Document:

Exhibit 10.8

 

 

Joint
Venture Agreement

Between

International
Truck and Engine Corporation,

International
Truck and Engine Investments Corporation

and

Monaco
Coach Corporation

Dated effective as of January 24, 2007

 

The Member Interests of the Company
(the “Member Interests”) are subject to the restrictions on transfer and other
terms and conditions set forth in this Agreement.

The Member Interests have been
acquired for investment only and have not been registered under (a) the Federal
Securities Act of 1933, as amended or (b) any other state securities law.  The Member Interests may not be offered for
sale, pledged, hypothecated, sold, assigned, or transferred, except in
compliance with (i) such laws and (ii) the terms and conditions of this
Agreement.

Table of Contents

	
   

  	
  Page

  
	
  ARTICLE I Definitions and Rules of Construction

  	
  2

  
	
   

  	
  1.1

  	
   

  	
  Certain Defined Terms

  	
  2

  
	
   

  	
  1.2

  	
   

  	
  Rules of Construction

  	
  2

  
	
   

  	
  1.3

  	
   

  	
  Joint and Several Liability

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II Establishment of the Company

  	
  2

  
	
   

  	
  2.1

  	
   

  	
  Establishment of the Company

  	
  2

  
	
   

  	
  2.2

  	
   

  	
  Name

  	
  2

  
	
   

  	
  2.3

  	
   

  	
  Term

  	
  2

  
	
   

  	
  2.4

  	
   

  	
  Representations and Warranties

  	
  2

  
	
   

  	
  2.5

  	
   

  	
  Covenants Pending Closing

  	
  3

  
	
   

  	
  2.6

  	
   

  	
  Closing Conditions and Termination

  	
  3

  
	
   

  	
  2.7

  	
   

  	
  Place and Time of Closing

  	
  3

  
	
   

  	
  2.8

  	
   

  	
  Closing Deliveries

  	
  3

  
	
   

  	
  2.9

  	
   

  	
  Initial Member Interests

  	
  4

  
	
   

  	
  2.10

  	
   

  	
  Company Obligations & Rights

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III Capital Contributions

  	
  5

  
	
   

  	
  3.1

  	
   

  	
  Initial Capital Contributions

  	
  5

  
	
   

  	
  3.2

  	
   

  	
  Additional Capital Contributions and Member Loans

  	
  5

  
	
   

  	
  3.3

  	
   

  	
  Failure of a Member to Make Additional Capital Contribution
  or Member Loan

  	
  6

  
	
   

  	
  3.4

  	
   

  	
  No Withdrawal of or Payment of Interest on Capital

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV Allocation of Profits and Losses;
  Distributions

  	
  7

  
	
   

  	
  4.1

  	
   

  	
  Shares of Profits and Losses

  	
  7

  
	
   

  	
  4.2

  	
   

  	
  Distributions

  	
  7

  
	
   

  	
  4.3

  	
   

  	
  No Priority

  	
  7

  
	
   

  	
  4.4

  	
   

  	
  Other Distribution Rules

  	
  7

  
	
   

  	
  4.5

  	
   

  	
  Liquidating Distribution Provisions

  	
  7

  
	
   

  	
  4.6

  	
   

  	
  Limitation upon Distributions

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V Management and Employees

  	
  9

  
	
   

  	
  5.1

  	
   

  	
  Board of Directors

  	
  9

  
	
   

  	
  5.2

  	
   

  	
  Board of Directors Meetings

  	
  10

  
	
   

  	
  5.3

  	
   

  	
  Voting of Directors; Quorum

  	
  11

  
	
   

  	
  5.4

  	
   

  	
  Actions Requiring Approval of the Board of Directors

  	
  11

  
	
   

  	
  5.5

  	
   

  	
  General Manufacturing Manager.

  	
  13

  
	
   

  	
  5.6

  	
   

  	
  Employees

  	
  14

  
	
   

  	
  5.7

  	
   

  	
  Business Plan

  	
  14

  
	
   

  	
  5.8

  	
   

  	
  Dispute Resolution Procedures

  	
  15

  
	
   

  	
  5.9

  	
   

  	
  Standard of Conduct

  	
  16

  
	
   

  	
  5.10

  	
   

  	
  Directors and Officers—Exculpation

  	
  17

  
						

 

 

	
  

  	
  5.11

  	
   

  	
  Directors and Officers—Indemnification

  	
  17

  
	
   

  	
  5.12

  	
   

  	
  Average Cost Savings.

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI Transfer Restrictions on Member
  Interests

  	
  20

  
	
   

  	
  6.1

  	
   

  	
  Restrictions on Transfer of Member Interests

  	
  20

  
	
   

  	
  6.2

  	
   

  	
  Effect of Non-compliance

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII Termination

  	
  21

  
	
   

  	
  7.1

  	
   

  	
  Termination Generally

  	
  21

  
	
   

  	
  7.2

  	
   

  	
  Termination for Default

  	
  22

  
	
   

  	
  7.3

  	
   

  	
  Remedies—Upon Default by One Member

  	
  24

  
	
   

  	
  7.4

  	
   

  	
  Remedies if Both Members are Defaulting Members

  	
  24

  
	
   

  	
  7.5

  	
   

  	
  Post-Termination Supply Arrangements

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII Dissolution

  	
  25

  
	
   

  	
  8.1

  	
   

  	
  Generally

  	
  25

  
	
   

  	
  8.2

  	
   

  	
  Liquidation Procedures

  	
  25

  
	
   

  	
  8.3

  	
   

  	
  Certified Liquidation Statement

  	
  25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX Reporting and Accounting Provisions

  	
  26

  
	
   

  	
  9.1

  	
   

  	
  Books and Records

  	
  26

  
	
   

  	
  9.2

  	
   

  	
  Other Accounting and Tax Provisions

  	
  26

  
	
   

  	
  9.3

  	
   

  	
  Distribution of Financial Statements and Other
  Reports

  	
  26

  
	
   

  	
  9.4

  	
   

  	
  Right of Inspection and Examination

  	
  27

  
	
   

  	
  9.5

  	
   

  	
  Auditors

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X Dispute Resolution

  	
  27

  
	
   

  	
  10.1

  	
   

  	
  Generally

  	
  27

  
	
   

  	
  10.2

  	
   

  	
  Dispute Resolution Procedures

  	
  27

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI Indemnification

  	
  29

  
	
   

  	
  11.1

  	
   

  	
  Survival; Effect of Knowledge; Other

  	
  29

  
	
   

  	
  11.2

  	
   

  	
  Indemnification—By International

  	
  29

  
	
   

  	
  11.3

  	
   

  	
  Indemnification—By Monaco

  	
  29

  
	
   

  	
  11.4

  	
   

  	
  Limitations on Indemnification Amount

  	
  30

  
	
   

  	
  11.5

  	
   

  	
  Time Limitations

  	
  30

  
	
   

  	
  11.6

  	
   

  	
  Procedure for Indemnification—Third Party Claims

  	
  30

  
	
   

  	
  11.7

  	
   

  	
  Procedure for Indemnification—Other Claims

  	
  31

  
	
   

  	
  11.8

  	
   

  	
  Satisfaction of Indemnification Obligations

  	
  31

  
	
   

  	
  11.9

  	
   

  	
  Exclusiveness of Remedies

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XII Competition

  	
  32

  
	
   

  	
  12.1

  	
   

  	
  Competition

  	
  32

  
	
   

  	
  12.2

  	
   

  	
  Independent Agreements

  	
  33

  
	
   

  	
  12.3

  	
   

  	
  Scope of Restrictions

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIII Confidentiality

  	
  33

  

 

 ii
 

 

	
  

  	
  13.1

  	
   

  	
  Confidentiality—Confidential Information

  	
  33

  
	
   

  	
  13.2

  	
   

  	
  Confidentiality—Company Information

  	
  34

  
	
   

  	
  13.3

  	
   

  	
  Definitions—Company Information and Other

  	
  34

  
	
   

  	
  13.4

  	
   

  	
  Certain Exceptions

  	
  35

  
	
   

  	
  13.5

  	
   

  	
  Permitted Disclosure to Representatives

  	
  36

  
	
   

  	
  13.6

  	
   

  	
  Disclosure to Non-Representatives

  	
  36

  
	
   

  	
  13.7

  	
   

  	
  Continuing Protection of Trade Secrets

  	
  36

  
	
   

  	
  13.8

  	
   

  	
  Remedies

  	
  36

  
	
   

  	
  13.9

  	
   

  	
  Attorney-Client Privilege

  	
  36

  
	
   

  	
  13.10

  	
   

  	
  Continuing Obligations

  	
  37

  
	
   

  	
  13.11

  	
   

  	
  No Limitation on Other Agreements

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XIV Miscellaneous

  	
  37

  
	
   

  	
  14.1

  	
   

  	
  Further Assurances

  	
  37

  
	
   

  	
  14.2

  	
   

  	
  Notices

  	
  37

  
	
   

  	
  14.3

  	
   

  	
  Jurisdiction; Service of Process

  	
  39

  
	
   

  	
  14.4

  	
   

  	
  Waiver

  	
  39

  
	
   

  	
  14.5

  	
   

  	
  Entire Agreement and Modification

  	
  39

  
	
   

  	
  14.6

  	
   

  	
  Assignments, Successors

  	
  39

  
	
   

  	
  14.7

  	
   

  	
  No Third Party Rights

  	
  39

  
	
   

  	
  14.8

  	
   

  	
  Severability

  	
  39

  
	
   

  	
  14.9

  	
   

  	
  Time is of the Essence; Computation of Time

  	
  40

  
	
   

  	
  14.10

  	
   

  	
  Expenses

  	
  40

  
	
   

  	
  14.11

  	
   

  	
  Governing Law

  	
  40

  
	
   

  	
  14.12

  	
   

  	
  Counterparts

  	
  40

  

 

 iii

Joint Venture Agreement

This Joint Venture Agreement (together with all
Attachments and Exhibits and amendments to it, this “Agreement”), is
executed as of January 24, 2007, by and among International Truck and Engine
Corporation, a Delaware corporation (“ITEC”), International Truck and
Engine Investments Corporation, a Delaware corporation and wholly-owned
subsidiary of ITEC (“Investments” and, together with ITEC, “International”),
and Monaco Coach Corporation, a Delaware corporation (“Monaco”).

RECITALS

WHEREAS, ITEC’s
wholly owned indirect subsidiary, Workhorse Custom Chassis, LLC, an Illinois
limited liability company (“Workhorse”), is a manufacturer of stripped
chassis products (i.e., a rolling chassis including power-train but excluding
cab) for recreational vehicles, buses and step vans;

WHEREAS, Monaco is
a manufacturer of premium recreational vehicles, including Class A, B and C
motor coaches, as well as rear engine diesel stripped chassis products; and

WHEREAS,
International and Monaco desire to form a joint venture as a Delaware limited
liability company (the “Company”) to be the exclusive manufacturer and
supplier of (i) all of Workhorse’s production requirements for its current and
future portfolio of rear engine diesel recreational vehicle and low-floor bus
stripped chassis products (excluding the “Whirlaway” platform) and (ii) all of
Monaco’s production requirements for all of its current and future rear engine
diesel stripped chassis (such supply and manufacturing operations, the “Business”).

NOW, THEREFORE, in
consideration of the premises and mutual promises contained in this Agreement
(the mutuality, adequacy and sufficiency of which are hereby acknowledged), the
parties hereto agree as follows:

ARTICLE I

Definitions and Rules of Construction

1.1
Certain Defined Terms.  Capitalized terms used in this Agreement have
the meanings indicated in Attachment 1.1.

1.2
Rules of Construction.  Attachment 1.2 contains rules of
construction relating to this Agreement.

1.3
Joint and Several Liability.  All obligations of ITEC and Investments under this Agreement shall be joint and several,
whether or not such obligation is stated as an obligation of a Member or the
holder of Member Interests.

ARTICLE
II

Establishment of the Company

2.1
Establishment of the Company.

(a) Generally.  At the
Closing (as defined in Section 2.7), the Members will establish the
Company pursuant to the Delaware Limited Liability Company Act, Del. Code Ann.
tit. 6, § 18—101 et seq. (1992) (the “DLLCA”).

(b ) Applicability of the DLLCA.  To the
extent that a Member’s rights and obligations with respect to, and procedures
with respect to the administration, dissolution, liquidation and termination
of, the Company are not set forth in this Agreement, which constitutes the
Company’s limited liability company agreement, they will be governed by the
DLLCA.  To the extent that this Agreement
contains a provision contrary to a DLLCA provision that permits its being
overridden by a limited liability company agreement, that DLLCA provision is overridden
by such contrary provision in this Agreement whether or not specific reference
is made to the overridden provision of the DLLCA.

2.2
Name.  The name of the Company is “Custom Chassis
Products, LLC.”

2.3
Term.  The Company will continue for a fixed term of
10 years commencing on the Closing Date; provided that, at the end of the
initial term (and any renewal term), the Company will be continued for an
additional four year renewal term unless either Member shall have given written
notice to the other at least one year prior to the end of such term stating
that the term of the Company will not be so renewed.

2.4
Representations and Warranties.  International makes the representations and
warranties set forth in Attachment 2.4-A, and Monaco makes the representations
and warranties set forth in Attachment 2.4-B.   MONACO ACKNOWLEDGES AND AGREES THAT THE ONLY
REPRESENTATIONS AND WARRANTIES MADE BY INTERNATIONAL ARE THE REPRESENTATIONS
AND WARRANTIES SET FORTH IN ATTACHMENT 2.4-A, AND MONACO HAS NOT RELIED UPON
ANY OTHER REPRESENTATIONS, WARRANTIES OR OTHER INFORMATION MADE OR SUPPLIED BY
OR ON BEHALF

 2
 

OF INTERNATIONAL OR BY ANY
AFFILIATE OR REPRESENTATIVE OF INTERNATIONAL.  
INTERNATIONAL ACKNOWLEDGES AND AGREES THAT THE ONLY REPRESENTATIONS AND
WARRANTIES MADE BY MONACO ARE THE REPRESENTATIONS AND WARRANTIES SET FORTH IN
ATTACHMENT 2.4-B, AND INTERNATIONAL HAS NOT RELIED UPON ANY OTHER
REPRESENTATIONS, WARRANTIES OR OTHER INFORMATION MADE OR SUPPLIED BY OR ON
BEHALF OF MONACO OR BY ANY AFFILIATE OR REPRESENTATIVE OF MONACO.

2.5
Covenants Pending Closing.  Until the Closing, International and Monaco
will comply with the covenants set forth in Attachment 2.5.

2.6
Closing Conditions and Termination.  The conditions to
International’s obligation to close and, if not satisfied, the right to
terminate are set forth in Attachment 2.6-A.  The conditions to Monaco’s obligation to
close and, if not satisfied, the right to terminate are set forth in Attachment
2.6-B.

2.7
Place and Time of Closing.  The completion of the Formation Transactions
(the “Closing”) will occur at the offices of Kirkland & Ellis LLP,
Chicago, Illinois, commencing at 10:00 a.m. (local time) on (a) February 9,
2007 or, if later, the second Business Day following the satisfaction of the
conditions to the Closing set forth in Attachment 2.6-A and Attachment
2.6-B and effective as of the opening of business on such day, or (b) at
such other date, time and place as the parties may agree (the date of the
Closing, the “Closing Date”).

2.8 Closing
Deliveries.  At the Closing:

(a) Deliveries By International. 
International will deliver:

(i)            to Monaco and the Company, each
Related Agreement to which International or any of its Affiliates is a party;

(ii)           to Monaco and the Company, a
certificate executed by an authorized representative of International to the
effect that, except as otherwise stated in such certificate, each of
International’s representations and warranties pursuant to Section 2.4
is accurate in all material respects as of the date of this Agreement and as of
the date of the Closing as if made on the date of the Closing, except for those
representations and warranties given as of a specified date, which shall be
accurate in all material respects as of such specified date (in each case,
without giving effect to any exceptions made in such certificate);

(iii)          to Monaco, such other documents as
Monaco may reasonably request for the purpose of (A) evidencing the accuracy of
any of International’s representations and warranties, (B) evidencing the performance
by International of, or the compliance by International with, any covenant or
obligation required to be performed or complied with by International, (C)
evidencing the satisfaction of any condition referred to in Attachment 2.6-B,
or (D) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement; and

 3
 

(iv)          to the Company its capital
contribution, consisting of (A) cash in an amount to be agreed upon by the
parties to this Agreement and (B) the assets to be agreed upon by the parties
to this Agreement that International will transfer by the transfer documents in
form and substance reasonably agreed by the parties, together with any permits
and/or licenses required in connection with such assets.

(b) Deliveries By Monaco.  Monaco will
deliver:

(i)            to International and the Company,
each Related Agreement to which Monaco or any of its Affiliates is a party;

(ii)           to International and the Company, a
certificate executed by an authorized representative of Monaco to the effect
that, except as otherwise stated in such certificate, each of Monaco’s
representations and warranties pursuant to Section 2.4 is accurate in
all material respects as of the date of this Agreement and as of the date of
the Closing as if made on the date of the Closing, except for those
representations and warranties given as of a specified date, which shall be
accurate in all material respects as of such specified date (in each case,
without giving effect to any exceptions made in such certificate);

(iii)          to International, such other documents
as International may reasonably request for the purpose of (A) evidencing the
accuracy of any of Monaco’s representations and warranties, (B) evidencing the
performance by Monaco of, or the compliance by Monaco with, any covenant or
obligation required to be performed or complied with by Monaco, (C) evidencing
the satisfaction of any condition referred to in Attachment 2.6-A, or
(D) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement; and

(iv)          to the Company its capital
contribution, consisting of (A) cash in an amount to be agreed upon by the
parties to this Agreement and (B) the assets to be agreed upon by the parties
to this Agreement that Monaco will transfer by the transfer documents transfer
documents in form and substance reasonably agreed by the parties, together with
any permits and/or licenses required in connection with such assets.

2.9 Initial Member
Interests.

(a) Generally.  The respective initial interests of the
Members in the capital, net profits, net losses and distributions of the
Company as represented by their Member Interests are as follows:

	
  Name

  	
   

  	
  Member Interest

  
	
  Investments

  	
   

  	
  51.0%

  
	
  Monaco

  	
   

  	
  49.0%

  
	
  Total

  	
   

  	
  100.0%

  

 

 4
 

Such percentages will change only
(i) by amendment to this Agreement, (ii) by an assignment of a Member Interest
permitted by this Agreement, (iii) by the issuance of additional Units in
accordance with the terms of this Agreement, or (iv) to reflect
additional capital contributions pursuant to Section 3.2.  Such changes will be effective upon the
effective date of the amendment, assignment, issuance or additional capital
contribution, and the Company’s books will be closed as of such effective date
so that allocations and distributions in accordance with Article IV can be made
to reflect such change in Member Interests.  The percentages set forth above, as so
changed, apply in all circumstances where relevant to determining the extent of
each Member’s interest in the Company, including its rights to profits and
losses, right to vote on, consent to or otherwise participate in any decision
or action to be taken by the Members under this Agreement or the DLLCA.

(b) Units.  Each Member’s
Member Interest may be stated in terms of “Units.” For such purposes, initially
each Member has Units equal to its initial Member Interest percentage (so that,
for example, Investments has 51 Units at the date of this Agreement).

2.10 Company Obligations
& Rights.

(a) Generally.  The Members
will cause the Company to fulfill its obligations pursuant to this
Agreement.  The Company may, as a third
party beneficiary or otherwise, independently enforce its rights under this
Agreement, including those under Article XI and Article XII.

ARTICLE
III

Capital Contributions

3.1 Initial Capital
Contributions.  Immediately after the completion of the
Closing, the Book Capital Account of each Member shall be as agreed upon by the
parties hereto.

3.2  Additional Capital Contributions and Member
Loans.

(a) Mandatory Only If Included in Business Plan.  Each Member
will make additional capital contributions (“Additional Capital
Contributions”) or loans (“Member Loans”) to the Company, but only
in the amounts and at the times set forth in the Business Plan as it may be
amended from time to time.  Neither
Member is otherwise required to make Additional Capital Contributions or make
Member Loans to the Company.

(b) Procedure.

(i)            Generally.  All requirements or requests for Additional
Capital Contributions or Member Loans will (A) be in a notice delivered to each
Member by the Company stating explicitly whether such requirement or request
relates to an Additional Capital Contribution or a Member Loan, and stating
that such Additional Capital Contribution or Member Loan, as applicable, has
been approved by the Board of Directors in accordance with Section 5.4
or pursuant to the Business Plan; (B) state the aggregate amount of Additional
Capital Contributions or Member Loans, as applicable,

 5
 

and the amount
of each Member’s share of such Additional Capital Contribution or Member Loan
(which shall in all cases be allocated on a pro rata basis between the
Members); and (C) specify the date that the Additional Capital Contribution or
Member Loan, as applicable, is to be made, which will not be sooner than twenty
(20) Business Days following each Member’s receipt of the notice.  Except as set forth in the last sentence of Section
3.3, any amounts paid to the Company pursuant to a notice delivered in
accordance with this Section 3.2(b) shall be characterized as an
Additional Capital Contribution or Member Loan based on how the related
requirement or request is characterized in such notice.

(ii)           Accompanying
Certificate.  Each Member will
deliver certificates to the Company and to each other, dated as of the date the
Additional Capital Contribution or Member Loan, as applicable, is to be made,
that contain customary representations and warranties relating to authorization,
title and such other matters with respect to capital contributions in the form
of property (other than cash) as the Members shall reasonably agree.  In addition, if Additional Capital
Contributions are to consist of property other than cash, such certificate will
contain customary representations and warranties as to the ownership and
condition of any such property.

(c) Member Loans.  Each Member
Loan will be evidenced by a promissory note bearing interest at a
fluctuating rate equal to six percentage points over the Prime Rate, but
not in excess of any legally permitted rate of interest (the “Specified
Interest Rate”).  “Prime Rate” means
the prime rate as published in the “Money Rates” table of The Wall Street
Journal on the first publication day of the calendar quarter in which the loan
was made and as adjusted as of the first publication day of each subsequent
calendar quarter until paid.  Each Member
Loan will (i) be for such term and subject to such security, if any, as
determined by the Board of Directors, (ii) if necessary to secure financing for
the Company, be subordinated to any other indebtedness of the Company or a
portion of it, (iii) become due and payable in the event the Company is
dissolved, (iv) rank pari passu with any and all other Member Loans and (v) be
non-recourse as to the other Member.

3.3 Failure of a Member
to Make Additional Capital Contribution or Member Loan.  If a Member
(the “Non-Contributing Member”) fails to make all or a portion of a
required Additional Capital Contribution or Member Loan within thirty (30) days
of when such Additional Capital Contribution or Member Loan is due, the other
Member (the “Other Member”) may lend an amount equal to such shortfall
to the Non-Contributing Member (a “Shortfall Loan”), which amount shall
constitute an Additional Capital Contribution or Member Loan by the
Non-Contributing Member and shall be secured by the Non-Contributing Member’s
Member Interest.  Until all accrued
interest and principal on the Shortfall Loan is repaid in full (i) the
Non-Contributing Member will be liable to the Other Member for the amount of
such Shortfall Loan, plus all expenses incurred by the Other Member and the
Company in connection with such Shortfall Loan, to be repaid in 20 equal
quarterly installments (minus any applicable Shortfall Distributions (as
defined below)) plus interest at the Specified Interest Rate; and (ii) any
distributions from the Company otherwise due to the Non-Contributing Member
will be paid directly to the Other Member and be applied to the interest and
principal of the Shortfall Loan (“Shortfall Distributions”).  In addition to the foregoing, any Member
providing a Shortfall Loan 

 6
 

to another Member shall be
entitled, in its sole discretion, to recharacterize the Additional Capital
Contributions as Member Loans.

3.4
No Withdrawal of or Payment of Interest on Capital.  No Member
will have any right to withdraw or make a demand for withdrawal of all or any
portion of its Book Capital Account.  No
interest or additional share of profits will be paid or credited to the Members
on their Book Capital Accounts.

ARTICLE IV

Allocation of Profits and Losses; Distributions

4.1
Shares of Profits and Losses.  Except as otherwise provided in Sections
4.3 and 4.4 of Attachment 9, each Member will share in the
Company’s book profits and book losses in accordance with its Member
Interest.  A Member’s share of the
taxable income or loss or other tax items of the Company will be determined in
accordance with Sections 4.1 and 4.2 of Attachment 9.

4.2
Distributions.  Distributions shall be made as follows:

(a) Distribution of Tax Amount.  No later
than sixty-five (65) days after the end of the Company’s Fiscal Year, the
Company will distribute to each Member its share (based on expected allocations
of taxable income for the Fiscal Year to which such distribution relates) of
the Tax Amount estimated by the Company to have accrued through the end of the
Fiscal Year.  To the extent that each
Member’s actual allocation of taxable income for the Fiscal Year is later
determined to be different than was estimated for purposes of these
distributions, such differences will be adjusted against the amounts computed
and distributed to each Member for the next Fiscal Year.

(b)   Other
Distributions.  All other
distributions shall be made at such times and in such amounts as shall be
determined by the Board of Directors in accordance with Section 5.4(a).

4.3
No Priority.  Except as otherwise provided in this Agreement,
no Member will have priority over any other Member as to the return of capital,
allocation of income or losses, or any distribution.

4.4
Other Distribution Rules.  Except as provided in Section 4.5
below, (a) no Member will have the right to demand and receive property other
than cash in payment for its share of any distribution and (b) distribution of
non-cash property may be made with the consent of both Members.  The preceding sentence expressly overrides the
contrary provisions of DLLCA § 18—605 as to non-cash distributions.

4.5
Liquidating Distribution Provisions.  Distributions made upon
liquidation of any Member Interest will be made in accordance with the positive
Book Capital Account balance of the Member. 
These balances will be determined after taking into account all Book
Capital Account adjustments for the Company’s Fiscal Year during which the
liquidation occurs.  In the 

 7
 

event of a liquidation of the
Company, distributions of the positive Book Capital Account Balance of each
Member, if any, will be made as follows:

(a)   Except as otherwise agreed in writing by
the parties, each non-cash operating asset of the Company contributed to the
Company at Closing (as well each non-cash operating asset subsequently
purchased by the Company to replace a contributed asset) (each, a “Contributed
Operating Asset”) shall be distributed to the Member that contributed such
asset, or the asset it replaced as applicable, to the Company. Each non-cash
operating asset of the Company that is not a Contributed Operating Asset (each,
an “Other Operating Asset” and, together with the Contributed Operating
Assets, the “Operating Assets”) shall be distributed to the Member that,
as of the date of such distribution, purchases at least 60% of the products
manufactured using such Other Operating Asset or, in the case of inventory,
uses such Other Operating Asset (such Member, the “Principal Customer”
of such Other Operating Asset), in all cases irrespective of whether or not the
aggregate fair market value of the Operating Assets distributed to such Member
exceeds such Member’s Book Capital Account Balance; provided, however,
that in the event that there is no Principal Customer with respect to an Other
Operating Asset, such Other Operating Asset shall be distributed pursuant to
the determination of the Board of Directors;

(b)    To the extent the fair market value of the
Operating Assets allocated to a Member pursuant to Section 4.5(a) hereof
exceeds such Member’s Book Capital Account Balance (such excess, if any, the “Excess
Distribution Amount”), such Member will, except as otherwise agreed by the
Members, (i) contribute an amount of cash to the Company equal to the Excess
Distribution Amount, (ii) assume additional accrued liabilities of the Company
in an amount equal to the Excess Distribution Amount or (iii) contribute cash
and assume accrued liabilities such that the total amount of the cash
contribution and accrued liabilities assumed equals the Excess Distribution
Amount.

The
Members shall cooperate reasonably in order to determine the fair market value
of the Operating Assets required to be distributed pursuant to this Section
4.5.  In the event that the Members
cannot agree on the fair market value for one or more Operating Assets, each
Member shall, within thirty (30) days of any election or event resulting in
dissolution, select a valuation expert (each, an “Initial Valuation Expert”)
and cause such expert to deliver a valuation report that sets forth such expert’s
determination of the fair market value, together with an analysis of how it
determined that fair market value (any such report, a “Valuation Report”).  In the event that the Members cannot agree on
a fair market value within ten days of the receipt of the Initial Valuation
Reports, the two Initial Valuation Experts shall subsequently select a third
valuation expert (the “Final Valuation Expert”).  Within sixty (60) days after the appointment
of the Final Valuation Expert, the Members will cause the Final Valuation
Expert to deliver to each Member a final valuation report that sets out such
valuation expert’s determination of the fair market value, together with an
analysis of how it determined that fair market value (the “Final Valuation
Report”); provided, however, that the fair market value determined by the
Final Valuation Expert may in no event (i) be less than the lowest value or
(ii) be more than the highest value attributed by the Initial Valuation
Experts.  Each Member will pay the fees
and expenses of the Initial Valuation Expert it appoints. The fees and expenses
of the Final Valuation Expert shall be borne by the Members in direct
proportion to the ratio of (A) the difference between (x) the fair

 8
 

market value set out in the Initial
Valuation Report prepared by the Initial Valuation Expert appointed by such
Member and (y) the fair market value set out in the Final Valuation Report over
(B) the difference between the fair market values set out in the two Initial
Valuation Reports.

If the Company is
prohibited by Applicable Law from effecting a liquidating distribution in
accordance with the provisions of this Section 4.5, then the Members
agree that they will cooperate reasonably to effect the sale by the Company of
the Operating Assets to each Member in a manner consistent with the allocation
set forth in this Section 4.5 (including, without limitation, by
providing guarantees from their respective parent companies to creditors of the
Company).

4.6
Limitation upon Distributions.  No distribution will be made to Members if
prohibited by DLLCA § 18—607 or other Applicable Law.

ARTICLE V

Management and Employees

5.1 Board of Directors.

(a) Board of Directors.  The business
and affairs of the Company will be managed exclusively by or under the
direction of a Board of Directors (the “Board of Directors”) consisting
of five individuals (each, a “Director”).  The Board of Directors shall be the Manager
(the “Manager”) of the Company. 
The foregoing expressly override the contrary provisions of DLLCA § 18—407.

(b) Initial Appointment; Replacement.  International
will appoint three Directors (each, an “International Director”) and
Monaco will appoint two Directors (each, a “Monaco Director”).  The initial appointments by each Member are
as follows:

	
  International

  	
   

  	
  Monaco

  
	
   

  	
   

  	
   

  
	
  President, Workhorse

  (Dave Olsen)

  	
   

  	
  Corporate Controller,
  Monaco

  (Charlie Kimball)

  
	
  Vice President,
  Purchasing

  and Logistics- ITEC

  (Tom Akers)

  	
   

  	
  Vice President and
  Director of

  Oregon Manufacturing

  Operations

  (Marty Garriott)

  
	
   

  	
   

  	
   

  
	
  Vice President,
  Finance,

  Truck Group - ITEC

  (Rich Tarapchak)

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

By written notice to the other Member and Directors, a
Member may, in its sole discretion, remove and replace with or without cause
any of its appointed Directors with other individuals.  A Director may be an officer or employee of a
Member or of an Affiliate of a Member. 
Each Director will serve on the Board of Directors until his successor
is appointed or until his earlier death, resignation or removal.

 9
 

 

(c) Compensation and Expenses of Directors.  Each Member
will pay the compensation and expenses of the Directors it appoints.

(d) Right to Rely on Certificate of
Manufacturing Manager.  Any Person dealing with the Company may rely
(without duty of further inquiry) upon a certificate signed by the Manufacturing
Manager as to (i) the identity of any Officer, Member or employee of the
Company, (ii) the existence or nonexistence of any fact or facts that
constitute a condition precedent to acts by the Board of Directors or that are
in any other manner germane to the affairs of the Company or (iii) the Persons
who are authorized to execute and deliver any instrument or document of the
Company.

(c) Signing on Behalf of the Company.  Except as
otherwise provided in Section 5.5(c) or as required by law, the signature
of any individual to whom the Board of Directors has delegated appropriate
authority is sufficient to constitute execution of a document on behalf of the
Company.  A copy or extract of this
Agreement may be shown to the relevant parties in order to confirm such
authority.

(f) No Authority of Members to Act on Behalf of
the Company.  Except as otherwise specifically provided in
this Agreement, no Member will act for, deal on behalf of or bind the Company
in any way other than through its representatives on the Board of Directors
(acting as members of a board of directors). 
Neither party shall take any action as a Member other than in accordance
with this Agreement.

5.2 Board of Directors
Meetings.

(a) Meetings.  The Board of
Directors will hold regular meetings (at least quarterly) at such time and
place as it determines.  Any Director or
the Chair may call a special meeting of the Board of Directors by giving the
notice specified in Section 5.2(g).

(b) Chair  The
chairperson of the Board of Directors (“Chair”) will be one of the three
International Directors.  The initial
Chair shall be the President of Workhorse. 
The Chair will preside at all meetings of the Board of Directors but will
have no other special rights. 
Notwithstanding the foregoing, the Chair shall be responsible for
preparing and circulating the agenda for each meeting of the Board of
Directors, although other directors shall be entitled to supplement the agenda
with additional items.

(c) Participation.  Directors
may participate in a meeting of the Board of Directors in person or by
conference video or telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.

(d) Written Consent.  Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting upon the unanimous written consent of the
Directors.  Each Director will be given a
copy of the written consent promptly after the last required signature is
obtained.  A copy of the consent will be
filed with the minutes of Board of Directors meetings.

 10

(e)   Minutes.  The Board of Directors will keep written minutes of all of its
meetings.  Copies of the minutes will be
provided to each Director.

(f)    Delegation.  Each Director has the right to appoint, by written notice to the other
Directors, any individual as his delegate. 
That delegate may attend meetings of the Board of Directors on his
behalf and exercise all of such Director’s authority for all purposes until the
appointment is revoked.

(g)   Notice.  Written notice of each meeting of the Board of Directors will be given
to each Director at least five Business Days before the meeting and will
identify the items of business to be conducted at the meeting.  No business other than those items listed in
the notice may be conducted at any meeting, unless otherwise expressly agreed
by all of the Directors.  The notice
provisions of this Section may be waived in writing and will be waived by a
Director’s attendance at the meeting, unless the Director at the beginning of
the meeting or promptly upon his arrival objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.

5.3  Voting of Directors; Quorum.

(a)   Generally.  Each Director will have one vote. 
Except as otherwise provided in Section 5.4, all actions by the
Board of Directors will require the approval of a majority of the Directors
present at a meeting at which a quorum exists.

(b)   Quorum.  Two Directors will constitute a quorum for the transaction of business,
provided that at least one International Director and at least one Monaco
Director is in attendance.

5.4  Actions Requiring Approval of the Board of
Directors.

(a)   Supermajority Approval Required.  The following actions require the approval of
at least one International Director and one Monaco Director:

(i)            approval
of any new Business Plan or material modification of an existing Business Plan
(for this purpose, any change by $50,000 or more during any Fiscal Year of any
line item in the budget that is included in the Business Plan shall constitute
a material modification of the Business Plan);

(ii)           to
the extent not provided for in any Business Plan, the approval of:

                a.     any capital and other expenditures in excess of $50,000;

                b.     any acquisition or lease of real property in excess of $50,000,
including the exercise of extension options under the Lease;

                c.     the incurrence of debt, borrowings, guarantees or indemnities in
excess of $50,000;

 11
 

d.     any
pledge or encumbrance of assets in excess of $50,000;

e.     the
extension of credit in excess of $50,000, other than trade receivables in the
ordinary course of business;

f.      the
sale of assets of the Company in excess of $50,000, or otherwise outside the
ordinary course of business;

g.     engaging
in any single transaction outside of the ordinary course of business involving
aggregate consideration in excess of $50,000; or

(iii)          any
material change in product designs, programs or offerings;

(iv)          any
increase in (or material change in the terms of) the funding obligations of any
Member (whether in the form of capital contributions, loans, guarantees or
otherwise);

(v)           any change in
the distribution strategy of the Company or the distribution rights of the
Members set forth in this Agreement, including any determination pursuant to Section
4.5(a);

(vi)          the
entry by the Company into new markets or businesses;

(vii)         any
issuance of additional Units;

(viii)        (A) the
establishment of a subsidiary, (B) the acquisition of assets or shares of any
other Person in excess of $100,000 in any single transaction or series of
related transactions, other than inventory purchased in the ordinary course of
business, (C) entering into any joint venture, collaboration or similar
arrangement, (D) the acquisition of an interest in any entity or (E) the making
of loans to any Person.

(ix)           appointment
and removal of key officers, other than the Manufacturing Manager;

(x)            any
change in the compensation of officers or employees of the Company, other than
increases in the compensation of employees in the ordinary course of business
as contemplated by the Business Plan;

(xi)           entry into
or material change in the terms of any transaction or agreement between the
Company and any Member or Affiliate of a Member, or any director or Affiliate
of a director, including, without limitation, any agreement with Monaco and
International for the provision of services or the supply of product to the
Company;

(xii)          any
distributions of cash or property other than those pursuant to Sections
4.3(a) and 4.5 hereof;

 12
 

(xiii)         any
action affecting the Members in a manner disproportionate to their pro rata
ownership of Units of the Company;

(xiv)        approval
of the calculation of the Average Cost Savings pursuant to Section 5.12
hereof;

(xv)         any
liquidation of the Company, winding-up of the Company’s business or the filing
of an Insolvency Proceeding by the Company;

(xvi)        any
merger, consolidation, conversion, transfer or other reorganization of the
Company;

(xvii)       any issuance or redemption of securities by
the Company;

(xviii)      any
proposed sale of products manufactured by the Company to any entity other than
Monaco or Workhorse; or

(xix)         any
adjustment to the Average Cost Savings Target pursuant to Section 5.12(e)
hereto.

(b)   Majority Approval Required. 
Except as otherwise provided in Section 5.4(a), and except for
actions within the authority of the Manufacturing Manager, all actions by the
Company shall require the approval of a simple majority of the Directors
present at a meeting at which a quorum exists.

5.5  General Manufacturing Manager.

(a)   Appointment.  The initial general manufacturing manager (“Manufacturing
Manager”) and subsequent Manufacturing Managers will be appointed by
Monaco, subject to the prior written consent of International, not to be
unreasonably withheld or delayed; provided, however, that prior
to any such appointment, International shall have had reasonable opportunity to
(i) interview the candidate and (ii) consult with Monaco for a reasonable
period both before and after such interview regarding the candidate and the appointment
process.  The Manufacturing Manager may
be an officer or employee of a Member or its Affiliate.

(b)   Term.  The Manufacturing Manager will hold office until his resignation,
removal or death.  The Board of Directors
may remove the Manufacturing Manager at any time with or without cause.

(c)   Authority.  Subject to (1) the power and authority of the
Board of Directors to revoke or modify the following or to direct the actions
of the Manufacturing Manager and (2) the then-current Business Plan, the Manufacturing
Manager has responsibility and authority for:

(i)            operating
and managing the day-to-day business and affairs of the Company in a manner
consistent with the Business Plan and then-current budgets;

(ii)           hiring
and removal of Company employees;

 13
 

(iii)          purchase
of services from the Members up to an annual aggregate of $50,000 in excess of
the then-current Business Plan;

(iv)          proposing
revisions to the Business Plan or budget for submission to the Board of
Directors for consideration;

(v)           implementing
the Business Plan and budget as approved by the Board of Directors;

(vi)          appointing
and removal of the Company’s appointee to the Purchasing Committee;

(vii)         making
any non-material changes to or taking actions that would constitute a
non-material deviation from the Business Plan or budget; and

(viii)        executing
contracts or other instruments on behalf of the Company (subject to the receipt
of any necessary approvals of the Board of Directors).

The Manufacturing Manager shall keep the Board of
Directors reasonably informed of his actions.

5.6  Employees. 
All employees will be leased to the Company by Monaco pursuant to the
Services Agreement.  Subject to the
Business Plan, leased employees shall include, but not be limited to, materials
administrators, purchasing/scheduling administrator(s), finance manager(s),
IE(s), design engineer(s) and administrative and support personnel.  Appointment and removal of the chief
accounting officer and his or her staff shall be subject to the prior approval
of the Board of Directors.  Other than as
set forth in the Business Plan, material changes to staffing levels shall
require approval by the Board of Directors.

5.7  Business Plan.

(a)   Initial Business Plan.  The initial business plan (“Business Plan”) to be agreed upon by
the parties hereto shall cover the first five years of the Company’s proposed
operations.  The Business Plan will
include a budget prepared in accordance with Section 5.7(b).  The Members intend that the Business Plan be
reviewed or modified, as applicable, at least annually.  At least 120 days before the beginning of
each Fiscal Year, the Manufacturing Manager will deliver to the Board of
Directors any proposed modifications in the Business Plan.

(b)   Budget Contents.  The budget will include:

(i)            a
projected income statement, balance sheet and operational and capital
expenditure budgets for the forthcoming Fiscal Year;

(ii)           a
projected cash flow statement showing in reasonable detail: (A) the
projected receipts, disbursements and distributions; (B) the amounts of any
corresponding projected cash deficiencies or surpluses; and (C) the amounts and
due 

 14
 

dates of all projected calls for Additional Capital Contributions for
the forthcoming Fiscal Year;

(iii)          market
strategies, product cycle plan, manufacturing and distribution strategies, and
a proposed organization chart; and

(iv)          such
other items requested by the Board of Directors.

(c)   Consideration of Proposed Plans.  Each proposal to continue or
modify a Business Plan will be considered for approval by the Board of
Directors at least forty-five (45) days before the beginning of the Fiscal Year
to which it pertains.  The Board of
Directors may revise the proposed Business Plan or direct the Manufacturing
Manager to submit revisions to the Board of Directors for consideration.

(d)   Continuation of Existing Business Plan.  Until a revised Business Plan is approved,
the Company will be managed in a manner consistent with the last Business Plan
approved by the Board of Directors, adjusted as necessary to reflect the
Company’s contractual obligations and other changes that result from the
passage of time or the occurrence of events beyond the control of the Company.

(e)   Strategic Plan.  In addition to the foregoing, the Members
shall use reasonable best efforts to complete, within six (6) months of the
date hereof, a long-term strategic plan for the Company, which plan shall be
updated on an annual basis.

5.8  Dispute Resolution Procedures.

(a)   Failure to Approve Certain Actions.  If (i) the Board of Directors has disagreed
regarding (A) material modifications to the then-current Business Plan and the
disagreement has not been resolved at least ten Business Days before the
beginning of the next Fiscal Year or (B) any other action listed in Section
5.4(a) when properly submitted to it for a vote, (ii) the Board of
Directors approves any resolution or votes to take any action as to which one
or both Monaco Directors casts a “no” vote or (iii) (A) a duly called meeting
is adjourned because none of the Directors appointed by a Member attends that
meeting, (B) none of the Directors appointed by that Member attends a meeting
duly called as to the same items of business of the adjourned meeting within
thirty (30) days after the adjournment of that first meeting and (C) notice of
both meetings complied with Section 5.2(g) (any of which, a “Business
Dispute”), then the Directors will consult and negotiate with each other in
good faith to find a mutually agreeable solution.  Notwithstanding the foregoing, in no event
shall any decision of the Board of Directors to adjust or refrain from
adjusting an Average Cost Savings Target pursuant to Section 5.12(e)
hereof, whether or not in connection with discussions of the Board of Directors
relating to the Business Plan, be the basis for a Business Dispute.  If the Directors do not reach a solution
within ten Business Days from the date the Directors receive notice of such
Business Dispute and the failure to reach a solution, in a Member’s judgment,
adversely affects the Company or such Member’s interest in the Company (other
than immaterial effects), then either Member may initiate the escalation
procedures under this Section.  No action
of the Board of Directors which is the subject of a Business Dispute shall be
effective until resolved pursuant to this Section 5.8.

 15
 

(b)   Consideration by Management Representatives.  Upon the initiative of either Member, in
accordance with Section 5.8(a), the Business Dispute will be referred by the
Directors to the Vice President and General Manager, Medium Truck Vehicle
Center of International and the President of Monaco (the “Designated
Representatives”).  The Designated
Representatives will meet, consult and negotiate with each other in good
faith.  If they are unable to agree
within twenty Business Days of the date of such referral, then they will
adjourn such attempts for a further period of five Business Days during which
no meeting will be held.  On the first
Business Day following such period, the Designated Representatives will meet
again in an effort to resolve the Business Dispute.  If the Designated Representatives are unable
to resolve the Business Dispute within 48 hours after the time at which their
last meeting occurred, then Section 5.8(c) will apply.

(c)   Mediation.  If the
Designated Members are unable to resolve the Business Dispute within the 48
hour period set forth in Section 5.8(b), either Member may provide the
other Member with a notice for mediation. 
After delivery of that notice, the Members will attempt in good faith to
settle the matter by mediation administered by the CPR Institute for Dispute
Resolution under its CPR Mediation Procedure. If within 60 days after receipt
of the notice for mediation, the mediation does not result in resolution of the
Business Dispute, then Section 7.1(a) will apply.

5.9  Standard of Conduct.

(a)   Generally.

(i)            A
Director and each Officer, in managing the business or affairs of the Company,
will discharge his duties:

a.     in
a manner he believes in good faith to be in the best interests of the Company;

b.     in
a manner he believes in good faith to represent the care an ordinarily prudent
person in a like position would exercise under similar circumstances;

c.     in
good faith reliance on the provisions of this Agreement;

d.     without
intentional misconduct or a knowing violation of law; and

e.     without
engaging in any transaction for which he receives a personal benefit (or
benefit for the Member that appointed him) in violation or breach of any
provision of this Agreement.

(ii)           Except
as otherwise set forth herein and for the implied contractual covenant of good
faith and fair dealing under applicable Delaware law, no Director or Officer
has any other duty to the Company, any Member or any other Person.

 16
 

(b)   Limitations.  Notwithstanding the foregoing Subsection (a),
a Director or Officer (i) does not violate a duty or obligation under this
Agreement or under Applicable Law because the Director’s or Officer’s conduct
furthers the interest of a Member (including in the case of a Director, the
Member that designated the Director, the Members each acknowledging that each
Member has appointed a Director with the expectation that such Director will
represent and serve the interest of the Member appointing him) and (ii) without
limiting the foregoing clause (i), has no duty or obligation to consider any
interest of or affecting the Company, any Member or any other Person.

(c)   No Duty of Members.  No Member has any duty to the Company or any
Member solely by reason of acting in its capacity as a Member, except to
refrain from (i) any act or omission that constitutes a bad faith violation of
the implied contractual covenant of good faith and fair dealing and (ii) any
transaction in which the Member receives a personal benefit in violation or
breach of any provision of this Agreement. 
Without limiting the foregoing, a Member (A) does not violate any duty
or obligation under this Agreement or under Applicable Law because the Member’s
conduct furthers its interest and (B) has no duty or obligation to consider any
interest of or effect on the Company or any other Person.

(d)   Override.  The provisions of this Agreement (including this Section 5.9 and
Sections 5.10 and 5.11) replace, eliminate and otherwise supplant
those duties (including fiduciary duties) that a Member, Manager, Director or
Officer might otherwise have under Applicable Law.

5.10                        Directors and Officers—Exculpation.  No Director or Officer will be
personally liable to the Company, any Member or any other Person for monetary
damages for any act or omission, including breach of contract or breach of
duties (including fiduciary duties) of a Director or Officer to the Company,
any Member or any other Person, except (a) for any act or omission that
constitutes a bad faith violation of the implied contractual covenant of good
faith and fair dealing or (b) for any transaction for which the Director or
Officer received a personal benefit in violation or breach of any provision of
this Agreement.

5.11                        Directors
and Officers—Indemnification.

(a)   Generally.  The Company will indemnify, defend and hold
harmless each Director and Officer (each, a “Company Indemnified Person”)
in connection with the management of the Company or any entity in which the
Company has an interest to the fullest extent permitted under the DLLCA and
Applicable Law; provided, however, that the foregoing obligations will not
apply (i) unless the Company Indemnified Person (A) acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interest of the Company and (B) with respect to a criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful
or (ii) to the extent that the act or omission of the Company Indemnified
Person involved either (x) any act or omission that constitutes a bad faith
violation of the implied contractual covenant of good faith and fair dealing or
(y) any transaction for which the Company Indemnified Person received a
personal benefit (or benefit for the Member that appointed him) in violation or
breach of any provision of this Agreement. 
The sole source of indemnity under this Section 5.11(a) shall be
the assets of the Company, and no Member shall be required to make any
additional capital contribution, loan or guarantee (or 

 17
 

provide any other form of financing or credit support)
to the Company in order to fund any indemnity obligation pursuant hereto.

(b)   Procedure.  If a Company Indemnified Person requests
indemnification pursuant to this Agreement, the Board of Directors will cause a
determination to be made as to whether indemnification of the Company
Indemnified Person is proper in the circumstances.  Upon any such determination that indemnification
is proper, the Company will make indemnification payments of liability, cost,
payment or expense asserted against, or paid or incurred by, the Company
Indemnified Person to the maximum extent permitted by the DLLCA and Applicable
Law.

(c)   Defense Counsel.

(i)            The
Company shall be entitled to assume and control the defense of a claim against
a Company Indemnified Person. If the Company elects to assume and control the
defense, Company Indemnified Person shall have the right to employ counsel separate
from counsel employed by the Company in any such action and to participate in
the defense thereof, but the fees and expenses of such counsel employed by the
Company Indemnified Person shall be at the expense of the Company Indemnified
Person unless (A) the employment thereof has been specifically authorized
by the Company in writing, or (B) the Company has been advised by counsel
that a reasonable likelihood exists of a conflict of interest between the
Company and the Company Indemnified Party.

(ii)           If
the Company shall control the defense of any such claim, the Company shall
obtain the prior written consent of the Company Indemnified Party (which shall
not be unreasonably withheld or delayed) before entering into any settlement of
a claim or ceasing to defend such claim if, pursuant to or as a result of such
settlement or cessation, injunction or other equitable relief will be imposed
against any Company Indemnified Person or if such settlement does not expressly
unconditionally release each Company Indemnified Person from all liabilities
with respect to such claim and all other claims arising out of the same or
similar facts and circumstances, with prejudice.

(d)   Non-Exclusive.  The rights accruing to each Company
Indemnified Person under this Section will not exclude any other right to which
he may be lawfully entitled.

(e)   Subsequent Amendment.  No amendment, termination or other
elimination of this Section or of any relevant provisions of the DLLCA or of
any other Applicable Law will affect or diminish in any way the rights to
indemnification under this Section with respect to any action, suit or
proceeding arising out of, or relating to, any event or act or omission
occurring or fact or circumstance existing before the amendment, termination or
other elimination.

(f)    Continuation of Right to Indemnification.  All
rights to indemnification under this Section will continue as to a person who
has ceased to be a Director or Officer, will inure to the benefit of the heirs,
executors, administrators and the estate of that person, and will be deemed to
be a contract between the Company and each such person.  This Section shall be binding upon any
successor to the Company, whether by way of merger, consolidation, liquidation,
dissolution or otherwise.

 18
 

(g)   Savings Clause.  If this Section or any portion of it is
invalidated on any ground by any court of competent jurisdiction, then the
Company will nevertheless indemnify persons specified in this Section to the
full extent permitted by any applicable portion of this Section that has not
been invalidated.

5.12                        Average Cost Savings.

(a)   Purchasing Committee. 
The Company will establish a steering committee (the “Purchasing
Committee”) designed to (i) manage purchasing decisions on behalf of the
Company and (ii) report to the Board of Directors on the Company’s progress in
realizing on cost savings objectives set forth in this Section 5.12 and
the Business Plan.  Each of the Company,
International and Monaco shall appoint one member of the Purchasing
Committee.  The initial appointments by
each Member shall be director-level appointees of such Member.

(b)   Efforts by the Members. 
The Members shall use their commercially reasonable efforts to achieve
the Average Cost Savings sufficient to meet the periodic targets set forth in Section
5.12(e) below.

(c)   Purchasing Efforts by International.  International shall use its commercially
reasonable efforts to permit the Company to be entitled to make purchases on
the same prices and terms as International and its Affiliates under supply
agreements entered into by International (or its Affiliates) relating to the
supply of component parts used by the Business.   International shall also use its
commercially reasonable efforts to specifically address the purchasing needs of
the Company in its future negotiations with suppliers of component parts.

(d)   Measurement of Average Cost Savings.  As soon as reasonably practicable, but in no
event more than 10 Business Days, after each Measurement Date, the Purchasing
Committee shall submit to the Board of Directors (i) its determination of the
Actual Per Unit Cost for each chassis and (ii) its calculation of the Average
Cost Savings as of such Measurement Date. 
For avoidance of doubt, any calculation of the Average Cost Savings
shall be made according to the procedures and methodologies which shall be agreed by the
parties in writing.  The
Board of Directors shall use its commercially reasonable efforts to approve a
final measurement of the Average Cost Savings as soon as practicable after its
receipt of the calculation of the Purchasing Committee.  If the Board of Directors approves the
measurement of the Average Cost Savings pursuant to Section 5.4(a), the
calculation of the Average Cost Savings with respect to such Measurement Date
shall be final for all purposes related to this Agreement.

(e)   Average Cost Savings Targets.  In the event that Monaco notifies
International that it believes in good faith that the Average Cost Savings was
less than as mutually agreed upon by the parties for (i) the first Measurement
Date or (ii) for any subsequent Measurement Date ((i) or (ii), as applicable,
as adjusted from time to time after the twenty-four-month anniversary of the
Closing by the Board of Directors in accordance with Section 5.4(a) hereof, the
“Goal”) as of any Measurement Date, the Members shall consult with each
other as to commercially reasonable actions which they or the Company should
consider to address the situation. 
Without limiting the foregoing, International shall consider, depending
upon the results achieved from earlier actions and such other factors that
International considers relevant, whether it will take one or more of the
following actions:

 19
 

(i)            convene
meetings with suppliers in order to seek further price concessions related to
components used by the Company;

(ii)           deliver
written communications to suppliers, where applicable, regarding consolidation
efforts / expectations of support and/or denote suppliers’ lack of support,
where applicable, on supplier score cards;

(iii)          initiate
and prioritize (at International’s expense) a VAVE effort with respect to the
production processes of the Company; and/or

(iv)          discuss
the possibility of changing the prices at which International would agree to
sell engines to the Company.

In the event that
the Company achieves Average Cost Savings of less than Goal as of (A) each
Measurement Date during the nine (9) months following the date on which Monaco
provided notice pursuant to Section 5.12(e) (such period, the “Cure
Period”) and (B) the date on which the Cure Period ends, Monaco shall have
the right to dissolve the Company pursuant to Section 7.1(b).  The calculation of the Average Cost Savings
at the end of the Cure Period shall be subject to the dispute resolution
procedures set forth in Section 5.8.

(f)    Limitation. 
Dissolution of the Company in accordance with Articles V and VII shall
be the sole remedy of the Parties in the event that any particular levels of
Average Cost Savings are not realized. 
The Parties understand and acknowledge that (1) International is not
giving any guarantee or assurance as to its ability to extend its pricing and
terms for component parts to the Company, (2) International shall not be
required to agree to higher pricing or less advantageous supply terms for its
truck, engine, chassis or other business units in order to include the Company
in its purchasing arrangements, or to sell engines to the Company at any
particular pricing level, (3) neither International nor Monaco shall be
required to agree to any change in the design or manufacturing of its chassis
(including any “make versus buy” decision) if it concludes in good faith that
strategic, safety or other business considerations dictate otherwise, and (4)
neither International nor Monaco is providing any indemnity, and neither
International nor Monaco shall be subject to any damages, in the event that the
Company does not achieve any particular level of Average Cost Savings.

ARTICLE
VI

Transfer Restrictions on Member Interests

6.1  Restrictions on Transfer of Member Interests.  Except to the extent specifically permitted
or required by this Agreement, neither Member may transfer its Member Interest
or any interest in it without the prior written consent of the other Member,
which consent may be granted or withheld by such party in its sole discretion;
provided, however, that if such transfer shall be to an entity that is wholly
owned by such party, directly or indirectly (or, in the case of International,
wholly owned directly or indirectly by Navistar International Corporation),
then such consent may not be unreasonably withheld; provided, further, however,
that the transferring Member (and in the case of International, ITEC) shall
continue to be the primary obligor of the obligations under this Agreement.  For purposes of this Article, “Transfer” and
its derivatives include all forms of direct or indirect transfer or
disposition, voluntary or involuntary, by 

 20
 

operation of law, by direct or indirect sale of stock
or equity interests, or other direct or indirect change of control of the
Member or otherwise, as well as the creation of any Encumbrance on all or any
part of a Member Interest; provided, however, that the change of control of
Monaco or Navistar International Corporation shall not be deemed a “Transfer”
for purposes of this Agreement, unless such change of control constitutes a
Change of Control under Section 7.2(a)(vi).  The provisions of this Article VI replace,
eliminate and otherwise supplant any contrary provisions in the DLLCA
(including DLLCA § 18—702) that permit the assignment of a limited liability
company interest.

6.2  Effect of Non-compliance.

(a)   Non-Permitted Transfers Null and Void.  ANY ATTEMPTED TRANSFER NOT STRICTLY IN
ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE WILL BE VOID AB INITIO AND OF NO
FORCE OR EFFECT WHATSOEVER.

(b)   Other.  Without limiting the foregoing, if any Member
Interest or certificate representing it is purported to be transferred in whole
or in part in contravention of this Article, the Person to whom the transfer is
made will not be entitled to any rights as a Member, including any rights:

(i)            to
participate in the management, business or affairs of the Company,

(ii)           to
access to information concerning Company transactions,

(iii)          to
inspect or copy the Company’s books or records,

(iv)          to
receive distributions to which the transferor would otherwise be entitled, or

(v)           to
receive upon the dissolution and winding up of the Company the net amount
otherwise distributable to the transferor.

ARTICLE
VII

Termination

7.1  Termination
Generally.

(a)     Unresolved Business Disputes. Either
Member may elect to effect the dissolution of the Company in accordance with
Article VIII upon the occurrence of a Business Dispute that remains unresolved
following the exhaustion of all procedures set forth in Section 5.8.

(b)   Failure to Achieve Average
Cost Savings.  Monaco may elect to effect the dissolution of the Company in accordance
with Article VIII by written notice to International within thirty (30) days
after the expiration of any Cure Period during which International has failed
to achieve Average Cost Savings equal to or in excess of Goal pursuant to Section
5.12(e).

 21
 

(c)   Non-Renewal.  A Member may terminate this Agreement, and
effect the dissolution of the Company in accordance with Article VIII, at the
times and on the terms set forth in Section 2.3.

7.2  Termination for Default.  This Article applies only if (a) only one
Member is a Defaulting Member, in which case the Non-Defaulting Member may
elect to terminate the Company in accordance with Section 7.3, or (b)
both Members are Defaulting Members, in which case Section 7.4 will
apply.

(a)   Definitions—Defaulting
Member and Non-Defaulting Member and Default Event.  “Defaulting Member” is a Member with respect
to which any Default Event has occurred. 
A “Non-Defaulting Member” is a Member with respect to which no Default
Event has occurred.  Each of the
following is a “Default Event”:

(i)            Material Default.  Any material
default by the Member in the performance of any covenant in this Agreement or
in the performance of any material provision of any Related Agreement, which
default continues for a period of 30 days after written notice thereof has been
given by the Non-Defaulting Member to the Defaulting Member (each, a “Material
Default”).  Without limiting the
foregoing, “Material Default” shall include any failure for at least thirty
(30) days to make when due any payment required to be made in respect of an
Additional Capital Contribution or Member Loan pursuant to Section 3.3.

(ii)           Material Breach.  A breach of
any representation or warranty contained in Attachment 2.4-A or Attachment
2.4-B that would reasonably be expected to have a material adverse effect
on either the Company or on the Non-Defaulting Member’s rights or benefits to
be derived under this Agreement.

(iii)          Voluntary
Termination of Existence by a Member.  A Member commences any proceeding to wind up,
dissolve or otherwise terminate its legal existence.

(iv)          Involuntary Termination of Existence by a
Member. 
Any Proceeding commenced against a Member that seeks or requires the
winding up, dissolution or other termination of its legal existence; except if
the Member defends or contests that Proceeding in good faith within 15 days of
its commencement and obtains a stay of that Proceeding within 90 days of its
commencement, a Default Event will not exist so long as the stay continues and
the Member pursues the defense or contest diligently thereafter or the
Proceeding is dismissed.

(v)           Prohibited Transfer.  The Member
consummates any transaction that does, or agrees to any transaction that would,
if consummated, breach or result in a default under Section 6.1.

(vi)          Change of Control.  There is a
Change of Control of the Member or Person directly or indirectly controlling the
Member, including a transfer prohibited by 

 22
 

Section 6.1
(each, a “Target”).  A “Change of
Control” occurs when any of the following occurs:

a.     Change
in Ownership.  Any Person that is a
Competitor or group of Persons acting in concert that includes a Competitor
acquires or agrees to acquire, directly or indirectly, either (A) that percent
of the ownership interests of the Target that will provide the acquirer with a
sufficient number of the Target’s ownership interests having general voting
rights to elect a majority of the directors or corresponding governing body or
(B) in the case of a Target that has a class of securities registered under
section 12 of the Securities Exchange Act of 1934, as amended, or that is
subject to the periodic reporting requirements of that act by virtue of section
15(d) of that act, more than 50% of the Target’s ownership interests having
general voting rights for the election of directors or corresponding governing
body.

b.     Board
Approval of Acquisition.  The Target’s
board of directors or corresponding governing body recommends a tender offer
for 50% or more of the outstanding ownership interest of the Target by a Person
that is a Competitor or a group of Persons acting in concert that includes a
Competitor.

(vii)         International
Acquisition of a Monaco Competitor.  With respect to International, if
International or any Person directly or indirectly controlling International or
any subsidiary or affiliate of the foregoing or any group of Persons acting in
concert that includes any of the foregoing, directly or indirectly, takes any
of the following actions:  (A) acquires or agrees to acquire beneficial
ownership of voting securities of a Monaco Competitor representing 15% or more
of the then outstanding voting securities of such Monaco Competitor; (B)
announces or commences a tender or exchange offer to acquire voting securities
of a Monaco Competitor which, if successful, would result in such Person or
group owning, when combined with any other voting securities of such Monaco Competitor
owned by such Person or group, 15% or more of the then outstanding voting
securities of such Monaco Competitor; (C) enters into any merger, sale or other
business combination transaction with a Monaco Competitor; or (D) acquires or
agrees to acquire all or a substantial portion of a Monaco Competitor’s assets.

(viii)        Insolvency
Proceeding.  If any of the following occurs: (A) the
Member seeks relief in an Insolvency Proceeding or (B) the institution against
the Member of an involuntary Insolvency Proceeding; provided, however, that if
the Member defends or contests that Insolvency Proceeding in good faith within
15 days of its commencement and obtains a stay of that Proceeding within 90
days of its commencement, a Default Event will not exist so long as the stay
continues and the Member pursues the defense or contest diligently thereafter
or the Proceeding is dismissed; (iii) the Member admits the material
allegations of a petition against the Member in any Insolvency Proceeding; or
(iv) an order for relief (or similar order under non-U.S. law) is issued in any
Insolvency Proceeding.

(ix)           Appointment of a Receiver or Levy.  Either (A) a
Proceeding has been commenced to appoint a receiver, receiver-manager, trustee,
custodian or the like 

 23
 

for all or a substantial
part of the business or assets of the Member or (B) any writ, judgment, warrant
of attachment, warrant of execution, distress warrant, charging order or other
similar process (each, a “Levy”) of any
court is made or attaches to the Member’s Member Interest or a substantial part
of the Member’s properties; provided, however, that if the Member defends or
contests that Proceeding or Levy in good faith within 15 days of its
commencement and obtains a stay of that Proceeding or Levy within 90 days of
its commencement, a Default Event will not exist so long as the stay continues
and it pursues the defense or contest diligently thereafter or the Proceeding
is dismissed.

(x)            Assignment for the Benefit of Creditors.  The Member
makes a general assignment for the benefit of creditors, composition,
marshalling of assets for creditors or other, similar arrangement in respect of
the Member’s creditors generally or any substantial portion of those creditors.

7.3  Remedies—Upon Default by One Member.

(a)   By Non-Defaulting Member  A Non-Defaulting Member may, within 90 days
of becoming aware of the occurrence of a Default Event, give notice of the
Default Event (a “Default Notice”) to the Defaulting Member, electing to
dissolve the Company in accordance with Article IX.

(b)   Other Remedies.

(i)            Generally. 
The Non-Defaulting Member’s election to dissolve the Company under Section
7.3(a) will not preclude its exercise of whatever rights it may also have
under Article XI or at law.

(ii)           Certain Other Rights.  Notwithstanding the foregoing, no election
under Section 7.3(a) will preclude either (A) recourse by either the
Defaulting Member or the Non-Defaulting Member to whatever injunctive relief to
which it may otherwise be entitled under this Agreement or any Related
Agreement or (B) the recourse by the Non-Defaulting Member under Section
2.10 to recover amounts owing to the Company that are not specifically
taken into account in the determination of Fair Market Value.

(iii)          Fees and Expenses.  The Non-Defaulting Member’s legal fees and
expenses will be deducted from any distribution otherwise to be made to the
Defaulting Member and will be paid to the Non-Defaulting Member or, if the
Non-Defaulting Member elects, will be paid by the Defaulting Member to the
Non-Defaulting Member.

(c)   Effect of Notice.  If
the Non-Defaulting Member elects in its Default Notice the remedy in Section
7.3(a), it will carry out that dissolution in accordance with Article IX.

7.4  Remedies if Both Members are Defaulting
Members.  If both Members are, or become, Defaulting
Members, simultaneously or sequentially, then (a) the Members and the Manager
will proceed as expeditiously as possible to dissolve the Company in accordance
with Article IX as though such dissolution resulted from an election pursuant
to Section 7.3(a), and 

 24
 

(b) both Defaulting Members
will thereafter have whatever rights and remedies available to them under
Article XI and under Applicable Law.

7.5  Post-Termination Supply Arrangements.  This Section 7.5 applies
irrespective of whether either Member is a Defaulting Member.  Should the Company be dissolved following a
termination event pursuant to this Article VII, Monaco shall enter into a
supply agreement to meet International’s demand for diesel rear engine chassis
for a period of twelve (12) months following such dissolution on commercially
reasonable terms, (and shall include terms substantially similar terms to those
contained in Sections 5 through 7 and Sections 9 through 12
of the Supply Agreement, but shall not require that International use Monaco as
the exclusive supplier).

ARTICLE
VIII

Dissolution

8.1  Generally. 
Promptly after any election or event resulting
in dissolution, liquidation or winding up of the Company, including any
election to dissolve pursued under Section 7.3(a), the Board of
Directors will proceed to wind up the affairs of the Company in the manner set
forth in this Article.  After such notice
or other event, neither Member will be obligated to provide any additional
funds that would otherwise be required by the Company except amounts owing by
such Member pursuant to this Agreement or other contractual arrangements.

8.2  Liquidation Procedures.  Promptly
after any election or event resulting in dissolution, liquidation or winding up
of the Company, including any election to dissolve pursued under Section
7.3(a), the Board of Directors will apply the proceeds of the liquidation
of the Company in the following order:

(a)   to the payment of the expenses of liquidation;

(b)   to the payment of the liabilities and obligations of the Company,
other than those owing to a Member;

(c)   to the payment of any principal and/or interest due in respect of
Member Loans; and

(d)   thereafter in accordance with Section 4.5.

8.3  Certified Liquidation Statement.  The Members, or the Non-Defaulting Member,
if the Company is dissolved pursuant to Section 7.3(a), will cause the
Company’s independent auditors to prepare a certified liquidation statement of
the Company.  Each Member agrees to
prepare its financial statements and to prepare and file all tax returns
required to be filed by it in accordance with that liquidation statement, which
will contain:

(a)   a summarized statement of receipts and disbursements (including
expenses of dissolution);

(b)   a determination of the Book Capital Account of each Member;

 25
 

(c)   a statement of the liabilities of the Company owing to each
Member;

(d)   an allocation between the Members of all gains or losses realized
on the liquidation of the assets of the Company; and

(e)   an allocation of any tax attributes between the Members.

ARTICLE
IX

Reporting and Accounting Provisions

9.1  Books and Records.  The Company will make and keep books,
records and accounts that, in reasonable detail, accurately and fairly
reflect in all material respects the assets, liabilities and operations
of the Company.  The Company will also
maintain a system of internal accounting controls that complies with industry
standards and Applicable Law and that will provide reasonable assurance that:

(a)   transactions are executed in accordance with the Board of
Directors’ general or specific authorization;

(b)   transactions are recorded as necessary (i) to permit preparation
of financial statements in conformity with GAAP and (ii) to maintain
accountability for assets;

(c)   access to assets is permitted only in accordance with the Board of
Directors’ general or specific authorization; and

(d)   the recorded accountability for assets is compared with existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.

9.2  Other Accounting and Tax Provisions.  Attachment 9 contains additional accounting and tax
provisions applicable to the Company.

9.3  Distribution of Financial Statements and Other
Reports.  The Company will distribute to each Member:

(a)   Monthly Information.  As soon as practical after the end of each of the first three quarterly
periods in each calendar month and in any event within ten (10) Business Days
after the end of each such calendar month, a balance sheet as of the end of the
month and statements of income and cash flow, both for the month and for
the year to date, which financial statements shall fairly present in all
material respects the Company’s financial position as of that date and the
results of its operations for those periods in accordance with GAAP (subject to
normal year-end adjustments and the furnishing of notes; provided, however,
that notes will be furnished to the extent necessary to make the statements not
misleading);

(b)   Annual Information.  As soon as practical after the end of each Fiscal Year and in any event
within ten (10) Business Days thereafter:

(i)            a
balance sheet as of the year-end and statements of income and cash flow,
both for the fourth quarter and for the year; and

 26
 

(ii)           a
draft of the Company’s tax return in accordance with Section 5.2(a) of Attachment
9 hereto, and information that will be required to permit the Member to
prepare its tax return.

The year-end balance sheet and the statements for the
year will be examined in accordance with generally accepted auditing standards
by the Company’s independent certified public accountants, who will render
their opinion on whether those statements fairly present in all material
respects the Company’s financial position as of that date and the results of
its operations for those periods in accordance with GAAP.

9.4  Right of Inspection and Examination.  At all reasonable times, each Member,
through its representatives, has the right to inspect and copy the records of
the Company and to examine the employees of the Company with regard to its
activities.  These rights may be
exercised through any agent or employee of the Member designated by notice to
the Board of Directors.  The inspecting
Member will bear all expenses incurred in the inspection or examination.

9.5  Auditors. 
The
initial auditors of the Company are KPMG LLP.

ARTICLE X

Dispute Resolution

10.1        Generally.

(a)   Applies Only to Legal Claims.  This Article 10 governs only those disputes
that arise under this Agreement, the outcome of which depends solely on whether
the Company, a Member or any of its Affiliates is in default of its contractual
or other legal obligations (a “Legal Claim”).  “Legal Claims” include (i) disputes as to
indemnification under Article XI or any of the Related Agreements and (ii) the
formation, validity, binding effect, applicability, scope, interpretation,
performance, breach or termination of this Agreement or any Related Agreement.

(b)   Matters Specifically Not Subject to Article 10 Dispute
Resolution Procedures.  Without limiting  Section 10.1(a):

(i)            Business
Disputes: any Business Dispute (as defined in Section 5.8) is not considered a
Legal Claim subject to resolution under Section 10.2 but will be subject
instead to Section 5.8; and

(ii)           Injunctive
Relief: requests for injunctive or other equitable relief may be brought under Section
10.2.

10.2        Dispute Resolution Procedures

(a)   Negotiation.  Either
Member may give notice of a Legal Claim to the other Member.  For a period of 30 days from receipt of the
notice, the Members will consult with each other in a good faith effort to
resolve the Legal Claim.

 27

(b) Mediation.  If the
Members do not settle the Legal Claim within the 30-day period set forth in Section
10.2(a), either Member may provide the other Member with a notice for
mediation.  After delivery of that
notice, the Members will attempt in good faith to settle the matter by
mediation administered by the CPR Institute for Dispute Resolution under its
CPR Mediation Procedure.

(c) Binding Arbitration.  If within 30
days after receipt of the notice for mediation, the mediation does not result
in settlement of the Legal Claim, then the Legal Claim will be finally resolved
by arbitration administered by the CPR Institute for Dispute Resolution, in
accordance with its Rules for Non-Administered Arbitration.  A Member may initiate arbitration by notice
to the other Member any time after expiration of 60 days from receipt of notice
of the Legal Claim provided for in Section 10.2(a), whether or not
mediation has been initiated or completed unless the mediation was completed by
agreement of the parties, as reflected in a written agreement.  Unless the Members agree otherwise,
initiation of arbitration will not relieve any Member of its obligation to
participate in any mediation initiated under Section 10.2(b).

(d) Arbitration Terms.  Any
arbitration will comply with the following terms:

(i)            Formation
of Tribunal.  The arbitration
tribunal will consist of three arbitrators. 
One arbitrator will be appointed by each Member and the third will be
appointed by the first two.  If the first
two arbitrators fail to agree on the third arbitrator within 30 days after
their appointment, the third arbitrator will be appointed by the American
Arbitration Association.

The arbitrators will be familiar with the commercial
and manufacturing practices of the industry.

(ii)           Conduct
of Arbitration.  The
arbitration will take place in and will exclude any right of application or
appeal to any court in connection with any question of law or fact arising in
the course of the arbitration or with respect to any award made.  The United States Arbitration Act (9 U.S.C.
§§ 1—16, 201—208, 301—302) will apply and the arbitrators will otherwise apply
the law specified in Section 14.11.

(iii)          Awards.  The arbitration award will be final and
binding on the Members, will not be subject to judicial appeal, will not
include any punitive damages and will allocate, as appropriate, the costs of
arbitration, including legal fees and all related matters.  Any monetary award will stipulate a rate of
interest, deemed appropriate by the arbitrators, which will run from the date
notice of Legal Claim was given until the date when the award is fully
satisfied.  The arbitration award will be
promptly satisfied by the Member against whom it is granted, free of any
deduction or offset.  Any cost or fee
incident to enforcing the award will, to the maximum extent permitted by law,
be charged against the Member resisting enforcement.  Judgment upon the award rendered may be
entered in any court having jurisdiction, or application may be made to that
court for a judicial recognition of the award or an order of enforcement
thereof, as applicable.  The Company or
any Member may bring an action to enforce any award granted under this Section
10.2.

 28
 

ARTICLE
XI

Indemnification

11.1        Survival; Effect of Knowledge; Other.

(a) Survival.  Each
representation, warranty, covenant and agreement in this Agreement, and in any
certificate or document delivered pursuant to this Agreement, survives the
Closing only (i) for the time periods specified in Section 11.4 and (ii)
as to claims made within those time periods, until resolved.

(b) Relation to Default Provisions.  Except as
set forth in Section 7.3(b), the fact that a party has an
indemnification right under this Article XI will not preclude the exercise of
rights under Article VII.

(c) Duty to Mitigate.  A Member
must use its Best Efforts to mitigate its Damages for which it will seek
indemnification or other recovery against the other Member.

11.2        Indemnification—By International.  International
will indemnify and hold harmless and pay promptly to the Company the amount of
any Damages (as defined below) resulting from:

(a)   Breach
of Representations or Warranties: any breach of any representation or warranty
in this Agreement or in any certificate delivered pursuant to Section
2.8(a)(ii) made by International in connection with the Closing, without
giving effect to any exceptions made in such certificate;

(b)   Breach
of Covenants: any breach by International in the performance of its covenants
or obligations in this Agreement; and

(c)   Excluded
Liabilities of International: any liability, obligation, contractual commitment
or other commitment (whether known or unknown and whether absolute, accrued,
contingent or otherwise) (“Liabilities”) that is not expressly assumed
by the Company pursuant to this Agreement (“Excluded Liabilities”) of
International.

“Damages” means (A) any loss, whether in the nature of
a cost, damage, expense, payment, liability or obligation or otherwise, and
related attorneys’, accountants’ and other professional advisors’ reasonable
fees and expenses (including those as to investigation, prosecution or defense
of any claim or threatened claim), whether or not involving a third-party
claim, and (B) special, incidental, consequential, punitive or any other
damages, but only in the case of Excluded Liabilities and third party claims.

11.3        Indemnification—By Monaco.  Monaco will
indemnify and hold harmless and pay promptly to the Company the amount of any
Damages resulting from:

(a)           Breach of
Representations or Warranties: any breach of any representation or warranty in
this Agreement or in any certificate delivered pursuant to Section
2.8(b)(ii) made by Monaco in connection with the Closing, without giving
effect to any exceptions made in such certificate;

 29
 

(b)           Breach of Covenants:
any breach by Monaco in the performance of its covenants or obligations in this
Agreement; and

(c)   Excluded
Liabilities of Monaco: any Liability of Monaco that is an Excluded Liability.

11.4        Limitations on Indemnification Amount. 
International will not have any liability for indemnification with
respect to the matters described in Section 11.2(a) and Monaco will not
have any liability with respect to the matters described in Section 11.3(a)
until the total of all Damages with respect to the matters for which the Member
is otherwise liable exceeds $50,000 and then only for the amount by which the
Damages exceed $50,000.  This limitation
will not apply to any breaches of a party’s representations or warranties
relating to its authority or its title to any property contributed to the
Company.  Notwithstanding anything to the
contrary in this Agreement, no party shall be liable for any amount in excess
of $1,000,000 in the aggregate with respect to the matters described in Section
11.2(a) or 11.3(a) (as applicable). 
For avoidance of doubt, any indemnification in respect of Excluded
Liabilities shall not be subject to the limitations set forth in this Section
11.4.

11.5        Time Limitations.  No party
will have any liability for indemnification under this Article XI unless the
Person claiming the right to be indemnified (the “Indemnified Person”)
gives notice to the party from whom indemnification is being sought (the “Indemnifying
Person”), on or before the one (1) year anniversary of the Closing, stating
that the Indemnified Person has paid or properly accrued for losses, or
reasonably anticipates that it will incur liability for a loss for which the
Indemnified Person is entitled to indemnification under this Agreement.  Notwithstanding the foregoing, no limitations
as to the time for making claims (and such claims shall survive the termination
of this Agreement) applies to (i) Excluded Liabilities, (ii) those involving a
party’s representations or warranties relating to its authority or its title to
any property contributed to the Company or (iii) those involving any covenant
to be performed and complied with after the Closing.

11.6        Procedure for Indemnification—Third
Party Claims.

(a) Notice.  Promptly,
and in any event no later than 10 Business Days after receipt by a Person
entitled to indemnification of notice of the commencement of any Proceeding
against it, the indemnified Person will, if a claim is to be made against an
indemnifying party, give notice to the indemnifying party of the commencement
of the claim; provided, however, that the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may have
to any indemnified Person, except to the extent that the indemnifying party
demonstrates that the defense of the Proceeding is prejudiced by the
indemnified Person’s failure to give the notice timely.

(b) Participation.  If any Proceeding
referred to in Section 11.6(a) is brought against an indemnified Person
and the indemnified Person gives notice to the indemnifying party of the
commencement of the Proceeding, the indemnifying party may (i) participate in
the Proceeding and (ii) elect by notice to the indemnified Person to assume the
defense of the Proceeding with lawyers reasonably satisfactory to the
indemnified Person unless (A) the indemnifying party is also a party to the
Proceeding and the indemnified Person determines in 

 30
 

good faith that joint representation
would be inappropriate or (B) the indemnifying party fails to provide, promptly
after giving notice to the indemnified Person, reasonable assurance to the
indemnified Person of its financial capacity to defend the Proceeding and
provide indemnification with respect to the Proceeding.  If the indemnifying party assumes the defense
of the Proceeding, (1) the indemnifying party will not, as long as it
diligently conducts the defense, be liable to the indemnified Person under this
Section for any fees of other lawyers or any other expenses with respect to the
defense of the Proceeding subsequently incurred by the indemnified Person in
connection with the defense of the Proceeding, other than reasonable costs of
investigation and (2) no compromise or settlement of the claims may be effected
by the indemnifying party without the indemnified Person’s written consent
(which consent will not be unreasonably withheld or delayed) unless (x) there
is no finding or admission of any violation of legal requirements or any
violation of the rights of any Person and no effect on any other claims that
may be made against the indemnified Person and (y) the sole relief provided is
monetary damages that are paid in full by the indemnifying party.

(c) Right of Indemnified Person to Defend. 
Notwithstanding the foregoing, if an indemnified Person determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its Affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified Person may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle the Proceeding, but the
indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which
will not be unreasonably withheld or delayed).

11.7        Procedure for Indemnification—Other
Claims.  A claim for indemnification for any matter
not involving a third-party claim will be asserted by notice to the party  from
whom indemnification is sought promptly after becoming aware of the acts or
omissions or facts and circumstances on which the claim is based, but the
failure to notify the indemnifying party
will not relieve the indemnifying
party  of any liability that it may have to any indemnified
Person, except to the extent that the indemnifying party  demonstrates
that it is prejudiced by the failure. 
That notice is notice of a Legal Claim for purposes of Section 10.1.

11.8        Satisfaction of Indemnification
Obligations.

Subject to the terms and conditions of this Article XI
and in accordance with the deadlines specified in the preceding subsections, an
Indemnifying Person will satisfy its liability to the Company for indemnified
Damages by paying the amount of the liability to the Company, and will satisfy
its liability to any other Indemnified Person by paying the amount of the
liability to such Indemnified Person. 
Payments pursuant to the foregoing will be by wire transfer or by check,
as the recipient may direct.  In the
absence of directions within a reasonable period of time, payment may be made
by check.

11.9        Exclusiveness of Remedies.  Except (a)
as provided in Section 7.3(b) and 11.1(b), (b) for fraud or
willful misconduct and (c) subject to the procedures set forth in Article 10,
the remedies provided in this Article constitute the sole and exclusive
remedies available to the Company and the Indemnified Persons with respect to
matters covered in Sections 11.2 and 11.3.  Neither the foregoing nor anything else in
this Agreement will limit the right of a party  or

 31
 

the Company to enforce the
performance of this Agreement or of any Contract, document or other instrument
executed and delivered pursuant to this Agreement by any remedy available to it
in equity, including specific performance. 
The parties waive any requirement that the Person seeking equitable
relief post a bond or other security. 
For the avoidance of doubt, this Article XI shall not apply to claims
arising out of or relating to the performance of the Related Agreements.

ARTICLE
XII

Competition

12.1        Competition.

(a) Generally.  Each Member
will not, and will take all actions necessary to ensure that its Affiliates will
not, engage in the activities prohibited by this Section 12.1.  For purposes of this Section 12.1, the
“Restricted Period” for a Member lasts for so long as it or any of its
Affiliates owns any interest in the Company, plus the shorter of (A) any period
thereafter during which a Member is obligated to supply chassis to the other
Member pursuant to this Agreement or the transactions contemplated by this
Agreement and (B) twelve (12) months.

(b) Exclusive Supplier.  The Members agree that the Company shall be
the exclusive manufacturer and supplier of all of Workhorse’s production
requirements for its current and future portfolio of rear engine diesel
recreational vehicle and low-floor bus stripped chassis products (excluding the
“Whirlaway” platform) and the exclusive manufacturer and supplier of all of
Monaco’s production requirements for all of its current and future rear engine
diesel stripped chassis products. The Company hereby grants to Workhorse and
Monaco the exclusive right and license to (i) combine (or have third parties
combine) the chassis with vehicles bodies or any other components and (ii)
resell (or have third parties resell) chassis and any complete vehicles upon
which a chassis may be attached to third parties, subject to the terms and conditions
of this Agreement, provided that Monaco shall not be permitted to resell
chassis to up-fitters (other than Burlington Specialty Vehicles), truck
equipment manufacturers or other OEMs (excluding Swagman Motorhomes) but may
only resell the chassis (and the associated body) through its dealer network.

(c) Member Activities.  Monaco
acknowledges and agrees that (i) Workhorse will re-sell the chassis it
purchases from the Company to manufacturers of diesel motorhomes and low floor
buses, including manufacturers which may compete with Monaco, and (ii) Monaco
will use the chassis it purchases from the Company only in its internal
production operations (and will not sell stripped chassis to any third party or
resell chassis to up-fitters (other than Burlington Specialty Vehicles), truck equipment
manufacturers or other OEMs (excluding
Swagman Motorhomes), but may only resell the chassis (and the associated body)
through its dealer network).  Workhorse
acknowledges and agrees that Monaco’s finished products may compete with
finished products offered by manufacturers that purchase stripped chassis from
Workhorse.

(d) Restricted Activities.  Neither the
Member nor any of its Affiliates will:

(i)            Non-Competition: during the
Restricted Period, carry on or be engaged, concerned or interested directly or
indirectly whether as shareholder, partner,

 32
 

director,
employee, member, agent or otherwise in carrying on any business similar to or
competing with the Business anywhere in the United States (other than as a
holder of not more than five percent of the issued voting securities of any
company listed on any registered national securities exchange);

(ii)           Non-Solicitation of Employees: during
the Restricted Period, either on its own account or in conjunction with or on behalf
of any other Person, employ, solicit or entice away or attempt to employ,
solicit or entice away from the Company or the other Member, any Person who is
or will have been at the date of or within 24 months before any solicitation,
enticement or attempt, an officer, Director, consultant or engineering,
professional or administrative employee of the Company or of the other Member,
whether or not that Person would commit a breach of contract by reason of
leaving employment; provided, however, that the foregoing does not restrict a
Member from employing any such person who was an employee of that Member while
(A) serving as a Director or (B) providing services to the Company (whether as
an employee, consultant or otherwise) nor does it restrict a Member’s general
advertisements with respect to a position that are not specifically directed to
officers, Directors, consultants or engineering, professional or administrative
employees of the Company, and provided, further, that the Members may agree
from time to time that this Section does not apply to specified persons; and

(iii)          Restriction on Use of Trademark and
Trade name: at any time hereafter use as a company name, trademark or service
mark the word “Custom Chassis Products “ or any similar word in a way likely to
be confused with the name of the Company.

12.2        Independent Agreements.  The
agreements set forth in Section 12.1 are, will be deemed, and will be
construed as separate and independent agreements.  If any agreement or any part of the
agreements is held invalid, void or unenforceable by any court of competent
jurisdiction, then such invalidity, voidness or unenforceability will in no way
render invalid, void or unenforceable any other part of the agreements; and Section
12.1 will in that case be construed as if the void, invalid or
unenforceable provisions were omitted.

12.3        Scope of Restrictions.  While the
restrictions contained in Sections 12.1 and 12.2 are considered
by the Members to be reasonable in all the circumstances, it is recognized that
restrictions of the nature in question may not be enforced as written by a
court.  Accordingly, if any of those
restrictions are determined to be void as going beyond what is reasonable in
all the circumstances for the protection of the interest of the Members, but
would be valid if restrictive periods were reduced or if the range of
activities or area dealt with were reduced in scope, then the periods,
activities or area will apply with the modifications as are necessary to make
them enforceable.

ARTICLE
XIII

Confidentiality

13.1        Confidentiality—Confidential Information.  Except as
otherwise expressly permitted by this Article XIII, each Member and the Company
will keep confidential, will not

 33
 

disclose and will otherwise retain
in strictest confidence any Confidential Information (as defined in Section
13.3), unless disclosure is (a) approved by both Members or (b) expressly
permitted by this Article XIII.

13.2        Confidentiality—Company Information.  Except as
otherwise expressly permitted by this Article XIII:

(a) Obligations of the Members.  Each Member
will keep confidential, will not disclose, will not use, and will otherwise
retain in strictest confidence the Company Information.  Without limiting the foregoing, each Member
will use no less than the same degree of care, and no less than a reasonable
degree of care, to protect the Company Information as it uses to protect its
own trade secrets and confidential information.

(b) Obligations of the Company.  The Company
will keep confidential, will not disclose, and will otherwise retain in
strictest confidence the Company Information. 
The foregoing permits the Company to use the Company Information, but
the Company will adopt procedures in connection with its use of Company
Information that are reasonably expected to prevent that information from
becoming publicly available.  The
foregoing does not limit the Company’s obligations otherwise set forth in this
Article XIII, including those in Section 13.5 and Section 13.6.

13.3        Definitions—Company Information and Other.

(a) Company Information.  “Company
Information” means all information (whether written, oral or in another form)
that consists of, or includes, (i) Trade Secrets of the Company or any Member
or (ii) Confidential Information.

(b) Trade Secrets.  “Trade
Secrets” means trade secrets under applicable trade secret or other law; and
includes, however documented, concepts, ideas, designs, know-how, methods,
data, processes, formulae, compositions, improvements, inventions, discoveries,
product specifications, past, current and planned research and development and
manufacturing or distribution methods and processes, lists of actual or
potential customers or suppliers, current and anticipated customer
requirements, price lists, market studies, business plans, computer software
and programs (including object code and source code), computer software and
database technologies, systems, structures and architectures, and any other
information that is a trade secret within the meaning of Applicable Law.

(c) Confidential Information.  “Confidential
Information” means written or other information concerning the Company or any
Member, other than Trade Secrets; and, to the extent consistent with the
foregoing definition, includes historical financial statements, financial projections
and budgets, historical and projected sales, capital spending budgets and
plans, information regarding dealer and customer distribution networks, the
terms of this Agreement, the terms of the Business Plan, the terms of any
executed confidentiality agreement and any information that is marked “confidential”
or in some comparable manner.

 34
 

13.4        Certain Exceptions.  The
prohibitions in Sections 13.1 and 13.2 will not apply only to the
extent that:

(a) Previously in Possession.  The
disclosing Person (i) demonstrates through written records that the same
Company Information was in its possession before disclosure to it and (ii) the
disclosing Person provided the Company and each Member with written notice of
prior possession either (A) before the execution and delivery of this Agreement
or (B) if the disclosing Person later becomes aware of (through disclosure by
the Company or otherwise) some aspect of the Company Information as to which it
had prior possession, promptly upon its becoming aware of the Company
Information;

(b)   Existing
Product Business.  (i) Where Monaco
is the disclosing Person, the Company Information or Confidential Information,
as the case may be, relates to Monaco’s Product Business or the Monaco
Contributed Assets or (ii) where International is the disclosing Person, the
Company Information or Confidential Information, as the case may be, relates to
International’s Product Business or the International Contributed Assets.

(c) Becomes Public.  The
disclosing Person demonstrates (i) that the same information is currently
publicly available or has become publicly available and (ii) that such public
availability does not result from (A) the misappropriation or improper
disclosure of such Company Information by the disclosing Person or (B) the
obtaining of such Company Information by improper means of the disclosing
Person;

(d) Independently Developed.  The
disclosing Person demonstrates that the same information was developed
independently by the disclosing Person without the use of the Company
Information;

(e) Legal Obligation to Disclose.  The
disclosing Person demonstrates that Applicable Law requires it to disclose the
Company Information, but then only (i) to the extent disclosure is required and
(ii) after giving the Company and each Member notice of the obligation so that
it may seek a protective order or other similar or appropriate relief.  In the absence of an order or relief, the
disclosing Person must use reasonable efforts to have the disclosed information
treated confidentially consistent with this Article;

(f) Enforcement of Agreement.  The
disclosing Person demonstrates that it is reasonably necessary for the
disclosing Person to make the disclosure to enforce this Agreement, and then
only if the disclosing Person undertakes in good faith to limit the manner and
extent of that disclosure to the extent practical including obtaining
protective orders from the court or arbitrator from whom enforcement is sought;
or

(g) Stock Exchange Rules and Securities Laws.  The
disclosing Person has determined, in good faith after consultation with outside
counsel to the disclosing Person, that disclosure is necessary or desirable in
order to comply with applicable stock exchange rules or federal or state
securities laws.

 35
 

13.5        Permitted Disclosure to Representatives. 
Notwithstanding the prohibitions of this Article, each Member and the
Company may disclose the terms of this Agreement and Company Information to its
Representatives directly involved with the Company but:

(a)   only
to the extent necessary for the Representative to accomplish his assigned tasks
and otherwise strictly on a need to know basis; and

(b)   only
if the Representative (i) is provided a copy of this Article and (ii) is
advised in writing by the disclosing Person (A) that he is obligated to keep
confidential, not disclose and retain in strictest confidence the terms of this
Agreement and the Company Information strictly in accordance with terms of this
Article and (B) that the Company or any Member may directly enforce the obligation.

“Representatives” means a Person’s directors,
officers, employees, agents, consultants, advisors or other representatives,
including lawyers, accountants and financial advisors.  In the case of a Member, “Representatives”
includes the Representatives of that Member’s Affiliates.

13.6        Disclosure to Non-Representatives.  Any
disclosure of the terms of this Agreement or any Company Information may be
made to a non-Representative only if the receiving Person executes and delivers
a confidentiality agreement in form and substance approved by the Board of
Directors.

13.7        Continuing Protection of Trade Secrets.  Any Trade
Secrets of the Company will also be entitled to all of the protections and
benefits under Applicable Law.  If a
court of competent jurisdiction determines that any Company Information that
the Company deems to be a Trade Secret is not a Trade Secret, or ceases to be a
Trade Secret under Applicable Law, then the Company Information will be
considered Confidential Information for purposes of this Article.

13.8        Remedies.  Each Member
recognizes that the activities proscribed by this Article will result in
irreparable damage and harm to the Company and the Members and that the Company
and Members and their Affiliates may be without an adequate remedy at law in
the event of any such activities. 
Therefore, if any of the foregoing Sections of this Article is breached
or is threatened to be breached, the Company, each Member, and each of their
Affiliates may: (a) obtain specific performance; (b) enjoin any Person that has
breached or threatens to breach from engaging in any activity proscribed by
this Article; and (c) pursue any one or more of the foregoing or any other
remedy available to it under Applicable Law, including actual and/or punitive damages
and set-off rights.  A Person seeking or
obtaining any such relief will not be deemed to be precluded from obtaining any
other relief to which that Person may be entitled.  Each Member waives on behalf of itself and
each of its Affiliates any requirement that a Person seeking to enforce this
Article submit proof of the economic value of any Trade Secret or post any bond
or other security in connection therewith.

13.9        Attorney-Client Privilege.  To the
extent that any Company Information includes materials subject to the
attorney-client privilege, the Company is not waiving and will not be deemed to
have waived or diminished its attorney work-product protections,
attorney-client privileges or similar protections and privileges as a result of
disclosing any Company 

 36
 

Information (including Company
Information related to pending or threatened litigation) to a Member, whether
or not the Company has asserted, or is or may be entitled to assert, those
privileges and protections.  The Company
and the Members: (a) share a common legal and commercial interest in all such
Company Information that is subject to such privileges and protections; (b) are
or may become joint defendants in proceedings to which such Company Information
covered by those protections and privileges relates; and (c) intend that those
privileges and protections remain intact if the Company or any Member becomes
subject to any actual or threatened proceeding to which such Company
Information covered by such protections and privileges relates.  In furtherance of the foregoing, no Member
shall claim or contend, in proceedings involving the Company or any Member,
that the Company waived its attorney work-product protections, attorney-client
privileges or similar protections and privileges as a result of disclosing any
Company Information (including Company Information related to pending or
threatened litigation) to the Member.

13.10      Continuing Obligations.  The
obligations in this Article will be effective from the date of this Agreement
and will bind (a) the Company indefinitely and (b) each Member (i) with respect
to the Confidential Information of the Company, for so long as that Member is
bound by the non-competition provisions of Article XII and (ii) with respect to
the Trade Secrets of the Company, for as long as those Trade Secrets remain
trade secrets under Applicable Law.

13.11      No Limitation on Other Agreements.  The
prohibitions in this Article are in addition to, and will be interpreted as
separate and independent from, any similar prohibitions in any agreement
between the Company and any of its Representatives that limits the use or
disclosure of information concerning the Company.

ARTICLE
XIV

Miscellaneous

14.1        Further Assurances.

(a) Generally.  The Members
will (i) furnish upon request to each other further information, (ii) execute
and deliver to each other documents, and (iii) do other acts and things, all as
the other Member may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.

(b) Transition.  In
connection with and for a reasonable time following a permitted purchase of a
Member’s Member Interest, the selling Member will cooperate in connection with
any reasonable requests of the Company or the other Member to effect the
purchase, but the selling Member will be entitled to be reimbursed the actual
out-of-pocket expenses it incurs in complying with the request.

14.2        Notices.  Ordinary
course business communications in connection with the performance of this
Agreement may be given electronically, by fax, by mail or any other comparable
means, but any such communication will be deemed received only upon actual
receipt.  Any other notice, communication
and delivery under this Agreement (including one of default or termination):
(a) will be made in writing signed by the Person making it; (b) will specify
the Section to which it relates; (c) will be delivered only (i) in person, (ii)
by nationally

 37
 

recognized next Business Day
delivery service electing, and being timely delivered to such service for, next
Business Day delivery, or (iii) by fax and with a confirming copy sent by a
nationally recognized next Business Day delivery service electing, and being
timely delivered to such service for, next Business Day delivery; (d) unless
given in person, will be given to the address specified below; (e) will be
deemed given (i) if delivered in person, on the date of personal delivery, (ii)
if sent by nationally recognized next Business Day delivery service electing,
and being timely delivered to such service for, next Business Day delivery, on
the first Business Day after so sent, or (iii) if sent by fax with a copy sent
by a nationally recognized Business Day delivery service electing, and being
timely delivered to such service for, next Business Day delivery, on the first
Business Day after so sent; and (f) will be deemed received (i) if delivered in
person, on the date of personal delivery, (ii) if sent by nationally recognized
next Business Day delivery service electing, and being timely delivered to such
service for, next Business Day delivery, on the first Business Day after so
sent, and (iii) if sent by fax and with a confirming copy sent by a nationally
recognized next Business Day delivery service electing, and being timely
delivered to such service for, next Business Day delivery, on the first
Business Day after so sent.  The Person
giving the notice will pay all delivery costs. 
The addresses and the requirements for copies are as follows:

	
  If to International, to:

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
  International
  Truck and Engine Investments Corporation and International Truck and

  Engine Corporation

  4201 Winfield Road Warrenville,

  Illinois 60555

  Attention: VP & GM Medium Truck

  Vehicle Center

  	
   

  	
  International Truck and Engine Corporation

  4201 Winfield Road

  Warrenville, Illinois 60555

  Attention: Office of the General Counsel

  
	
   

  	
   

  	
   

  
	
  If to Monaco,
  to:

  	
   

  	
  with copies to:

  
	
   

  	
   

  	
   

  
	
  Monaco Coach
  Corporation

  91320 Industrial Way

  	
   

  	
  Monaco Coach Corporation

  606 Nelson’s Parkway

  
	
  Coburg, Oregon
  97408

  	
   

  	
  Wakarusa, Indiana 46573

  
	
  Attention:
  President

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wilson Sonsini Goodrich & Rosati

  Professional Corporation

  
	
   

  	
   

  	
  650 Page Mill Road

  Palo Alto, CA 95304

  
	
   

  	
   

  	
  Attention:

  	
  Henry P. Massey 

  
	
   

  	
   

  	
  Robert T. Ishii

  

 

Notice will be given to such other representatives or
at such other addresses as a Person may furnish to the other Persons entitled
to notice pursuant to the foregoing.  If
notice is given pursuant to this Section of a permitted successor or assign of
a Person, then notice will thereafter be given as set forth above also to such
successor or assign of such Person.

 38
 

 

14.3        Jurisdiction; Service of Process.  All actions
or Proceedings relating to this Agreement (whether to enforce a right or
obligation or obtain a remedy or otherwise) that are not subject to Article XI
will be brought solely in the state or federal courts located in or for the
State of Indiana.  Each Member hereby
unconditionally and irrevocably consents to the jurisdiction of those courts
and waives its rights to bring any action or Proceeding against the other
Member except in those courts.  Process
in any action or Proceeding referred to in the preceding sentence may be served
on any Member anywhere in the world. 
Each Member irrevocably waives any right to a jury trial with respect to
any matter arising out of or in connection with this Agreement.  If any Member seeks to enforce its rights
under this Agreement by joining another Person to a Proceeding before a jury in
which the third party is a party, the parties will request the court to try the
claims between the Members without submitting the matter to the jury.

14.4        Waiver.  Neither the
failure nor any delay by any Person in exercising any right, power or privilege
under this Agreement or the documents referred to in this Agreement will
operate as a waiver of the right, power or privilege, and no single or partial
exercise of any right, power or privilege will preclude any other or further
exercise of the right, power or privilege or the exercise of any other right,
power or privilege.  To the extent
permitted by Applicable Law: (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one Person, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Person; (b) no waiver that may be
given by a Person will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one Person will be deemed to be
a waiver of any obligation of that Person or of the right of the Person giving
the notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.

14.5        Entire Agreement and Modification.  This
Agreement and the Related Agreements (a) supersede all prior agreements between
the parties with respect to their subject matter and (b) constitute a complete
and exclusive statement of the terms of the agreement between the parties with
respect to their subject matter.  This
Agreement may not be amended except by a written agreement executed by the
Members.

14.6        Assignments, Successors.  Except as
expressly provided in this Agreement, neither Member may assign any of its
rights under this Agreement without the prior written consent of the other
Member.  Any such assignment without the
other parties’ prior written consent shall be null and void.

14.7        No Third Party Rights.  Other than
the rights provided under Section 5.11 hereof, nothing expressed or
referred to in this Agreement will be construed to give any Person other than
the Members (and the Company) any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision of this Agreement.  This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the Members (and the
Company) and their successors and assigns.

14.8        Severability.  If any
provision of this Agreement not essential to accomplishing its purposes is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect.  Any provision of this

 39
 

Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.

14.9        Time is of the Essence; Computation of
Time.  Time is of the essence of each and every
provision of this Agreement.  If the last
day for the exercise of any privilege or the discharge of any duty under this
Agreement falls on a day that is not a Business Day, then the Person having
such privilege or duty will have until 5:00 p.m. (its local time) on the next
succeeding Business Day to exercise its privilege or to discharge its duty.

14.10      Expenses.  Each Member
will bear its own expenses incurred in connection with the negotiation,
drafting, implementation and performance of this Agreement except as provided
in Section 7.3(b)(iii).

14.11      Governing Law.  Except for
the application of the United States Arbitration Act (9 U.S.C. §§ 1—16) to
dispute resolution as provided in this Agreement, this Agreement, including
issues arising out of or related to this Agreement, will be governed by the
laws of the State of Indiana.

14.12      Counterparts.  This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.

Signature
page follows.

 40

                IN WITNESS WHEREOF, the parties
hereto have duly executed this Agreement as of the date first written above.

	
  

  	
   

  	
  INTERNATIONAL TRUCK AND ENGINE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Daniel C. Ustian

  
	
   

  	
   

  	
  Name:

  	
  Daniel C. Ustian

  
	
   

  	
   

  	
  Title:

  	
  Chairman, President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INTERNATIONAL TRUCK AND ENGINE INVESTMENTS
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Daniel C. Ustian

  
	
   

  	
   

  	
  Name:

  	
  Daniel C. Ustian

  
	
   

  	
   

  	
  Title:

  	
  Chairman, President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MONACO COACH CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kay L. Toolson

  
	
   

  	
   

  	
  Name:

  	
  Kay L. Toolson

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
					

 

Attachment 1.1

Definitions and Certain Rules of Construction 

Part One: Definitions

“Actual Chassis Cost”
means, with respect to each chassis manufactured by the Company, the product of
(i) the Actual Per Unit Cost for such chassis and (ii) the applicable Chassis
Volume.

“Actual Per Unit Cost”
means, with respect to each chassis manufactured by the Company, the actual
current materials cost for such chassis.

“Additional Capital Contributions” has the
meaning given in Section 3.2(a).

“Affiliate” of a Person means:  (a) a director, officer, partner, member,
manager, executor or trustee of a Person and (b) any Person directly or
indirectly controlling, controlled by, or under common control with, that
Person, provided, however, no party to this Agreement will be considered an
affiliate of any other party solely by reason of its participation in the
Company. For purposes of this definition, “control,”
“controlling,” and “controlled” mean
having the right to elect a majority of the board of directors or other comparable
body responsible for management and direction of a Person by contract, by
virtue of share ownership or otherwise.

“Aggregate Actual Cost” means the sum of the
Actual Chassis Costs for all chassis manufactured by the Company.

“Aggregate Baseline Cost”
means the sum of the Baseline Chassis Costs for all chassis manufactured by the
Company.

“Aggregate Chassis Volume”
means the sum of the Chassis Volumes for all chassis manufactured by the
Company.

“Agreement” has the meaning given in the
opening paragraph.

“Applicable Law” means each applicable
provision of any constitution, statute, law, ordinance, code, rule, regulation,
order, decree, judgment, award or injunction.

“Average Cost Savings”
means, with respect to any Measurement Date, (i) the difference between the
Aggregate Baseline Cost and the Aggregate Actual Cost divided by (ii) the
Aggregate Chassis Volume.

“Baseline Assessment” has the meaning given
in the Lease.

“Baseline Chassis Cost” means, with respect
to each chassis manufactured by the Company, the product of (i) the Baseline
Per Unit Cost for such chassis and (ii) the applicable Chassis Volume.

“Baseline
Per Unit Cost” means the material costs for such chassis as the parties to
the Agreement may agree.

“Best
Efforts” means the efforts that a prudent Person who wants to obtain a
result would use in similar circumstances to attempt to obtain that
result.  An obligation to use Best
Efforts under this Agreement does not require a Person to take actions that
would result in a materially adverse change in the benefits of this Agreement
and the Formation Transactions to that Person.

“Board of Directors”
has the meaning given in Section 5.1(a).

“Book Capital Account”
has the meaning given in Section 3.1 of Attachment 9.

“Business” has the
meaning given in the Recitals.

“Business Day” means
any day other than Saturday, Sunday or any public or legal holiday, whether
federal or state, in the place in which a duty or obligation is to be
performed.

“Business Dispute”
has the meaning given in Section 5.8(a).

“Business Plan” has
the meaning given in Section 5.7(a).

“Chair” has the meaning
given in Section 5.2(b).

“Change of Control”
has the meaning given in Section7.2(a)(vi).

“Chassis Volume” means, with respect to each
chassis manufactured by the Company, the projected manufacturing volume for
such chassis as set forth in the Business Plan with respect to the 12-month
period ending on the relevant Measurement Date.

“Cleanup” means any investigation, remediation
or other response action required by any Governmental Body with applicable
jurisdiction pursuant to applicable Environmental Laws.

“Closing”
has the meaning given in Section 2.7.

“Closing
Date” has the meaning given in Section 2.7.

“Company”
has the meaning given in the Recitals.

“Company
Indemnified Person” has the meaning given in Section 5.11(a).

“Company
Information” has the meaning given in Section 13.3(a).

“Confidential
Information” has the meaning given in Section 14.3(c).

“Contract” means
any binding contract, agreement, commitment, arrangement, undertaking or understanding
of any kind whatsoever, together with all related amendments, modifications,
supplements, waivers and consents.

“Contributed
Operating Asset” has the meaning given in Section 4.5(a).

“Cumulative Net
Taxable Income” means, as of the end of each Fiscal Year of the Company for
which a Tax Amount is to be determined, the sum of all taxable income for the
current and all prior Fiscal Years reduced by the sum of all taxable losses for
the current and all prior Fiscal Years.

“Cure Period” has the
meaning given in Section 5.12(e).

“Damages” has the
meaning given in Section 11.2.

“Default Event” has
the meaning given in Section 7.2(a).

“Default Notice” has
the meaning given in Section 7.3(a).

“Defaulting Member”
has the meaning given in Section 7.2(a).

“Designated
Representatives” has the meaning given in Section 5.8(b).

“Director” has the
meaning given in Section 5.1(a).

“DLLCA” has the
meaning given in Section 2.1(a).

“Dispute Notice” has the meaning given in Section
5.8(a).

“Effective Tax Rate” means the highest U.S.
corporate income tax rate for that year plus the federal tax-effected state and
local income tax rate in effect at the principal office of the Company.

“Encumbrance” means any charge, claim,
condition, equitable interest, lien, option, pledge, security interest, right
of refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.

“Enforceability Exceptions” means applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally or by equitable principles relating to enforceability.

“Environment” means soil, land surface or
subsurface strata, surface waters (including navigable waters, ocean waters,
streams, ponds, drainage basins, and wetlands), ground waters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life.

“Environmental
Laws” means any Applicable Law relating to pollution or protection of human
health, as it relates to exposure to Hazardous Materials, environment and
natural resources, including those relating to the management, Release or
threatened release of Hazardous Materials into the Environment or into any
building or structure and the clean-up thereof.

“Environmental Permits”
has the meaning given in Section 8.1 of Attachment 2.4-A.

“Excess Distribution
Amount” has the meaning given in Section 4.5(b).

“Excluded Liabilities”
has the meaning given in Section 11.2(c).

“Facility” means the factory at the Premises
and related assets to be operated by the Company for the research, development,
manufacturing and distribution of products to be manufactured by the Company.

“Fair
Market/Statutory Value” has the meaning given in Section 1 of Attachment
9.

“Fiscal Year”
means the twelve month period beginning November 1st of each year and ending October 31st of the
following year.

“Formation Transactions” means all of the
transactions contemplated by this Agreement, including the formation of the Company
and the actions to be taken by the Members at the Closing.

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

“GAAP Accounts and Statements” has the
meaning given in Section 2.1 of Attachment 9.

“Goal” has the meaning given in Section
5.12(e).

“Governmental Authorization” means any
consent, license, permit or other authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Applicable Law, but excluding consents, licenses, permits or
other authorizations issued pursuant to Environmental Laws, which are covered
under “Environmental Permits.”

“Governmental Body” means any governmental or
quasi-governmental body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power.

“Hazardous Materials” means any waste,
material, substance or pollutant that has been designated by any Governmental
Body to be hazardous or toxic (including petroleum products, polychlorinated
biphenyls (“PCBs”), friable asbestos or asbestos-containing materials and
radioactive materials).

“Insolvency Proceeding” means any Proceeding
relating to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors.

“International” has the meaning given in the
opening paragraph of this Agreement.

“International Contributed Assets” has the
meaning given in Section 2.8(a)(iv).

“International Director” has the meaning
given in Section 5.1(b).

“International Disclosure Schedule” means the
disclosure schedules delivered by International pursuant to this Agreement.

“International Indemnified Person” has the
meaning given in Section 12.4(ii).

“International’s
Product Business” has the meaning given in Section 1 of Attachment
2.4-A.

“IRC” has the meaning
given in Section 1 of Attachment 9.

“Knowledge”, with respect to an individual,
means “Knowledge” of a particular
fact or other matter if that individual is actually aware of that fact or other
matter.  A Person (other than an
individual) will be deemed to have “Knowledge”
of a particular fact or other matter if any individual who is
serving as a director or executive officer of such Person has, at the time with
respect to which the term is used, “Knowledge”
of such fact or other matter as set forth in the preceding sentence.

“Lease”
means the real property lease among Monaco, the Company and ITEC.

“Legal
Claim” has the meaning given in Section 10.1(a).

“Levy”
has the meaning given in Section 7.2(a)(viii).

“Liabilities”
has the meaning given in Section 11.2(c).

“Liquidation
of the Company” has the meaning given in Section 1 of Attachment
9.

“Liquidation
of a Member’s Interest” has the meaning given in Section 1 of Attachment
9.

“Manager”
has the meaning given in Section 5.1(a).

“Manufacturing
Cost Amount” has that meaning as provided in the Supply Agreement.

“Manufacturing
Manager” has the meaning given in Section 5.5(a).

“Material
International Consents” has the meaning given in Section 1.3 of Attachment
2.6-A.

“Material
Monaco Consents” has the meaning given in Section 1.3 of Attachment
2.6-B.

“Material
Default” has the meaning given in Section 7.2(a)(i).

“Measurement Date”
shall mean the first Business Day following each of (i) the nine-month anniversary
of the Closing, (ii) the twelve-month anniversary of the Closing, (iii) each
six-month anniversary of the Closing thereafter and (iv) the final day of any
Cure Period during which the Average Cost Savings has not otherwise been
determined to have equaled or exceeded Goal.

“Member” means a Person who is a Member as
provided in this Agreement, each permitted successor or assign of a Member,
and, when appropriate to effect the binding nature of this Agreement for the
benefit of another party, any other successor or assign of a Member.

“Member
Interest” means all of a Member’s interest in the Company, including the
Member’s economic interest and all management and other rights.  The interest is generally expressed as a
percentage of all interests in the Company as determined in accordance with
this Agreement.

“Member
Loans” has the meaning given in Section 3.2(a).

“Monaco”
has the meaning given in the opening paragraph of this Agreement.

“Monaco Contributed Assets” has the meaning
given in Section 2.8(b)(iv).

“Monaco Director” has the meaning given in Section
5.1(b).

“Monaco Disclosure Schedule” means the
disclosure schedules delivered by Monaco pursuant to this Agreement.

“Monaco
Governmental Authorization” has the meaning given in Section 6.2 of Attachment
2.4-B.

“Monaco’s Product Business” has the meaning
given in Section 1 of Attachment 2.4-B.

“Non-Contributing Member” has the meaning
given in Section 3.3.

“Non-Defaulting Member” has the meaning given
in Section 7.2(a).

“Officer” means any officer of the Company
appointed pursuant to Section 5.4(a)(ix), and includes, for all
applicable purposes in the Agreement, the Manufacturing Manager.

“Operating Asset” has the meaning given in Section
4.5(a).

“Order” means any award, order, injunction,
judgment, ruling or verdict entered, issued, made or rendered by any
Governmental Body or by any arbitrator.

“Ordinary Course of Business” means an action
taken by a Person only if it is consistent with the past practices of that
Person and is taken in the ordinary course of the normal day-to-day operations
of that Person; and, if undertaken by the Company, does not require approval by
the Board of Directors or the Members.

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

“Other Member” has the meaning given in Section
3.3.

“Party or Parties” means each or all, as
applicable, of the entities who have executed and delivered this Agreement,
each permitted successor or assign of a party and, when appropriate to effect
the binding nature of this Agreement for the benefit of another party, any
other successor or assign of a party.

“Permitted Encumbrances” has the meaning
given in Section 1.4(b)(ii) of Attachment 2.6-A and Section
1.4(b)(ii) of Attachment 2.6-B.

“Person”
means any person or entity of every kind and is to be construed as broadly as
possible.

“Pre-contribution Gain”
has the meaning given in Section 4.2(d) of Attachment 9.

“Pre-contribution
Loss” has the meaning given in Section 4.2(d) of Attachment 9.

“Premises” has the
meaning given in the Lease.

“Prime Rate” has the
meaning given in Section 3.2(c).

“Principal Customer”
has the meaning given in Section 4.5(a).

“Proceeding” means
any action, arbitration, audit, litigation or suit (whether civil, criminal,
administrative or investigative) commenced by or before, or otherwise
involving, any Governmental Body or arbitrator.

“PPI”
means the Producer Price Index for Commodities in the “Transportation Equipment
Group,” Series ID: WPU14, as measured by the U.S. Department of Labor, Bureau
of Labor Statistics.

“Purchasing
Committee” has the meaning given in Section 5.12(a).

“Regulatory Allocations”
has the meaning given in Section 4.4 of Attachment 9.

“Related Agreements” include, without limitation,
the Joint Venture Supply Agreement, the Workhorse Services Agreement, the
Monaco Services Agreement, and the Lease, each entered into as of the date
hereof.

“Release” shall have the same meaning as under
the Comprehensive Environmental Response Compensation & Liability Act of
1980.

“Representatives”
has the meaning given in Section 13.5.

“Restricted
Period” has the meaning given in Section 12.1.

“Shortfall
Distributions” has the meaning given in Section 3.3(b).

“Shortfall
Loan” has the meaning given in Section 3.3(b).

“Specified
Interest Rate” has the meaning given in Section 3.2(c).

“Target”
has the meaning given in Section 7.2(a)(vi).

“Tax” means any
tax or other similar charge, whether based on income, the ownership of property,
the happening of an event or otherwise (including penalties, interest or
additions to tax related thereto), assessed by or under the authority of any
Governmental Body or payable pursuant to any Contract relating to the sharing
of the payment of any such tax or charge.

“Tax
Amount” means the product of (i) the Effective Tax Rate and (ii) the
Company’s Cumulative Net Taxable Income. 
The Tax Amount will not be in excess of the product of (A) the Effective
Tax Rate and (B) the Company’s taxable income for the Fiscal Year of the determination.

“Tax Regulations”
has the meaning given in Section 1 of Attachment 9.

“Tax Return” means any return or other document
required to be submitted to any Governmental Body in connection with any Tax.

“Trade
Secrets” has the meaning given in Section 13.3(b).

“Transfer”
has the meaning given in Section 6.1.

“Unit”
has the meaning given in Section 2.9(b).

“Workhorse”
has the meaning given in the Recitals.

 

 

Attachment 1.2 to Joint Venture Agreement

Certain Rules of Construction 

For
purposes of this Agreement:

1.               The
phrase “breach of a representation” includes a misrepresentation and the
failure of a representation to be accurate.

2.               “Including”
and any other words or phrases of inclusion will not be construed as terms of
limitation, so that references to “included” matters will be regarded as
non-exclusive, non-characterizing illustrations.

3.               “Copy”
or “copies” means that the copy or copies of the material to which it relates
are true, correct and complete.

4.               When
“Article,” “Section,” “Exhibit,” or “Attachment” is capitalized in this
Agreement, it refers to an article, section, exhibit or attachment to this
Agreement.

5.               “Will”
has the same meaning as “shall” and, thus, connotes an obligation and an
imperative and not a futurity.

6.               Titles
and captions of or in this Agreement, the cover sheet and table of contents of
this Agreement are inserted only as a matter of convenience and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any of its provisions.

7.               Whenever
the context requires, the singular includes the plural and the plural includes
the singular, and the gender of any pronoun includes the other genders.

8.               Each
exhibit and schedule referred to in this Agreement and each attachment to any
of them or this Agreement is hereby incorporated by reference into this
Agreement and is made a part of this Agreement as if set out in full in the
first place that reference is made to it.

9.               Any
reference to any statutory provision includes each successor provision and all
Applicable Laws as to that provision.

10.         Acknowledging
that the parties have participated jointly in the negotiation and drafting of
this Agreement, if an ambiguity or question of intent or interpretation arises
as to any aspect of this Agreement, then it will be construed as if drafted
jointly by the parties and no presumption or burden of proof will arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.

 

Attachment 2.4-A to Joint Venture Agreement 

Representations and Warranties of International 

1.                                       Organization
and Good Standing. International is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, with full corporate
power and authority (a) to conduct its business as it is now being conducted to
the extent related to the Business (“International’s Product Business”),
the International Contributed Assets, or its participation in, including its
satisfying its obligations to, the Company, and (b) to perform all its
obligations under this Agreement and the Related Agreements.  International is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each state or other jurisdiction where such qualification is required.

2.                                       Authority;
No Conflict  

2.1                                 Enforceability.
This Agreement and the Related Agreements constitute the legal, valid, and
binding obligations of International, enforceable against International in
accordance with their respective terms, subject to the Enforceability
Exceptions. International has the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and the Related
Agreements and to perform its obligations under this Agreement and the Related
Agreements.

2.2                                 No
Conflict, etc. Except as would not reasonably be expected to have a
material adverse effect on International’s ability to complete the transactions
contemplated by, or satisfy its obligations under, this Agreement, neither the
execution and delivery of this Agreement or the Related Agreements nor the
consummation or performance of any of the transactions contemplated thereunder
will, directly or indirectly (with or without notice or lapse of time):

(a)                                  contravene,
conflict with, or result in a violation of (i) any provision of the
Organizational Documents of International or (ii) any resolution adopted by the
board of directors or the stockholders of International;

(b)                                 contravene,
conflict with, or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the transactions contemplated by
this Agreement or the Related Agreements or to exercise any remedy or obtain
any relief under any Applicable Law or any Order to which International, or any
of the International Contributed Assets, may be subject;

(c)                                  contravene,
conflict with, or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate, or modify, any Governmental Authorization that is held by
International and that otherwise relates to International’s Product Business or
the ownership or use of any of the International Contributed Assets;

(d)                                 contravene,
conflict with, or result in a violation or breach of any provision of, or give
any Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any contract (i) under which International has or may

acquire any rights, (ii)
under which International has or may become subject to any obligations or
liability, or (iii) by which International or any of the assets owned or used
by it is or may become bound; or

(e)                                  result
in the imposition or creation of any Encumbrance upon or with respect to any of
the International Contributed Assets.

3.                                       Consents
and Notices. International is not required to give any notice to or obtain
any approval, consent, ratification, waiver or other authorization of any Person
(including any Governmental Authorization) in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
transactions contemplated by this Agreement or the Related Agreements.

4.                                       Title
to Properties; Encumbrances. International owns all the tangible personal
properties and assets that constitute the International Contributed
Assets.  All of the International
Contributed Assets are free and clear of all Encumbrances (other than Permitted
Encumbrances) except, with respect to all those properties and assets, (a)
security interests listed in the International Disclosure Schedule as securing
specified liabilities or obligations, with respect to which no default (or
event that, with notice or lapse of time or both, would constitute a default)
exists, (b) liens for current taxes not yet due, and (c) certain tooling
included in the International Contributed Assets that is in the possession of
suppliers.

5.                                       Condition.
Except as would not reasonably be expected to have a material adverse effect on
International’s ability to complete the transactions contemplated by, or
satisfy its obligations under, this Agreement, (i) the equipment comprising the
International Contributed Assets is in reasonable operating condition and
repair, and is adequate for the uses to which it is currently being put, and
(ii) none of that equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost.

6.                                       Compliance
with Applicable Laws; Governmental Authorizations.

(a)                                  International’s
Product Business and the International Contributed Assets are, and at all times
since December 31, 2006 have been, in compliance in all material respects with
each Applicable Law that is or was applicable to it or to the conduct or
operation of International’s Product Business or the ownership or use of any of
the International Contributed Assets, including the possession of all required
Governmental Authorizations;

(b)                                 No
event has occurred or circumstance exists that (with or without notice or lapse
of time) would reasonably be expected to result in a material violation by
International of, or a material failure on the part of International to comply
with, any Applicable Law with respect to International’s Product Business or
the International Contributed Assets, including the requirements of all
required material Governmental Authorizations, or may give rise to any
obligation on the part of International to undertake, or to bear all or any
portion of the cost of, any material remedial action of any nature with respect
to International’s Product Business or the International Contributed Assets;
and

(c)                                  International
has not received, at any time since December 31, 2006, any written notice or
other communication from any Governmental Body or any other Person regarding
any actual, alleged, or potential material violation of, or material failure

to
comply with, any Applicable Law with respect to International’s Product
Business or the International Contributed Assets, or any actual, alleged, or
potential obligation on the part of International to undertake, or to bear all
or any portion of the cost of, any material remedial action of any nature with
respect to International’s Product Business or the International Contributed
Assets.

7.                                       Legal
Proceedings. There is no Proceeding pending or, to International’s
Knowledge, threatened, except as would not be material to International’s
Product Business or the International Contributed Assets, taken as a whole:

(a)                                  that
has been commenced by or against International that is reasonably expected to
relate to International’s Product Business or any of the International
Contributed Assets; or

(b)                                 that
challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated by
this Agreement or the Related Agreements.

8.                                       Orders.

(a)                                  There
is no Order to which International is subject that is reasonably expected to
relate to International’s Product Business or any of the International
Contributed Assets in any material respect;

(b)                                 To
the Knowledge of International, no officer, director, agent, or employee of
International is subject to any Order that prohibits that officer, director,
agent, or employee from engaging in or continuing any material conduct,
activity, or practice relating to International’s Product Business;

(c)                                  International
is, and at all times since December 31, 2006 has been, in material compliance
with all of the terms and requirements of each Order to which it is or has been
subject that relates to or affects International’s Product Business or to which
any of the International Contributed Assets is or has been subject, in each
case in any material respect;

(d)                                 No
event has occurred or circumstance exists that could reasonably be expected to
result in (with or without notice or lapse of time) a material violation of or
failure to comply with any term or requirement of any Order to which
International is or has been subject that is reasonably expected to relate to
International’s Product Business or to which any of the International
Contributed Assets is subject; and

(e)                                  International
has not received, at any time since December 31, 2006, any written notice or
other communication from any Governmental Body or any other Person regarding
any actual, alleged, possible, or potential material violation of, or failure
to comply with, any material term or requirement of any Order to which
International is or has been subject that is reasonably expected to relate to
International’s Product Business or as to which any of the International
Contributed Assets is or has been subject.

9.                                       Brokers
or Finders. International and its agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders’ fees or agents’
commissions or other similar payment in connection with this Agreement or the
transactions contemplated hereby.

 

Attachment 2.4-B to Joint Venture Agreement

Representations and Warranties of Monaco 

1. Organization and Good Standing. Monaco is a
corporation duly organized, validly existing, and in good standing under the
laws of Delaware, with full corporate power and authority (a) to conduct its
business as it is now being conducted to the extent related to the Business (“Monaco’s
Product Business”), the Monaco Contributed Assets, or its participation in,
including its satisfying its obligations to, the Company, and (b) to perform
all its obligations under this Agreement and the Related Agreements.  Monaco is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction where such qualification is required.

2. Authority; No Conflict. 

2.1                   Enforceability. This
Agreement and the Related Agreements constitute the legal, valid, and binding
obligations of Monaco, enforceable against Monaco in accordance with their
respective terms, subject to the Enforceability Exceptions.  Monaco has the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this Agreement and
the Related Agreements and to perform its obligations under this Agreement and
the Related Agreements.

2.2                   No Conflict, etc. Except as
would not reasonably be expected to have a material adverse effect on Monaco’s
ability to complete the transactions contemplated by, or satisfy its
obligations under, this Agreement, neither the execution and delivery of this
Agreement or the Related Agreements nor the consummation or performance of any
of the transactions contemplated thereunder will, directly or indirectly (with
or without notice or lapse of time):

(a) contravene, conflict with, or result in a violation of
(i) any provision of the Organizational Documents of Monaco or (ii) any
resolution adopted by the board of directors or the stockholders of Monaco;

(b) contravene, conflict with, or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or the Related Agreements or to
exercise any remedy or obtain any relief under any Applicable Law or any Order
to which Monaco, or any of the Monaco Contributed Assets, may be subject;

(c) contravene, conflict with, or result in a violation of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Monaco and that otherwise relates to Monaco’s
Product Business or the ownership or use of any of the Monaco Contributed
Assets;

(d) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any contract (i) under which Monaco has or
may acquire any rights, (ii) under which Monaco has or may become subject to
any obligations or liability, or (iii) by which Monaco or any of the assets
owned or used by it is or may become bound;

 

or

(e) result in the imposition or creation of any Encumbrance
upon or with respect to any of the Monaco Contributed Assets.

3. Consents and Notices.  Monaco is not required to give any notice to
or obtain any approval, consent, ratification, waiver or other authorization of
any Person (including any Governmental Authorization) in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the transactions contemplated by this Agreement or the Related
Agreements.

4. Title to Properties; Encumbrances. Monaco owns all
the tangible personal properties and assets that constitute the Monaco
Contributed Assets and owns fee title to the Premises.  All of the Monaco Contributed Assets and the
Premises are free and clear of all Encumbrances (other than Permitted
Encumbrances) and are not, in the case of real property, subject to any rights
of way, building use restrictions, exceptions, variances, reservations, or
limitations of any nature except, with respect to all those properties and
assets, (a) mortgages or security interests listed in the Monaco Disclosure
Schedule as securing specified liabilities or obligations, with respect to which
no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) liens for current taxes and assessments not
yet delinquent, (c) with respect to real property, (i) imperfections of title
and encumbrances, if any, none of which materially impairs the use of the
property subject thereto, and (ii) zoning laws and other land use restrictions
that do not impair the present or anticipated use of the property subject
thereto and (d) certain tooling included in the Monaco Contributed Assets that
is in the possession of suppliers. The Premises does not encroach upon the
property of, or otherwise conflict with the property rights of, any other
Person.

5. Condition. Except as would not reasonably be
expected to have a material adverse effect on Monaco’s ability to complete the
transactions contemplated by, or satisfy its obligations under, this Agreement,
(i) the equipment comprising the Monaco Contributed Assets is in reasonable
operating condition and repair, and is adequate for the uses to which it is
currently being put, and (ii) none of that equipment is in need of maintenance
or repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost.

6. Compliance with Applicable Laws; Governmental
Authorizations.

6.1       Generally.

(a) Monaco’s Product Business, the Monaco Contributed Assets
are, and at all times since December 31, 2006 have been, in material compliance
with each Applicable Law that is or was applicable to it or to the conduct or operation
of Monaco’s Product Business or the ownership or use of any of the Monaco
Contributed Assets, including the possession of all required Governmental
Authorizations;

(b) No event has occurred or circumstance exists that (with
or without notice or lapse of time) would be reasonably expected to result in a
material violation by Monaco of, or a failure on the part of Monaco to comply
with, any Applicable Law with respect to Monaco’s Product Business, the Monaco
Contributed Assets, including the requirements of all required material
Governmental Authorizations, or may give rise to any obligation on the part of
Monaco to undertake, or to bear all or any portion of the cost of, any material
remedial action of any nature with respect

to Monaco’s Product Business, the Monaco Contributed
Assets; and

(c) Monaco has not received, at any time since December 31,
2006, any written notice or other communication from any Governmental Body or
any other Person regarding any actual, alleged, or potential material violation
of, or material failure to comply with, any Applicable Law with respect to
Monaco’s Product Business, the Monaco Contributed Assets or the Premises, or
any actual, alleged, or potential obligation on the part of Monaco to
undertake, or to bear all or any portion of the cost of, any material remedial
action of any nature with respect to Monaco’s Product Business, the Monaco
Contributed Assets or the Premises.

6.2
                              Governmental
Authorizations. Each material Governmental Authorization held by
Monaco that pertains to Monaco’s Product Business, the Monaco Contributed
Assets (each, a “Monaco Governmental Authorization”) is valid and in
full force and effect. Except as set forth in the Monaco Disclosure Schedule,
and except as would not reasonably be expected to have a material adverse
effect on (x) the Company or its expected operations or (y) Monaco’s ability to
consummate the transactions contemplated by, or satisfy its obligations under,
this Agreement:

(a) Monaco has not received, at any time since December 31,
2006, any written notice regarding any actual, alleged or potential violation
of or failure to comply with any term or requirement of any Monaco Governmental
Authorization with respect to Monaco’s Product Business, the Premises or any of
the Monaco Contributed Assets, or any actual, proposed or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
such Monaco Governmental Authorization; and

(b) all applications required to have been filed for the
renewal of the Monaco Governmental Authorizations have been duly filed on a
timely basis with the appropriate Governmental Bodies, and all other filings
required to have been made with respect to those Monaco Governmental
Authorizations have been duly made on a timely basis with the appropriate
Governmental Bodies.

The Monaco Governmental
Authorizations collectively constitute all of the material Governmental
Authorizations necessary to permit Monaco to lawfully conduct and operate
Monaco’s Product Business in the manner Monaco currently conducts and operates
Monaco’s Product Business and to permit Monaco to own and use the Monaco
Contributed Assets in the manner in which it currently owns and uses the Monaco
Contributed Assets.

 7. Legal
Proceedings; Orders.

    7.1       Generally. There is no Proceeding
pending or, to Monaco’s Knowledge, threatened:

(a) that
has been commenced by or against Monaco that is reasonably expected to relate
to Monaco’s Product Business, the Premises or any of the Monaco Contributed
Assets; or

(b) that
challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated by
this Agreement or the Related Agreements.

 

                7.2           Orders.

                (a)
There is no Order to which Monaco is subject that is reasonably expected to
relate to Monaco’s Product Business, the Premises or any of the Monaco
Contributed Assets in any material respect;

                (b) To
the Knowledge of Monaco, no officer, director, agent, or employee of Monaco is
subject to any Order that prohibits that officer, director, agent, or employee
from engaging in or continuing any conduct, activity, or practice relating to
Monaco’s Product Business;

                (c)
Monaco is, and at all times since December 31, 2006 has been, in material
compliance with all of the terms and requirements of each Order to which it is
or has been subject that relates to or affects Monaco’s Product Business or to
which the Premises or any of the Monaco Contributed Assets is or has been
subject, in each case in any material respect;

                (d) No
event has occurred or circumstance exists that would reasonably be expected to
result in (with or without notice or lapse of time) a material violation of or
failure to comply with any term or requirement of any Order to which Monaco is
or has been subject that is reasonably expected to relate to Monaco’s Product
Business or to which the Premises or any of the Monaco Contributed Assets is
subject; and

                (e)
Monaco has not received, at any time since December 31, 2006, any written notice
or other communication from any Governmental Body or any other Person regarding
any actual, alleged, possible, or potential material violation of, or failure
to comply with, any material term or requirement of any Order to which Monaco
is or has been subject that is reasonably expected to relate to Monaco’s
Product Business or as to which the Premises or any of the Monaco Contributed
Assets is or has been subject.

8. Environmental.

8.1                   Compliance.  Except as disclosed in the Monaco Disclosure
Schedule, with respect to the Premises: 
(a) there are no pending or, to the knowledge of Monaco, threatened
claims with respect to the Premises alleging non-compliance with Environmental
Law or release or threatened release of Hazardous Materials; (b) to the knowledge
of Monaco, there are no other unresolved violations of any Environmental Law
with respect to the Premises; and (c) all material governmental approvals,
authorizations, permits and consents required, if any, under any Environmental
Law (“Environmental Permits”) are valid and in full force and effect.

8.2                 Threatened
Claim. 
There are no pending or, to the Knowledge of Monaco, threatened claims
resulting from any violation of Environmental Law, in connection with the
operation of Monaco’s Product Business or with respect to or affecting the
Premises.

8.3                 Presence
of Hazardous Materials. To the
knowledge of Monaco and except as would not reasonably be expected to result in
a material liability to Monaco, no Hazardous Materials are present on the
Premises that would require Cleanup.

8.4                 Releases. To the knowledge of Monaco, there has been no Release or
disposal or arrangement for disposal of, or exposure to, any Hazardous
Materials at or from the Premises or at any other locations where any Hazardous
Materials were generated,

 

manufactured, refined,
transferred, produced, imported, used or processed by Monaco in connection with
the operation of Monaco’s Product Business which would give rise to any current
or future material or potentially material liability or corrective or remedial
obligation under any Environmental Law.

8.5                 Certain
Copies. Monaco has delivered to
International true and complete copies and results of any Phase 1 or Phase 2
environmental Premises assessment reports relating to the Premises in its
possession, custody or control.

8.6                 Environmental
Representations.
Notwithstanding anything to the contrary elsewhere in this Agreement, the
representations and warranties in this Section 8 are the only representations
and warranties Monaco is making that pertain or relate to the Environment,
Hazardous Materials, Environmental Laws or Environmental Permits.

9. Labor Relations. Monaco has not been and is not a
party to any collective bargaining or other labor Contract that covers any of
the employees who are employed in the operation of Monaco’s Product Business.
Since December 31, 2006, there has not been, there is not presently pending or
existing, and to Monaco’s Knowledge there is not threatened:  (a) any strike, slowdown, picketing, work
stoppage, or employee grievance process that covers any of the employees who
are employed in the operation of Monaco’s Product Business; (b) any Proceeding
against or affecting Monaco that covers any of the employees who are employed
in the operation of Monaco’s Product Business relating to the alleged violation
of any Applicable Law pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting Monaco’s Product Business or any of the
Monaco Contributed Assets; or (c) any application for certification of a collective
bargaining agent affecting any of the employees who are employed in Monaco’s
Product Business.

10. Employee Benefits. Neither the Company nor
International shall be liable for or required to pay or accrue any salaries,
employee benefits of any kind, or other compensation of or to any of the
employees who are employed in Monaco’s Product Business with respect to
services rendered to Monaco or any of its Affiliates (other than the Company)
prior to the Closing.

11. Brokers or Finders. Monaco and its agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders’ fees or agents’ commissions or other similar payment in connection
with this Agreement or the transactions contemplated hereby.

 

Attachment 2.5 to Joint Venture Agreement 

Covenants of International and Monaco 

Prior to Closing Date 

This sets forth agreements
of the Members between the date of this Agreement and the Closing.

1.                                       Access
and Investigation. International and Monaco will each, for the purpose of
consummating the transactions contemplated by this Agreement and provided that
such access and investigation shall not cause either party to breach its
existing obligations, (a) grant to the other and its employees, agents and representatives,
upon reasonable prior notice and during such reasonable times as they agree
upon, access to each other’s personnel, properties, contracts, books and
records, and other documents and data pertaining to the assets to be
contributed to, and liabilities and obligations to be assumed by, the Company, (b)
furnish to each other copies of all such contracts, books and records, and
other documents and data as may reasonably be requested, and (c) furnish each
other with such additional financial, operating, and other data and information
as may reasonably be requested pertaining to the assets to be contributed to,
and liabilities and obligations to be assumed by, the Company.  Any access to the properties of either Member
shall be subject to such Member’s reasonable security measures.

2.                                       Best
Efforts. Neither International nor Monaco will, without the prior consent
of the other, take any affirmative action, or fail to take any reasonable
action within its control, as a result of which it is reasonably likely that a
condition of Closing will not be fulfilled, and each will use its Best Efforts
to cause the conditions of Closing to be fulfilled.

3.                                       Required
Approvals, Consents and Filings. International and Monaco will each use
Best Efforts to obtain all consents and approvals that it is required to obtain
or to cause to be obtained in order to consummate the transactions contemplated
by this Agreement.  Without limiting the
generality of the foregoing, as promptly as practicable after the date of this
Agreement, International and Monaco will make all filings required to be made
by them in order to consummate the transactions contemplated by this Agreement.
International and Monaco will cooperate with respect to all filings that they
may mutually elect to make or that either of them is required by Applicable Law
to make in connection with the transactions contemplated by this Agreement.

4.                                       Notification.  International and Monaco (a) will each
promptly notify the other in writing if it becomes aware of any fact or
condition that causes or constitutes a breach of any of the representations and
warranties made by such party as of the date of this Agreement or as of the
Closing (to the extent such breach would result in any of the conditions of
Section 2.6 and its Attachments not being satisfied) and (b) will provide the
other with a supplement to the International Disclosure Schedule or the Monaco
Disclosure Schedule (as applicable) setting out such fact or condition and the
required amendment to the representations and warranties. Each party will
promptly notify the other of any breach of any covenant of this Attachment or
of the occurrence of any event that would result in any of the conditions of Section
2.6 and its Attachments not being satisfied.

5.                                       Maintain
Ordinary Course of Business. International and Monaco will each use its
Best Efforts to (a) ensure that the International Contributed Assets and the
Monaco Contributed Assets, as applicable, are maintained in accordance with
past practices (except for cutbacks in personnel to be undertaken in connection
with the formation of the Company and with respect to which each party agrees
to keep the other fully advised), (b) conduct the existing International’s
Product Business and Monaco’s Product Business, as applicable, of each party
only in the Ordinary Course of Business, and (c) not incur any material
liabilities or commitments that affect or form a part of the International
Contributed Assets or the Monaco Contributed Assets, as applicable, that are
not in the Ordinary Course of Business.

 

Attachment 2.6-A to Joint Venture Agreement

Conditions Precedent to International’s Obligations

to Close and Right to Terminate Prior to Closing 

International’s obligation to contribute assets to the Company in
accordance with Article 2 of the Agreement and to take the other actions
required to be taken by International at the Closing is subject to the
satisfaction, at or before the Closing, of each of the following conditions
(any of which may be waived by International, in whole or in part):

1.
Conditions Precedent.

1.1       Accuracy
of Representations.

(a)             All
of Monaco’s representations and warranties in this Agreement (considered
collectively), and each of those representations and warranties (considered
individually), shall have been accurate in all material respects as of the date
of this Agreement and shall be accurate in all material respects as of the time
of the Closing as if then made, except for those representations and warranties
given as of a specified date, which shall be accurate in all material respects
as of such specified date (in each case, without giving effect to any
exceptions made in such certificate).

(b)            Each
of the representations and warranties in this Agreement that contains an
express materiality qualification shall have been accurate in all respects as
of the date of this Agreement and shall be accurate in all respects as of the
time of the Closing as if then made, except for those representations and
warranties given as of a specified date that contain an express materiality
qualifier, which shall be accurate in all respects as of such specified date
(in each case, without giving effect to any exceptions made in such
certificate).

1.2                                 Monaco’s Performance.
All of the covenants and obligations (including the covenants in Section 2.6
and its Attachment) that Monaco is required to perform or to comply with
pursuant to this Agreement at or before the Closing (considered collectively),
and each of those covenants and obligations (considered individually), must
have been duly performed and complied with in all material respects.

1.3                                 Consents. Each of
the Consents identified in the Monaco Disclosure Schedule (the “Material
Monaco Consents”) must have been obtained and must be in full force and
effect.

1.4                                Additional Documents.
Monaco shall have caused the documents and instruments required by Section
2.8(b) and the following documents to be delivered (or tendered subject
only to Closing) to International:

(a)             As to each material Monaco Contributed Asset that is
subject to an Encumbrance other than a Permitted Encumbrance:

(i)               a
statement from the holder of each note and security interest, if any, dated the
Closing Date that (1) sets forth the principal amount then outstanding on the
indebtedness represented by such note or secured by such

 

                          instrument, and the interest rate thereon and (2) contains a
statement to the effect that Monaco, as obligor under such note or instrument,
is not in default under any of its provisions; and

(ii)            a
release of all Encumbrances on such Monaco Contributed Assets, other than
Encumbrances that do not have a material adverse effect on the use or value of
such Monaco Contributed Assets (“Permitted Encumbrances”).

1.5                   No Proceedings. Since the
date of this Agreement, there has not been commenced or threatened against
International or Monaco, or against any Affiliate of International or Monaco,
any Proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Formation Transactions or (b) that
creates a reasonable likelihood of preventing, substantially delaying or making
illegal any of the Formation Transactions.

1.6       Related Agreements. 
The relevant Persons shall have entered into the Related Agreements.

2.
Termination Before Closing.

2.1                   Termination
Events.  This Agreement may, by notice
given before or at the Closing, be terminated by International:

                                  (a) if a material breach of any provision of Attachment
2.5 has not, to the extent curable, been cured within 30 days after
delivery of notice of such breach by International to Monaco and has not been
waived by International; or

                                  (b) if the
Closing has not occurred on or before
March 30, 2007, or such later date as the parties may agree upon, unless
International is in material breach of this Agreement.

This
Agreement may also be terminated before Closing by mutual consent of Monaco and
International.

2.2
                Effect of
Termination. 
International’s right of termination under Section 2.1 is in
addition to any other rights it may have under this Agreement or otherwise, and
the exercise of such right of termination will not be an election of
remedies.  If this Agreement is
terminated pursuant to Section 2.1, all further obligations of
International under this Agreement will terminate, except that the obligations
of the parties in Section 14.10 will survive; provided, however, that if this Agreement is terminated by
International because of a willful breach of this Agreement by Monaco,
International’s right to pursue all legal and equitable remedies will survive
the termination unimpaired.

 

Attachment 2.6-B to Joint Venture Agreement

Conditions Precedent to Monaco’s Obligations to Close

and Right to Terminate Prior to Closing 

Monaco’s
obligation to contribute assets to the Company in accordance with Article 2 of
the Agreement and to take the other actions required to be taken by Monaco at
the Closing is subject to the satisfaction, at or before the Closing, of each
of the following conditions (any of which may be waived by Monaco, in whole or
in part):

1.     Conditions Precedent.

1.1
                              Accuracy of
Representations.

a.     All of International’s representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the time of the Closing as if then
made, except for those representations and warranties given as of a specified
date, which shall be accurate in all material respects as of such specified
date (in each case, without giving effect to any exceptions made in such
certificate).

b.     Each of the representations and warranties
in this Agreement that contains an express materiality qualification shall have
been accurate in all respects as of the date of this Agreement and shall be
accurate in all respects as of the time of the Closing as if then made, except
for those representations and warranties given as of a specified date that
contain an express materiality qualifier, which shall be accurate in all
respects as of such specified date (in each case, without giving effect to any
exceptions made in such certificate).

1.2
                              International’s
Performance. All of the covenants and obligations (including
the covenants in Section 2.6 and its Attachment) that
International is required to perform or to comply with pursuant to this
Agreement at or before the Closing (considered collectively), and each of those
covenants and obligations (considered individually), must have been duly
performed and complied with in all material respects.

1.3
                              Consents. Each of
the Consents identified in the International Disclosure Schedule (the “Material
International Consents”) must have been obtained and must be in full force
and effect.

1.4
                              Additional
Documents. International shall have caused the documents and
instruments required by Section 2.8(a) and the following documents to be
delivered (or tendered subject only to Closing) to Monaco:

a.             As to each
material International Contributed Asset that is subject to an Encumbrance,
other than a Permitted Encumbrance:

(i)                   a statement from the holder of each
note and security interest, if any, dated the Closing Date, that (1) sets forth
the principal amount then outstanding on the indebtedness represented by such
note or secured by such instrument, and

the interest rate thereon and (2) contains a statement to the
effect that International, as obligor under such note or instrument, is not in
default under any of its provisions; and

(ii)              a release of all Encumbrances on such
International Contributed Assets, other than Encumbrances that do not have a
material adverse effect on the use or value of such International Contributed
Assets (“Permitted Encumbrances”);

1.5
                              No Proceedings. Since the
date of this Agreement, there has not been commenced or threatened against
Monaco or International, or against any Affiliate of Monaco or International,
any Proceeding (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Formation Transactions, or (b) that
creates a reasonable likelihood of preventing, substantially delaying or making
illegal any of the Formation Transactions.

1.6
                              Related
Agreements. The relevant Persons shall have entered into the
Related Agreements.

2.
            Termination
Before Closing.

2.1
                              Termination
Events. This Agreement may, by notice given before or at the Closing, be
terminated by Monaco:

a.     if a material breach of any provision of Attachment
2.5 , has not, to the extent curable, been cured within 30 days after
delivery of notice of such breach by Monaco to International and has not been
waived by Monaco; or

b.     if the Closing has not
occurred on or before March 30, 2007, or such later date as the parties may
agree upon, unless Monaco is in material breach of this Agreement.

This
Agreement may also be terminated before Closing by mutual consent of
International and Monaco.

2.2                               Effect of
Termination.  Monaco’s
right of termination under Section 2.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of such
right of termination will not be an election of remedies.  If this Agreement is terminated pursuant to Section
2.1, all further obligations of Monaco under this Agreement will terminate,
except that the obligations of the parties in Section 14.10 (Expenses)
will survive; provided, however, that if this Agreement is
terminated by Monaco because of a willful breach of this Agreement by
International, Monaco’s right to pursue all legal and equitable remedies will
survive the termination unimpaired.

 

Attachment
9 to Joint Venture Agreement

Accounting and Tax Matters 

1.               Definitions.

“Fair Market / Statutory
Value” of an item of Company property means the greater of (a) the fair
market value of such property or (b) the amount of any nonrecourse indebtedness
to which such property is subject within the meaning of IRC § 7701(g). For purposes of this definition,
the fair market value shall be determined in accordance with the procedures set
forth in Section 4.5(b) of the Agreement.

“Liquidation” of a
Member’s interest in the Company occurs upon the earlier of:  (a) the date upon which there is a
liquidation of the Company; or (b) the date upon which there is a liquidation
of the Member’s interest in the Company under paragraph (d) of Tax Regulations § 1.761-1.

“Liquidation” of the
Company occurs upon the earlier of:  (a)
the date upon which the Company is terminated under IRC § 708(b)(1); or (b) the date upon which the
Company ceases to be a going concern (even though it may continue in existence
for the purpose of winding up its affairs, paying its debts, and distributing
any remaining balance to its Members).

“Pre-contribution
Gain or Loss Property” is defined in Section 4.2.

“Tax
Regulations” means the regulations issued under the Internal Revenue Code
of 1986 (“IRC”).

2.               GAAP, Book and Tax
Accounting.

2.1                               GAAP Accounts and Statements.  The Company will establish and maintain
accounts and will prepare and distribute financial statements in accordance
with GAAP (the “GAAP Accounts and Statements”).

2.2                               Book Accounts and Statements.  Book accounts will be maintained in
accordance with Section 3 below. To the extent the value of assets
contributed to the Company differs from their GAAP values or to the extent this
Agreement requires that items of operational income or expense be recorded
differently from GAAP principles, the Company will maintain adequate records to
reflect such differences.

2.3                               Tax Accounts and Statements.
The Company will establish and maintain accounts and will prepare and
distribute statements, returns and other documents as are necessary to prepare
and file the Company’s tax records and reports.

2.4                               Reconciliation. The
Company will prepare annually and distribute to the Members a schedule
reconciling the GAAP, book and tax statements.

2.5                               GAAP. If GAAP
principles permit a transaction to be accounted for in more than one way, the
Company will follow the principle adopted by International.

3.               Book Accounts.

3.1
                              Book Capital
Account. The Company will establish and maintain a capital account for each
Member (the “Book Capital Account”).

(a)   Each Member’s Book Capital Account is
increased by:

(i)            the amount of money contributed by
the Member to the Company;

(ii)                  the fair market value of property
contributed by the Member to the Company (net of liabilities secured by such
contributed property that the Company assumes);

(iii)               allocations to the Member of Company
book income and gain;

(iv)              upon the revaluation of Company property
pursuant to Section 3.3, the book gain (if any) that would have been allocated
to the Member if such Company property had been sold at its Fair Market Value
immediately before the event that requires the revaluation; and

(v)                 upon distribution of Company property to
a Member, if the Company property is not revalued pursuant to Section 3.3,
the book gain (if any) that would have been allocated to such Member if such
Company property had been sold at its Fair Market Value immediately before the
distribution;

(b)   and is decreased by:

(i)                     the amount of money distributed to it by
the Company;

(ii)                  the fair market value of property
distributed to it by the Company (net of liabilities secured by such
distributed property which the Member assumes);

(iii)               allocations of Company
book loss;

(iv)              upon the revaluation of Company property
pursuant to Section 3.3, the book loss (if any) that would have been
allocated to the Member if such Company property had been sold at its Fair
Market Value immediately before the event that requires the revaluation; and

(v)                 upon distribution of Company property to
a Member, if the Company property is not revalued pursuant to Section 3.3,
the book loss (if any) that would have been allocated to such Member if such
Company property had been sold at its Fair Market Value immediately before the
distribution;

and shall be otherwise adjusted in accordance
with the additional rules set forth in the Tax Regulations. Company book income
and book loss shall be determined on the same basis as partnership income,
gain, deduction, and loss is determined for purposes of maintaining capital
accounts under the rules set forth in Section 1.704-1(b)(2)(iv) of the Tax
Regulations. The Company may (if the Members so determine), upon the occurrence
of the events specified in Section 1.704-1(b)(2)(iv)(f) of the Tax Regulations, increase or decrease the Book
Capital Accounts of the Members in accordance with the rules of such regulation
and Section 1.704-1(b)(2)(iv)(g)
of the Tax Regulations to reflect a revaluation of Company property.

3.2
                              Liability
Assumption. For purposes of Section 3.1(b) a liability
is “assumed” by the Company or a Member only to the extent that the assuming
party is thereby subjected to personal liability with respect to such
obligation, the obligee is aware of the assumption and can directly enforce the
assuming party’s obligation, and, as between 

the assuming party and the
party from whom the liability is assumed, the assuming party is ultimately
liable.

3.3
                              Revaluation
When Interest Is Acquired from or Relinquished to Company.

(a)   In
connection with:

(i)                   a contribution of money or other
property to the Company by a new or existing Member as consideration for an
interest in the Company;

(ii)                the distribution of money or other
property by the Company to a retiring or continuing Member as consideration for
an interest in the Company; and

(iii)               the liquidation of the
Company;

the Company will increase or
decrease the book value of its property to its Fair Market Value.

(b)   The Company will adjust the Book Capital Accounts to reflect such
revaluation in the manner in which the unrealized income, gain, loss, or
deduction inherent in such property would be allocated if there were a taxable
disposition on such property for its fair market value on the date of
revaluation.

3.4                               Transfer. Upon the transfer
of all or a part of an interest in the Company, the Book Capital Account of the
transferor that is attributable to the transferred interest shall carry over to
the transferee.

4. Tax Accounting.

4.1
                              Members’ Shares
of Taxable Income, Etc.  The Company will allocate the Company’s
taxable income or loss and of its separately stated items of income, gain,
loss, deduction and credit among the members in accordance with the allocation
of such income, gains, losses, and deductions among the Members for computing
their Book Capital Accounts, provided that, if any such allocation is not
permitted by the Tax Regulations or other applicable law, the Company’s
subsequent income, gains, losses, deductions and credits will be allocated
among the Members so as to reflect as nearly as possible the allocation set
forth herein in computing their Book Capital Accounts.

4.2
                              Allocations
with respect to property contributed or deemed contributed to the Company with
Pre-Contribution Gain or Loss.

(a)          Depreciation deductions with
respect to Pre-contribution Gain or Loss Property (based on the Company’s basis
therein), to the extent possible, shall be allocated first to the
non-contributing Member in an amount equal to the book depreciation or
amortization expense allocated to that Member, and the balance of the
deduction, if any, shall be allocated to the contributing Member.

(b)         The total income, gain, loss
or deduction allocated to the Members for a taxable year with respect to
Pre-contribution Gain or Loss Property cannot exceed the total income, gain,
loss or deduction of the Company with respect to that property for the taxable
year.

(c)          If the Company sells or exchanges
Pre-contribution Gain or Loss Property, solely 

for tax purposes the adjusted Pre-Contribution Gain or Loss shall be
allocated to the contributing Member.

(d)         “Pre-contribution Gain” is
the excess of a property’s value, as reflected in the Member’s Book Capital
Account at the time of contribution, over the contributing Member’s adjusted
tax basis in the property at the time of contribution.  “Precontribution Loss” is the excess of the
contributing Member’s adjusted tax basis in a property at the time of
contribution over the property’s value, as reflected in the Member’s Book
Capital Account at the time of contribution. 
“Precontribution Gain or Loss Property” is property that has been
contributed to the Company which has Pre-contribution Gain or Pre-contribution
Loss.

(e)          If the value of any Company
asset as reflected in the Member’s Book Capital Accounts is adjusted pursuant
to the requirements of Section 1.704-1(b)(2)(iv)(e) or (f) of
the Tax Regulations, subsequent allocations of items of taxable income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its book value as reflected in the Member’s Book Capital Accounts
in the same manner as described above in paragraphs (a) through (d) of this Section
4.2 as though such variation constituted Pre-Contribution Gain or
Pre-Contribution Loss.

(f)            Allocations pursuant to Section
4.1 and this Section 4.2 are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into account in
computing, any Member’s Book Capital Account or share of book profits, book
losses distributions or other Company items pursuant to any provision of this
Agreement.

4.3                                 Special
Allocations. 

(a)          Company
Minimum Gain Chargeback. 
Notwithstanding any other provision of this Agreement, except as
otherwise provided in Tax Regulation §
1.704-2(f), if there is a net decrease in Company minimum gain during any
Fiscal Year, each Member will be specially allocated items of Company income
and gain for the Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Member’s share of the net decrease in Company minimum
gain, determined in accordance with Tax Regulations § 1.704-2(g). Allocations pursuant to the previous sentence
will be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto.  The
items to be allocated shall be determined in accordance with Tax Regulations §§ 1.704-(f)(6) and1.704-2(j)(2). This
paragraph is intended to comply with the minimum gain chargeback requirement in
Tax Regulations § 1.704-2(f) and shall be interpreted consistently therewith.

(b)         Qualified
Income Offset. In the event any Member unexpectedly receives any
adjustments, allocations or distributions described in Tax Regulations §§ 1.704-1 (b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5)
or 1.704-1(b)(2)(ii)(d)(6) of the Tax Regulations, then items of Company income
and gain shall be specially allocated to that Member in an amount and manner
sufficient to eliminate, to the extent required by the Tax Regulations, the
adjusted capital account deficit of such

Member as
quickly as possible, but an allocation pursuant to this paragraph shall be made
only if and to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Agreement have
been tentatively made as if this paragraph were not in the Agreement.

(c)          Gross
Income Allocation. In the event any Member has a deficit Book Capital Account
at the end of any Fiscal Year that is in excess of the sum of (i) any amount
such Member is obligated to restore pursuant to any provision of this
Agreement, and (ii) the amount such Member is deemed to be obligated to restore
pursuant to the penultimate sentences of Tax Regulations §§ 1.704-2(g)(1) and 1.704-2(i)(5), then
that Member shall be specially allocated items of Company income and gain in
the amount of such excess as quickly as possible; but an allocation pursuant to
this paragraph shall be made only if and to the extent that such Member would
have a deficit Book Capital Account in excess of such sum after all other
allocations provided for in this Agreement have been made as if this Subsection
4.3(c) and the preceding Subsection 4.3(b) were not in the
Agreement.

(d)         Nonrecourse
Deductions. Nonrecourse deductions for any Fiscal Year shall be
allocated to the Members pro rata
in accordance with their Member Interests.

(e)          IRC § 754 Adjustment.  To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to IRC § 734(b) or IRC § 743(b) is
required, pursuant to Tax Regulations § 1.704-1(b)(2)(iv)(m)(2) or § 1.704-1 (b)(2)(iv)(m)(4),
to be taken into account in determining Book Capital Accounts as the result of
a distribution to a Member in complete liquidation of its interest in the Company, the amount of
such adjustment to the Book Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company in
the event Tax Regulation § 1.704-1 (b)(2)(iv)(m)(2) applies, or to the Members
to whom such distribution was made in the event Tax Regulation § 1.704-1 (b)(2)(iv)(m)(4)
applies.

4.4
                              Regulatory
Allocations.  The allocations set forth in Section 4.3
(the “Regulatory Allocations”) are intended to comply with certain requirements
of the Tax Regulations.  It is the intent
of the Members that, to the extent possible, all Regulatory Allocations shall
be offset either with other Regulatory Allocations, or with special allocations
of other items of Company income, gain, loss or deduction pursuant to this Section.
However, offsetting special allocations of Company income, gain, loss or
deduction shall be made, in whatever manner the Members deem appropriate, so
that, after such offsetting allocations are made, each Member’s Book Capital
Account balance is, to the extent possible, equal to the Book Capital Account
balance such Member would have had if the Regulatory Allocations were not part
of this Agreement and all Company items were allocated pursuant to this
Agreement without regard to the Regulatory Allocations.  In exercising their discretion under this Section,
the Members will take into account future Regulatory Allocations under Section
4.3 that, although not yet made, are likely to offset other Regulatory
Allocations previously made under Section 4.3.

4.5
                              IRC § 754 Election.  If requested by a Member, the Company will
make the election under IRC § 754 to adjust the basis of Company property
pursuant to IRC §§ 734 and 743.

5. Tax Matters Member.

5.1
                              Designation.  International will be the Tax
Matters Member of the Company.

5.2
                              Duties.  The duties of the Tax Matters
Member include the following:

(a)          to cause the preparation of
the Company’s tax returns by an independent certified public accountant
reasonably acceptable to each Member, which tax returns shall be timely filed
by the due date (including extensions) for filing; provided, that a draft of each income or franchise tax
return shall be provided to each of the Members for review and comment no later
than 60 days after the end of the Company’s Fiscal Year, and a draft of each
other material tax return shall be provided to each of the Members for review
and comment  at least twenty (20) days
prior to the due date (including extensions) for filing, and no such tax return
shall be filed without the unanimous consent of the Members, which consent
shall not be unreasonably withheld, conditioned or delayed;

(a)          to represent the Company in
all administrative proceedings with all federal and state taxing authorities;
and

(b)         to settle, compromise,
litigate or pursue any course of action with respect to any dispute with
respect to any tax issue; except that the Tax Matters Member shall not take any
of the foregoing actions without the unanimous consent of the Members.

The Members shall cooperate in good faith to
resolve any disputes with respect to the matters set forth in this Section
5.2. If any such dispute cannot be resolved within fifteen (15) days of
notice of such dispute, it shall be referred for resolution to an independent
certified accountant reasonably acceptable to each Member (which shall not be
the accountant referred to in Section 5.2(a) hereof).

5.3
                              Giving Notice.  The Tax Matters Member shall
take all reasonable steps necessary to keep all Members informed as to the
status of any action, audit, hearing, settlement, litigation or other tax
matter.  The Tax Matters Member shall
provide each Member with a copy of all written communications between any
taxing authority and the Tax Matters Member.

5.4
                              Effective Tax
Rate Calculation.  The Tax Matters Member shall, from time to
time, as necessary due to the effects of changes in federal or state income
taxes or changes in the Company’s operations, cause the Effective Tax Rate to
be recalculated and updated.

5.5
                              Rights of
Members. Notwithstanding anything in
this Section 5, each Member shall have the right to participate in any
administrative or judicial proceeding to the extent provided by the IRC.

5.6
                              Partnership
Classification for Tax Purposes.  The Company is intended to be a partnership
for U.S. federal, state and local income tax purposes and the Tax Matters

Member shall cause to be filed
with the appropriate tax authorities any elections or other documents necessary
to give due legal effect to such position, if any.  No Member shall file (and each Member hereby
represents that it has not filed) any income tax election or other document
that is inconsistent with the Company’s position regarding its classification
as a “partnership” for applicable Federal, State and local income tax purposes.

International Disclosure Schedule 

None.

Monaco Disclosure Schedule 

None.Exhibit
10.4

PROMISSORY NOTE

	
  Principal

  	
  Loan
  Date

  	
  Maturity

  	
  Loan
  No

  	
  Call
  / Coll

  	
  Account

  	
  Officer

  	
  Initials

  
	
  $20,000,000.00

  	
  04-30-2006

  	
  04-29-2007

  	
  8454545-10000

  	
  A4

  	
  00002551852

  	
  18181

  	
   

  
	
  References in
  the shaded area are for Lender’s use only and do not limit the applicability
  of this document to any particular loan or item

  Any item above containing “***” has been omitted due to text length
  limitations.

  

 

	
  Borrower:

  	
   

  	
  Old Second Bancorp. Inc.

  	
   

  	
  Lender:

  	
   

  	
  M&I Marshall & Ilsley Bank

  
	
   

  	
   

  	
  37 South River St.

  	
   

  	
   

  	
   

  	
  Correspondent Banking

  
	
   

  	
   

  	
  Aurora, IL 60506-4173

  	
   

  	
   

  	
   

  	
  770 N. Water Street

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Milwaukee, WI 53202

  

 

	
  Principal Amount: $20,000,000.00

  	
  Initial Rate: 5.729%

  	
  Date of Note:  April 30, 2006

  

 

PROMISE TO PAY.  Old Second Bancorp, Inc. (“Borrower”) promises
to pay to M&I Marshall & Ilsley Bank (“Lender”), or order, in lawful
money of the United States of America, the principal amount of Twenty Million
& 00/100 Dollars ($20,000,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated from the date of each advance until
repayment of each advance.

PAYMENT.  Borrower will pay this loan in one payment of
all outstanding principal plus all accrued unpaid interest on April 29, 2007.
In addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning May 29, 2006, with all
subsequent interest payments to be due on the same day of each month after
that. Unless otherwise agreed or required by applicable law, payments will be
applied to accrued interest, credit life premiums, principal, late charges, and
escrow. The annual interest rate for this Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender’s address shown above or at such other place as Lender may designate in
writing.

VARIABLE INTEREST RATE.  The interest rate on this Note is
subject to change from time to time based on changes in an independent index
which is the British Bankers Association (BBA) LIBOR and reported by a major
news service selected by Lender (such as Reuters, Bloomberg or Moneyline
Telerate). If BBA LIBOR for the one month period is not provided or reported on
the first day of a month because, for example, it is a weekend or holiday or
for another reason, the One Month LIBOR Rate shall be established as of the
preceding day on which a BBA LIBOR rate is provided for the one month period
and reported by the selected news service (the “Index”). The Index is not
necessarily the lowest rate charged by Lender an its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower Lender will tell Borrower the current
Index rate upon Borrower’s request. The interest rate change will not occur
more often than each first day of each calendar month. Borrower understands
that Lender may make loans based on other rates as well. The Index currently is
4.829% per annum. The interest rate to be applied to the unpaid principal
balance of this Note will be at a rate of 0.900 percentage points over the
Index, resulting in an initial rate of 5.729% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.

PREPAYMENT.  Borrower may pay without penalty all or a
portion of the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of Borrower’s
obligation to continue to make payments of accrued unpaid interest. Rather,
early payments will reduce the principal balance due. Borrower agrees not to
send Lender payments marked “paid in full”, “without recourse”, or similar
language. If Borrower sends such a payment, Lender may accept it without losing
any of Lender’s rights under this Note, and Borrower will remain obligated to
pay any further amount owed to Lender. All written communications concerning
disputed amounts, including any check or other payment instrument that
indicates that the payment constitutes “payment in full” of the amount owed or
that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: M&I Marshall &
Ilsley Bank, P O. 3114 Milwaukee, WI 53201-3114.

LATE CHARGE.  If a payment is 10 days or more late, Borrower
will be charged 5.000% of the unpaid portion of the regularly scheduled
payment.

INTEREST AFTER DEFAULT.  Upon default, including failure to pay
upon final maturity. Lender, at its option, may, if permitted under applicable
law, increase the variable interest rate on this Note to 3.900 percentage
points over the Index. The interest rate will not exceed the maximum rate
permitted by applicable law.

DEFAULT.  Each of the following shall constitute an event
of default (“Event of Default”) under this Note:

Payment Default.  Borrower fails to make any payment when due
under this Note

Other Defaults.  Borrower fails to comply
with or to perform any other term, obligation, covenant or condition contained
in this Note or in any of the related documents or to comply with or to perform
any term, obligation, covenant or condition contained in any other agreement
between Lender and Borrower.

Default in Favor of Third Parties.  Borrower or any Grantor defaults under any
loan, extension of credit, security agreement, purchase or sales agreement, or
any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower’s property or Borrower’s ability to repay
this Note or perform Borrower’s obligations under this Note or any of the
related documents.

False Statements.  Any warranty, representation or statement made
or furnished to Lender by Borrower or on Borrower’s behalf under this Note or
the related documents is false or misleading in any material respect, either
now or at the time made or furnished or becomes false or misleading at any time
thereafter.

Insolvency.  The dissolution or termination of Borrower’s
existence as a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings.  Commencement of foreclosure
or forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This includes a
garnishment of any of Borrower’s accounts, including deposit accounts, with
Lender. However, this Event of Default shall not apply if there is a good faith
dispute by Borrower as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Borrower gives Lender
written notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture proceeding, in an
amount determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.

Events Affecting Guarantor.  Any of the preceding events
occurs with respect to any guarantor, endorser, surety, or accommodation party
of any of the indebtedness or any guarantor, endorser, surety, or accommodation
party dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any guaranty of the indebtedness evidenced by this Note. In
the event of a death, Lender, at its option, may, but shall not be required to,
permit the guarantor’s estate to assume unconditionally the obligations arising
under the guaranty in a manner satisfactory to Lender, and, in doing so, cure
any Event of Default

Change In Ownership.  Any change in ownership of
twenty-five percent (25%) or more of the common stock of Borrower

Adverse Change.  A material adverse change occurs in Borrower’s
financial condition, or Lender believes the prospect of payment or performance
of this Note is impaired

Insecurity.  Lender in good faith believes itself insecure.

LENDER’S RIGHTS.  Upon default, Lender may declare the entire
unpaid principal balance on this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.

ATTORNEYS’ FEES; EXPENSES.  Lender may hire or pay someone else to
help collect this Note if Borrower does not pay Borrower will pay Lender that
amount. This includes, subject to any limits under applicable law. Lender’s
attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit,
including attorneys’ fees, expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), and appeals. If
not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law

JURY WAIVER.  Lender and Borrower hereby
waive the right to any jury trial in any action, proceeding, or counterclaim
brought by either Lender or Borrower against the other.

GOVERNING LAW.  This Note will be governed
by federal law applicable to Lender and, to the extent not preempted by federal
law, the laws of the State of Wisconsin without regard to its conflicts of law
provisions. This Note has been accepted by Lender in the State of Wisconsin.

CHOICE OF VENUE.  If there is a lawsuit, Borrower
agrees upon Lender’s request to submit to the jurisdiction of the courts of
Milwaukee County, State of Wisconsin

DISHONORED ITEM FEE.  Borrower will pay a fee to Lender of
$15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized
charge with which Borrower pays is later dishonored.

RIGHT OF SETOFF.  To the extent permitted by applicable law,
Lender reserves a right of setoff in all Borrower’s accounts with Lender
(whether checking, savings, or some other account). This includes all accounts
Borrower holds jointly with someone else and all accounts Borrower may open in
the future. However, this does not include any IRA or Keogh accounts, or any
trust accounts for which setoff would be prohibited by law. Borrower authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all sums
owing on the debt against any and all such accounts, and, at Lender’s option,
to administratively freeze all such accounts to allow Lender to protect Lender’s
charge and setoff rights provided in this paragraph.

LINE OF CREDIT.  This Note evidences a
revolving line of credit. Advances under this Note, as well as directions for
payment from Borrower’s accounts, may be requested orally or in writing by
Borrower or by an authorized person. Lender may, but need not, require that all
oral requests be confirmed in writing. Borrower agrees to be liable for all
sums either: (A) advanced in accordance with the instructions of an authorized
person or (B) credited to any of Borrower’s accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender’s internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (A) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (B) Borrower or
any guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor’s
guarantee of this Note or any other loan with Lender; (D) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized
by Lender; or (E) Lender in good faith believes itself insecure.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon
Borrower, and upon Borrower’s heirs, personal representatives, successors and
assigns, and shall inure to the benefit of Lender and its successors and
assigns.

GENERAL PROVISIONS.  This Note benefits Lender and its
successors and assigns, and binds Borrower and Borrower’s heirs, successors,
assigns, and representatives. If any part of this Note cannot be enforced, this
fact will not affect the rest of the Note. Lender may delay or forgo enforcing
any of its rights or remedies under this Note without losing them. Borrower and
any other person who signs, guarantees or endorses this Note, to the extent allowed
by law, waive presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender’s security interest in the collateral;
and take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are Joint and several.

PRIOR TO SIGNING THIS
NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING
THE VARIABLE INTEREST RATE PROVISIONS, BORROWER AGREES TO THE TERMS OF THE
NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF
THIS PROMISSORY NOTE.

BORROWER:

OLD SECOND BANCORP, INC.

	
  By:

  	
   /s/ William Skoglund

  	
   

  	
  By:

  	
   /s/ J. Douglas Cheatham

  
	
   

  	
   William Skoglund, President of Old Second
  Bancorp,

  	
   

  	
   

  	
   J. Douglas Cheatham, SVP and CFO of Old Second

  
	
   

  	
   Inc.

  	
   

  	
   

  	
   Bancorp, Inc.

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