Document:

Operating Agreement of Chem-Mod LLC

 Exhibit 10.38 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
 OPERATING AGREEMENT 
  
 OF 
  
 CHEM-MOD LLC 

 TABLE OF CONTENTS 
  

					
	 ARTICLE
	 	 	  	PAGE
			
	 ARTICLE 1
	 	 DEFINITIONS AND INTERPRETATION
	  	1
	 1.1
	 	 Definitions
	  	1
	 1.2
	 	 Interpretation
	  	4
			
	 ARTICLE 2
	 	 FORMATION OF THE COMPANY
	  	4
	 2.1
	 	 Formation
	  	4
	 2.2
	 	 Entire Agreement
	  	5
			
	 ARTICLE 3
	 	 NAME AND PRINCIPAL OFFICE
	  	5
	 3.1
	 	 Name
	  	5
	 3.2
	 	 Principal Office, Registered Office and Registered Agent
	  	5
			
	 ARTICLE 4
	 	 PURPOSE
	  	5
			
	 ARTICLE 5
	 	 TERM AND FISCAL YEAR
	  	5
	 5.1
	 	 Term
	  	5
	 5.2
	 	 Fiscal Year
	  	5
			
	 ARTICLE 6
	 	 CAPITAL CONTRIBUTIONS, LOANS AND CAPITAL ACCOUNTS
	  	6
	 6.1
	 	 Contribution of License
	  	6
	 6.2
	 	 Contributions of Cash
	  	6
	 6.3
	 	 Additional Contributions
	  	9
	 6.4
	 	 Loans
	  	9
	 6.5
	 	 Return of Capital Contributions
	  	10
	 6.6
	 	 Capital Account
	  	10
	 6.7
	 	 Interest on Capital Contributions
	  	10
			
	 ARTICLE 7
	 	 ALLOCATION OF PROFITS AND LOSSES
	  	10
	 7.1
	 	 General Allocation of Profits and Losses
	  	10
	 7.2
	 	 Depreciation Recapture
	  	11
	 7.3
	 	 Allocations with Respect to Transferred Interests
	  	12
	 7.4
	 	 Tax Credits
	  	12
	 7.5
	 	 Regulatory Allocations
	  	12
	 7.6
	 	 Section 704(c) Allocation
	  	13
	 7.7
	 	 Allocation of Excess Nonrecourse Liabilities
	  	13
			
	 ARTICLE 8
	 	 DISTRIBUTIONS
	  	14
	 8.1
	 	 Distribution of Net Cash Receipts
	  	14
	 8.2
	 	 Timing of Distribution; No Third-Party Beneficiaries
	  	14
			
	 ARTICLE 9
	 	 BOOKS OF ACCOUNT, RECORDS AND REPORTS
	  	14
	 9.1
	 	 Books of Account and Records
	  	14
	 9.2
	 	 Reports to Members
	  	15

  

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	 ARTICLE 10
	 	 MANAGEMENT OF THE COMPANY
	  	16
	 10.1
	 	 Management of Company Affairs
	  	16
	 10.2
	 	 Major Decisions
	  	16
	 10.3
	 	 Budgets
	  	18
	 10.4
	 	 Employment of Affiliates
	  	19
	 10.5
	 	 Liability of the Members
	  	19
	 10.6
	 	 Devotion of Time by Members
	  	19
	 10.7
	 	 Other Business of Members
	  	19
	 10.8
	 	 Tax Matters Partner
	  	19
	 10.9
	 	 Election to Adjust Basis
	  	20
	 10.10
	 	 Company Indemnification of Members
	  	20
			
	 ARTICLE 11
	 	 RIGHTS AND DUTIES OF MEMBERS
	  	20
	 11.1
	 	 Admission of Members
	  	20
	 11.2
	 	 Limited Liability
	  	20
	 113
	 	 No Individual Authority
	  	20
	 114
	 	 Representations by Members
	  	20
	 11 5
	 	 Indemnification by the Members
	  	21
	 11.6
	 	 Indemnification by the Company
	  	21
	 11.7
	 	 Rights of a Former Member
	  	21
	 11 8
	 	 Covenants
	  	21
			
	 ARTICLE 12
	 	 TRANSFER OF MEMBER INTERESTS
	  	25
	 12.1
	 	 General Prohibition
	  	25
	 12.2
	 	 Permitted Transfers
	  	25
	 12.3
	 	 Right of First Offer Refusal
	  	26
	 12.4
	 	 Involuntary Transfers
	  	27
	 12.5
	 	 Dissolution or Termination of Members
	  	28
	 12.6
	 	 Transfers of Ownership Interests in Members
	  	28
	 12.7
	 	 Status of Assignee
	  	28
	 12.8
	 	 Admission Requirements
	  	28
	 12.9
	 	 Effective Date of Assignment
	  	29
	 12.10
	 	 Status of Assignor
	  	29
	 12.11
	 	 Cost of Admission
	  	29
			
	 ARTICLE 13
	 	 TAG-ALONG RIGHT
	  	30
			
	 ARTICLE 14
	 	 BUY/SELL
	  	30
	 14.1
	 	 Right to Initiate
	  	30
	 14.2
	 	 Initiation and Elections
	  	30
	 14.3
	 	 Closing
	  	31
	 14.4
	 	 Payment of Loans
	  	32
	 14.5
	 	 Other Remedies for Noncompliance
	  	32
	 14.6
	 	 Assignees
	  	32
	 14.7
	 	 Additional Effects of a Buy/Sell
	  	32
	 14.8
	 	 Right to Assign
	  	33

  

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	 ARTICLE 15
	 	 DISSOLUTION AND LIQUIDATION OF COMPANY
	  	33
	 15.1
	 	 Dissolution of the Company
	  	33
	 15.2
	 	 Winding Up of Affairs
	  	33
	 15.3
	 	 Accounting
	  	33
	 15.4
	 	 Final Distribution of Company Property
	  	34
	 15.5
	 	 Certificate of Cancellation
	  	34
	 15.6
	 	 No Restoration of Deficit Capital Accounts
	  	34
			
	 ARTICLE 16
	 	 AMENDMENTS
	  	34
	 16.1
	 	 Amendment of Agreement
	  	34
	 16.2
	 	 Amendment of Certificate
	  	34
			
	 ARTICLE 17
	 	 NOTICES
	  	34
			
	 ARTICLE 18
	 	 MISCELLANEOUS PROVISIONS
	  	35
	 18.1
	 	 Severability
	  	35
	 18.2
	 	 Parties Bound
	  	35
	 18.3
	 	 Applicable Law
	  	36
	 18.4
	 	 Additional Documents and Acts
	  	36
	 18.5
	 	 Benefit
	  	36
	 18.6
	 	 Waiver
	  	36
	 18.7
	 	 Survival
	  	36
	 18.8
	 	 Headings
	  	36
	 18.9
	 	 Counterparts
	  	36

  
  

					
	 EXHIBITS
	  	 	    	 
			
	 Exhibit A
	  	-	    	 Description of Technology

	 Exhibit B
	  	-	    	 Development Budget

	 Exhibit C
	  	-	    	 License

	 Exhibit D
	  	-	    	 Test Protocol

	 Exhibit E
	  	-	    	 Confidentiality Agreement

  

 iii 

 OPERATING AGREEMENT OF 
 CHEM-MOD LLC 
  
  
 This Operating Agreement (this “Agreement”) of CHEM-MOD LLC, a Delaware limited liability company (the “Company”), is made and
entered into as of June 23, 2004, by and among NCXII, Ltd., an Ohio Limited Liability Company (“NOX”), AJG Coal, Inc., a Delaware corporation (“AJG”), and IQ Clean Coal LLC, a Delaware limited liability company
(“IQCC”). 
  
 R E C I
T A L S : 
  
 The parties to this
Agreement desire to form a Delaware limited liability company for the purpose of developing, using and commercializing certain coal remediation technology described in Exhibit A attached to this Agreement (the “Technology”). 
  
 By this Agreement, the parties desire to create the Company on the terms and
conditions set forth herein. 
  
 NOW THEREFORE, in
consideration of the foregoing, of the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 
  
 ARTICLE 1 
  
 DEFINITIONS AND INTERPRETATION 
  
 1.1    Definitions.    As used in this Agreement, the following terms shall have the meanings set forth below. 
  
 Act. The Delaware Limited Liability Company Act, as amended from time to time. 
  
 Adjusted Capital Account Deficit.    With
respect to any Member, the deficit balance, if any, in such Member’s Capital Account, as of the end of the relevant fiscal year, after giving effect to the following adjustments: (i) crediting thereto (A) the amount of such
Member’s share of Minimum Gain, including any “partner nonrecourse debt minimum gain” (as defined in Treasury Regulations Section 1.704-2(i)), and (B) the amount of Company liabilities allocated to such Member under
Section 752 of the Code with respect to which such Member bears the economic risk of loss (as defined in Treasury Regulations Section 1.752-2(a)), to the extent such liabilities do not constitute “partner nonrecourse debt” under
Treasury Regulations Section 1 752-2 and (ii) reduced by all reasonably expected adjustments, allocations and distributions described in Treasury Regulations Sections 1.704-l(b)(2)(ii)(d)(4), (5) and (6). 
  
 Affiliate.    (a) Any Person directly
or indirectly owning, controlling or holding the power to vote 10% or more of the outstanding voting securities of an identified other Person; (b) any Person 10% or more of whose voting securities are directly or indirectly owned, controlled or
held with power to vote, by such other Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (d) any officer, director, 

 
member, manager or partner of such other Person; (e) if such other Person is an officer, director, member, manager or partner, any entity for which such
Person acts in any such capacity; and (f) any spouse, lineal ancestor or descendant of such other Person. 
  
 Annual Budget.    As defined in Section 10.3. 
  
 Approved Budget.    The Development Budget and any Annual Budget, in each case for the
period to which such Budget applies. 
  
 Annual Tax
Liability.    For any Member for any fiscal year, the product of (a) forty percent (40%) multiplied by (b) the excess, if any, of (i) the amount of all items of taxable income and gain of the Company
for federal income tax purposes allocated to such Member for such fiscal year over (ii) the amount of all items of deductible expense and loss of the Company allocated to such Member for such fiscal year. 
  
 Capital Account.    The capital account
maintained for each Member pursuant to Section 6.6. 
  
 Capital Contributions.    With respect to any Member, the amount of money and the fair market value (as agreed by the Members) of any property or services contributed to the Company by such Member.

  
 Certificate.    The
Certificate of Formation of the Company, as amended from time to time. 
  
 Code.    The Internal Revenue Code of 1986, as amended from time to time, or any replacement or successor law. 
  
 Cumulative Tax Liability.    For each Member, as of any date during the term of this Agreement, the product of
(a) forty percent (40%) multiplied by (b) the excess, if any, (i) the amount of all items of taxable income and gain of the Company for federal income tax purposes allocated to such Member for all periods beginning on the date of
this Agreement through the end of the end of the fiscal year immediately preceding such date of calculation, over (ii) the amount of all items of deductible expense and loss of the Company allocated to such Member for all periods beginning on
the date of this Agreement through the end of the end of the fiscal year immediately preceding such date of calculation (with any excess of amounts in clause (ii) over amounts in clause (i) in prior fiscal periods being carried forward as
an item of loss in clause (ii) until absorbed in the subsequent fiscal period). 
  
 Development Budget.    The budget for the development of the Intellectual Property in accordance with the Test Protocol, a copy of which is attached to this Agreement as Exhibit B.

  
 Gross Cash Receipts.    With
respect to any period, the amount of all cash funds received by the Company from all sources. 
  
 Intellectual Property.    Any and all intellectual property and proprietary rights recognized in any country or jurisdiction in the United States and Canada and their respective

  

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possessions and territories now or in the future including, without limitation: (i) rights under patent, trademark, copyright and trade secret laws;
(ii) moral rights and similar rights; and (iii) documentation, research, databases, manuals, data, design information, materials, technical expertise, trade secrets, plans, specifications, and general know-how relating to the Technology
and/or Inventions, regardless of whether patentable or copyrightable, whether in tangible or intangible form and whether or not stored, compiled or memorialized physically, electronically, graphically, photographically or in writing. 
  
 Inventions.    As defined in
Section 11.8(e). 
  
 Investors.    AJG and IQCC, and their respective successors and assigns. 
  
 License.    The Technology License Agreement attached to this Agreement as Exhibit C, pursuant to which NOX has granted
the Company an exclusive, royalty-free right to use the Intellectual 1 Property in perpetuity. 
  
 Major Decisions.    As defined in Section 10.2. 
  
 Members.    NOX, AJG and IQCC, and each Person who may become a substituted or additional Member pursuant to the
provisions hereof and applicable law. 
  
 Minimum
Gain.    As such term is defined in Treasury Regulation Section 1.704-2(d), which shall generally mean the amount by which the nonrecourse liabilities secured by any assets of the Company exceed the adjusted tax
basis of such assets as of the date of determination. A Member’s share of Minimum Gain (and any net decrease thereof) at any time shall be determined in accordance with Treasury Regulation Section 1.704-2(g). 
  
 Net Cash Receipts.    With respect to any
period, the amount by which the Gross Cash Receipts in such period exceed the sum of the following: (a) all principal and interest payments on any indebtedness of the Company, and all other sums paid to such lenders in such period, but
excluding any payments specifically described in Article 8; (b) all cash expenditures (including expenditures for capital improvements) made in such period incident to the operation of the Company business, including but not limited to those
expenses of the Members paid, either directly or indirectly, by the Company; and (c) working capital and other reserves in such amounts and for such purposes as the Members deem necessary for proper current and future operation of the Company
business. 
  
 Participating
Percentage.    For each Member, the percentage set forth opposite such Member’s name below, as adjusted from time to time as provided in Section 6.2: 
  

			
	Member	  	Participating Percentage
		
	NOX	  	95.0%
	AJG	  	2.5%
	IQCC	  	2.5%

  
 Permitted
Transferee.    As defined in Section 12.2. 
  

 3 

 Person.    A natural person, corporation, limited liability company,
trust, partnership, estate, unincorporated association or other entity. 
  
 Prime Rate.    The rate of interest announced from time to time as its “prime rate” or “corporate base rate” (or equivalent rate) by The Bank of America at Chicago, Illinois (or its
successor-in-interest). 
  
 Priority
Return.    For each Investor, and NOX to the extent of any cash capital contributions as of any date, the sum of (a) the Capital Contributions in the form of cash or other immediately available funds of such
Investor, plus (b) the Cumulative Tax Liability of such Investor as of such date. 
  
 Profits or Losses.    The net income or loss of the Company for federal income tax purposes as finally determined by the Company’s accountants for each fiscal year of the
Company, as well as, where the context requires, related federal tax items such as tax preferences and credits, in each case appropriately adjusted with respect to final determination of any of the foregoing for federal income tax purposes.

  
 Test Protocol.    The
program for testing the Technology set forth in Exhibit D to this Agreement. 
  
 1.2    Interpretation.    The definitions in Section 1.1 shall apply equally to both the singular and plural forms of the terms defined. Wherever the context
may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine and neuter forms. For all purposes of this Agreement, the term “control” and variations thereof shall mean the direct or indirect
possession of the power to direct or cause the direction of the management and policies of the specified entity, through the ownership of equity interests therein, by contract or otherwise. As used in this Agreement, the words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”. As used in this Agreement, the terms “herein,” “hereof and “hereunder” shall refer to this Agreement
in its entirety. Any references in this Agreement to “Sections,” “Articles” of “Exhibits” shall, unless otherwise specified, refer to Sections, Articles, or Exhibits, respectively, in or attached to this Agreement.

  
 ARTICLE 2 
  
 FORMATION OF THE COMPANY 
  
 2.1    Formation.    The parties hereto agree to and do hereby form a limited liability company under and pursuant to the provisions of the Act; and the rights and obligations of the
Members shall be as provided therein except as otherwise expressly provided in this Agreement. The Members agree to execute such certificates or documents and to do such filings and recordings and all other acts, including the filing or recording of
the Certificate, and any assumed name filings in the appropriate offices in the State of Delaware and any other applicable jurisdictions as may be required to comply with applicable law. 
  

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 2.2    Entire Agreement.    Each and every other
agreement or understanding, oral or written, relating in any way to the formation or operation of the Company is hereby superseded in its entirety. From and after the execution of this Agreement, the same shall constitute the only Operating
Agreement of the Company except as the same may hereafter be amended pursuant to the provisions hereof. This Agreement represents the entire agreement and understanding of the parties hereto concerning the Company and their relationship as Members,
and all prior or concurrent agreements, understandings, representations and warranties in regard to the subject matter hereof are and have been merged herein. 
  

ARTICLE 3 
  
 NAME AND PRINCIPAL OFFICE 
  
 3.1    Name.     The business of the Company shall be conducted under the name of “Chem-Mod
LLC,” or such other name as the Members may designate. 
  
 3.2    Principal Office, Registered Office and Registered Agent.    The principal office of the Company shall be located at c/o NOX Inc., 4281 Meadowlark Trail, Stow, Ohio 44224. The
registered agent and the registered office of the Company in Delaware shall be Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. The Members may from time to time designate another registered agent or another
location for the principal office or registered office of the Company upon notice to all Members. 
  
 ARTICLE 4 
  
 PURPOSE 
  
 The
purpose of the Company is to engage in developing, commercializing, using, licensing and otherwise exploiting Intellectual Property pursuant to the License; financing any of the foregoing; and making prudent interim investments of Company funds,
including, without limitation, investments in obligations of federal, state and local governments or their agencies, mutual funds, money market funds and bank certificates of deposit; and engaging in any and all activities related or incidental
thereto. Except as specifically limited or prohibited by this Agreement, the Company is empowered to perform such actions and engage in such activities consistent with, useful or necessary to carry out the purpose of the Company. 
  
 ARTICLE 5 
  
 TERM AND FISCAL YEAR 
  
 5.1    Term.    The
term of the Company shall commence as of the date hereof and shall continue in perpetuity, unless sooner terminated pursuant to the provisions of this Agreement or as otherwise provided by law. 
  
 5.2     Fiscal
Year.    The fiscal year of the Company shall be the calendar year. 
  

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 ARTICLE 6 
  
 CAPITAL CONTRIBUTIONS, LOANS AND CAPITAL ACCOUNTS 
  
 6.1    Contribution of License.    Concurrently with the execution of
this Agreement, NOX shall enter into the License as a contribution to the capital of the Company. For purposes of this Agreement, the Members agree that the fair market value of the License on the date of this Agreement is zero. Immediately after a
patent application with respect to all or any portion of the Technology has been filed, NOX shall provide each Investor with a copy of such patent application. 
  

6.2    Contributions of Cash. 
  
 (a)    Phase 1-3 Testing. 
  
 (i)    Concurrently with the execution of
this Agreement, each Investor has advanced immediately available funds to the Company in the amount of One Hundred Thousand Dollars ($100,000) as a Capital Contribution. Within thirty (30) days after the execution of this Agreement, each
Investor shall advance additional immediately available funds to the Company in the amount of One Hundred Thousand Dollars ($100,000) as a Capital Contribution. The Company shall use such funds for the performance of the testing referred to as
Phases 1 through 3 in the Test Protocol (the “Phase 1-3 Testing”). 
  
 (ii)    If the actual cost of the Phase 1-3 Testing exceeds the Capital Contributions pursuant to Section 6.2(a)(i), NOX shall provide all additional funds needed to complete the Phase 1-3
Testing in accordance with the Test Protocol, at such time or times as such funds are needed therefor. Any such funds so provided by NOX shall constitute Capital Contributions by NOX. If NOX shall at any time fail to provide the additional funds, if
any, necessary to complete the Phase 1-3 Testing, then the Investors (in proportion to their Participating Percentages or in such other proportion as they may agree upon) shall have the right, but shall not be required, to provide all or any portion
of such additional required funds. If an Investor provides funds pursuant this Section 6.2(a)(ii) then (A) such funds shall constitute Capital Contributions by such Investor, (B) the Participating Percentage of such Investor shall
immediately and automatically be increased by the number of percentage points equal to the product of (x) one (1) percentage point multiplied by (y) the ratio of the amount of funds provided by such Investor pursuant to this
Section 6.2(a)(ii) to Eighty Thousand Dollars ($80,000), and (C) the Participating Percentage of NOX shall immediately and automatically be reduced by the increase to the Participating Percentage of such Investor pursuant to clause
(B) above. 
  
 (iii)    If the Capital Contributions pursuant to Section 6.2(a)(i) exceed the actual costs of the Phase 1-3 Testing, then (A) if any Capital Contributions are required of the Investors pursuant to
Section 6.2(b)(i), then fifty percent (50%) of 
  

 6 

 
such excess shall be applied toward each Investor’s obligation to contribute capital pursuant to Section 6.2(b)(i), or (B) if Capital
Contributions are not required of the Investors pursuant to Section 6.2(b)(i), then such excess shall be distributed pursuant to Section 8.1. 
  
 (b)    Phase 4 Testing. 
  
 (i)    If the Members unanimously agree that the Phase 1-3 Testing is successful, then each Investor shall advance
immediately available funds to the Company in the amount of Two Hundred Thousand Dollars ($200,000) (subject to reduction as provided in Section 6.2(a)(iii) above) as a Capital Contribution. The Capital Contributions pursuant to this
Section 6.2(b)(i) shall be made on such date or dates as all of the Members may agree upon, and based upon the availability of the University of North Dakota laboratory, contemplated as July 19, 2004. If an Investor fails to make the full
Capital Contribution required pursuant to this Section 6.2(b)(i), then the other Investor shall have the right, but shall not be required, to advance immediately available funds to the Company in amount of such deficiency, as a Capital
Contribution by such other Investor. Immediately upon the receipt by the Company of Capital Contributions from an Investor pursuant to this Section 6.2(b)(i), (A) the Participating Percentage of such Investor shall automatically be
increased by the number of percentage points equal to the product of (x) one (1) percentage point multiplied by (y) the ratio of the amount of such Investor’s Capital Contribution pursuant to this Section 6.2(b)(i)
(including any amount applied toward such Capital Contribution pursuant to Section 6.2(a)(iii)) to Eighty Thousand Dollars ($80,000), and (B) the Participating Percentage of NOX shall automatically be reduced by the increase to such
Investor’s Participating Percentage pursuant to clause (A) above. The Capital Contributions pursuant to this Section 6.2(b)(i) shall be used to fund the testing referred to as “Phase 4 Testing” in the Test Protocol (the
“Phase 4 Testing”). 
  
 (ii)    If the actual cost of the Phase 4 Testing exceeds the Capital Contributions pursuant to Section 6.2(b)(i), NOX shall provide all additional funds needed to complete the Phase 4 Testing in accordance with the
Test Protocol, at such time or times as such funds are needed therefor. Any such funds so provided by NOX shall constitute Capital Contributions by NOX. If NOX shall at any time fail to provide the additional funds, if any, necessary to complete the
Phase 4 Testing, then the Investors (in proportion to their Participating Percentages or in such other proportion as they may agree upon) shall have the right, but shall not be required, to provide all or any portion of such additional required
funds. If an Investor provides funds pursuant this Section 6.2(b)(ii) then (A) such funds shall constitute Capital Contributions by such Investor, (B) the Participating Percentage of such Investor shall immediately and automatically
be increased by the number of percentage points equal to the product of (x) one (1) percentage point multiplied by (y) the ratio of the amount of funds provided by such Investor pursuant to this Section 6.2(b)(ii) to Eighty
Thousand Dollars 

  

 7 

 
($80,000), and (C) the Participating Percentage of NOX shall immediately and automatically be reduced by the increase to the Participating Percentage of
such Investor pursuant to clause (B) above. 
  
 (iii)    If the Capital Contributions pursuant to Section 6.2(b)(i) exceed the actual costs of the Phase 4 Testing, then (A) if any Capital Contributions are required of the Investors pursuant to
Section 6.2(c)(i), then fifty percent (50%) of such excess shall be applied toward each Investor’s obligation to contribute capital pursuant to Section 6.2(c)(i), or (B) if Capital Contributions are not required of the
Investors pursuant to Section 6.2(c)(i), then such excess shall be distributed pursuant to Section 8.1. 
  
 (c)    Phase 5 Testing and Commercial Development. 
  
 (i)    If the Members unanimously agree that the Phase 4 Testing is successful, then the
Investors shall provide facilities, coal, chemicals and other goods and services to the Company and make facilities available to the Company to the extent necessary to allow the Company to perform the testing referred to as “Phase 5
testing” in the Test Protocol (the “Phase 5 Testing”) in accordance with the Test Protocol. Immediately upon the completion of the Phase 5 Testing as a result of the goods, services and facilities provided the Investors in accordance
with this Section 6.2(c)(i), (A) the Participating Percentage of each Investor shall automatically be increased by five (5) percentage points, and (B) the Participating Percentage of NOX shall automatically be reduced by ten
(10) percentage points. 
  
 (ii)    If the Members unanimously agree that the Phase 4 Testing is successful, then, in addition to the obligations described in Section 6.2(c)(i), each Investor shall advance immediately available funds to the
Company in the amount of fifty percent (50%) of Two Hundred Thousand Dollars ($200,000) (subject to reduction as provided in Section 6.2(b)(iii) above) or such lesser amount as the Company may require for the Phase 5 Testing and the
commercial development of the Intellectual Property. The Capital Contributions to be made pursuant to this Section 6.2(c)(ii) shall be made on such date or dates as all of the Members may agree upon. If an Investor fails to make the full
Capital Contribution required of such Investor pursuant to this Section 6.2(c)(ii), then the other Investor shall have the right, but shall not be required, to advance immediately available funds to the Company as a Capital Contribution by such
other Investor up to the amount of such deficiency (a “Default Contribution”). If an Investor makes a Default Contribution, then immediately upon the receipt by the Company of such Default Contribution, (A) the Participating
Percentage of such contributing Investor shall automatically be increased by the number of percentage points equal to the product of (x) one (1) percentage point multiplied by (y) the ratio of the amount of the Default Contribution to
One Hundred Forty Thousand Dollars ($140,000), and (B) the Participating Percentage of the defaulting Investor shall automatically be reduced by the increase to the Participating Percentage of the contributing Investor pursuant to clause
(A) above. 
  

 8 

 (iii)    The Capital Contributions advanced pursuant to
Section 6.2(c)(ii) shall be applied to fund the Phase 5 Testing and the commercial development of the Intellectual Property. If the Capital Contributions pursuant to Section 6.2(c)(ii) exceed the actual costs of the Phase 5 Testing, then
such excess shall be distributed pursuant to Section 8.1. 
  
 (d)    Amendments.    Each Member acting alone is hereby authorized to amend this Agreement to evidence any adjustment to the Participating Percentages in
accordance with Section 6.2. 
  
 (e)    Sole Remedy.    The adjustments to the Participating Percentages described in Sections 6.2(a), (b) and (c) above shall be the sole remedies for any failure to contribute
capital required under this Section 6.2. 
  
 6.3    Additional Contributions.    Except as specifically set forth in Section 6.1 and Section 6.2 of this Agreement, no Member shall be required to make any additional
contributions to the capital of the Company. 
  
 6.4    Loans. 
  
 (a)    If at any time in the opinion of the Members, the Company’s revenues and funds are not sufficient to satisfy the obligations and liabilities of the Company or to preserve, protect and
develop the property of the Company, the Members may arrange for the Company to borrow such required funds from a third party on such terms and conditions as the Members deem advisable, provided that: 
  
 (i)     No Member shall have any
personal liability for repayment of any loan without such Member’s prior written consent; and 
  
 (ii)    No Member shall be required to make a loan to the Company. 
  
 (b)    If at any time the Members
determine that the Company’s revenues and funds are not sufficient to satisfy the obligations and liabilities of the Company or to develop, preserve and protect the property of the Company, and the Company cannot borrow the required funds from
commercial lenders on terms that are reasonable under the circumstances (including but not limited to the terms described in Section 6.4(a) above), then one or more of the Members or their Affiliates, in such person’s sole discretion, may
loan the required funds to the Company. Any such loans shall be made by the lending Members or their Affiliates in proportion to the applicable lending Members’ respective Participating Percentages or in such other proportion as the lending
Members or their Affiliates may agree upon. All such loans (i) shall be payable only from the assets of the Company without any recourse against or right of contribution from any Member; (ii) shall bear interest at an annual rate equal to
the Prime Rate plus three percent (3%), adjusting when and as the Prime Rate shall adjust, compounded annually; and (iii) shall mature and be due and payable, to the extent not paid pursuant to other provisions of this Agreement, upon
termination of the Company. 
  

 9 

 6.5    Return of Capital Contributions.    Except
as specifically provided in this Agreement a Member shall not be entitled to the return of his capital contribution to the Company. 
  
 6.6    Capital Account.    A separate Capital Account shall be established and maintained for each
Member in accordance with the Code and the regulations promulgated thereunder, including but not limited to the rules regarding the maintenance of partners’ capital accounts set forth in Treasury Regulation Section 1.704-1. Subject to the
immediately preceding sentence, there shall be credited to each Member’s Capital Account (i) the amount of money and the fair market value (as determined by the Members) of any property (net of related liabilities) contributed by the
Member to the Company, and (ii) the Member’s share of income or gain (or items thereof) of the Company, including income and gain exempt from tax. There shall be charged against each Member’s Capital Account (iii) the amount of
money and the fair market value (as determined by the Members) of any property (net of related liabilities) distributed to the Member by the Company and (iv) the Member’s share of loss and deduction (or items thereof) of the Company. If
property is contributed to the capital of the Company or if there is a revaluation of any Company property such that the book value of such property differs from its adjusted tax basis, the Members’ Capital Accounts shall be appropriately
adjusted for income, gain, loss and deduction as required by Treasury Regulation Section 1.704-1(b)(2)(iv)(g). To the extent a Member’s Capital Account is greater than zero, such excess is hereinafter referred to as a “positive
balance.” To the extent that a Member’s Capital Account is less than zero, said amount is hereinafter referred to as a “deficit balance.” 
  
 6.7    Interest on Capital Contributions.    Except as specifically provided in this Agreement, the
Company shall not pay interest on Capital Contributions or undistributed Profits. 
  
 ARTICLE 7 
  
 ALLOCATION OF PROFITS AND LOSSES 
  
 7.1    General Allocation of Profits and Losses.    After giving effect to the allocations set forth in Sections 7.5 and 7.6, all Profits and Losses (including all items of income and
expense entering into the determination of such Profits and Losses), as finally determined for federal income tax purposes for each fiscal year of the Company, shall be allocated among the Members as follows: 
  
 (a)    Profits.    Profits shall be allocated among the Members in the following order of priority: 
  
 (i)    First, to the Members in proportion to and to the extent of the excess, in the
case of each Member, of (A) all Losses allocated to such Member pursuant to Section 7.1(b)(iii), over (B) all Profits previously allocated to such Member pursuant to this Section 7.1(a)(i). 
  
 (ii)    Second, to the Members in
proportion to and to the extent of the excess, in the case of each Member, of (A) all Losses allocated such Member pursuant to Section 7. l(b)(ii), over (B) all Profits previously allocated to such Member pursuant to this
Section 7.1(a)(ii). 
  

 10 

 (iii)    Third, to the Investors in proportion to and to the extent
of the excess, in the case of each Investor, of (A) the amount of all distributions of Net Cash Receipts to such Investor pursuant to Section 8.1(b) over (B) all prior allocations of Profits to such Member pursuant to this
Section 7.1(a)(iii). 
  
 (iv)    Fourth, to NOX, in the amount of the excess, if any of (A) the amount of all distributions of Net Cash Receipts to NOX pursuant to Section 8.1(c) over (B) all prior allocations of Profits to such
Member pursuant to this Section 7.1(a)(iv). 
  
 (v)    Fifth, to the Members in proportion to and to the extent of the excess, in the case of each Member, of (A) the amount of all distributions of Net Cash Receipts to such Member pursuant to
Section 8.1(d) over (B) all prior allocations of Profits to such Member pursuant to this Section 7.1(a)(v). 
  
 (vi)    Sixth, any remaining Profits shall be allocated to the Members in accordance with their Participating
Percentages 
  
 (b)    Losses.    Losses shall be allocated among the Members in the following order of priority: 
  

(i)    First, to the Members in proportion to and to the extent of the excess, in the case of each Member, of
(A) all Profits allocated to such Member pursuant to Section 7.1(a)(vi), over (B) all Losses previously allocated to such Member pursuant to this Section 7.1(b)(i). 
  
 (ii)    Second, to the Members having positive balances in their Capital Accounts in
proportion to and to the extent of such positive balances. 
  
 (iii)    Third, to the Members in accordance with their Participating Percentages. 
  
 7.2    Depreciation Recapture.    Subject to Section 7.6, if any portion of Profit recognized
from the disposition of property by the Company represents the “recapture” of previously allocated deductions by virtue of the application of Code Section l(h)(l)(D), 1245 or 1250 (“Recapture Gain”), such Recapture Gain shall be
allocated as follows: 
  
 (a)    First, to the Members in proportion to the lesser of each Member’s (i) allocable share of the total Profit recognized from the disposition of such property and (iii) share of depreciation or
amortization with respect to such property (as determined in the manner provided in Treasury Regulations Sections 1.1245-l(e)(2) and (3)), until each such Member has been allocated Recapture Gain equal to such lesser amount. 
  

 11 

 (b)    Second, the balance of Recapture Gain shall be allocated among
the Members whose allocable shares of total Profit from the disposition of such property exceed their shares of depreciation or amortization with respect to such property (as determined in the manner provided in Treasury Regulations Sections
1.1245-l(e)(2) and (3)), in proportion to their shares of total Profit (including Recapture Gain) from the disposition of such property; provided, however, that no Member shall be allocated Recapture Gain under this Section 7.2 in excess of the
total Profit otherwise allocated to such Member from such disposition. 
  
 7.3    Allocations with Respect to Transferred Interests.    Except as otherwise provided below or unless otherwise required by the provisions of the Code or agreed by the Members, any
Profit or Loss allocable to an interest in the Company which has been transferred during any year shall be allocated among the Persons who were holders of such interest during such year in proportion to the number of days during such year that each
holder was recognized as the holder of the interest, without regard to the results of Company operations during the period the holder was recognized as the owner thereof. 
  
 7.4    Tax Credits.    Unless otherwise required by the Code, any tax
credits of the Company shall be allocated among the Members in accordance with their Participating Percentages. Any recapture of tax credits shall be allocated among the Members in the same ratio as the applicable tax credits were allocated to the
Members. 
  
 7.5    Regulatory
Allocations. 
  
 (a)    Minimum Gain Chargeback.    Notwithstanding any other provision of this Agreement, if there is a net decrease in Minimum Gain for a Company taxable year, each Member shall be
allocated, before any other allocation of Company items for such taxable year, items of gross income and gain for such year (and, if necessary, for subsequent years) in proportion to, and to the extent of, the amount of such Member’s share of
the net decrease in Minimum Gain during such year. The income allocated pursuant to this Section 7.5(a) in any taxable year shall consist first of gains recognized from the disposition of property subject to one or more nonrecourse liabilities
of the Company, and any remainder shall consist of a pro rata portion of other items of income or gain of the Company. The allocation otherwise required by this Section 7.5(a) shall not apply to a Member to the extent provided in
Treasury Regulation 1.704-2(f)(2) through (5). 
  
 (b)    Qualified Income Offset.    Notwithstanding any other provision of this Agreement, if a Member unexpectedly receives an adjustment, allocation or distribution described in
Treasury Regulation Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6) that causes or increases an Adjusted Capital Account Deficit with respect to such Member, items of Company gross income and gain shall be specially allocated to such
Member in an amount and manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly as possible. 
  

 12 

 (c)    Gross Income
Allocation.    If at the end of any Company taxable year, a Member has an Adjusted Capital Account Deficit, such Member shall be specially allocated items of Company income or gain in an amount and manner sufficient to
eliminate such deficit Adjusted Capital Account Deficit as quickly as possible. 
  
 (d)    Nonrecourse Deductions.    Any deductions attributable to partnership nor
recourse liabilities (as determined pursuant to Treasury Regulation Section 1.704-2(c)) of the Company for any taxable year shall be allocated among the Members in the same proportion as Profits or Losses (as may apply) for such year are
allocated. 
  
 (e)    Member Nonrecourse Debt.    Notwithstanding any other provision of this Agreement, any item of Company Loss, deduction or expenditures described in Code Section 705(a)(2)(B)
that is attributable to a partner nonrecourse debt (as defined in Treasury Regulation Section 1.704-2(b)(4)) of a Member shall be allocated to those Members that bear the economic risk of loss for such partner nonrecourse debt, and among such
Members in accordance with the ratios in which they share such economic risk, determined in accordance with Treasury Regulation Section 1.704-2(i). If there is a net decrease for a Company taxable year in any partner nonrecourse debt minimum
gain of the Company, each Member with a share of such partner nonrecourse debt minimum gain as of the beginning of such year shall be allocated items of gross income and gain in the manner and to the extent provided in Treasury Regulation
Section 1.704-2(i)(4). 
  
 (f)    Interpretation.    The foregoing provisions of this Section 7.5 are intended to comply with Treasury Regulation Sections 1.704-l(b) and 1.704-2 and shall be interpreted
consistently with this intention. Any terms used in such provisions that are not specifically defined in this Agreement shall have the meaning, if any, given such terms in the Regulations cited above. 
  
 7.6    Section 704(c)
Allocation.    Notwithstanding the foregoing allocations of Profits and Losses, if any property contributed to the Company has a fair market value (as agreed by the Members) that differs from its adjusted basis for
federal income tax purposes at the time of such contribution, or if there is a revaluation of any Company property such that the book value of such property differs from its adjusted basis for federal income tax purposes, items of income, gain,
loss, and deduction with respect to any such property shall be allocated among the Members so as to take account of such difference, in the manner intended by Section 704(c) of the Code and the Treasury Regulations from time to time promulgated
thereunder, using such method permitted by such Treasury Regulations as the Members may determine. 
  
 7.7    Allocation of Excess Nonrecourse Liabilities.    Solely for the purpose of allocating excess
nonrecourse liabilities of the Company among the Members in connection with the determination of the Members’ adjusted tax bases for their interests in the Company, in accordance with Section 752 of the Code and the Treasury Regulations
from time to time promulgated thereunder, the Members agree that each Member’s interest in Company Profits equals such Member’s Participating Percentage. 
  

 13 

 ARTICLE 8 
  
 DISTRIBUTIONS 
  
 8.1    Distribution of Net Cash Receipts.    Net Cash Receipts, if any, shall be applied and
distributed in the following order of priority: 
  
 (a)    First, to pay principal and unpaid accrued interest on any loans made to the Company by any Member or any Affiliate thereof pursuant to Section 6.4(b), in proportion to the respective amounts of the
outstanding principal and accrued interest of such loans. 
  
 (b)    Second, until each Investor has received distributions of Net Cash Receipts pursuant to this Section 8.1 (b) in the amount of its Priority Return, to the Investors in proportion to
and to the extent of the excess, in the case of each Investor, of (i) such Investor’s Priority Return over (ii) all prior distributions of Net Cash Receipts to such Investor pursuant to this Section 8.1(b). 
  
 (c)    Third, to NOX until NOX has
received distributions of Net Cash Receipts pursuant to this Section 8.1(b) in the amount of its Priority Return, if any. 
  
 (d)    Fourth, from and after such time as each of the Investors and NOX has received aggregate distributions pursuant
to Sections 8.1(b) and 8.1(c) in the amount of such Member’s Priority Return, Net Cash Receipts shall be distributed to the Members in accordance with their Participating Percentages. To the extent that Net Cash Receipts are available for
distribution pursuant to this Section 8.1(d), the Company shall distribute Net Cash Receipts pursuant to this Section 8.1(d) on a quarterly basis in an amount sufficient to distribute to each Member pursuant to this Section 8.1(d) not
less than twenty-five percent (25%) of such Member’s Annual Tax Liability for the immediately preceding fiscal year. 
  
 8.2    Timing of Distribution; No Third-Party Beneficiaries.    Subject to Section 8. (d), Net
Cash Receipts shall be distributed to the Members in such amounts and at such intervals as the Members, in their sole discretion, may determine, but no less frequently than annually. The foregoing priorities of application of Net Cash Receipts are
for the benefit of the Members only and not for the benefit of any third party or creditor of the Company or of any Member, and neither the Company nor any Member shall be liable or responsible to any third party or creditor of the Company or of any
Member for any deviation from such priorities. 
  
  
 ARTICLE 9 
  
 BOOKS OF ACCOUNT, RECORDS AND REPORTS 
  
 9.1    Books of Account and Records. 
  
 (a)    The Members shall maintain at the principal place of business of the Company all
of the following: 
  

 14 

 (i)    a list of the full name and last known business address of
each Member setting forth the amount of cash each Member has contributed, a description and statement of the agreed value of any other property or services each Member has contributed or has agreed to contribute in the future, and the date on which
each became a Member; 
  
 (ii)    a copy of the Certificate and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any such instrument was executed; 
  
 (iii)    copies of the Company’s
federal, state and local income tax returns and reports, if any, for the three most recent years; 
  
 (iv)    copies of this Agreement and any amendments hereto; 
  
 (v)    copies of the financial
statements, if any, of the Company for the three most recent years; and 
  
 (vi)    proper and complete records and books of account for the Company. 
  
 Any of the foregoing may be inspected and copied by any Member or its duly authorized representatives, at the expense of such Member,
during ordinary business hours. 
  
 (b)    If a Member reasonably requests the Company to assemble or compile information, the Members shall have the authority to pass on all costs of labor, duplicating or other related charges so incurred to the Member
making the request. 
  
 9.2    Reports
to Members.    The Members, at Company expense, shall cause to be furnished to each of the Members as soon as practicable after the end of each calendar year the following: 
  
 (a)    A copy of the federal income tax
return filed by the Company for the calendar year, except for Schedules K-l applicable to other Members; 
  
 (b)    All information relative to the Company necessary for the preparation of the Members’ federal and state
income tax returns; and 
  
 (c)    A balance sheet as of the close of such calendar year and statements of Profits or Losses, and Net Cash Receipts, if any, all of which shall be prepared in accordance with generally accepted accounting principles
or tax accounting principles, with or without audit or review by an independent certified public accountant, in each case in the discretion of the Members. 
  
 In addition, the Company shall provide each Member with copies of any additional reports in existence regarding the Company or the Intellectual Property as such Member
may reasonably request, provided the information requested does not jeopardize the ability of NOX to obtain foreign patents, 
  

 15 

 ARTICLE 10 
  
 MANAGEMENT OF THE COMPANY 
  
 10.1    Management of Company Affairs.    Except as otherwise
specifically provided in this Agreement, the management of the Company shall be vested in the Members. Except as provided in Section 10.2 or as otherwise specifically provided in this Agreement, all rights and authority granted to the Members
under this Agreement or the Act, and all decisions and determinations to be made by the Members may be exercised or made only upon the approval of Members having more than fifty percent (50%) of the aggregate Participating Percentages of all
Members at such time. Any action (authorized in accordance with this Agreement) taken by a Member (in its capacity as such) shall constitute the act of and serve to bind the Company. Each Member may designate one or more of its employees, agents or
Affiliates to carry out its duties and responsibilities to the Company. Persons dealing with the Company shall be entitled to rely conclusively on the power and authority of each Member as set forth in this Agreement. The Members shall not employ,
or permit another Person to employ any funds or assets of the Company in any manner other than for the exclusive benefit of the Company. Except as all Members may agree from time to time, the Members shall not be entitled to any fees or other
compensation for the performance of their duties as such; provided, however, the Company shall reimburse each Member for all direct costs incurred by such Member, its Affiliates, employees or agents on behalf of the Company or otherwise in
connection with performance of the duties of a Member 
  
 10.2    Major Decisions.    Notwithstanding the provisions of Section 10.1 or any other provision of this Agreement, the following actions and decisions (“Major
Decisions”) by or on behalf of the Company shall require the prior written approval of all Members at such time: 
  
 (a)    The adoption of Annual Budgets pursuant to Section 10.3. 
  
 (b)    Any modification or amendment to
any Approved Budget. 
  
 (c)    Any expenditure in excess of one hundred ten percent (110%) of the amount set forth in an Approved Budget for such expenditure. 
  
 (d)    Any modification, amendment or termination of the License. 
  
 (e)    Any modification or amendment to
the Test Protocol. 
  
 (f)    Any sale, sublicense or other grant or disposition of the ownership of or right to use all or any portion of the property of the Company, including the Intellectual Property, the Technology and the Inventions.

  

 16 

 (g)    Any decisions relating to applying for, prosecuting,
obtaining, maintaining, enforcing or defending any Intellectual Property with respect to the Technology and/or Inventions. 
  
 (h)    The amount and timing of any distributions of Net Cash Receipts other than in accordance with Article 8.

  
 (i)    Subject to
Section 10.4, any decisions relating to any transaction between the Company and any Member or any Affiliate of any Member. 
  
 (j)    The borrowing of any funds or other incurrence of any indebtedness which is either (i) secured by any
assets of the Company, or (ii) in excess of Five Thousand Dollars ($5,000); and any refinancing of or material modification of the terms of any such indebtedness. 
  
 (k)    Any expenditures or commitments to make expenditures in excess of Five Thousand
Dollars ($5,000). 
  
 (l)    The acquisition or lease of any real property. 
  
 (m)    The issuance of any membership interest in the Company, any options or other rights to acquire any membership
interest in the Company, or any other securities convertible into any membership interest in the Company, and any purchase or recemption by the Company of any membership interest in the Company (provided that if any additional membership interests
in the Company are issued with the consent of the Members, in no event shall the Participating Percentage of either Investor be reduced). 
  
 (n)    The employment and the dismissal of any employee of the Company, and any changes in salaries or benefits of any
employee of the Company. 
  
 (o)    Any commitments with respect to pensions, phantom equity or deferred compensation to the Company’s employees, any bonuses for the Company’s employees in excess of their base salaries, and any
arrangements concerning the private use of vehicles belonging to the Company. 
  
 (p)    The organization of any subsidiaries of the Company, the investment in any other entity or the acquisition of any equity securities of any other entity. 
  
 (q)    The merger or consolidation of the
Company or any subsidiary of the Company with any other entity. 
  
 (r)    Any conversion or reorganization of the Company or any other entity into any other form of legal entity. 
  
 (s)    The engagement or termination of any independent contractor, the terms of any
such engagement and any material modification to any of the foregoing. 
  

 17 

 (t)    The engagement of any accountant or attorneys on behalf of the
Company. 
  
 (u)    The
establishment of or addition to any cash reserve, except to the extent required by any agreement to which the Company is a party. 
  
 (v)    Any material tax elections or decisions required in the preparation and filing of Company tax returns and any
decisions or agreements in connection with any examination or controversy relating to the tax returns or positions of the Company. 
  
 (w)    The commencement, compromise or settlement of any lawsuit, legal proceeding, bankruptcy proceeding or
arbitration proceeding involving the Company or affecting the Intellectual Property. 
  
 (x)    The decision to dissolve the Company. 
  
 (y)    Any transaction outside the ordinary course of the day-to-day business Company.

  
 10.3    Budgets. 

 
 (a)    Development
Budget.    The Members hereby approve and adopt the Development Budget. The Development Budget shall constitute an Approved Budget through December 31, 2004. 
  
 (b)    Annual Budgets.
    On or before November 1 of each year, NOX shall prepare a preliminary annual budget for the Company for the next calendar year, and shall submit such preliminary annual budget to each Member. Each preliminary annual
budget shall set forth reasonably itemized estimates of all revenues, expenses, reserves, capital expenditures and receipts from capital transactions of the Company, as well as any relevant business plans for the Company for the next calendar year.
On or before December 1 of each year, the Members, by the written approval of all Members, shall approve and adopt an annual budget for the Company for the next calendar year. Each annual budget described above and approved by all Members is
referred to herein as an “Annual Budget” and shall constitute an Approved Budget for the period covered by such Annual Budget. If all of the Members do not approve an Annual Budget for any calendar year prior to the commencement of such
calendar year then, until the Members shall agree upon an Annual Budget for such year, the Annual Budget in effect for the immediately preceding calendar year shall constitute the Annual Budget for such calendar year, except that any items or
portion of the preliminary annual budget for such calendar year upon which all Members agree shall be substituted for the corresponding items in the preceding year’s Annual Budget. 
  
 (c)    Separate Approval Not Required.    Any
expenditures or other matters set forth in an Approved Budget shall be deemed approved by all Members for purposes of Section 10.2 for the period covered by such Approved Budget, and the separate approval of the Members of any such matters
shall not be required. 
  

 18 

 10.4    Employment of Affiliates.    Subject to
Section 10.2, the Members may, on behalf and at the expense of the Company, engage any Member or an Affiliate of any Member to render services or provide goods to the Company. Notwithstanding Section 10.2 or any other provision of this
Agreement, all decisions relating to any contract or other arrangements between the Company and any Member or any Affiliate of any Member, including the License, shall be made solely by the Members that are not parties to such arrangement and whose
Affiliates are not parties to such arrangement (the “Other Members”). Any such decision shall require the approval of all of the Other Members if such matter is a Major Decision or the approval of Members having a majority of the
Participating Percentages of the Other Members if such matter is not a Major Decision. Such matters shall include any decision to exercise or waive any rights or remedies of the Company under, or to amend or modify, the License or any other contract
or arrangement from time to time in effect between the Company and any Member or any Affiliate of any Member. 
  
 10.5    Liability of the Members.    The Members and their respective Affiliates, agents and
employees shall not be liable, responsible or accountable in damages or otherwise to the Company or any of the Members or their successors or assigns for any acts performed or omitted within the scope of his authority as a Member, or otherwise
conferred on the Member and such Affiliates, agents and employees by this Agreement, including the execution and delivery of deeds in lieu of foreclosure, provided that such Member or such Affiliates, agents or employees shall act in good faith and
shall not be guilty of willful misconduct or gross negligence. 
  
 10.6    Devotion of Time by Members.    Each Member and its agents, Affiliates, employees and agents of Affiliates shall devote such time to the Company business as is reasonably
necessary to manage and supervise the Company business and affairs in an efficient manner and to accomplish the purposes of the Company. Each Member and each employee, agent or Affiliate thereof shall be free to engage in other business ventures
whether or not directly competing with the Company, or to exploit business opportunities whether or not arising from the conduct of Company business. 
  
 10.7    Other Business of Members.    Subject to Section 11.8, each Member and its Affiliates
may engage in or possess any interests in other business ventures of any kind, independently or with others. Subject to Section 11.8, neither the Company, any Member, nor the holder of any interest in the Company shall have any right by virtue
of this Agreement or the relationship created hereby in or to such ventures or activities or to the income or profits derived therefrom, and the pursuit of such ventures, even if competitive with the business of the Company, shall not be deemed
wrongful or improper. 
  
 10.8    Tax
Matters Partner.    AJG, for so long as it shall be a Member, shall be the “tax matters partner” (within the meaning of Section 6231 of the Code) of the Company, and as such, subject to Section 10.2,
shall have all powers and authorities granted tax matters partners under the applicable provisions of the Code and any regulations promulgated thereunder. All costs and expenses incurred by the tax matters partner in connection with an audit by the
Internal Revenue Service or other government tax agency of a Company income tax return shall be borne by the Company. 
  

 19 

 10.9    Election to Adjust Basis.    In the event
of a distribution of property made in the manner provided in Section 734 of the Code (or any comparable provision of any succeeding law), or in the event of a transfer of any membership interest in the Company permitted by this Agreement made
in the manner provided in Section 743 of the Code, the Members, in their sole discretion, may make or revoke on behalf of the Company the election referred to in Section 754 of the Code permitting adjustments to basis as provided in
Sections 734 and 743 of the Code. Any additional costs or expenses incurred by the Company as a result of such an election shall be borne pro rata by the Member or Members benefiting from such an election. 
  
 10.10    Company Indemnification of
Members.    The Company shall indemnify, defend, and hold the Members and their respective Affiliates, employees and agents, or their respective successors, executors, administrators or personal representatives harmless
from and against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees) sustained or incurred as a result of any act or omission concerning the business or activities of the Company; provided that the Member or any
Affiliate, employee, or agent is not guilty of gross negligence, willful misconduct or violation of fiduciary duty and was acting in good faith within what it reasonably believed to be the scope of its authority for a purpose which it reasonably
believed to be not opposed to the best interests of the Company. The foregoing indemnity shall not be enforceable against any Member personally but solely from such Member’s interest in the Company. 
  
 ARTICLE 11 
  
 RIGHTS AND DUTIES OF MEMBERS 
  
 11.1    Admission of
Members.    Each of NOX, AJG and IQCC is hereby recognized and admitted as a Member of the Company. No other person shall be recognized or admitted as a Member of the Company unless such person has satisfied the
requirements of Article 12. 
  
 11.2    Limited Liability.    Except to the extent provided in Section 11.5, the debts, obligations and liabilities of the Company, whether arising in contract, tort, or otherwise,
shall be solely the debts, obligations, and liabilities of the Company, and the Members shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member of the Company. Except as provided
in Section 11.5, no Member, in its capacity as a Member of the Company, shall be responsible or liable for any indebtedness or obligation of any other Member, nor, except to the extent provided in Section 11.6, shall the Company be
responsible or liable for any indebtedness or obligation of any Member. 
  
 11.3    No Individual Authority.    Except as otherwise expressly provided in this Agreement or in the Act, no Member, acting alone, shall have any authority to act for, or to create,
undertake or assume any liabilities, obligations or responsibilities on behalf of the Company or any other Member. 
  
 11.4    Representations by Members.    Each Member represents and warrants to the other Members and
to the Company that (i) all transactions contemplated by this Agreement to be performed by such Member have been duly authorized by all necessary action and do not 

  

 20 

 
require the consent or approval of any third party, (ii) such Member has all necessary power with respect thereto, (iii) the consummation of such
transactions will not (and with the giving of notice or lapse of time or both would not) result in a breach or violation of, or a default or loss of contractual benefits under, any trust agreement or other agreement by which such Member or any of
such Member’s properties is bound, or any statute, regulation, order or other law to which such Member or any of such Member’s properties is subject, or give rise to a lien or other encumbrance upon any of such Member’s properties or
assets, and (iv) this Agreement is a valid and binding agreement on the part of such Member, enforceable in accordance with its terms. 
  
 11.5    Indemnification by the Members.    Each Member hereby agrees to indemnify the Company and
each of its other Members and hold them each harmless from and against all liability, loss, cost, damage and expense (including attorneys’ fees and costs incurred in the investigation, defense and settlement of the matter) which the Company or
any of such other Members shall ever sustain, suffer or incur which relate or arise out of or in connection with a breach by the indemnifying Member of any representation, warranty or covenant made by the indemnifying Member in this Agreement or in
any agreement or instrument delivered pursuant hereto. If the Company is made a party to any litigation or otherwise incurs any loss or expense as a result of or in connection with any Member’s personal obligations or liabilities unrelated to
Company business, such Member shall indemnify and reimburse the Company for all such loss and expense incurred, including reasonable attorneys’ fees. The liability of any Member pursuant to this Section 11.5 may be assessed against such
Member’s interest in the Company, including the right to receive any distributions of Net Cash Receipts; provided, however, the liability of a Member under this Section 11.5 shall not be limited to such Member’s interest in the
Company but shall also be enforceable against such Member personally. 
  
 11.6    Indemnification by the Company.    The Company shall indemnify each of its Members and former Members for all costs, losses, liabilities and damages paid or incurred by any of
them in connection with the business of the Company, including any judgments, settlements, penalties, fines and expenses incurred in a proceeding to which any such person is a party because the person is or was a Member of the Company, to the
fullest extent provided or allowed by the Act or any other applicable laws; provided, however, that such liability does not arise by reason of the willful misconduct or gross negligence of such Member or any matter described in Section 11.5
with respect to which the Member is obligated to indemnify the Company. 
  
 11.7    Rights of a Former Member.    No Member shall have the right or power to resign or withdraw by voluntary act from the Company. If a Member shall cease to be a Member, and if the
Company is not then dissolved, then (i) such former Member shall be in breach of this Agreement, and (ii) notwithstanding the terms of Section 18-604 of the Act, such former Member shall not thereby be entitled to receive the fair
value of such former Member’s membership interest in the Company or any other payment or any other distribution except as specifically provided in this Agreement. 
  
 11.8    Covenants.    Notwithstanding anything contrary herein, each
Member covenants as follows: 
  

 21 

 (a)    Confidential
Information.    Each Member acknowledges the economic value of the Confidential Information (as defined below) of the Company. Accordingly, during the Confidential Restricted Period (as defined below), each such Member
shall not, in whole or in part, directly or indirectly: 
  
 (i)    divulge, furnish, make available or disclose any Confidential Information in any manner to any person, firm, corporation, partnership, limited liability company, association or other entity, or 
  
 (ii)    use any Confidential Information
for itself or for any other Person except as may be necessary in connection with the performance of its duties hereunder, or 
  
 (iii)    bring to the Company’s offices nor use, disclose to the Company, or induce the Company to use, any
confidential information or documents belonging to a third party. 
  
 As used herein, the term “Confidential Information” shall mean all information used in or relating to the Intellectual Property or the business of the Company which is not generally known to the competitors
of the Company, whether or not a trade secret as defined under applicable law, and which gives an advantage to the Company, including, without limitation, its patents, know-how and other intellectual property, its development plans, designs,
specifications, flow charts, processes, formulas, data, all such information relating to the identity of the potential and actual customers of the Company, their respective methods of operation, financial data and pricing policies. Notwithstanding
the foregoing, the term “Confidential Information” shall not include any information which is or becomes publicly known through no wrongful act of a Member, or which is rightfully received by a Member from any third party who is not bound
by any similar restriction. 
  
 As used herein,
the term “Confidential Restricted Period” with respect to each Member shall mean with respect to each particular item of Confidential Information: (a) the period commencing with the date such Member first becomes a Member of the
Company and ending three (3) years after such Member ceases to be a Member of the Company if the item of Confidential Information at issue does not constitute a trade secret; or (b) the period commencing with the date such Member first
becomes a Member of the Company and continuing indefinitely, if the item of Confidential Information at issue constitutes a trade secret, until such item of Confidential Information at issue ceases to be a trade secret, but in no event ending
earlier than three (3) years after such Member ceases to be a Member of the Company. 
  
 The terms, conditions and covenants contained in the Confidentiality and Nondisclosure Agreement, attached hereto, made a part hereof, and
attached as Exhibit E, are incorporated herein by this reference. 
  

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 (b)    Diversion of
Customers.    For so long as a Member is a Member and for a period of three (3) years thereafter (the “Restricted Period”), a Member shall not, either directly or indirectly, on its own account or as a
partner, joint venturer, consultant, employee, agent, member or shareholder of any other Person or in any other capacity, in any way, solicit, divert or take away, or attempt to solicit, divert or take away, any potential transaction with the
Company’s customers or potential customers, wherever located. 
  
 (c)    Solicitation for Employment.    Throughout the Restricted Period, a Member shall not, either directly or indirectly, on its own account or as a partner,
joint venturer, consultant, employee, agent, member or shareholder of any other Person or in any other capacity, in any way, solicit for employment or for engagement as an independent contractor in a competitive business any person who is then, or
within a period of twelve (12) months prior to any such relevant solicitation was, an employee of or independent contractor engaged by the Company. 
  
 (d)    Business Opportunities.    Throughout the period it is a Member of the
Company, a Member shall not directly or indirectly have any financial interest in or derive any financial benefits from contacts made by the Company with any third party (except in its capacity as a Member of the Company) without first disclosing
such interest or benefit to the other Members and obtaining the approval of all such other Members thereto. 
  
 (e)    Inventions.    All Inventions (as defined below) shall be the sole and
exclusive property of the Company. Such ownership of Inventions shall inure to the benefit of the Company from the date of the conception, creation or fixation of the Invention in a tangible medium of expression, as applicable. All newly-created
copyright aspects of the Inventions, whether created solely or jointly, shall be considered a “work-made-for-hire” within the meaning of the Copyright Act of 1976, as amended. If and to the extent the Inventions, or any part thereof, are
found by a court of competent jurisdiction not to be a “work-made-for-hire” within the meaning of the Copyright Act of 1976, as amended, each Member agrees that all exclusive, right, title and interest in and to those newly-created
copyrightable aspects of the Inventions, and all copies thereof, are hereby expressly assigned automatically to the Company without further consideration. Any agreement entered into by a Member and a third party in connection with the development of
an Invention shall require the prior consent of the Company and shall further include substantially the same terms as those appearing in this Section 11.8(e) to ensure that the Company obtains the same rights in the Inventions generated under
such third party agreement as those set forth in this Section 11.8(e). Each Member agrees to: (a) assist the Company in obtaining and enforcing all rights and other legal protections for the Inventions; (b) perform all acts deemed
necessary or desirable by the Company to permit and assist it, at the Company’s expense, in registering, recording, obtaining, maintaining, defending, enforcing and assigning Inventions or works made for hire in the United States and Canada;
and (c) execute any and all documents that the Company may reasonably request from time to time in connection therewith, including any copyright assignment document(s), without further consideration. Each Member hereby 

  

 23 

 
irrevocably designates and appoints the Company and its duly authorized officers and agents as such Member’s agents and attorneys-in-fact to act for and
in such Member’s behalf and instead of such Member, to execute and file any documents and to do all other lawfully permitted acts to further the above purposes with the same legal force and effect as if executed by such Member. This designation
and appointment constitutes an irrevocable power of attorney and is coupled with an interest. Each Member agrees to promptly disclose to the Company all Inventions, all original works of authorship and all work product relating thereto. This
disclosure will include complete and accurate copies of all source code, object code or machine-readable copies, documentation, work notes, flowcharts, diagrams, test data, reports, samples and other tangible evidence or results (collectively,
“Tangible Embodiments”) of such Inventions, works of authorship and work product. All Tangible Embodiments of any Invention, work of authorship or work product related thereto will be deemed to have been assigned to the Company as a result
of the act of expressing any invention or work of authorship therein. 
  
 As used herein, the term “Inventions” shall mean any and all inventions, developments, discoveries, improvements, works of authorship, concepts or ideas or expressions thereof, whether or not subject to
patent, copyright, trademark, trade secret protection or other intellectual property right protection (in the United States or Canada), and whether or not reduced to practice, which both (i) relate to or result from any Intellectual Property or
the actual or anticipated business, work, research or investigation of the Company, and (ii) are conceived or developed by a Member or any Affiliate or employee of a Member while such Member has an interest in the Company or within one
(1) year following termination of such Member’s interest in the Company. 
  
 The Members agree that the Inventions contemplated by this Section do not include inventions and patents involving cold ceramics, concrete
products or the cement industry. 
  
 (f)    Remedies.    The covenants of Section 11.8 above, singly and collectively are sometimes referred to herein as “Covenants.” Each Member agrees that the Covenants are
the minimum such restrictions necessary to protect the goodwill, Confidential Information and legitimate business interests of the Company and its successors and assigns, that the time periods and the territorial areas described above (in view of
the scope of the business to be conducted by the Company), are reasonable and necessary for said protection, and that damages cannot adequately compensate the Company in a event of a Member’s violation of any Covenant. Accordingly, each Member
agrees that if it shall violate or breach any Covenant, then the Company shall be entitled to obtain injunctive relief against such Member, without bond but upon due notice, in addition to such further relief as may be available at law or in equity.
In the event of the entry of any such injunction, such Member’s sole remedy shall be the dissolution of such injunction, if such is warranted following a full hearing, and all claims for damages by reason of the wrongful issuance of any such
injunction are hereby waived by such Member. The Company’s obtaining of any such injunction shall not be considered an election of remedies or a waiver of any right by the Company to assert any other remedy or remedies the Company may have
against a Member at law or in equity. 

  

 24 

 
Each Covenant shall be construed as an agreement which is independent of the other provisions of this Agreement and severable and separate, and the existence
of any claim or cause of action against the Company, of whatever nature, shall not constitute a defense to the Company’s enforcement of any Covenant. Any of the foregoing applicable restricted periods will be extended with respect to a Member
for any equivalent period of time during which such Member violates the provisions of this Section 11.8. To the extent any Covenant may be deemed unenforceable by virtue of its scope in terms of geographical area, length of time or otherwise,
but may be made enforceable by limitations thereon, each Member agrees that such Covenant shall be modified and enforced to the fullest extent permissible under the laws and public policies of the jurisdiction in which such enforcement is sought.
The parties hereto hereby authorize any court of competent jurisdiction to modify or reduce the scope of any such Covenant to the extent necessary to make such Covenant enforceable. 
  
 ARTICLE 12 
  
 TRANSFER OF MEMBER INTERESTS 
  
 12.1    General Prohibition.    A Member may not sell, transfer, encumber, pledge or assign all or
any part of its interest in the Company except (a) to a Permitted Transferee in accordance with Section 12.2, (b) in accordance with the procedure set forth in Section 12.3, (c) in accordance with the procedure set forth in
Article 13, (d) pursuant to the procedures of Article 14 or (e) with the prior written consent of all of the other Members, which consent may be granted or withheld in each Member’s sole and absolute discretion. In order for an
assignee to constitute a substituted or additional Member, the conditions set forth in Section 12.8 must be satisfied. In no event shall a Member consent to an assignment of any interest of a Member in the Company unless in the opinion of
counsel satisfactory to the Company such assignment (i) will not result in a termination of the Company for federal income tax purposes (or the transferring Member and its transferee jointly and severally indemnify the Company and each other
Member against any and all loss or cost arising from such termination), (ii) will not result in the Company failing to qualify for an exemption from the registration requirements of the federal or any applicable state securities laws,
(iii) will not be to a person that is a “foreign person” as that term is defined in the Foreign Investment in Real Property Tax Act of 1980, as amended (“FIRPTA”), (iv) will not result in the imposition of fiduciary
responsibility on the Company any Member, or any Affiliate of any of the foregoing under the Employee Retirement Income and Security Act of 1974, as amended from time to time (“ERISA”), and (v) will not result in the violation of any
term or provision of any agreement to which the Company is a party or the acceleration of any indebtedness of the Company. 
  
 12.2    Permitted Transfers.    A Member may assign all or any part of its interest in the Company
without the consent of any other Member to a “Permitted Transferee.” For purposes of this Agreement, the term “Permitted Transferee” shall mean, with respect to any Member (i) a partnership in which such Member, Persons
controlled by such Member or Persons controlling such Member on the date hereof are the sole or controlling general partner(s) and other partners are Persons controlled by such Member, Persons controlling such Member on the date hereof, or members
of the immediate family of such Member or Persons controlling such Member on the 

  

 25 

 
date hereof, (ii) a corporation controlled by such Member or persons controlling such Member on the date hereof, and all of the issued and outstanding
capital stock of all classes of such corporation is owned and controlled by such Member, Persons controlled by such Member, Persons controlling such Member on the date hereof, or by members of the immediate family of such Member or of Persons
controlling such Member on the date hereof, (iii) a trust controlled by such Member or Persons controlling such Member on the date hereof and for the benefit of such Member, Persons controlling such Member on the date hereof, or members of the
immediate family of such Member or of Persons controlling such Member on the date hereof, (iv) a limited liability company controlled by such Member or Persons controlling such Member on the date hereof and all of the membership interests of
which are owned by such Member, Persons controlled by such Member, Persons controlling such Member on the date hereof, or members of the immediate family of such Member or Persons controlling such Member on the date hereof, or (v) another
Member. For purposes of this Agreement, the immediate family of any Person shall mean the spouse and lineal descendants (either natural or by adoption) of such Person. 
  
 No withstanding anything in this Section 12.2 to the contrary, a Member may not assign all or part of its interest in
the Company if such assignment would, in the opinion of counsel to the Company, (v) result in a termination of the Company for federal income tax purposes (or the transferring Member and its transferee jointly and severally indemnify the
Company and each other Member against any and all loss or cost arising from such termination), (w) result in the Company not qualifying for an exemption from the registration requirements of the federal or any applicable state securities laws,
(x) be to a person that is a “foreign person” as that term is defined in FIRPTA, (y) result in the imposition of fiduciary responsibility on the Company, any Member, or any Affiliate of any of the foregoing under ERISA, or
(z) result in the violation of any term or provision of any agreement to which the Company is a party or the acceleration of any indebtedness of the Company. 
  
 Notwithstanding the right of a Member to transfer all or any portion of its interest to a Permitted Transferee, a Permitted
Transferee shall not be admitted as an additional or substituted Member of the Company unless and until the provisions of Section 12.8 are satisfied. Until the provisions of Section 12.8 are satisfied with respect to a Permitted
Transferee, such Permitted Transferee shall not be a Member but shall be an assignee having the rights described in Section 12.7. 
  
 12.3    Right of First Offer Refusal. 
  
 (a)    If a Member (the “Transferring Member”) shall desire to transfer all or
any portion of its interest as a Member of the Company (the “Offered Membership Interest”) to any Person other than a Permitted Transferee or pursuant to a transaction that has been approved by all of the other Members pursuant to clause
(e) of Section 12.1, pursuant to a bona fide written offer (a “Third-Party Offer”) for the purchase of such interest in exchange for a cash price payable entirely at closing, the Transferring Member shall deliver written notice
(the “Offer Notice”) to each other Member (the “Offeree Members”) setting forth the Participating Percentage that the Transferring Member desires to transfer and a copy of the Third-Party Offer. The Offer Notice shall constitute

  

 26 

 an offer (the “Offer”) by the Transferring Member to the Offeree Members to purchase the
Offered Membership Interest in exchange for the price and on the terms set forth in the Third-Party Offer. The Offeree Members shall have the right, for a period of thirty (30) days after the Offer Notice is delivered, to accept the Offer in
proportion to their Participating Percentages or in such other proportion as they may agree upon. The Offeree Members shall accept the Offer, if at all, by delivering of written notice setting forth such acceptance to the Transferring Member within
the 30-day period described above. 
  
 (b)    If the Offeree Members, in the aggregate, accept the Offer with respect to the entire Offered Membership Interest, the purchase and sale of the Offered Membership Interest shall close not later than sixty
(60) days following the expiration of the 30-day period described in Section 12.3(a). At the closing, the Transferring Member shall deliver to those Offeree Members accepting the Offer an assignment of the Offered Membership Interest, free
and clear of all liens and encumbrances. At the closing, the Offeree Members purchasing the Offered Membership Interest shall pay to the Transferring Member immediately available funds in the aggregate amount of the price set forth in the
Third-Party Offer. 
  
 (c)    If the Offeree Members, in the aggregate, fail to accept the Offer with respect to the entire Offered Membership Interest within the 30-day period described in Section 12.3(a), then the Transferring Member
may transfer the Offered Membership Interest to the Person submitting the Third-Party Offer, at the price and on the terms set forth therein, without the consent of any other Member provided that (i) such transfer is completed within one
hundred twenty (120) days following the expiration of the 30-day period described in Section 12.3(a); (ii) such transfer complies with the limitations set forth in clauses (v) through (z) of Section 12.2; and
(iii) such transfer shall be subject to Article 13, if applicable. Any Person acquiring an interest in the Company pursuant to this Section 12.3(c) shall not be a Member but shall an assignee having the rights described in
Section 12.7, until the provisions of Section 12.8 are satisfied with respect to such Person. 
  
 12.4    Involuntary Transfers.    In the event (i) of the death or adjudication of insanity or
incompetency of an individual Member, or (ii) any Member shall be adjudged bankrupt, enter into proceedings for reorganization or into an assignment for the benefit of creditors, have a receiver appointed to administer the Member’s
interest in the Company, be the subject of a voluntary or involuntary petition for bankruptcy, apply to any court for protection from its creditors, or have its interest in the Company seized by a judgment creditor (such Member being referred 10
herein as a “Bankrupt Member”), the personal representative or trustee (or successor-in-interest) of the deceased, insane or incompetent Member or Bankrupt Member shall be an assignee of such Member’s interest in the Company having
the rights set forth in Section 12.7 and shall not become an additional or substituted Member unless and until the conditions set forth in Section 12.8 are satisfied; and any such Member’s estate (or successor-in-interest) shall be
liable for all of its obligations as a Member. 
  

 27 

 12.5    Dissolution or Termination of
Members.    In the event of the dissolution of a Member that is a partnership, limited liability company or a corporation or the termination of a Member that is a trust, the successors-in-interest of the dissolved or
terminated Member shall, for the purposes of winding up the affairs of the dissolved or terminated Member, have the rights of an assignee of such Member’s interest in the Company, as described in Section 12.7, and shall not become
additional or substituted Members unless and until the conditions set forth in Section 12.8 are satisfied. 
  
 12.6    Transfers of Ownership Interests in Members.    For purposes of this Article 12, any
transfer or assignment of any direct or indirect ownership or other interest in a Member that (taking into account any prior such transfers or assignments, and any prior pledges, encumbrances or collateral assignments described below) results in
such Member being controlled by a Person or Persons other than the Person or Persons that control such Member on the date hereof shall be deemed an assignment of the interest in the Company of such Member and therefore subject to all of the
restrictions and provisions of this Article 12. In addition, any encumbrance, pledge or other collateral assignment of a direct or indirect ownership or other interest in a Member that, if the pledgee or other assignee were to exercise its right to
acquire such interest, would (taking into account any prior transfers or assignments described above and any prior such pledges, encumbrances or collateral assignments) result in such Member being controlled by a Person or Persons other than the
Person or Persons that control such Member on the date hereof shall be deemed an assignment of the interest in the Company of such Member and therefore subject to all of the restrictions and provisions of this Article 12. 
  
 12.7    Status of
Assignee.    Any person who acquires all or any portion of the interest of a Member in the Company in any manner (including a Permitted Transferee), shall not be a Member of the Company unless and until the conditions of
Section 12.8 are satisfied. Unless and until such conditions are satisfied, such person shall, to the extent of the interest acquired, be entitled only to the transferor Member’s rights, if any, in the Profits, Losses, Net Cash Receipts
and other distributions to the Members pursuant to this Agreement, subject to the liabilities and obligations of transferor Member hereunder; but such person shall have no right to act on behalf of the Company or otherwise participate in the
management of the business and affairs of the Company, and such person and his Participating Percentage shall be disregarded in determining whether the approval, consent or any other action has been given or taken by the Members. Any such assignee
shall have the same right, subject to the same limitations, as the transferor Member had under the provisions of this Article 12 to assign its interest as a Member (including the right to assign such interest to any Permitted Transferee of such
Member pursuant to Section 12.2), but any such further assignee shall have only the rights set forth in this Section 12.7 and shall not become an additional or substituted Member of the Company unless and until the conditions of
Section 12.8 have been satisfied. 
  
 12.8    Admission Requirements.    No assignee of all or any portion of a Member’s interest in the Company (including a Permitted Transferee) or any other person shall be admitted
as an additional or substituted Member of the Company unless and until: 
  
 (a)    such admission has been approved in writing by all of the other Members, which approval may be given or withheld in the sole discretion of each Member; 
  

 28 

 (b)    such assignment is made in writing, signed by the assigning
Member (or its successor) and accepted in writing by the assignee, and a duplicate original of such assignment has been delivered to each Member; 
  
 (c)    the Company has received an opinion of counsel as contemplated by Section 12.1 or each Member has waived
this requirement; and 
  
 (d)    the assignee executes and delivers to the Company and each other Member a written agreement in form reasonably satisfactory to all of the other Members, pursuant to which such assignee agrees to be bound by and
confirms the obligations, representations and warranties contained in this Agreement. 
  
 12.9    Effective Date of Assignment.    If an assignment is made in accordance with this Agreement, unless otherwise required by the Code: 
  
 (a)    the effective date of such
assignment shall be the first date that both the written instrument of assignment is received by the other Members and, if required, approved by the other Members; provided that such assignee shall not be admitted as a Member unless and until the
approvals and other requirements of Section 12.8 are satisfied; 
  
 (b)    the Company and the other Members shall be entitled to treat the assignor of the assigned interest as the absolute owner thereof in all respects and shall incur no liability for allocations
of Profits or Losses and distributions of Net Cash Receipts or other amounts made in good faith to such assignor until such time as the written instrument of assignment has been actually received by each Member, and recorded in the books of the
Company, and, if required, approved by the Members described in Section 12.1; and 
  
 (c)    any Profits and Losses shall be allocated between the assignor and the assignee of the assigned interest in the
manner described in Section 7.3. 
  
 12.10    Status of Assignor.    If there is a transfer or assignment of a Member’s interest in the Company, then, without regard to whether or when such assignee or transferee is
admitted as a Member of the Company, from and after the effective date of such assignment or transfer, the assigning or transferring Member shall cease to be a Member with respect to the transferred or assigned interest; and if such Member has
transferred or assigned his entire membership interest in the Company, upon the effective date of such transfer or assignment, such Member shall cease to be a Member of the Company. 
  
 12.11    Cost of Admission.    The cost of processing and perfecting
an admission contemplated by this Article 12 (including reasonable attorneys’ fees incurred by the Company) shall be borne by the party seeking admission as a Member to the Company. 
  

 29 

 ARTICLE 13 
  
 TAG-ALONG RIGHT 
  
 If at any time Members owning seventy-five percent (75%) or more of the Participating Percentages (“Controlling Members”) shall desire to
sell all of their membership interests in the Company to any third party (other than a Permitted Transferee), and the other Members do not elect to purchase such interests pursuant to Section 12.3, such Controlling Members shall give written
notice thereof (a “Tag-Along Notice”) to each of the other Members (“Minority Members”) specifying the Participating Percentage to be sold and the price and terms of such sale. Each Minority Member may elect to participate in any
such transaction as an additional selling Member on identical terms and conditions (with the aggregate price to be paid to the Controlling Members and the Minority Members electing to participate in the transaction allocated among them in proportion
to the amounts each such Member would receive upon a hypothetical distribution of the aggregate purchase price pursuant to Section 15.4(c) in complete liquidation of the Company), by delivering a written notice thereof (a “Tag-Along
Election Notice”) to the Controlling Members within fifteen (15) days after such Minority Member’s receipt of such Tag-Along Notice, thereby electing to sell in such transaction any portion of its interest in the Company specified in
the Tag-Along Election Notice which is less than or equal to the product of (i) the aggregate Participating Percentage which the Controlling Members propose to transfer in such transaction, multiplied by (ii) a fraction, the numerator of
which is the Participating Percentage owned by such Minority Member, and the denominator of which is the aggregate Participating Percentage owned by the Controlling Members and all Minority Members electing to participate in such transaction. If
Minority Members elect to sell interests pursuant to this Article 13, the aggregate Participating Percentage to be sold or transferred to such third party by the Controlling Members and the Minority Members shall remain constant. 
  
 ARTICLE 14 
  
 BUY/SELL 
  
 14.1    Right to
Initiate.    Each Investor and NOX shall have the right, exercisable at any time after eighteen months from the date of the execution of this Agreement, in its sole discretion, to initiate the buy/sell procedures of this
Article 14 in the manner described in Section 14.2. 
  
 14.2    Initiation and Elections.    A Member (the “Initiating Party”) shall initiate the buy/sell procedures of this Article 14, if at all, by delivering to either NOX (if the
Initiating Party is an Investor) or to either Investor (if the Initiating Party is NOX) (the “Other Party”) a written notice stating that the Initiating Party intends to proceed with this buy/sell procedure (a “Buy/Sell Notice”).
The Buy/Sell Notice shall in addition set forth a gross value (without reduction for liabilities) for all of the assets owned by the Company other than cash and cash equivalents (such cash and cash equivalents being referred to herein as “Cash
Assets” and such other assets being referred to herein as “Non-Cash Assets”), which assets shall include the Intellectual Property (the “Asset Value”), such value to be determined in the sole discretion of the Initiating
Party. The Other Party shall have a period of ninety (90) days after the receipt of 
  

 30 

 the Buy/Sell Notice (the “Exercise Period”) within which to notify the Initiating Party in writing (the
“Reply Notice”) whether the Other Party shall either (x) sell to the Initiating Party its entire interest in the Company at a price computed in the manner set forth in Section 14.2(a) (the “Reply Price”), or
(y) buy the entire interest in the Company of the Initiating Party at a price computed in the manner set forth in Section 14.2(b) (the “Buy/Sell Price”). If the Other Party timely gives the Reply Notice electing (x) above,
the Initiating Party shall be conclusively deemed to have agreed to purchase, and the Other Party shall be conclusively deemed to have agreed to sell, the entire interest in the Company of the Other Party at the Reply Price. If the Other Party
timely gives the Reply Notice electing (y) above, the Initiating Party shall be conclusively deemed to have agreed to sell, and the Other Party shall be conclusively deemed to have agreed to purchase, the entire interest in the Company of the
Initiating Party at the Buy/Sell Price. If the Other Party fails to give a Reply Notice prior to the expiration of the Exercise Period, it shall be conclusively presumed that the Other Party has properly elected (x) above. 
  
 (a)    Reply
Price.    The Reply Price for the purchase of the interest in the Company of the Other Party shall be the amount that would be distributed to the Other Party pursuant to Section 15.4(c) if the Company sold all of its
Non-Cash Assets for cash in the amount of the Asset Value, sold all of its Cash Assets for cash in the amounts shown for them on the books of the Company, applied such cash in full payment of all liabilities on the books of the Company, and the
amount of such cash not so applied was available for distribution to the Members pursuant to Section 15.4(c) upon liquidation of the Company as of the date of the closing of this buy/sell. 
  
 (b)    Buy/Sell
Price.    The Buy/Sell Price for the purchase of the interest in the Company of the Initiating Party shall be the amount that would be distributed to the Initiating Party pursuant to Section 15.4(c) if the Company
sold all of its Non-Cash Assets for cash in the amount of the Asset Value, sold all of its Cash Assets for cash in the amounts shown for them on the books of the Company, applied such cash in full payment of all liabilities on the books of the
Company, and the amount of such cash not so applied was available for distribution to the Members pursuant to Section 15.4(c) upon liquidation of the Company as of the date of the closing of this buy/sell. 
  
 (c)    Price
Determinations.    The determination of the amount of the Buy/Sell Price, the Reply Price and any other amounts payable pursuant to this Article 14 shall be made by the independent accountants then employed by the Company
on the basis of the Asset Value set forth in the Buy/Sell Notice and the Cash Assets and liabilities of the Company reflected on the books of the Company as of the date of closing of the buy/sell, which determination shall be final and
nonappealable, absent manifest error. 
  
 (d)    Exclusivity of Buy/Sell Notice.    Only one Buy/Sell Notice shall be entertained at any one time. The order of consideration of Buy/Sell Notices shall be determined by the date
upon which the Other Party receives the Buy/Sell Notice in accordance with Article 17. 
  
 14.3    Closing.    The transactions contemplated by the applicable buy/sell shall be consummated (herein, the “Closing”) at the principal office of the
Company on the business day 
  

 31 

 specified by the purchasing Member, provided that such date shall be not less than thirty (30) days and not more
than sixty (60) days after the expiration of the Exercise Period. At the Closing, the purchase price shall be paid by the purchasing Member to the selling Member in cash, by wire transfer of immediately available funds to the account or
accounts designated by the selling Member, or by certified bank check. The selling Member shall execute and deliver at the Closing an assignment, instrument of conveyance or other instrument appropriate to convey the entire interest in the Company
of the selling Member to the purchasing Member, and shall deliver to the purchasing Member such evidence as the purchasing Member may reasonably request showing that the interest in the Company being sold is owned free and clear of any and all
claims, liens and encumbrances of any kind or nature. 
  
 14.4    Payment of Loans.    If there shall be any outstanding loans due from the Company to the selling Member or any Affiliates thereof (other than loans payable pursuant to
Section 8.1(a), which shall be taken into account in determining the Reply Price or the Buy/Sell Price, as may apply), such loans, including accrued and unpaid interest, shall be purchased at par by the purchasing Member as a condition
precedent to the Closing. The purchase price for such loans shall be paid in full at the Closing in the same manner as the Reply Price or the Buy/Sell Price (as may apply) is paid. At the Closing, the selling Member (or any Affiliates thereof) shall
deliver and endorse without recourse to the purchasing Member each note or other instrument evidencing such loans and all documents securing such loans (including any loans referred to in Section 8. l(a)). 
  
 14.5    Other Remedies for
Noncompliance.    It is the intent of the Members that the requirements or obligations, if any, of any Member to sell or purchase an interest in the Company in accordance with the provisions of this Article 14 shall be
enforceable by an action for specific performance, with the same force and effect and at least to the same extent as is permitted at law or in equity for the specific performance of a contract relating to the purchase of real property or an interest
therein. 
  
 14.6    Assignees.    For purposes of this Article 14, the interest in the Company of each Member shall include all membership interests owned by such Member and any portion of such
interest that is owned by any Affiliate of such Member or that such Member has assigned or transferred to an Affiliate of such Member or any other Person (other than to a Person that is a Member or Affiliate of any other Member at the time of such
transfer). Any elections made by a Member under this Article 14 shall bind each Affiliate of such Member and any such assignee of such Member. All references in this Article 14 to a Member shall include all Affiliates of such Member and, except as
provided above, all Persons to which such Member has transferred or assigned any portion of his membership interest in the Company. 
  
 14.7    Additional Effects of a Buy/Sell.    If the selling Member or any Affiliate thereof is a
guarantor or an indemnitor of or with respect to any obligations of the Company, a condition precedent to the Closing shall be that the purchasing Member shall obtain a release of such guaranty or liability; or, if such a release is not so
obtainable and the selling Member agrees, the purchasing Member shall fully indemnify the selling Member and his Affiliates with respect to any such obligations. Any such indemnity by the purchasing Member shall be secured by its right to all
distributions by the Company (including both distributions with respect to such 
  

 32 

 purchased interest in the Company and with respect to all other interests in the Company of the purchasing Member or his
Affiliates) arising from and after the date there has been a default on an indemnified debt or obligation of the Company. 
  
 14.8    Right to Assign.    The purchasing Member may assign his purchase rights under this Article
14 in whole or in part to a third party who, upon Closing, shall become a Member of the Company, without the consent of the selling Member but subject to the consent of all other Members, provided that (a) the purchasing Member delivers written
notice to the selling Member of such assignment and of the identity of the assignee prior to the Closing; (b) such assignment, in the opinion of counsel to the Company, would not require registration of any interests in the Company under the
Securities Act of 1933 or any applicable state securities or “Blue Sky” law, or result in any violation of any such laws; and (c) no such assignment shall relieve the purchasing Member of his obligations and liabilities under this Article
14. 
  
 ARTICLE 15 
  
 DISSOLUTION AND LIQUIDATION OF COMPANY 
  
 15.1    Dissolution of the
Company.    The Company shall be dissolved upon the happening of any of the following: 
  
 (a)    the agreement of the Members pursuant to Section 10.2 to dissolve and wind up the affairs of the Company;

  
 (b)    any event that
makes it unlawful for the Company business to be continued; or 
  
 (c)    the sale, disposition, or abandonment of all or substantially all of the non-cash assets of the Company. 
  
 The death, retirement, resignation, bankruptcy, court declaration of incompetence, or dissolution of any one or more Members
or the occurrence of any other event that terminates the continued membership of any one or more Members (except as provided in the immediately preceding sentence) shall not cause the dissolution of the Company. 
  
 15.2    Winding Up of
Affairs.    In the event of the dissolution and liquidation of the Company for any reason, the Members shall commence to wind up the affairs of the Company and shall convert all of the Company’s assets to cash or
cash equivalents within such reasonable period of time as may be required to receive fair value therefor. All items of income, gain, loss, deduction and credit during the period of liquidation shall be allocated among the Members in the same manner
as before the dissolution. 
  
 15.3    Accounting.    In the case of the dissolution and termination of the Company, prior to any distributions to Members pursuant to Section 15.4(c), a proper accounting shall be
made of the Capital Accounts of the Members and of each item of income, gain, loss, deduction and credit of the Company from the date of the last previous accounting to the date of dissolution. A copy of such accounting shall be provided to all
Members. 
  

 33 

 15.4    Final Distribution of Company
Property.    Upon termination of the Company, the Members shall apply and distribute the remaining property of Company, together with the proceeds of any sales of same, as follows: 
  
 (a)    first, all Company debts and
liabilities shall be paid and discharged, except any debts (i) described in Section 8.1, or (ii) that are nonrecourse to the extent that the Members elect not to pay such debts; 
  
 (b)    second, to establish any reserve
which the Members may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company. Such funds may be placed in escrow by the Members for the purposes of disbursing such funds in payment of any of the
contingencies, liabilities, or obligations, and, at the expiration of such period as the Members shall deem advisable, the balance then remaining shall be distributed pursuant to Section 15.4(c); and 
  
 (c)    third, to apply and distribute the
balance in the manner and priority set forth in Section 8.1. 
  
 15.5    Certificate of Cancellation.    Upon completion of the liquidation of the Company and the distribution of all Company property, the Company shall terminate and the Members shall
have the authority to execute and record one or more Certificates of Cancellation of the Company as well as any and all other documents required or considered advisable by the Members to effectuate and evidence the dissolution and termination of the
Company. 
  
 15.6    No
Restoration of Deficit Capital Accounts.    Except as otherwise expressly provided herein, at no time shall a Member with a deficit balance in its Capital Account have any obligation to the Company or to another
Member or to any other person to restore such deficit balance. 
  
 ARTICLE 16 
  
 AMENDMENTS

  
 16.1    Amendment of
Agreement.    Except as provided in Section 6.2(d), this Agreement may be amended only with the written concurrence of all of the Members. 
  
 16.2    Amendment of Certificate.    If this Agreement shall be
amended pursuant to this Article 16, the Members shall cause the Certificate to be amended, to the extent required by applicable law, to reflect such change. Each Member shall promptly be notified of any amendments made under this Section 16.2.

  
 ARTICLE 17 
  
 NOTICES 
  
 Any and all notices to be served hereunder shall be in writing and shall be
personally delivered, sent by private courier, sent by certified mail, postage prepaid, or sent by facsimile 
  

 34 

 transmission and (a) if intended for the Company, to the Company at the address of the principal place of business
of the Company set forth herein, with a copy to each Member or (b) if intended for a Member, to such Member at the address set forth below; or to such other address or facsimile telecopier number as the Members, on behalf of the Company, or a
Member, on his own behalf, may designate from time to time in a written notice served upon the Company and each other Member in accordance herewith. Any notice personally delivered shall be deemed delivered on the date actually delivered. Any notice
sent by private courier shall be deemed delivered on the date of delivery or rejection of delivery, as shown on the receipt for delivery. Any notice sent by mail as provided above shall be deemed delivered on the third (3rd) business day next
following the postmark date which it bears. Any notice sent by facsimile transmission shall be deemed delivered on the date shown on the evidence of completed transmission. The addresses of the Members are as follows: 
  

			
	 NOX:
	  	 NOX II, Ltd.

	 	  	 4281 Meadowlark Trail

	 	  	 Stow, Ohio 44224

	 	  	 Fax No.: (330) 686-8916

		
	 AJG:
	  	 AJG Coal, Inc.

	 	  	 Two Pierce Place

	 	  	 Itasca, Illinois 60143-3141

	 	  	 Fax No.: (630) 284-4272

		
	 IQCC:
	  	 IQ Clean Coal LLC

	 	  	 c/o Wright Management Services LLC
 21 Martin Dale North
 Greenwich, Connecticut 06830
 Fax No.: (203) 622-6338

  
 ARTICLE
18 
  
 MISCELLANEOUS PROVISIONS 

 
 18.1    Severability.    If any provision of this Agreement or the application of such provision to any Person or circumstance shall be held invalid, the remainder of this Agreement, or
the application of such provision to Persons or circumstances other than those as to which it is held invalid, shall not be affected. 
  
 18.2    Parties Bound.    Any Person acquiring or claiming an interest in the Company, in any manner
whatsoever, shall be subject to and bound by all terms, conditions and obligations of this Agreement to which his or its predecessor in interest was subject or bound, without regard to whether such Person has executed a counterpart hereof or any
other document contemplated hereby. No Person, including the legal representative, heir or legatee of a deceased Member, shall have any rights or obligations greater than those set forth in this Agreement and no Person 
  

 35 

 shall acquire an interest in the Company or become a Member thereof except as permitted by the terms of this Agreement.
This Agreement shall be binding upon the parties hereto, their successors, heirs, devises, assigns, legal representatives, executors and administrators. 
  
 18.3    Applicable Law.    The Company and this Agreement shall be governed by the laws of
the State of Delaware. 
  
 18.4    Additional Documents and Acts.    In connection with this Agreement as well as all transactions contemplated by this Agreement, each party hereto shall execute and deliver
such additional documents and instruments, and perform such additional acts, as any other party hereto may reasonably deem necessary or desirable from time to time to effectuate, perform and evidence all of the terms, provisions and conditions of
this Agreement and all such transactions. 
  
 18.5    Benefit.    Nothing contained herein, express or implied, is intended to confer upon any person other than the parties hereto and their respective successors and permitted
assigns any rights or remedies under or by reason of this Agreement. 
  
 18.6    Waiver.    The failure to insist upon strict enforcement of any of the provisions of this Agreement or of any agreement or instrument delivered pursuant hereto shall not
be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Agreement or any agreement or instrument delivered pursuant hereto or any provision hereof or the right of any party hereto to thereafter
enforce each and every provision of this Agreement and each agreement and instrument delivered pursuant hereto. No waiver of any breach of any of the provisions of this Agreement or any agreement or instrument delivered pursuant hereto shall be
effective unless set forth in a written instrument executed by the party against which enforcement of such waiver is sought, and no waiver of any such breach shall be construed or deemed to be a waiver of any other or subsequent breach. 

 
 18.7    Survival.    The representations, warranties and covenants of the Members contained herein or in any agreement or instrument delivered pursuant hereto shall survive the
consummation of the transactions contemplated hereby, and shall not be affected by any investigation which may have been made by any of the parties hereto. 
  
 18.8    Headings.    The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision. 
  
 18.9    Counterparts.    This Agreement may be executed in multiple counterparts with
separate signature pages, each such counterpart shall be considered an original, but all of which together shall constitute one and the same instrument. 
  

 36 

 IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first set forth
above, confirms its agreement to become a Member of the Company, agrees to be bound by this Agreement, and swears that the statements set forth herein are true and correct. 
  

			
	 NOX II, LTD., an Ohio limited liability company

		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

  

			
	 AJG COAL, INC., a Delaware corporation

		
	 By:
	 	 /s/ Sally Wasikowski

	 	 	 Name:  Sally Wasikowski

	 	 	 Title:    Vice President

  

			
	 IQ CLEAN COAL LLC, a Delaware limited
 liability company

		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

  

 37 

 IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first set forth
above, confirms its agreement to become a Member of the Company, agrees to be bound by this Agreement, and swears that the statements set forth herein are true and correct. 
  

			
	 NOX, Ltd., an Ohio limited liability company

		
	 By:
	 	 /s/ Carolyn A. Kelly

	 	 	 Name:  Carolyn A. Kelly

	 	 	 Title:    Managing Member

  

			
	 AJG COAL, INC., a Delaware corporation

		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

  

			
	 IQ CLEAN COAL LLC, a Delaware limited
 liability company

		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

  

 38Option Agreement

 Exhibit 10.39 
  
 OPTION AGREEMENT 
  
 This Option Agreement (the “Agreement”) is entered into as of this 17TH day of October, 2005 by and among Carolyn Kelly (“Seller”), NOx II, Ltd., an Ohio limited liability company (the “Company”)
and AJG Financial Services, Inc., a Delaware corporation (“Purchaser”). 
  
 WHEREAS, Seller is the record and beneficial owner (subject to the Milford Agreement, as hereinafter defined) of sixty-three and seven-tenths percent (63.7%) of the issued and outstanding equity interests (the
“Equity Interests”) of the Company; and 
  
 WHEREAS, Seller desires to grant to Purchaser and Purchaser desires to obtain from Seller an option to purchase up to thirty-two and ninety-four one hundredths percent (32.94%) of the issued and outstanding equity interests in the
Company which is equivalent to fifty-one and seventy-one one hundredths percent (51.71%) of the Equity Interests on the date hereof (the “Interests”); and 
  
 WHEREAS, Vincent A. Vellella (“Vellella”), the Company and Purchaser are entering into an Option Agreement
(“Vellella Option Agreement”), of even date herewith pursuant to which Vellella is granting to Purchaser an option to purchase up to seven and six one hundredths percent (7.06%) of the issued and outstanding equity interests of
the Company which is equivalent to fifty-one and seventy-two one hundredths percent (51.72%) of the equity interests owned by Vellella on the date hereof. 
  

NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 
  
 1.    Grant of Option and Option Term.    Subject to the terms and conditions hereof, and in reliance upon the representations, warranties, covenants and agreements made
herein by Seller and Purchaser, Seller does hereby irrevocably grant to Purchaser the right, privilege and option to purchase from Seller equity interests in the Company owned by Seller up to the amount of the Interests in one or more transactions
(the “Option”) for an aggregate purchase price for all of the Interests of Nine Million Fifty Eight Thousand Five Hundred Dollars ($9,058,500) (the “Purchase Price”). The term of the Option granted hereunder shall
commence on the date hereof and shall expire (to the extent not exercised) at midnight on December 31, 2007 (the “Option Term”). 
  
 2.    Consideration for Option.    Subject to Purchaser’s right of recovery set forth below in this
Section 2, in consideration for Seller’s grant of the Option to Purchaser hereunder, Purchaser shall pay to Seller the sum of Seven Hundred Seventy-Three Thousand Five Hundred Dollars ($773,500) (the “Option
Consideration”) which sum shall be paid to Seller by Purchaser within three (3) business days after the date upon which Seller shall execute this Agreement by delivery of cash, certified check, bank cashier’s check, or via wire
transfer of immediately available funds to a bank account designated by Seller in writing. The obligation of Purchaser to deliver the consideration for the Option provided for in this Section 2 shall be conditioned upon the prior receipt by
Purchaser of each of the following: 
  
 (a)    A Restrictive Covenant Agreement in the form of Exhibit 2(a) attached hereto, duly executed by Seller and Douglas Comrie; 
  
 (b)    A Consent in the form of Exhibit 2(b) attached hereto, duly executed by each member of the Company and the
Company (the “Consent”). 

 Interests, then Purchaser shall be entitled to the return of that portion of the Option Consideration equal to the Option
Consideration multiplied by a fraction, the numerator of which is the Interests in the Company which have not on the applicable date been acquired by Purchaser and the denominator of which is all of the Interests in the Company that Purchaser may
acquire hereunder. Any amount due hereunder shall be paid to Purchaser by Seller contemporaneously with the closing of such sale. 
  
 3.     Exercise of Option. 
  
 (a)    Subject to the provisions of Paragraph 3(d) below, Purchaser may exercise the Option at any time and from time
to time during the Option Term, in whole or in part by delivering a written notice (the “Notice”) to Seller (with a copy to the Company) indicating the percentage of the Interests (the “Percentage”) Purchaser has
elected to purchase at such time; provided that any partial exercise of the Option may not be for an amount less than three and five-tenths percent (3.5%) of the Equity Interests. 
  
 (b)    Within 5 business days of delivery
of the Notice to Seller by Purchaser, Seller and Purchaser shall each execute and deliver a Purchase Agreement substantially in the form of Exhibit B hereto for the sale of that portion of the Interests which is then being sold pursuant to
the exercise of the Option; provided, however, that anything in this Agreement or such Purchase Agreement to the contrary notwithstanding, Purchaser shall not be obligated to consummate the purchase of the Interests with respect to which the Option
has been exercised unless Purchaser shall have accepted and approved all disclosures made by Seller on the schedules attached to the Purchase Agreement. 
  
 (c)    In connection with Purchaser’s decision whether to exercise any portion of the Option, and in connection
with Purchaser’s due diligence investigation of the Company with respect to matters disclosed by Seller on the disclosure schedules, if any, to the Purchase Agreement and other matters, Purchaser, either directly or through one or more
authorized agents, shall have the unrestricted right during normal business hours to review and inspect the facilities, books, records, data, information and other assets of the Company and to make copies, extracts or compilations thereof, and
Purchaser shall have the further right to interview officers, managers, employees, agents and contractors of the Company in connection therewith. All such information shall be held in confidence by Purchaser as described in Section 1.9 of the
Amended and Restated Limited Liability Company Agreement of the Company attached to and made a part of the Consent as Exhibit A (the “Company Operating Agreement”), on the same basis as if Purchaser were a “Member” of the
Company on the date such information was received. 
  
 (d)    The exercise of an Option under this Agreement is subject and conditioned upon Purchaser’s simultaneous pro rata exercise of the option granted to Purchaser by Carolyn under the Carolyn Option Agreement for
the purchase of equity interests in the Company owned by Carolyn. For example, if Purchaser exercises its option hereunder for one half (1/2) of the Interests, then Purchaser must exercise its option under the Carolyn Option Agreement to
acquire one half (1/2) of the Interests that are subject to the Carolyn Option Agreement. 
  
 4.     Adjustment of Option.    In the event of a change in the equity interests of the Company resulting from a reorganization, reclassification, merger, consolidation
or other similar transaction, then, and in each such event, Purchaser shall have the right thereafter, upon exercise of the Option pursuant to Section 3, to convert the Interests into the kind and amount of interests, units, shares of
stock and/or other securities and/or other property receivable by the holders of the equity interests of the Company upon such reorganization, reclassification, merger, consolidation or other similar transaction, which Purchaser would have been
entitled to receive if Purchaser had exercised the Option immediately prior to such transaction. 
  

 2 

 5.    Consent.    As an inducement to Purchaser to enter
into the Agreement and to consummate some or all of the transactions contemplated hereby, the Company agrees and acknowledges with and to Purchaser that (i) the Company has been provided with a true, correct and complete copy of the Agreement
and will maintain the Agreement in its files during the Option Term without disclosing such Agreement or any of its terms to any party without the prior written consent of Purchaser; (ii) the Company has made a notation of the existence of this
Agreement and the Option granted to Purchaser hereunder on the Company’s books and records with respect to the ownership of equity interests in the Company; (iii) the Company will make appropriate modifications to its books and records
with respect to the ownership of equity interests in the Company to reflect Purchaser’s exercise of all or any portion of the Option; (iv) the Company will not effectuate or permit the transfer of any portion of the Interests during the
Option Term in contravention of the Option or after the expiration of the Option Term with respect to any portion of the Option exercised by Purchaser during the Option Term, without the prior written Consent of Purchaser; (v) any attempted
transfer in violation of the above provisions or in violation of any provision of the Agreement shall be deemed null and void and of no force or effect; and (vi) the Company shall cooperate with Purchaser and make available such information and
personnel as Purchaser shall request in connection with its due diligence investigation pursuant to Section 3(c) above. 
  
 6.    Representations and Warranties of Seller.    To induce Purchaser to enter into this Agreement Seller
represents and warrants to Purchaser as follows, which representations and warranties, shall survive the consummation of the transactions contemplated by this Agreement: 
  
 (a)    Due Organization and Status.    The Company is a
limited liability company duly organized, validly existing and in good standing under the laws of the state of its organization. The Company is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where
such qualification is required, except where the lack of such qualification would not have a material adverse effect on the financial condition of the Company taken as a whole. The Company has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and used by it. 
  
 (b)    Authority: Enforceability.    Seller has the full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly executed and delivered by Seller and constitutes a legal, valid and binding agreement of Seller, enforceable against Seller in accordance with its terms.

  
 (c)    Title to
Equity.    Seller owns the Equity Interests free and clear of any and all options, proxies, voting trusts, voting agreements, judgments, pledges, charges, escrows, rights of first refusal or first offer, mortgages,
indentures, claims, transfer restrictions, liens, equities, security interests and other encumbrances of every kind and nature whatsoever, whether arising by agreement, operation of law or otherwise (“Claims”). 
  
 (d)    Consents.    No consent, authorization, order or approval of, or filing or registration with, any person, entity (including, but not limited to, the Company) or governmental authority is
required for or in connection with the execution and delivery of this Agreement by Seller or the consummation by Seller of any of the transactions contemplated hereby. 
  
 (e)    Conflicts Under Laws.    Neither the execution and
delivery of this Agreement by Seller, nor the consummation by Seller of any of the transactions contemplated hereby will conflict with or constitute a breach of any of the terms, conditions or provisions of any statute or 
  

 3 

 administrative regulation, or of any order, writ, injunction, judgment or decree of any court or
governmental authority or of any arbitration award, to which Seller is a party or by which Seller is bound. 
  
 (f)    Conflicts Under Contracts.    Seller is not a party to, or bound by, any unexpired,
undischarged or unsatisfied written or oral contract, agreement, indenture, mortgage, debenture, note or other instruments under the terms of which the execution, delivery and performance by Seller of this Agreement and the consummation of any of
the transactions contemplated hereby by Seller will require a consent, or approval which has not been obtained on or prior to the date hereof, or notice which has not been given on or prior to the date hereof, or result in a lien on the Equity
Interests or any portion thereof owned by Seller. 
  
 (g)    Ownership of Interests.    To the knowledge of Seller (solely as to the interests of persons other than Seller) Schedule 5(h) sets forth a complete and correct description of the
beneficial and record owners of all equity interests of the Company and the percentage of ownership that each such equity interest bears to all equity interests in the Company. Seller owns beneficially and of record the Equity Interests of the
Company and such Equity Interests are owned free and clear of Claims. The Equity Interests have been duly authorized and validly issued, and were offered, issued, sold and delivered by the Company to Seller in compliance with all applicable state
and federal laws concerning the issuance of securities. Further, none of such Equity Interests were issued in violation of any preemptive or similar rights of any past or present member or other person or entity. 
  
 7.    Additional Covenants of
Seller.    From the date hereof until the expiration of the Option Term: 
  
 (a)    Seller shall not sell, convey, assign or otherwise transfer or grant any right or interest in the Interests or
any portion thereof, except as provided herein. 
  
 (b)    Seller shall not create any security interest in, mortgage, pledge, or otherwise encumber the Interests or any part thereof, or permit the same to be or become subject to any lien, attachment, execution,
sequestration, other legal or equitable process, or any encumbrance of any kind or character. 
  
 8.    Restrictive Legend.    In the event any portion of the Interests shall be certificated or otherwise evidenced by any document or instrument that is subject to
transfer or assignment, then such certificate shall immediately be delivered to Purchaser for safekeeping and as security for the Option during the Option Term. Each such certificate or other such document or instrument shall bear a restrictive
legend on its face, in bold type, stating as follows: 
  
 “THE EQUITY INTEREST IN NOX II, LTD. EVIDENCED HEREBY IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN OPTION AGREEMENT DATED AS OF SEPTEMBER 7, 2005 BY AND BETWEEN VINCENT A. VELLELLA AND AJG FINANCIAL SERVICES, INC.”

  
 Such restrictive legend shall be removed upon the expiration of the Option
Term to the extent the Option has not been duly exercised by Purchaser. 
  
 9.    Succession and Assignment.    This Agreement shall be binding upon and inure to the benefit of the parties named herein and their respective successors and permitted assigns and, with
respect to Seller, his heirs, executors, administrators, personal representatives and legal representatives. No party 
  

 4 

 may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written
approval of the other party; provided that Purchaser may assign the Agreement or any of its rights, interests or obligations hereunder to an Affiliate (as defined in the Company Operating Agreement) without the consent of Seller.

  
 10.    Counterparts.    This Agreement may be executed in two or more counterparts and by facsimile, each of which shall be deemed an original but all of which together will constitute one and
the same instrument. 
  
 11.    Headings.    The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

  
 12.    Notices.    All notices, requests, demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be
deemed duly given two business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: 
  
 if to Seller: 
  
 Vincent A. Vellella 
 One Thorn Run Center 
 Suite 425 
 Coraopolis, Pennsylvania 15108-3198 
 Telecopier: (412) 264-2327 
  
 if to Purchaser: 
  
 c/o Arthur J. Gallagher & Co. 
 Two Pierce Place 
 Itasca, IL 60143 
 Attention: Sally Wasikowski 
 Telecopier: (630) 285-4272 
  
 if to the Company: 
  
 NOx II, Ltd.

 4281 Meadowlark Trail 
 Stow, Ohio 
 Telecopier: (330) 686-4968 
  
 Any party may send any notice, request, demand, claim, or other communication hereunder to
the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth. 
  
 13.    Entire Agreement.    This Agreement and the instruments to be delivered by the parties pursuant to the provisions hereof constitute the entire agreement between
the parties with respect to the subject matter hereof, and all prior or contemporaneous negotiations, discussions, agreements or understandings are merged herein and are superceded hereby. Each schedule shall be considered incorporated into this
Agreement. 
  

 5 

 14.    Governing Law.    This Agreement shall be governed
by and shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to its conflict of law principles. 
  
 15.     Amendments and Waivers.    No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by Purchaser and Seller. The failure in any one or more instances of a party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or privilege in
this Agreement conferred, or the waiver by said party of any breach of any of the terms, covenants or conditions of this Agreement, shall not be construed as a subsequent waiver of any such terms, covenants, conditions, rights or privileges, but the
same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party and no waiver by any party
of any default, misrepresentation, or breach of warranty or covenant hereunder, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder. 
  
 16.     Severability.    Any
term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction. 
  
 [signature page follows] 
  

 6 

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

			
	AJG Financial Services, Inc.
		
	 By:
	 	 /s/ Sally Wasikowski

		
	 Its:
	 	 Vice President

	
	NOx II, Ltd.
		
	 By:
	 	  

		
	 Its:
	 	  

	
	  

	Carolyn Kelly, in her individual capacity

  
 JOINDER

  
 To induce Purchaser to enter into the foregoing Option
Agreement the undersigned, DOUGLAS COMRIE, hereby agrees to execute and deliver to Purchaser a counterpart of the Restrictive Covenant Agreement referred to in Section 2(a) above immediately after the execution of such Option Agreement.

  
 Dated as of the 17th day of October, 2005. 
  

	
	 
	
	 
	 Douglas Comrie

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

			
	AJG Financial Services, Inc.
		
	 By:
	 	  

		
	 Its:
	 	  

	
	NOx II, Ltd.
		
	 By:
	 	 /s/ Carolyn A. Kelly

		
	 Its:
	 	 President

	
	 Carolyn Kelly

	Carolyn Kelly, in her individual capacity

  
 JOINDER

  
 To induce Purchaser to enter into the foregoing Option
Agreement the undersigned, DOUGLAS COMRIE, hereby agrees to execute and deliver to Purchaser a counterpart of the Restrictive Covenant Agreement referred to in Section 2(a) above immediately after the execution of such Option Agreement.

  
 Dated as of the I7th day of October, 2005. 
  

	
	 
	
	 /s/ Douglas Comrie

	 Douglas Comrie

  
 EXHIBIT A 

 
 TO 
  
 OPTION AGREEMENT DATED AS OF OCTOBER 17, 2005 
  
 BETWEEN 
  
 CAROLYN KELLY 
  
 AND 
  
 AJG FINANCIAL SERVICES, INC. 

 PURCHASE AGREEMENT 
  
 This Purchase Agreement (this “Agreement”) is made and entered into as of
                    , 200   by and between CAROLYN KELLY (“Seller”) and AJG FINANCIAL
SERVICES, INC., a Delaware corporation (“Purchaser”). 
  
 RECITALS 
  
 WHEREAS, as of September 7, 2005 Seller owned (subject to the Milford Agreement, as hereinafter defined) sixty-three and seven-tenths percent (63.7%) of the issued and outstanding equity interests (the “Equity
Interests”) of NOx II, Ltd., an Ohio limited liability company (the “Company”); 
  
 WHEREAS, the Company, through its affiliate Chem-Mod, LLC., a Delaware limited liability company, is engaged in the business of utilizing certain
sorbent chemical technology for sulfur, NOX, chlorine, mercury and other heavy metal remediation of combusted carbonaceous materials in the United States and Canada (the “Business”); 
  
 WHEREAS, on September 7, 2005 Seller and Purchaser entered into
that certain Option Agreement (the “Option Agreement”) pursuant to which Seller granted to Purchaser the option to purchase up to thirty two and ninety four one hundredths percent (32.94%) of the issued and outstanding equity
interests of the Company, which is equivalent to fifty one and seventy one hundredths percent (51.71%) of the Equity Interests (the “Option Equity Interests”); 
  
 WHEREAS, in accordance with the Option Agreement, which allows Purchaser to purchase Equity Interests in one or more
transactions, Purchaser has given a written notice to Seller pursuant to which Purchaser has elected to purchase             % of the Option Equity Interests (the
“Interests”); and 
  
 WHEREAS, Purchaser
desires to purchase, and Seller desires to sell the Interests. 
  
 NOW, THEREFORE, to induce Purchaser to purchase the Interests, and to induce Seller to sell the Interests, and for other good and valuable consideration, the parties hereto agree as follows: 
  
 ARTICLE I. PURCHASE OF INTERESTS; PURCHASE PRICE 
  
 Section 1.1    Sale and Purchase of
Interests.    Subject to the terms and conditions hereof, and in reliance upon the representations, warranties, covenants and agreements made herein by Seller and Purchaser, Purchaser shall purchase and accept the Interests
from Seller, and Seller shall sell, transfer, convey, assign and deliver the Interests to Purchaser at the Closing, on the Closing Date (defined in Section 7.1 below). 
  
 Section 1.2    Consideration.    The aggregate purchase price for all of the
Option Equity Interests is Nine Million Fifty Eight Thousand Five Hundred Dollars ($9,058,500). The purchase price (the “Purchase Price”) payable by Purchaser for the Interests shall be an amount equal to (i) the percentage of
the Option Equity Interests being purchased pursuant to this Agreement, (ii) multiplied by Nine Million Fifty Eight Thousand Five Hundred Dollars ($9,058,500). By way of example, if 20% of the Option Equity Interests is purchased, the
purchase price shall be equal to One Million Eight Hundred Eleven Thousand Seven Hundred Dollars ($1,811,700), the product of .20 x $9,058,500. 

 ARTICLE II. REPRESENTATIONS AND WARRANTIES OF PURCHASER 
  
 Section 2.1    As an inducement to Seller to enter
into and perform its obligations under this Agreement, and in consideration of the covenants of Seller contained herein, Purchaser represents and warrants to Seller on the date hereof and on the Closing Date as follows: 
  
 (a)    Organization.    Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of its organization. 
  
 (b)    Authorization;
Enforceability.    Purchaser has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Purchaser,
enforceable in accordance with its terms. 
  
 (c)    Consents.    No consent, authorization, order or approval of, or filing or registration with, any governmental authority is required for or in connection with the consummation by
Purchaser of the transactions contemplated hereby. 
  
 (d)    Conflicts Under Constituent Documents or Laws.    Neither the execution and delivery of this Agreement by Purchaser, nor the consummation by Purchaser of the transactions contemplated
hereby will conflict with or result in a breach of any of the terms, conditions or provisions of its certificate of incorporation or by-laws, or of any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of
any court or governmental authority or of any arbitration award which has been served upon Purchaser. 
  
 (e)    Conflicts Under Contracts.    Purchaser is not a party to any unexpired,
undischarged or unsatisfied written or oral contract, agreement, indenture, mortgage, debenture, note or other instrument under the terms of which performance by Purchaser of the terms of this Agreement may be prohibited, prevented or delayed.

  
 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER

  
 Section 3.1 As an inducement to Purchaser to enter
into and perform its obligations under this Agreement and in consideration of the covenants of Purchaser contained herein, Seller represents and warrants to Purchaser, except as set forth on the Disclosure Schedule (if any) attached hereto, on the
date hereof and on the Closing Date as follows: 
  
 (a)    Due Organization and Corporate Status.    The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the state of its
organization. The Company is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where such qualification is required, except where the lack of such qualification would not have a Material Adverse Effect
on the Company taken as a whole. The Company has full corporate power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. As used in this Agreement, “Material Adverse
Effect” means a material adverse effect on the business, operations (including results of operations), assets, liabilities, condition (financial or otherwise) or prospects of the Company or the consummation of the transaction contemplated
hereby. 
  
 (b)    Authority; Enforceability.    Seller has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement has been duly
executed and delivered by Seller and constitutes a legal, valid and binding agreement of Seller, enforceable against Seller in accordance with its terms. 
  

 2 

 (c)    Title to Interests.    Except with
respect to (i) the option granted to Purchaser pursuant to the Option Agreement, and (ii) the right of Milford Associates, LLC, a Michigan limited liability company (“Milford”) to the financial benefits (but not the right to
vote) associated with a two percent (2%) membership interest in the Company as granted to Milford by Seller pursuant to the Agreement, dated April 27, 2005, between Milford and Seller (“Milford Agreement”), Seller owns the
Interests free and clear of any and all options, proxies, voting trusts, voting agreements, judgments, pledges, charges, escrows, rights of first refusal or first offer, mortgages, indentures, claims, transfer restrictions, liens, equities, security
interests and other encumbrances of every kind and nature whatsoever, whether arising by agreement, operation of law or otherwise (“Claims”). 
  

(d)    Consents.    No consent, authorization, order or approval of, or filing or
registration with or notice to, any person, entity (including, but not limited to, the Company) or governmental authority is required for or in connection with the consummation by Seller of the transaction contemplated hereby, other than the Consent
executed and delivered pursuant to the Option Agreement (the “Consent”). 
  
 (e)    Conflicts Under Laws.    Neither the execution and delivery of this Agreement by
Seller, nor the consummation by Seller of the transaction contemplated hereby will conflict with or constitute a breach of any of the terms, conditions or provisions of any statute or administrative regulation, or of any order, writ, injunction,
judgment or decree of any court or governmental authority or of any arbitration award, to which Seller is a party or by which Seller is bound. 
  
 (f)    Conflicts Under Contracts.    Seller is not a party to, or bound by, any unexpired,
undischarged or unsatisfied written or oral contract, agreement, indenture, mortgage, debenture, note or other instruments under the terms of which the execution, delivery and performance by Seller of this Agreement and the consummation of the
transaction contemplated hereby by Seller will result in a lien on the Option Equity Interests or any portion thereof owned by Seller or would prohibit, prevent or delay timely performance by Seller according to the terms of this Agreement.

  
 (g)    Ownership of
Interests.    One hundred percent (100%) of the equity interests of the Company are issued and outstanding. The Equity Interests have been duly authorized and validly issued and were offered, issued, sold and delivered
by the Company to Seller in compliance with all applicable state and federal laws concerning the issuance of securities. Further, none of such Equity Interests were issued in violation of any preemptive or similar rights of any past or present
member or other person or entity. 
  
 (h)    Subsidiaries.    The Company has no subsidiaries. 
  
 (i)    Constituent Documents.    True and complete copies of the articles of organization
and all amendments thereto, the operating agreement, as amended and currently in force, all equity interest records, and all minute books and records of the Company have been furnished for inspection by Purchaser. Such equity interest records
accurately reflect all equity interest transactions and the equity interest ownership of the Company. The minute books and records of the Company contain true and complete copies of all resolutions adopted by the members or the board of managers of
the Company, and any other action formally taken by the Company. 
  
 (j)    Undisclosed Liabilities.    The Company does not have any Liability that relate to or that have arisen out of a breach of contract, breach of warranty, tort, or
infringement by or against the Company or any claim or lawsuit involving the Company. The Company does not have any obligation or liability of any nature whatsoever (direct or indirect, matured or 

  

 3 

 unmatured, absolute, accrued, contingent or otherwise), which would be required by GAAP to be provided or
reserved against on a balance sheet (a “Liability”), which has not been properly and adequately reserved on the most recent balance sheet of the Company, a true, correct and complete copy of which has been delivered to Purchaser by
Seller prior to the date hereof: 
  
 (k)    Title to Assets.    The Company has good title to its assets, free and clear of any Claims, except for statutory liens for federal or state taxes not yet due. No unreleased mortgage,
trust deed, chattel mortgage, security agreement, financing statement or other instrument encumbering any of the Company’s assets has been recorded, filed, executed or delivered. 
  
 (l)     Conduct of Business.    Except as is set forth in
Schedule 3.1(s) hereto, since the date of the most recent financial statements (balance sheet and profit and loss statement) of the Company delivered to Purchaser by Seller, the business of the Company has only been conducted in the usual and
ordinary course, consistent with past practices, and there has not occurred any Material Adverse Effect. 
  
 (m)    Employees Relations.    The Company does not currently have and since its inception
has not had any employees (except to the extent, if any, that Seller or Douglas C. Comrie are considered employees of the Company) and, since the formation of the Company, no wages or other compensation have been paid to any person which resulted in
the issuance of Internal Revenue Service Form W-2, no employment agreement has been entered into between the Company and any individual, and the Company has not treated or dealt with any individual as if such individual is or was an employee of the
Company. 
  
 (n)    Real
Estate.    The Company has not in the past owned or leased and does not currently own or lease any real property. 
  
 (o)    Litigation and Claims.    There is no litigation or proceeding, in law or in equity,
and there are no proceedings or governmental investigations before any commission or other administrative authority, pending or, to Seller’s knowledge, overtly threatened against the Company or any of the Company’s officers, managers,
members or affiliates, with respect to or affecting the Company’s operations, Business or assets, or with respect to the Interests, the Option Equity Interests or the consummation of the transactions contemplated hereby. To Seller’s
knowledge there are no facts which, if known by a potential claimant or governmental authority, would give rise to a claim or proceeding which, (i) if asserted or conducted with results unfavorable to the Company, may have a Material Adverse
Effect; or (ii) if asserted or conducted with results unfavorable to the Seller, may have a material adverse effect upon (1) Seller; (2) the value of the Interests or the Option Equity Interests; or (3) Seller’s ability to
consummate the sale of the Interests contemplated hereby. 
  
 (p)     Compliance with Laws.    To Seller’s knowledge after due inquiry and investigation, the Company is not in violation of, or delinquent in respect to, any
decree, order or arbitration award or law, statute, or regulation of or agreement with, or any permit from, any federal, state or local governmental authority to which the property, assets, personnel or Business activities of the Company are
subject, including federal, state or local laws, statutes and regulations relating to equal employment opportunities, fair employment practices, occupational health and safety, wages and hours, and discrimination. Since the inception of the Company,
the Company has not received from any governmental authority any written notification with respect to possible noncompliance of any decree, order, writ, judgment or arbitration award or law, statute, or regulation. 
  

 4 

 (q)    Complete Disclosure.    The
representations and warranties of Seller herein do not omit to state a material fact necessary in order to make the representations, warranties or statements contained in this Agreement not misleading. The copies of all documents furnished by Seller
to Purchaser pursuant to the terms of this Agreement are complete and accurate in all material respects. 
  
 ARTICLE IV. COVENANTS OF SELLER 
  
 Section 4.1    Expenses and Transfer Taxes.    Seller will bear the legal, accounting and other expenses incurred by Seller in connection with the negotiation,
preparation and execution of this Agreement and the other documents, instruments and agreements contemplated hereby and the transactions contemplated hereby and thereby, and will pay all sales, transfer, recordation and documentary taxes and fees
that may be payable in connection with the transactions contemplated by this Agreement. 
  
 Section 4.2    Further Assurances.    Seller shall use commercially reasonable efforts to implement the provisions of this Agreement, and for such purpose Seller, at
the request of Purchaser, at or after the Closing shall without further consideration promptly execute and deliver, or cause to be executed and delivered, to Purchaser such further instruments or documents, and take all such other actions, as
Purchaser may reasonably deem necessary or desirable to implement any provision of this Agreement. 
  
 ARTICLE V. COVENANTS OF PURCHASER 
  
 Section 5.1    Expenses.    Purchaser will bear the legal, accounting and other expenses incurred by it in connection with the negotiation, preparation and execution
of this Agreement and the other documents, instruments and agreements contemplated hereby and the transactions contemplated hereby and thereby. 
  
 Section 5.2    Further Assurances.    Purchaser shall use commercially reasonable efforts to implement
the provisions of this Agreement, and for such purpose Purchaser, at the request of Seller, at or after the Closing shall without further consideration promptly execute and deliver, or cause to be executed and delivered, to Seller such further
instruments or documents, and take all such other actions, as Seller may reasonably deem necessary or desirable to implement any provision of this Agreement. 
  
 ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASER’S OBLIGATIONS 
  
 Section 6.1    Conditions Precedent.    The obligation of Purchaser to
consummate the transaction contemplated by this Agreement shall be conditioned upon the fulfillment (or written waiver by Purchaser) of each of the following conditions: 
  
 (a)    The representations and warranties of Seller shall be true, correct and not
breached. 
  
 (b)    Seller
shall have fully performed each and every covenant and agreement applicable to Seller at or prior to the Closing on the Closing Date. 
  
 (c)    Purchaser shall have approved and accepted each of the schedules (as to both form and content) to Seller’s
representations and warranties set forth herein. 
  
 (d)    The members of the Company shall have executed and delivered to Purchaser an Amended and Restated Operating Agreement in the form of Exhibit 6.1(e) attached hereto. 
  

 5 

 ARTICLE VII. CLOSING; CLOSING DELIVERIES 
  
 Section 7.1    Closing.    As used in this Agreement, the “Closing” shall mean the time at which Seller consummates the sale, transfer, conveyance, assignment and delivery
of the Interests to Purchaser as provided herein by the execution and delivery by Seller of this Agreement against the execution and delivery by Purchaser of this Agreement and the payment by Purchaser to Seller of the Purchase Price in accordance
with Article I. The date of the Closing shall be referred to herein as the “Closing Date.” Unless the parties otherwise agree, the Closing shall occur at 9:00 a.m. on the date hereof at the offices of DLA Piper Rudnick Gray
Cary US LLP at 203 North LaSalle Street, Chicago, Illinois, or at such other time or location as the parties shall agree upon. 
  
 Section 7.2    Deliveries by Seller at Closing.    At the Closing, Seller will deliver or cause to be
delivered to Purchaser the following: 
  
 (a)    a certificate or certificates, if any, representing all of the Interests, endorsed by Seller in blank, or with equity interest transfer powers executed by Seller in blank attached; 
  
 (b)    if the Interests are not
certificated, an Assignment in a form approved in writing by Purchaser pursuant to which the Interests are transferred, sold and assigned to Purchaser by Seller free and clear of any and all Claims; 
  
 (c)    articles of organization certified
by the Secretary of the State of Ohio and dated within 30 days of Closing; 
  
 (d)    certificate of good standing certified by the Secretary of the State of Ohio dated within 10 days of Closing; 
  
 (e)    certificates of good standing certified by the secretary of state of each state
in which the Company is qualified to do business as a foreign limited liability company dated within 10 days of Closing; and 
  
 (f)    without limitation by specific enumeration of the foregoing, all other documents reasonably required from
Seller to consummate the transactions contemplated hereby. 
  
 Section 7.3    Deliveries by Purchaser at Closing.    At the Closing, in consideration of the receipt by Purchaser of the Seller deliveries referred to in Section 7.2 above and
the satisfaction of the other conditions set forth in Section 6.1 above, Purchaser will deliver or cause to be delivered to Seller the following: 
  
 (a)    the Purchase Price by wire transfer to a bank account designated by Seller in writing at least two
(2) business days before the Closing Date. 
  
 ARTICLE
VIII. INDEMNIFICATION 
  
 Section 8.1    Certain Definitions.    As used in this Agreement, the following terms have the meanings set forth below: 
  
 (a)    “Damages” means all actions, lawsuits, proceedings, hearings,
investigations, charges, complaints, demands, injunctions, judgments, orders, decrees, rulings, dues, liabilities, obligations, taxes, liens, assessments, levies, losses, fines, penalties, damages, claims, costs, fees and expenses, including
reasonable attorneys’, accountants’, investigators’, and experts’ fees and expenses incurred in investigating or defending any of the foregoing. 
  

 6 

 (b)    “Purchaser Indemnitees” means Purchaser and
its directors, managers, officers, members, shareholders, partners, agents, representatives, successors and assigns, and the term “Purchaser Indemnitee” means any one of the foregoing Purchaser Indemnitees. 
  
 (c)    “Survival Date”
means for claims made based on an alleged breach of the Representations and Warranties located in Article III, the second anniversary of the Closing Date; provided however that with respect to the breach of any representation or warranty
which was known by Seller to be untrue when made, the Survival Date shall be deemed to be the date six months after the applicable statute of limitations would bar such claim. 
  
 Section 8.2    Seller’s Indemnification Obligations.    Subject to
the provisions of Section 8.3, Seller shall indemnify, save and keep each Purchaser Indemnitee harmless against and from all Damages sustained or incurred by any Purchaser Indemnitee, as a result of, or arising out of, or by virtue of:

  
 (a)    any inaccuracy in
or breach of any representation and warranty made by Seller to Purchaser herein or in any closing document delivered to Purchaser in connection herewith; or 
  
 (b)    the breach by Seller of, or failure of Seller to comply with any of the covenants or obligations under this
Agreement to be performed by Seller (including Seller’s obligations under this Article VIII). 
  
 Section 8.3    Limitation on Seller’s Indemnification Obligations.    Seller’s obligations
pursuant to the provisions of Section 8.2 are subject to each of the following limitations: 
  
 (a)    Purchaser Indemnitees shall not be entitled to recover under Section 8.2 unless a claim has been
asserted by written notice, delivered to Seller on or prior to the Survival Date. 
  
 (b)    Purchaser Indemnitees shall not be entitled to recover under Section 8.2 for the amount of Damages
in excess of the Purchase Price. 
  
 Section 8.4    Payment of Amount Due.    Any amount to which Purchaser is entitled pursuant to this Article 8 shall be paid within ten (10) business days after demand therefore and
any amount not paid when due shall bear interest from the due date thereof until it is paid in full at the rate of ten percent (10%) per annum. 
  
 ARTICLE IX. GENERAL 
  
 Section 9.1    Succession and Assignment.    This Agreement shall be binding upon and inure to the
benefit of the parties named herein and their respective heirs, legalese, devisees, executors, administrators, legal representatives, successors and permitted assigns. No party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other party; provided, however, that nothing herein shall prohibit an assignment by Purchaser to any affiliate of Purchaser. 
  
 Section 9.2    Counterparts.    This Agreement may be executed in two or more counterparts and by facsimile, each of which shall be deemed an original but all of which together will
constitute one and the same instrument. 
  
 Section
9.3    Headings.    The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 
  

 7 

 Section 9.4    Notices.    All notices, requests,
demands, claims, and other communications hereunder shall be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given two business days after it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: 
  
 if to Seller: 
  
 Carolyn Kelly 
 4281 Meadowlark Trail 
 Stow, Ohio 44224 
 Telecopier: (330) 686-4968 
  
 With a copy to: 
  
 Dennis K. Loy, P.C. 
 Attn: Dennis k. Loy 
 17200 East Ten Mile Road Suite 140 
 Eastpointe, Michigan 48021 
 Telecopier: (586) 775-1752 
  
 if to Purchaser: 
  
 c/o Arthur J.
Gallagher & Co. 
 Two Pierce Place 
 Itasca, Illinois 60143 
 Attention: Sally Wasikowski 
 Telecopier: (630) 285-4272 
  
 with a copy to: 
  
 DLA Piper Rudnick Gray Cary US LLP 
 Suite 1900 
 203 N. LaSalle Street 
 Chicago, Illinois 60601 
 Attention: Stephen A. Landsman, Esq. 
 Telecopier: (312) 630-6330 
  
 Any party may send
any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be delivered by giving the other party notice in the manner herein set forth. 
  
 Section 9.5    Entire Agreement.    The Option Agreement, this Agreement (including any Disclosure
Schedule to this Agreement) and the instruments to be delivered by the parties pursuant to the provisions hereof constitute the entire agreement between the parties with respect to the subject matter hereof, and all prior or contemporaneous
negotiations, discussions, understandings, representations, warranties or agreements are merged herein and superceded hereby (it being understood and agreed that the Option Agreement shall survive the Closing and shall remain in full force and
effect). 
  

 8 

 Section 9.6    Governing Law.    This Agreement shall
be governed by and shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to its conflict of law principles 
  
 Section 9.7    Amendments and Waivers.    No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by Purchaser and Seller. The failure in any one or more instances of a party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or
privilege in this Agreement conferred, or the waiver by said party of any breach of any of the terms, covenants or conditions of this Agreement, shall not be construed as a subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party and no
waiver by any party of any default, misrepresentation, or breach of warranty or covenant hereunder, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder. 
  
 Section 9.8    Severability.    Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. 
  
 [signature page follows] 
  

 9 

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

			
	  
  

 CAROLYN KELLY

	
	AJG FINANCIAL SERVICES, INC., a Delaware corporation
		
	 By:
	 	  

		
	 Its:
	 	  

  

 10

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