over
  Prime

  	
   

  
	
  $0 to
  $49,999

  	
   

  	
  3.50%

  	
   

  
	
  $50,000 to
  $99,999

  	
   

  	
  3.00%

  	
   

  

 

 

 

NOTICE TO CO-SIGNER
(Traduccion en Ingles Se Requiere Por La Ley)

 

You are being asked to guarantee this
debt. Think carefully before you do. If the borrower doesn’t pay the debt, you
will have to. Be sure you can afford to pay if you have to, and that you want
to accept this responsibility.

 

You may have to pay to the full
amount of the debt if the borrower does not pay. You may also have to pay late
fees or collection costs, which increase this amount.

 

The creditor can collect this debt
from you without first trying to collect from the borrower. The creditor can
use the same collection methods against you that can be used against the
borrower, such as suing you, garnishing your wages, etc. If this debt is ever
in default, that fact may become a part of your credit record.

 

This notice is not the contract that
makes you liable for the debt.

 

AVISO PARA EL FIADOR
(Spanish Translation Required By Law)

 

Se le esta pidiendo que garantice
esta deuda. Pienselo con cuidado antes de ponerse de acuerdo. Si la persona que
ha pedido este prestamo no paga la deuda, usted tendra que pagarla. Este seguro
de que usted podra pagar si sea obligado a pagarla y de que usted desea aceptar
la responsabilidad.

 

Si la persona que ha pedido el
prestamo no paga la deuda, es posible que usted tenga que pagar la suma total
de la deuda, mas los cargos por tardarse en el pago o el costo de cobranza, lo
cual aumenta el total de esta suma.

 

El acreedor (financiero) puede
cobrarle a usted sin, primeramente, tratar de cobrarle al deudor. Los mismos metodos
de cobranza que pueden usarse contra el deudor, podran usarse contra usted,
tales como presentar una demanda en corte, quitar parte de su sueldo, etc. Si
alguna vez no se cumpla con la obligacion de pagar esta deuda, se puede incluir
esa informacion en la historia de credito de usted.

 

Este aviso no es el contrato mismo en
que se le echa a usted la responsabilidad de la deuda.

 

	
   

  	
   

  	
   

  	
  ©2008 UBS Bank USA. All rights
  reserved.

  
	
   

  	
   

  	
  14

  	
   

  	
  Sign and date the application on
  page 5

  
					

 

	
  

  	
   

  	
  UBS Bank USA

  

 

	
   

  	
   

  KU

   

  
	
  ADDENDUM TO CREDIT LINE ACCOUNT APPLICATION AND 

  AGREEMENT

  	
   

  

 

	
  Credit Line
  Account

  	
   

  	
   

  	
  Account Number

  	
   

  
	
  CONCEPTUS INC

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Collateral Account

  	
   

  	
   

  	
  Account Number

  	
   

  
	
  CONCEPTUS INC

  	
   

  	
   

  	
   

  	
   

  

 

This Addendum (this “Addendum”)
is attached to, incorporated by reference into and is fully a part of the
Credit Line Account Application and Agreement between UBS Bank USA (the "Bank”)
and the borrower named in the signature area below (the “Borrower”), dated as
of the date hereof (as amended or otherwise modified from time to time, the “Agreement”).
This Addendum and the Agreement shall not become effective and binding upon the
Bank until this Addendum has been executed by the Borrower and accepted by the
Bank at its home office. Any conflict between the terms of the Agreement and
this Addendum shall be resolved in accordance with the terms of this Addendum.
Defined terms used herein to have the respective meanings set forth in the
Agreement unless otherwise defined in this Addendum.

 

A.    The Bank, UBS Financial Services Inc.
and the Borrower each acknowledge and agree that:

 

Definitions

 

1.     The Agreement is amended by adding
the following definitions in Section 1:

 

	
  “·

  	
   

  	
  “Additional
  Payments” has the meaning specified in Section 5 g).

  
	
  ·

  	
   

  	
  “ARS
  Collateral” means any and all Collateral consisting of Auction Rate
  Securities.

  
	
  ·

  	
   

  	
  “ARS
  Payments” has the meaning specified in Section 5 g).

  
	
  ·

  	
   

  	
  “Auction
  Rate Securities” means any and all securities determined by the Bank, in its
  sole and absolute discretion, as being commonly referred to as “Auction Rate
  Securities,” which, for greater certainty, include, without limitation, debt
  securities on which the interest rate payable is periodically re-set by an
  auction process and/or equity securities on which any dividend payable is
  periodically re-set by an auction process.

  
	
  ·

  	
   

  	
  “Taxable
  SLARC Maximum Auction Rate” means the applicable “reset rate,” “maximum
  auction rate” or other similar rate as may be specified in the prospectus or
  other documentation governing any applicable Taxable Student Loan Auction
  Rate Securities as representing the failed auction rate or similar rate
  payable on such Auction Rate Securities, in each case expressed as a
  per-annum rate and as calculated in the Bank’s sole and absolute discretion.

  
	
  ·

  	
   

  	
  “Taxable
  Student Loan Auction Rate Securities” means any and all Auction Rate
  Securities Collateral consisting of securities determined by the Bank, in its
  sole and absolute discretion, as being commonly referred to as “Student Loan
  Auction Rate Securities” and on which the interest or dividend rate paid or payable
  to the Borrower by the issuer of such securities is taxable to the Borrower.”

  

 

Terms of Advances

 

2.     The Agreement
is amended by adding the following as Section 3 e):

 

“The
Borrower acknowledges that the Bank will not make an Advance against the ARS
Collateral in amounts equal to the fair market or par value of the ARS
Collateral unless the Borrower arranges for another person or entity to provide
additional collateral or assurances on terms and conditions satisfactory to the
Bank. In requesting an Approved Amount equal to the par value of the ARS
Collateral, the Borrower has arranged for UBS Financial Services Inc. to
provide, directly or through a third party, the pledge of additional collateral
and/or assurances to the Bank so that the Bank will consider making Advances
from time to time in accordance with the terms of this Agreement and in amounts
equal to, in the aggregate, the par value of the ARS Collateral at the date of
an Advance. In addition, the Borrower, the Bank and UBS Financial Services Inc.
acknowledge and agree that if (a) the Bank is repaid all of the Credit
Line Obligations due to the Bank under the Agreement and this Addendum and (b) as
part of such repayment, the Bank realizes on the additional collateral and/or
assurances pledged or otherwise provided by UBS Financial Services and/or any
such third party to the Bank, then the Agreement shall not terminate and the
Bank shall automatically assign to UBS Financial Services Inc. and any such
third party, and UBS Financial Services Inc. and any such third party shall
automatically assume and be subrogated to, all of the Bank’s rights, claims and
interest in and under the Agreement and this Addendum, including without
limitation, the security interest in the Collateral, including without limitation
the ARS Collateral, granted the Bank under the Agreement and this Addendum
(further including, without limitation, interest, dividends, distributions,
premiums, other income and payments received in respect of any and all such
Collateral) to the extent of the amount that the Bank has realized on all or
any part of the additional collateral and/or assurances pledged or otherwise
provided by UBS Financial Services and/or any such third party to the Bank in
order to effect the repayment of the Credit Line Obligations due to the Bank
under the Agreement. Upon such automatic assignment and subrogation, UBS
Financial Services Inc. and any such third party shall be entitled to directly
exercise any and all rights and remedies afforded the Bank under the Agreement,
this Addendum and any and all other documents and agreements entered into in
connection with the Agreement and/or this Addendum.”

 

1 of 5

 

	
  

  	
   

  	
  Credit Line Account Number

  
	
   

  	
   

  	
   

  	
  CP

  

 

 

Interest

 

3.     The Agreement
is amended by adding the following as a new Section 4 d), Section 4
e) and Section 4 f):

 

	
  “d)

  	
   

  	
  Notwithstanding
  anything to the contrary in this Agreement, and subject to the provisions of
  Sections 4 e) and f) of this Agreement, the interest rate charged on any and
  all outstanding Variable Rate Advances shall be the lesser of (i) the
  amount prescribed by Sections 4 a), b), or c) of this Agreement, as
  applicable, and (ii) the then applicable weighted average rate of
  interest or dividend rate paid to the Borrower by the issuer of the ARS
  Collateral.

  
	
  e)

  	
   

  	
  The Bank
  and the Borrower acknowledge and agree that the Bank shall be entitled to
  determine or adjust, at any time and from time to time, the interest rate
  payable by the Borrower to the Bank on all or any part of the outstanding
  Variable Rate Advances to reflect any changes in the composition of the ARS
  Collateral, to address any inability to determine interest rates, or for any
  other reason that, in the Bank’s sole and absolute discretion, is necessary
  to give effect to the intent of the provisions of this Agreement, including,
  without limitation, this Section 4 (it being acknowledged and agreed
  that the provisions of this Section 4 are intended to cause the interest
  payable by the Borrower under this Agreement to equal the interest or
  dividend rate payable to the Borrower by the issuer of any ARS Collateral)
  and any and all such adjustments by the Bank hereunder shall be conclusive
  and binding on the Bank and the Borrower absent manifest error.

  
	
  f)

  	
   

  	
  If and to the extent that any or all of the ARS Collateral consists of
  Taxable Student Loan Auction Rate Securities, then notwithstanding anything
  to the contrary in this Agreement, when calculating such weighted average
  interest rate, the interest rate paid to the Borrower with respect to such
  Taxable Student Loan Auction Rate Securities shall be deemed to be equal to
  (i) for the period from the date of this Addendum through and including
  January 21, 2009, the applicable coupon rate(s) and (ii) from
  January 22, 2009 and thereafter, the then applicable Taxable SLARC
  Maximum Auction Rate, for, and to the extent of, such Taxable Student Loan
  Auction Rate Securities. The Borrower will be charged interest on the Loan in
  months in which the Borrower does not receive interest on the Taxable Student
  Loan Auction Rate Securities.”

  

 

Payments

 

4.     The Agreement
is amended by adding the following as Section 5 g):

 

“The
Borrower will make additional payments (“Additional Payments”) as follows:

 

	
  ·

  	
   

  	
  The
  proceeds of any liquidation, redemption, sale or other disposition of all or
  part of the ARS Collateral will be automatically transferred to the Bank as
  payments. The amount of these payments will be determined by the proceeds
  received in the Collateral Account, and may be as much as the total Credit
  Line Obligations.

  
	
  ·

  	
   

  	
  All other
  interest, dividends, distributions, premiums, other income and payments that
  are received in the Collateral Account in respect of any ARS Collateral will
  be automatically transferred to the Bank as payments. These are referred to
  as “ARS Payments.” The amount of each ARS Payment will vary, based on the
  proceeds received in the Collateral Account. The Bank estimates that the ARS
  Payments will range from zero to fifteen ($15.00) dollars per month per
  $1,000 in par value of Pledged ARS. The Bank will notify the Borrower at
  least ten (10) days in advance of any ARS Payment that falls outside of
  this range. If the Borrower would prefer to have advance notice of each
  payment to be made to Advances, the Borrower may cancel ARS Payments as
  described below.

  
	
  ·

  	
   

  	
  The
  Borrower agrees that any cash, check or other deposit (other than a deposit
  of securities) made to the Collateral Account is an individual authorization
  to have such amount transferred to the Bank as a payment. The amount of each
  payment is the amount of the deposit.

  

 

Each
Additional Payment will be applied, as of the date received by the Bank, in the
manner set forth in the last sentence of Section 5 d). The Borrower acknowledges
that neither the Bank nor UBS Financial Services Inc. sets or arranges for any
schedule of Additional Payments. Instead, Additional Payments will be
transferred automatically from the Collateral Account whenever amounts are
received in the Collateral Account, generally on the second Business Day after
receipt.

 

The
Borrower may elect to stop ARS Payments at any time, and this election will
cancel all ARS Payments that would occur three (3) Business Days or more
after the Bank receives such notice. If the Borrower stops ARS Payments, the
Borrower will continue to be obligated to pay principal, interest, and other
amounts pursuant to the Agreement. If the Borrower elects to cancel ARS
Payments, all other Additional Payments will be cancelled. Cancelling ARS
Payments and Additional Payments may result in higher interest charges by the
Bank because amounts received in the Collateral Account will not be
automatically transferred and credited. Any amounts received in the Collateral
Account will remain in the Collateral Account unless the Bank permits you to
withdraw all or part of such amounts. Your notice to cancel must be sent to:
Attention: Head of Credit Risk Monitoring, UBS Bank USA, 299 South Main Street,
Suite 2275, Salt Lake City, Utah 84111, or call (801) 741-0310.

 

Important Disclosure About Required Payments. If
Additional Payments are sufficient to pay all accrued interest on Advances on
or before a due date, then the Borrower need not make an additional interest
payment. Excess Additional Payments will be applied against principal. However,
if Additional Payments are not sufficient to pay all accrued interest on
Advances on or before a due date, then the Bank may, in its sole discretion (1) capitalize
unpaid interest as an additional Advance, or (2) require the Borrower to
make payment of all accrued and unpaid interest.”

 

2 of 5

 

	
  

  	
   

  	
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  CP

  

 

 

Remedies

 

5.     The Agreement is amended by adding the following as Section 10
e):

 

“The
Borrower agrees that in the event the Bank determines to liquidate or sell any
Collateral, the Bank shall, to the fullest extent permitted by applicable law,
have the right to do so in any manner, including, without limitation, the sale
of Collateral individually or in a block, for cash or for credit, in a public
or private sale, with or without public notice, through the use of sealed bids
or otherwise, with the aid of any advisor or agent who may be an affiliate of
the Bank or in any other manner as the Bank in its sole discretion shall
choose. The Borrower acknowledges that the price the Bank obtains for
Collateral in the Bank’s chosen method of sale may be lower than might be
otherwise obtained in another method of sale, and the Borrower hereby agrees
that any such sale shall not be considered to be not commercially reasonable
solely because of such lower price. The Borrower understands that there may not
be a liquid market for the Collateral and that, as a result, the price received
for the Collateral upon liquidation or sale by the Bank may be substantially
less than the Borrower paid for such Collateral or than the last market value
available for it, if any. The Borrower further agrees that any sale by the Bank
shall not be considered to be not commercially reasonable solely because there
are few (including only one) or no third parties who submit bids or otherwise
offer to buy the Collateral. The Borrower understands that the Bank’s sale of
any of the Collateral may be subject to various state and federal property
and/or securities laws and regulations, and that compliance with such laws and
regulations may result in delays and/or a lower price being obtained for the
Collateral. The Borrower agrees that the Bank shall have the right to restrict
any prospective purchasers to those who, in the Bank’s sole discretion, the
Bank deems to be qualified. The Borrower acknowledges that the Bank shall have
sole authority to determine, without limitation, the time, place, method of
advertisement and manner of sale and that the Bank may delay or adjourn any
such sale in its sole discretion. The Borrower expressly authorizes the Bank to
take any action with respect to the Collateral as the Bank deems necessary or
advisable to facilitate any liquidation or sale, and the Borrower agrees that
the Bank shall not be held liable for taking or failing to take any such
action, regardless if a greater price may have been obtained for the Collateral
if such action was or was not taken, as applicable. The Borrower hereby waives,
to the fullest extent permitted by law, any legal right of appraisal, notice,
valuation, stay, extension, moratorium or redemption that the Borrower would
otherwise have with respect to a sale of the Collateral.”

 

Representations, Warranties and Covenants
by the Loan Parties

 

6.     The Agreement is amended by adding the following as Section 11
g):

 

	
  “g)

  	
   

  	
  If at any
  time there are Credit Line Obligations outstanding under the Credit Line,
  then in connection with any ARS Collateral, if at any time any such ARS Collateral
  may be sold, exchanged, redeemed, transferred or otherwise conveyed by the
  Borrower for gross proceeds that are, in the aggregate, not less than the par
  value of such Auction Rate Securities to any party, including, without
  limitation, to UBS Financial Services Inc. and/or any of its affiliates (any
  such sale, exchange, redemption, transfer or conveyance referred to herein as
  an “ARS Liquidation”), the Borrower agrees (i) to immediately effect
  such ARS Liquidation to the extent necessary to satisfy all Credit Line
  Obligations in full and (ii) that the proceeds of any such ARS
  Liquidation so effected shall be immediately and automatically used to pay
  down any and all such outstanding Credit Line Obligations to the extent of
  such proceeds. The Borrower hereby acknowledges and agrees with the Bank and
  directs UBS Financial Services Inc. that to the extent permitted by
  applicable law, this Section 11 g) shall constitute an irrevocable
  instruction, direction and standing sell order to UBS Financial Services Inc.
  to effect an ARS Liquidation to the extent it is possible to do so at any
  time during the term of this Agreement. The Borrower further agrees with the
  Bank and UBS Financial Services Inc. to execute and deliver to the Bank
  and/or UBS Financial Services Inc. such further documents and agreements as
  may be necessary in the sole and absolute discretion of the Bank and/or UBS
  Financial Services Inc. to effect the foregoing irrevocable instruction,
  direction and standing sell order.”

  

 

Waivers

 

7.     The Agreement is amended by adding the following as Section 21:

 

“The Borrower hereby (i) acknowledges and admits its indebtedness
and obligations to the Bank under the Agreement; and (ii) acknowledges,
admits and agrees that it has no and shall assert no defenses, offsets,
counterclaims or claims in respect of its obligations under the Agreement, in
each case notwithstanding any claim or asserted claim that it may have, or
purport to have, against any affiliate of the Bank.”

 

Schedules I and II

 

	
  8.

  	
  a)

  	
  Schedule I of the Agreement is
  amended in its entirety to read as follows:

  
	
   

  	
   

  	
  $25,001 to $499,999

  	
   

  	
  2.750%

  
	
   

  	
   

  	
  $500,000 to $999,999

  	
   

  	
  1.750%

  
	
   

  	
   

  	
  $1,000,000 to $4,999,999

  	
   

  	
  1.500%

  
	
   

  	
   

  	
  $5,000,000 and over

  	
   

  	
  1.250%

  
	
   

  	
  b)

  	
  Schedule II of the Agreement is
  deleted in its entirety and replaced with: “[Intentionally Deleted].”

  

 

3 of 5

 

	
  

  	
   

  	
  Credit Line Account Number

  
	
   

  	
   

  	
   

  	
  CP

  

 

 

No Fixed Rate Advances/Prime Credit Lines

 

9.     The Bank and the Borrower acknowledge
and agree that notwithstanding anything to the contrary in the Agreement: (a) the
Borrower shall not request and the Bank shall not make a Fixed Rate Advance;
and (b) there shall be no Prime Credit Line facilities available under the
Agreement.

 

Alternative Financing

 

10.   If at any time the Bank exercises its right of demand under Section 5
a), Section 5 b) and Section 10 b) of the Loan Agreement for any
reason other than (i) the occurrence of an Event under Sections 10 a)
(iv), (v), (vii), (ix) (if and to the extent any indebtedness specified
thereunder is to the Bank or any of the Bank’s affiliates), or (xi) of the
Agreement; or (ii) in connection with any termination for cause by UBS
Financial Services Inc. of the overall customer relationship between UBS
Financial Services Inc. and the Borrower or its affiliates, then UBS Financial
Services Inc. shall, or shall cause one or more of its affiliates, to provide
as soon as reasonably possible, alternative financing on substantially the same
terms and conditions as those under the Agreement and the Bank agrees that the
Agreement shall remain in full force and effect until such time as such
alternative financing has been established.

 

Margin Calls; Interest Payments

 

11.   Notwithstanding anything to the
contrary in the Agreement, the Bank and the Borrower acknowledge and agree that
UBS Financial Services Inc. or any affiliate thereof may, in its sole and
absolute discretion, elect to: (i) provide additional collateral to the
Bank in the form of United States Treasury Securities if and to the extent that
the Borrower does not maintain in a Collateral Account, Collateral having an
aggregate lending value as specified by the Bank from time to time; and/or (ii) satisfy
any and all amounts of accrued and unpaid interest that are otherwise due and
payable by the Borrower to the Bank under the Agreement, to the extent that the
amount of any Additional Payments under the Agreement are insufficient to
satisfy any and all such amounts.

 

Collateral Account Features

 

12.   Section 8 f) of the Agreement is
deleted in its entirety and replaced with the following:

 

“If
a Collateral Account has margin features, the margin features will be removed
by UBS Financial Services Inc. or UBS International Inc., as applicable, so long
as there is no outstanding margin debit in the Collateral Account. If a
Collateral Account has Resource Management Account® or Business Services
Account BSA® features, such as check writing, cards, bill payment, or
electronic funds transfer services, all such features shall be removed by UBS
Financial Services Inc. or UBS International Inc., as applicable.”

 

No Credit Line Checks

 

13.   The Bank and the Borrower acknowledge
and agree that notwithstanding anything to the contrary in the Agreement, the
Credit Line shall not have Credit Line checks.

 

Headings

 

14.   The headings of each of Section of
this Addendum is for descriptive purposes only and shall not be deemed to
modify or qualify the terms, conditions, rights or obligations described in
such Section.

 

B.     This Addendum may be
signed in multiple original counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same
instrument.

 

 

[Signature
page(s) follows]

 

4 of 5

 

	
  

  	
   

  	
  Credit Line Account Number

  
	
   

  	
   

  	
   

  	
  CP

  

 

 

IN WITNESS WHEREOF, each of the
parties has signed this Addendum pursuant to due and proper authority as of the
date set forth below.

 

 

	
   

  	
   

  	
  Gregory E Lichtwardt, Chief
  Financial Officer/

  	
   

  	
   

  
	
   

  Date

  	
   

  	
  CFO

   

  	
   

  	
   

  Signature

  
	
   

  	
   

  	
  Print Name
  and Title

  	
   

  	
   

  
	
   

  	
   

  	
  Mark Sieczkarek, President and CEO

   

  	
   

  	
   

  
	
   

  Date

  	
   

  	
   

  Print Name
  and Title

  	
   

  	
   

  Signature

  

 

 

	
   

  	
  UBS BANK USA 

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  UBS FINANCIAL
  SERVICES INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
  , 2008

  

 

5 of 5Exhibit 10.15

 

AMENDED AND
RESTATED EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment
Agreement, dated as of December 31, 2008 (this “Agreement”), is by
and between Robert J. Kerton (the “Executive”) and Safety Insurance
Group, Inc., a Delaware corporation (the “Company”);

 

W I T N E S S E T H:

 

WHEREAS, the Company wishes to obtain the
future services of the Executive for and on behalf of the Companies (as defined
in Section 11);

 

WHEREAS, the Executive is willing upon the
terms and conditions herein set forth, to provide services to the Companies
hereunder; and

 

WHEREAS, the Company wishes to secure the
Executive’s non-interference with the Companies’ business, upon the terms and
conditions herein set forth;

 

WHEREAS, the Executive and the Company
entered into an Employment Agreement, dated November 8, 2004 (the “Prior
Employment Agreement”); and

 

WHEREAS, the Executive and the Company desire
to amend and restate the Prior Employment Agreement.

 

NOW, THEREFORE, in consideration of the
mutual promises and covenants contained herein, and intending to be legally
bound hereby, the parties hereto agree as follows:

 

1.             Nature
of Employment

 

Subject to Section 3, the Company
shall continue to employ Executive, and Executive shall serve the Company, in
accordance with the terms of this Agreement, during the Term of Employment (as
defined in Section 3(a)), as Vice President of the Company with
such duties and responsibilities as are customarily assigned to an executive in
such position and such other duties and responsibilities not inconsistent
therewith as may from time to time reasonably be assigned to the Executive by
the Board of Directors and/or Chairman of the Board, President and Chief
Executive Officer of the Company.  The
Executive also agrees to serve without additional compensation in such
capacities (including, without limitation, as an officer or director) with
Company affiliates as the Board of Directors and/or Chairman of the Board,
President and Chief Executive Officer of the Company may prescribe.  Upon termination of the Executive’s
employment with the Company, the Executive’s employment, board membership or
other service relationship with any Company affiliate shall automatically
terminate unless otherwise agreed to by the parties.

 

 

2.             Extent of Employment

 

(a)           During
the Term of Employment, the Executive shall perform his obligations hereunder
faithfully and to the best of his ability at the principal executive offices of
the Company, under the direction of the Board of Directors and/or Chairman of
the Board, President and Chief Executive Officer of the Company, and shall
abide by the rules, customs and usages from time to time established by the
Companies.

 

(b)           During
the Term of Employment, the Executive shall devote all of his business time,
energy and skill as may be reasonably necessary for the performance of his
duties, responsibilities and obligations hereunder (except for vacation periods
and reasonable periods of illness or other incapacity), consistent with past
practices and norms in similar positions.

 

(c)           Nothing
contained herein shall require Executive to follow any directive or to perform
any act which would violate any laws, ordinances, regulations or rules of
any governmental, regulatory or administrative body, agent or authority, any
court or judicial authority, or any public, private or industry regulatory
authority (collectively, the “Regulations”).  Executive shall act in good faith in
accordance with all Regulations.

 

3.             Term of Employment; Termination

 

(a)           The
“Term of Employment” shall commence on November 8, 2004 and shall
continue until December 31, 2007 (the “Initial Term”); provided,
that, (i) such term shall continue for the twelve month period following
such Initial Term, and for each twelve month period thereafter (each, an “Additional
Term”), unless at least 180 days prior to the scheduled expiration date of
the Initial Term or any Additional Term, either the Executive or the Company
notifies the other of its decision not to continue such term and (ii) should
the Executive’s employment by the Company be earlier terminated pursuant to Section 3(b) or
by the Executive pursuant to Section 3(c), the Term of Employment
shall end on the date of such earlier termination.

 

(b)           Subject
to the payments contemplated by Sections 3(f) through 3(i),
the Term of Employment may be terminated at any time by the Company:

 

(i)            upon the death of
Executive;

 

(ii)           in the event that
because of physical or mental disability Executive is unable to perform, and
does not perform, in the view of the Company and as certified in writing by a
competent medical physician, his duties hereunder for a continuous period of
three consecutive months or any sixty working days out of any consecutive six
month period;

 

(iii)          for Cause (as
defined in Section 3(d)) or Material Breach (as defined in Section 3(e));

 

2

 

(iv)          upon the continuous
poor or unacceptable performance of the Executive’s duties to the Companies
(other than due to a physical or mental disability), which has remained uncured
for a period of 90 days after delivery of notice by the Company to the
Executive of such dissatisfaction with Executive’s performance, which notice
shall describe in reasonable detail the areas of dissatisfaction; or

 

(v)           for any other reason
or no reason, it being understood that no reason is required.

 

Executive acknowledges that no
representations or promises have been made concerning the grounds for
termination or the future operation of the Companies’ business, and that
nothing contained herein or otherwise stated by or on behalf of any of the
Companies modifies or amends the right of the Company to terminate Executive at
any time, with or without Material Breach or Cause.  Termination shall become effective upon the delivery
by the Company to the Executive of notice specifying such termination and the
reasons therefor (i.e., Section 3 (b)(i)-(v)), subject to the
requirements for advance notice and an opportunity to cure provided in this
Agreement, if and to the extent applicable. 
Notwithstanding anything to the contrary in this Agreement, for purposes
of this Agreement, any reference to “termination,” as it relates to a
termination of the Executive’s employment, shall refer to a termination of
employment which constitutes a “separation from service” within the meaning of Section 409A
of the Internal Revenue Code of 1986, as amended and the regulations
promulgated thereunder (“Section 409A”).

 

(c)           Subject
to the payments contemplated by Section 3(f) and 3(i),
the Term of Employment may be terminated at any time by the Executive:

 

(i)            upon the death of
Executive;

 

(ii)           as a result of a
material reduction in Executive’s authority, perquisites, position or
responsibilities (other than such a reduction in perquisites which affects all
of the Company’s senior executives on a substantially equal or proportionate
basis), the relocation of the Company’s primary place of business or the
relocation of Executive by any of the Companies to another office more than 75
miles from Boston, Massachusetts, or the Company’s willful, material violation
of its obligations under this Agreement, in each case, after 60 days’ prior
written notice to the Company and its Board of Directors and the Company’s
failure thereafter to cure such reduction or violation; or

 

(iii)          as a result of the
Company’s willful and material violation of this Agreement, the 2002 Management
Omnibus Incentive Plan (the “Incentive Plan”), or any agreement between
Executive and any of the Companies pertaining to awards made pursuant to the
Incentive Plan or the Executive Incentive Compensation Plan, in each case as
such agreements or plans may be amended from time to time.

 

3

 

(d)                                 For
the purposes of this Section 3, “Cause” shall mean any of
the following:

 

(i)            Executive’s
commission or conviction of any crime or criminal offense involving monies or
other property or any felony;

 

(ii)           Executive’s
commission or conviction of fraud or embezzlement;

 

(iii)          Executive’s
material and knowing violation of any obligations imposed upon Executive,
personally, as opposed to upon the Company, whether as a stockholder or
otherwise, under this Agreement, the Incentive Plan or any other agreement
between the Executive, on the one hand, and any of the Companies, on the other
hand, the Amended and Restated Certificate of Incorporation, or the By-Laws of
the Company, in each case as may be amended from time to time; provided,
that the Executive has been given written notice describing any such violation
in reasonable detail and fails to cure the violation within 90 days from such
notice; or

 

(iv)          Executive engages in
egregious misconduct involving serious moral turpitude to the extent that
Executive’s credibility and reputation no longer conform to the standard of the
Company’s executives.

 

(e)                                  For
the purposes of this Section 3, “Material Breach” shall mean
any of the following:

 

(i)            Executive’s breach
of any of his fiduciary duties to the Companies or their stockholders or making
of a willful misrepresentation or omission which breach, misrepresentation or
omission would reasonably be expected to materially adversely affect the
business, properties, assets, condition (financial or other) or prospects of
the Companies;

 

(ii)           Executive’s
willful, continual and material neglect or failure to discharge his duties,
responsibilities or obligations prescribed by this Agreement or any other
agreement between the Executive and any of the Companies (other than arising
solely due to physical or mental disability);

 

(iii)          Executive’s
habitual drunkenness or substance abuse which materially interferes with
Executive’s ability to discharge his duties, responsibilities or obligations
prescribed by this Agreement or any other agreement between the Executive and
any of the Companies; and

 

(iv)          Executive’s willful
and material violation of any non-competition, non-disparagement, or
confidentiality agreement with any of the Companies, including without
limitation, those set forth in Sections 7, 8 and 9 of this
Agreement, or any other agreements with any of the Companies;

 

4

 

in each case, for purposes of clauses (i) through (iv), after the
Company or the Board of Directors of the Company has provided Executive with 60
days’ written notice describing such circumstances and the possibility of a
Material Breach in reasonable detail, and Executive fails to cure such
circumstances and Material Breach within those 60 days.  No act or omission shall be deemed willful if
done, or omitted to be done, in good faith by the Executive based upon a
resolution duly adopted by the Company’s Board of Directors.

 

(f)            In
the event Executive’s employment is terminated by the Company under any
circumstances described in Section 3(b)(v) or by Executive
under the circumstances described in Section 3(c)(ii) or (iii),

 

(i)            the Company shall
pay or cause to be paid to the Executive, (A) within five business days
after the date of termination, any earned but unpaid base salary and, subject
to the provisions of Section 5, any expense reimbursement payments owed to
the Executive, and (B) any earned but unpaid annual bonus payments
relating to the prior year to be paid in accordance with the terms and
conditions of the Safety Insurance Group, Inc. Annual Performance
Incentive Plan, or any successor plan thereto (collectively, the “Accrued
Obligations”);

 

(ii)           the Company shall
pay or cause to be paid to the Executive, within thirty business days after the
date of termination, a lump-sum payment equal to the annual base salary the
Executive would have received over the remaining Term of Employment if his
employment had not terminated, assuming for this purpose that a notice not to
extend the Term of Employment was provided on the date of termination (the “Severance
Period”), based on the Executive’s base salary in effect immediately prior
to the date of termination; and

 

(iii)          subject to the
provisions of Section 5, during the Severance Period, the Company
will provide or cause to be provided to the Executive (and any covered
dependents), with life and health insurance benefits (but not disability
insurance benefits) substantially similar to those the Executive and any
covered dependents were receiving immediately prior to the date of termination
and at the same dollar cost to the Executive as in effect immediately prior to
the termination of employment.  Nothing
in this Section 3(f)(iii) will extend the COBRA continuation
coverage period.

 

(g)           In
the event the Executive’s employment is terminated within three years after a
Change of Control (provided the Term of Employment has not already expired)
under any circumstances described in Section 3(b)(v) or by
Executive under the circumstances described in Section 3(c)(ii) or
(iii),

 

(i)            the Company shall
pay or cause to be paid to the Executive any Accrued Obligations in accordance
with Section 3(f)(i);

 

5

 

(ii)           the Company shall
pay or cause to be paid to the Executive, within thirty business days after the
date of termination, a lump-sum payment equal to two (2) times the sum of (A) the
Executive’s annual base salary in effect immediately prior to the date of
termination and (B) the most recent annual bonus paid to the Executive
prior to the Change in Control; and

 

(iii)          subject to the
provisions of Section 5, for a two (2) year period after the
date of termination, the Company will provide or cause to be provided to the
Executive (and any covered dependents), with life and health insurance benefits
(but not disability insurance benefits) substantially similar to those the
Executive and any covered dependents were receiving immediately prior to the
date of termination and at the same dollar cost to the Executive as in effect
immediately prior to the termination of employment.  Nothing in this Section 3(g)(iii) will
extend the COBRA continuation coverage period.

 

(h)           In
the event Executive’s employment is terminated by the Company under the
circumstances described in Section 3(b)(iv),

 

(i)            the Company shall
pay or cause to be paid to the Executive any Accrued Obligations in accordance
with Section 3(f)(i);

 

(ii)           the Company shall
pay or cause to be paid to the Executive, within thirty business days after the
date of termination, a lump-sum payment equal to three (3) months base
salary, based on the Executive’s base salary in effect immediately prior to the
date of termination; and

 

(iii)          subject to the
provisions of Section 5, for a three (3) month period after
the date of termination, the Company will provide or cause to be provided to
the Executive (and any covered dependents), with life and health insurance
benefits (but not disability insurance benefits) substantially similar to those
the Executive and any covered dependents were receiving immediately prior to
the date of termination and at the same dollar cost to the Executive as in
effect immediately prior to the termination of employment.  Nothing in this Section 3(h)(iii) will
extend the COBRA continuation coverage period.

 

(i)            In
the event Executive’s employment is terminated by the Company under the
circumstances described in Section 3(b)(i) or (ii) or
by the Executive under Section 3(c)(i),

 

(i)            the Company will
pay or cause to be paid to the Executive (or the Executive’s estate or
representative, as the case may be) any Accrued Obligations in accordance with Section 3(f)(i);

 

(ii)           the Company will
pay or cause to be paid to the Executive (or the Executive’s estate or
representative, as the case may be), within thirty business days after the date
of termination, a lump-sum payment equal to 100% of the 

 

6

 

Executive’s
annual base salary in effect immediately prior to the date of termination; and

 

(iii)          subject to the
provisions of Section 5, for a one (1) year period after the
date of termination, the Company will provide or cause to be provided to the
Executive (and any covered dependents), with life and health insurance benefits
(but not disability insurance benefits) substantially similar to those the
Executive and any covered dependents were receiving immediately prior to the
date of termination and at the same dollar cost to the Executive as in effect
immediately prior to the termination of employment.  Nothing in this Section 3(i)(iii) will
extend the COBRA continuation coverage period.

 

(j)            In
the event Executive’s employment is terminated by the Company under any
circumstances described in Section 3(b)(iii) or by Executive
as a result of resignation or voluntary termination due to any circumstance
other than the material reductions, relocation or violations described in Section 3(c)(ii) above,
there will be no amounts owed to the Executive under Section 4 or
any other part of this Agreement, from and after the effectiveness of
termination.

 

(k)           The
payments and benefits required by Section 3(f), 3(g), 3(h) or 3(i),
as applicable, constitute severance and liquidated damages, and, except for
payments that may be required pursuant to Section 10, the Company
will be obligated to pay or cause to be paid any further amounts to Executive
under this Agreement or otherwise be liable to Executive in connection with any
termination.

 

(l)            All
determinations pursuant to this Section 3 shall be made by the
Company’s Board of Directors (not including Executive) in good faith.

 

(m)          Termination
of the Term of Employment will not terminate Sections 7 through 10
and 12 through 23, or any other provisions not associated
specifically with the Term of Employment.

 

(n)           In
the event the Term of Employment is terminated and the Company is obligated to
make or cause to be made payments pursuant to Section 3(f), the
Executive will use his reasonable efforts to seek and obtain alternative
employment; provided, however, that the Executive shall not be
required to accept a position or positions of a substantially different
character than the position(s) held by him under this Agreement; and provided further,
if the Executive shall become physically or mentally disabled, he will not be
under such duty.  Moreover, in the event
that after the Restricted Period pursuant to Section 8(a),
Executive is employed by or engaged in a Competitive Business as contemplated
by Section 8(a)(i), then the payments under Section 3(f) will
thereupon cease.

 

(o)           Notwithstanding
any provision herein to the contrary, as a condition to payment of any amounts
or provision of any benefits pursuant to Sections 3(f) through 3(i) or
10 of this Agreement (other than due to the Executive’s death), the
Executive shall 

 

7

 

be required to have executed a complete release of the Companies and
related parties in such form as is reasonably required by the Company.  Subject to Section 3(p), all
payments and benefits under this Section 3 shall be paid or
commenced on the sixtieth (60th) day following the date of termination of the
Executive’s employment, provided that the release described in the preceding
sentence becomes irrevocable prior to such sixtieth (60th) day.

 

(p)           Notwithstanding the foregoing, if the
Executive is a “specified employee” within the meaning of Section 409A at
the time of a termination, any portion of the payments under this Section 3
due hereunder during the first six months following the date of the Executive’s
termination, to extent that such payments constitute “deferred compensation”
under Section 409A, shall not be paid during such six-month period and
instead shall be paid on the first business day following the expiration of
such six-month period.  The remaining
portion of the payments due hereunder shall be paid as provided in the
applicable provisions of this Section 3.

 

4.             Compensation

 

The Company shall pay or cause to be paid to
Executive the following compensation:

 

(a)           During
the Term of Employment, the Company shall pay or cause to be paid to Executive
as base compensation for his services hereunder, in monthly installments, a
base salary at a rate of $175,000 per annum, as increased on an annual basis to
reflect the increase in the United States Cost of Living Index for All Urban
Consumer (CPI-U) for the Boston, Massachusetts area (the “CPI-U Index”). 
The January 2004 CPI-U Index shall provide the basis for calculations of
such increases.  Notwithstanding the
minimum increase set forth above, the Board of Directors of the Company or a
committee thereof may establish a higher compensation level.

 

(b)           During
the Term of Employment, the Company shall pay or cause to be paid to Executive
an annual bonus based on Executive’s performance, as determined and approved by
the Board of Directors of the Company or a committee thereof under the Safety
Insurance Group, Inc. Annual Performance Incentive Plan, or any successor
thereto.  Such bonus will be at the full
discretion of the Board of Directors of the Company or a committee thereof, and
may not be paid at all.  Executive acknowledges
that no bonus has been agreed upon or promised.

 

5.             Reimbursement
of Expenses

 

During the Term of Employment, the Company
shall reimburse or cause Executive to be reimbursed for documented travel,
entertainment and other expenses reasonably incurred by Executive in connection
with the performance of his duties hereunder and, in each case, in accordance
with applicable rules, customs and usages promulgated by the Companies from
time to time in effect.  All reimbursements and in-kind benefits provided
under this Agreement, shall be made or provided in accordance 

 

8

 

with the requirements of Section 409A,
including, where applicable, the requirement that (a) any reimbursement
shall be for expenses incurred during a specified period, (b) the amount
of expenses eligible for reimbursement, or in-kind benefits provided, during a
calendar year may not affect the expenses eligible for reimbursement, or
in-kind benefits to be provided, in any other calendar year, (c) the
reimbursement of an eligible expense shall be made on or before the last day of
the calendar year following the year in which the expense is incurred (or such
earlier date if specified in this Agreement), and (d) the right to
reimbursement or in-kind benefits is not subject to liquidation or exchange for
another benefit.

 

6.             Benefits

 

During the Term of Employment, the Executive
shall be entitled to perquisites, paid vacations and benefits (including
health, short and long term disability, pension and life insurance benefits
consistent with past practice, or as increased from time to time) established
from time to time, by the Board of Directors of the Company for executives of
the Companies, subject to the policies and procedures in effect regarding
participation in such benefits.

 

7.             Confidential
Information

 

During and after the Term of Employment,
Executive will not, directly or indirectly in one or a series of transactions,
disclose to any person, or use or otherwise exploit for the Executive’s own
benefit or for the benefit of anyone other than the Companies, any Confidential
Information, whether prepared by Executive or not; provided, however,
that any Confidential Information may be disclosed to officers,
representatives, employees and agents of the Companies who need to know such
Confidential Information in order to perform the services or conduct the
operations required or expected of them in the Business (as defined in Section 11).  Executive shall use his best efforts to
prevent the removal of any Confidential Information from the premises of the
Companies, except as required in his normal course of employment by the
Company.  Executive shall use
commercially reasonable efforts to cause all persons or entities to whom any
Confidential Information shall be disclosed by him hereunder to observe the
terms and conditions set forth herein as though each such person or entity was
bound hereby. Executive shall have no obligation hereunder to keep confidential
any Confidential Information if and to the extent disclosure of any thereof is
specifically required by law;  provided,
however, that in the event disclosure is required by applicable law, the
Executive shall provide the Companies with prompt notice of such requirement,
prior to making any disclosure, so that the Companies may seek an appropriate
protective order.  At the request of the
Companies, Executive agrees to deliver to the Companies, at any time during the
Term of Employment, or thereafter, all Confidential Information which he may possess
or control.  Executive agrees that all Confidential Information of the
Companies (whether now or hereafter existing) conceived, discovered or made by
him during the Term of Employment exclusively belongs to the Companies (and not
to Executive).  Executive will promptly
disclose such Confidential Information to the 

 

9

 

Companies and perform all actions reasonably requested by the Companies
to establish and confirm such exclusive ownership.

 

8.             Non-Interference

 

(a)           Executive
acknowledges that the services to be provided give him the opportunity to have
special knowledge of the Companies and their Confidential Information and the
capabilities of individuals employed by or affiliated with the Companies and
that interference in these relationships would cause irreparable injury to the
Companies.  In consideration of this
Agreement, Executive covenants and agrees that:

 

(i)            During the
Restricted Period (which shall not be reduced by any period of violation of
this Agreement by Executive or period which is required for litigation to
enforce the rights hereunder), Executive will not, without the express written
approval of the Board of Directors of the Company, anywhere in the Market,
directly or indirectly, in one or a series of transactions, own, manage,
operate, control, invest or acquire an interest in, or otherwise engage or
participate in, whether as a proprietor, partner, stockholder, lender,
director, officer, employee, joint venturer, investor, lessor, supplier,
customer, agent, representative or other participant, in any business which
competes, directly or indirectly, with the Business in the Market (“Competitive
Business”) without regard to (A) whether the Competitive Business has
its office, manufacturing or other business facilities within or without the
Market, (B) whether any of the activities of the Executive referred to
above occur or are performed within or without the Market or (C) whether
the Executive resides, or reports to an office, within or without the Market; provided,
however, that (x) the Executive may, anywhere in the Market,
directly or indirectly, in one or a series of transactions, own, invest or
acquire an interest in up to five percent (5%) of the capital stock of a
corporation whose capital stock is traded publicly, or that (y) Executive
may accept employment with a successor company to the Company.

 

(ii)           During the
Restricted Period (which shall not be reduced by any period of violation of
this Agreement by Executive or period which is required for litigation to
enforce the rights hereunder), Executive will not without the express prior
written approval of the Board of Directors of the Company (A) directly or
indirectly, in one or a series of transactions, recruit, solicit or otherwise
induce or influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor, supplier,
customer, agent, representative or any other person which has a business
relationship with the Companies or had a business relationship with the
Companies within the 24 month period preceding the date of the incident in
question, to discontinue, reduce or modify such employment, agency or business
relationship with the Companies, or (B) employ or seek to employ or cause
any Competitive Business to employ or seek to employ any person or agent who is
then (or was at any time within 24 months prior to the date the Executive or
the Competitive Business employs or seeks to employ such person) employed or retained
by the Companies.

 

10

 

Notwithstanding the
foregoing, nothing herein shall prevent the Executive from providing a letter
of recommendation to an employee with respect to a future employment
opportunity.

 

(iii)          The scope and term of this Section 8
would not preclude Executive from earning a living with an entity that is not a
Competitive Business.

 

(b)           In the event that
Executive breaches his obligations in any material respect under Section 7,
this Section 8 or Section 9, the Company, in addition
to pursuing all available remedies under this Agreement, at law or otherwise,
and without limiting its right to pursue the same shall cease or cause to be
ceased all payments to the Executive under this Agreement or any other
agreement.

 

9.             Non-Disparagement

 

During and after the Term of Employment, the Executive agrees that he
shall not make any false, defamatory or disparaging statements about the
Companies or the officers or directors of the Companies.  During and after the Term of Employment, the
Company agrees, on behalf of the Companies that neither the officers nor the
directors of the Companies shall make any false, defamatory or disparaging
statements about the Executive.

 

10.           Excise Tax
Gross-up Payments

 

(a)           If any payments or
benefits paid or provided or to be paid or provided to the Executive or for his
benefit pursuant to the terms of this Agreement or otherwise in connection
with, or arising out of, his employment with the Company or the termination
thereof (a “Payment”) would be subject to the excise tax (the “Excise
Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), then the Executive will be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after
payment by the Executive of all income taxes, employment taxes and any Excise
Tax imposed upon the Gross-Up Payment (including any related interest and
penalties), the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax (including any related interest and penalties) imposed upon the
Payments.

 

(b)           An initial
determination of whether a Gross-Up Payment is required pursuant to this
Agreement, and the amount of such Gross-Up Payment, will be made at the Company’s
expense by an accounting firm selected by the Company.  The accounting firm
will provide its determination, together with detailed supporting calculations
and documentation, to the Company and the Executive within 10 days after the
date of termination of Executive’s employment, or such other time as may be
requested by the Company or the Executive.  If the accounting firm
determines that no Excise Tax is payable by the Executive with respect to a
Payment or Payments, it will furnish the Executive with an opinion to that
effect.  If a Gross-Up Payment becomes payable, such Gross-Up Payment
shall be paid to the Executive within thirty business days of the receipt of
the accounting firm’s determination.  Within 10 days after the accounting
firm 

 

11

 

delivers
its determination to the Executive, the Executive will have the right to
dispute the determination.  The existence
of a dispute will not in any way affect the Executive’s right to receive the
Gross-Up Payment in accordance with the determination.  If there is no dispute, the determination
will be binding, final, and conclusive upon the Company and the Executive.  If there is a dispute, the Company and the
Executive will together select a second accounting firm, which will review the
determination and the Executive’s basis for the dispute and then will render
its own determination, which will be binding, final, and conclusive on the
Company and on the Executive for purposes of determining whether a Gross-Up
Payment is required pursuant to this Section 10(b).  If as a result of any dispute pursuant to
this Section 10(b) additional Gross-Up Payments are made, such
additional Gross-Up Payment will be paid to the Executive within thirty
business days of the receipt of the second accounting firm’s
determination.  The Company will pay or
caused to be paid all costs associated with the second accounting firm’s
determination, unless such determination does not result in additional Gross-Up
Payments to the Executive, in which case all such costs will be borne by the
Executive.  Notwithstanding anything
contained herein to the contrary, any such Gross-Up Payment shall be paid no
later than the end of the Executive’s taxable year next following the Executive’s
taxable year in which the Executive remits the related taxes.

 

(c)           For purposes of determining
the amount of the Gross-Up Payment, the Executive will be deemed to pay federal
income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and applicable state
and local income taxes at the highest marginal rate of taxation in the state
and locality of the Executive’s residence on the date of termination of
Executive’s employment, net of the maximum reduction in federal income taxes
that would be obtained from deduction of those state and local taxes.

 

(d)           As a result of the
uncertainty in the application of Section 4999 of the Code, it is possible
that Gross-Up Payments which will not have been made should have been made (“Underpayment”)
or Gross-Up Payments are made which should not have been made (“Overpayment”).  If it is determined that an Underpayment has
occurred, the accounting firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) shall be promptly paid
to or for the benefit of Executive. 
Notwithstanding anything contained herein to the contrary, any such
Underpayment shall be paid no later than the end of the Executive’s taxable
year next following the Executive’s taxable year in which the Executive remits
the related taxes.  If the Gross-Up
Payment exceeds the amount necessary to reimburse the Executive for his Excise
Tax, the Accounting Firm shall determine the amount of the Overpayment that has
been made and any such Overpayment (together with interest at the rate provided
in Section 1274(b)(2) of the Code) shall be promptly paid by
Executive (to the extent he has received a refund if the applicable Excise Tax
has been paid to the Internal Revenue Service) to or for the benefit of the
Company; provided, however, that if the Company determines that such repayment
obligation would be or result in an unlawful extension of credit under Section 13(k) of
the Securities Exchange Act, repayment shall not be required.  The Executive shall cooperate, to the extent
his expenses are reimbursed in 

 

12

 

accordance
with this Section 10, with any reasonable requests by the Company in
connection with any contest or disputes with the Internal Revenue Service in
connection with the Excise Tax.

 

(e)           The Executive shall
notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment of an Underpayment.  Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive
is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be
paid.  The Executive shall not pay such
claim prior to the expiration of the thirty (30) day period following the date
on which he gives such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall:

 

(i)                                     give the
Company any information reasonably requested by the Company relating to such claim,

 

(ii)                                  take such
action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably selected
by the Company,

 

(iii)                               cooperate with
the Company in good faith in order effectively to contest such claim, and

 

(iv)          permit the Company to
participate in any proceeding relating to such claim;

 

provided,
however, that the Company shall pay or cause to be paid all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including related interest and
penalties) imposed as a result of such representation and payment of costs and
expenses no later than 60 days after the end of the taxable year following the
year in which the Executive incurs such costs and expenses.  Without limitation on the foregoing
provisions of this Section 10(e), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs the Executive to pay such claim and sue for a refund, such payment shall
be advanced to the Executive, on an interest-free basis and the Executive shall
be indemnified and held harmless, on an after-tax basis, from any 

 

13

 

Excise
Tax or income tax (including related interest or penalties) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance.  The Company’s control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

 

(f)            If, after the
receipt by the Executive of an amount advanced pursuant to Section 10(e),
the Executive becomes entitled to receive any refund with respect to such
claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 10(e)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto).  If,
after the receipt by the Executive of an amount advanced pursuant to Section 10(e) hereof,
a determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid.

 

11.           Definitions

 

Capitalized terms used in this Agreement but not otherwise defined
shall have the meanings set forth below:

 

“Business” means any business conducted, or engaged in, by the
Companies prior to the date hereof or at any time during the Term of Employment.

 

“Cause” is defined in Section 3(c).

 

“Change of Control” means any of the following: (i) the
closing of any merger, combination, consolidation or similar business
transaction involving the Company in which the holders of Company Common Stock
immediately prior to such closing are not the holders, directly or indirectly,
of a majority of the ordinary voting securities of the surviving person in such
transaction immediately after such closing, (ii) the closing of any sale
or transfer by the Company of all or substantially all of its assets to an
acquiring person in which the holders of Company Common Stock immediately prior
to such closing are not the holders of a majority of the ordinary voting
securities of the acquiring person immediately after such closings, or (iii) the
closing of any sale by the holders of Company Common Stock of an amount of
Company Common Stock that equals or exceeds a majority of the shares of Company
Common Stock immediately prior to such closing to a person in which the holders
of the Company Common Stock immediately prior to such closing are not the
holders of a majority of the ordinary voting securities of such person
immediately after such closing.

 

“Companies” means the Company and its successors or any of its
direct or indirect parents or direct or indirect subsidiaries, now or hereafter
existing.

 

14

 

“Company” is defined in the introduction.

 

“Competitive Business” is defined in Section 8(a)(i).

 

“Confidential Information” means any confidential information
including, without limitation, any study, data, calculations, software storage
media or other compilation of information, patent, patent application,
copyright, trademark, trade name, service mark, service name, “know-how”, trade
secrets, customer lists, details of client or consultant contracts, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans or any portion or
phase of any scientific or technical information, ideas, discoveries, designs,
computer programs (including source of object codes), processes, procedures,
formulas, improvements or other proprietary or intellectual property of the
Companies, whether or not in written or tangible form, and whether or not
registered, and including all files, records, manuals, books, catalogues,
memoranda, notes, summaries, plans, reports, records, documents and other
evidence thereof.  The term “Confidential
Information” does not include, and there shall be no obligation hereunder
with respect to, information that becomes generally available to the public
other than as a result of a disclosure by the Executive not permissible
hereunder.

 

“Executive” means Robert J. Kerton or his estate, if deceased.

 

“Market” means any state in the United States of America and
each similar jurisdiction in any other country in which the Business was
conducted by or engaged in by the Companies prior to the date hereof or is
conducted or engaged in, or in which the Companies are seeking authorization to
conduct Business at any time during the Term of Employment.

 

“Regulations” is defined in Section 2(c).

 

“Restricted Period” means the date commencing on the date of
this Agreement and ending on the later of (x) the date of termination of
the Term of Employment or (y) the end of the applicable severance period
provided under Section 3(f); provided, however, that
the “Restricted Period” may be extended, in the sole discretion of the Company,
for an additional period of up to twenty-four (24) months if the Company
continues to pay or to cause to be paid to the Executive (i) the full
amounts to which he would be entitled as base compensation under Section 4(a) and
(ii) customary benefits, in each case during such extended period.

 

“Term of Employment” is defined in Section 3(a).

 

12.           Notice

 

Any notice, request, demand or other communication required or
permitted to be given under this Agreement shall be given in writing and if
delivered personally, or sent 

 

15

 

by
certified or registered mail, return receipt requested, as follows (or to such
other addressee or address as shall be set forth in a notice given in the same
manner):

 

	
  If to Executive:

  	
  Robert
  J. Kerton

  
	
   

  	
  c/o
  Safety Insurance Group, Inc.

  
	
   

  	
  20
  Custom House Street

  
	
   

  	
  Boston,
  Massachusetts 02110

  
	
   

  	
   

  
	
  If to Company:

  	
  Safety
  Insurance Group, Inc.

  
	
   

  	
  20
  Custom House Street

  
	
   

  	
  Boston,
  Massachusetts 02110

  
	
   

  	
  Attention:  David Brussard

  

 

Any
such notices shall be deemed to be given on the date personally delivered or
such return receipt is issued.

 

13.           Executive’s
Representation

 

Executive hereby warrants and represents to the Company that Executive
has carefully reviewed this Agreement and has consulted with such advisors as
Executive considers appropriate in connection with this Agreement, and is not
subject to any covenants, agreements or restrictions, including without
limitation any covenants, agreements or restrictions arising out of Executive’s
prior employment which would be breached or violated by Executive’s execution
of this Agreement or by Executive’s performance of his duties hereunder.

 

14.           Other Matters

 

(a)           Executive agrees and
acknowledges that the obligations owed to Executive under this Agreement are
solely the obligations of the Company, and that none of the Companies’
stockholders, directors, officers, affiliates, representatives, agents or
lenders will have any obligations or liabilities in respect of this Agreement
and the subject matter hereof.

 

(b)           Notwithstanding
anything contained herein to the contrary, the Companies may withhold from any
amounts payable under, or benefits provided pursuant to, this Agreement all
federal, state, local, and foreign taxes that are required to be withheld by
applicable laws or regulations.

 

(c)           In addition to any
obligations imposed by law upon any successor to the Company, the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.

 

16

 

15.           Validity

 

If, for any reason, any provision hereof shall be determined to be
invalid or unenforceable, the validity and effect of the other provisions
hereof shall not be affected thereby.

 

16.           Severability

 

Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.  If any court determines that
any provision of Section 8 or any other provision hereof is
unenforceable and therefore acts to reduce the scope or duration of such
provision, the provision in its reduced form shall then be enforceable.

 

17.           Waiver of Breach;
Specific Performance

 

The waiver by the Company or Executive of a breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any other breach of such other party. 
Each of the parties (and third party beneficiaries) to this Agreement
will be entitled to enforce its respective rights under this Agreement and to
exercise all other rights existing in its favor.  The parties hereto agree and acknowledge that
money damages may not be an adequate remedy for any breach of the provisions of
Sections 7, 8 and 9 of this Agreement and that any
party (and third party beneficiaries) may in its sole discretion apply to any
court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions in order to enforce or prevent any
violations of the provisions of this Agreement. 
In the event either party takes legal action to enforce any of the terms
or provisions of this Agreement, the nonprevailing party shall pay the
successful party’s costs and expenses, including but not limited to, attorneys’
fees, incurred in such action.  If the
Executive prevails, the Company will reimburse the Executive’s legal fees no
later than 60 days after the end of the taxable year following the year in
which the Executive incurs such the costs and expenses.

 

18.           Assignment; Third
Parties

 

Neither the Executive nor the Company may assign, transfer, pledge,
hypothecate, encumber or otherwise dispose of this Agreement or any of his or
its respective rights or obligations hereunder, without the prior written
consent of the other.  The parties agree
and acknowledge that each of the Companies and the stockholders and investors
therein are intended to be third party beneficiaries of, and have rights and
interests in respect of, Executive’s agreements set forth in Sections 7,
8 and 9.

 

17

 

19.           Amendment; Entire
Agreement

 

This Agreement may not be changed orally but only by an agreement in
writing agreed to by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought. 
This Agreement embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter of this Agreement, and
supersedes and replaces all prior agreements, understandings and commitments
with respect to such subject matter, including, without limitation, the Prior
Employment Agreement and that certain Employment Agreement, dated October 16,
2001, between Executive and Safety Insurance Company.

 

20.           Litigation

 

THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED, APPLIED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, EXCEPT THAT NO
DOCTRINE OF CHOICE OF LAW SHALL BE USED TO APPLY ANY LAW OTHER THAN THAT OF
MASSACHUSETTS, AND NO DEFENSE, COUNTERCLAIM OR RIGHT OF SET-OFF GIVEN OR
ALLOWED BY THE LAWS OF ANY OTHER STATE OR JURISDICTION, OR ARISING OUT OF THE
ENACTMENT, MODIFICATION OR REPEAL OF ANY LAW, REGULATION, ORDINANCE OR DECREE
OF ANY FOREIGN JURISDICTION, BE INTERPOSED IN ANY ACTION HEREON.  EXECUTIVE AND THE COMPANY AGREE THAT ANY
ACTION OR PROCEEDING TO ENFORCE OR ARISING OUT OF THIS AGREEMENT SHALL BE
COMMENCED IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS LOCATED IN BOSTON,
MASSACHUSETTS OR THE UNITED STATES DISTRICT COURTS IN BOSTON,
MASSACHUSETTS.  EXECUTIVE AND THE COMPANY
CONSENT TO SUCH JURISDICTION, AGREE THAT VENUE WILL BE PROPER IN SUCH COURTS
AND WAIVE ANY OBJECTIONS BASED UPON FORUM NON CONVENIENS.  THE
CHOICE OF FORUM SET FORTH IN THIS SECTION 20 SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING
OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER JURISDICTION.

 

21.           Further Action

 

Executive and the Company agree to perform any further acts and to
execute and deliver any documents which may be reasonable to carry out the
provisions hereof.

 

22.           Counterparts

 

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

 

18

 

23.           Section 409A

 

To the extent applicable, it is intended that this Plan comply with,
and should be interpreted consistent with, the requirements of Section 409A.

 

IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.

 

	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/Robert
  J. Kerton

  
	
   

  	
  Name: Robert J. Kerton

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SAFETY INSURANCE GROUP, INC.:

  
	
   

  	
   

  
	
   

  	
  /s/David
  F. Brussard

  
	
   

  	
  Name:  David F.
  Brussard

  
	
   

  	
  Title: President,CEO and Chairman of the Board

  

 

19

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