Document:

exv4w2

 

Exhibt
4.2

STOCKHOLDER AGREEMENT

BY AND AMONG

SXC HEALTH SOLUTIONS CORP.,

NEW MOUNTAIN AFFILIATED INVESTORS, L.P.,

AND

NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.

DATED AS OF FEBRUARY 25, 2008

 

 

INDEX OF DEFINED TERMS

	 	 	 	 	 
	 	 	Page	 
	Agreement
	 	 	1	 
	Beneficial Ownership
	 	 	2	 
	Beneficially Own
	 	 	2	 
	Beneficially Owned
	 	 	2	 
	Claims
	 	 	11	 
	Company
	 	 	1	 
	Company Common Stock
	 	 	1	 
	Company Convertible Preferred Stock
	 	 	1	 
	Company Stock
	 	 	1	 
	Covered Shares
	 	 	2	 
	Depositary
	 	 	3	 
	Encumbrance
	 	 	2	 
	Existing Shares
	 	 	2	 
	Fundamental Amendment
	 	 	12	 
	Grantees
	 	 	5	 
	Lock-Up Period
	 	 	8	 
	Merger
	 	 	1	 
	Merger Agreement
	 	 	1	 
	Merger Sub
	 	 	1	 
	Offer
	 	 	1	 
	Operative Date
	 	 	2	 
	Other Stockholder
	 	 	2	 
	Parent
	 	 	1	 
	Prohibited Activity
	 	 	11	 
	Registration Rights Agreement
	 	 	8	 
	Releasees
	 	 	11	 
	Section 3.1(a) Matters
	 	 	5	 
	Stockholder
	 	 	1	 
	Tender Documents
	 	 	3	 
	Traded Securities
	 	 	10	 
	Transfer
	 	 	2	 
	US Corp.
	 	 	1	 
	Valuation Period
	 	 	10	 

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STOCKHOLDER AGREEMENT

          STOCKHOLDER AGREEMENT, dated as of February 25, 2008 (this “Agreement”), by and among
SXC Health Solutions Corp., a corporation organized under the laws of Yukon Territory, Canada
(“Parent”), New Mountain Affiliated Investors, L.P., a Delaware limited partnership (the
“Stockholder”), and National Medical Health Card Systems, Inc., a Delaware corporation (the
“Company”).

WITNESSETH:

          WHEREAS, concurrently with the execution of this Agreement, Parent, SXC Health Solutions,
Inc., a Texas corporation (“US Corp.”), Comet Merger Corporation, a newly-formed Delaware
corporation that is wholly-owned by US Corp. and an indirect wholly-owned subsidiary of Parent
(“Merger Sub”), and the Company are entering into an Agreement and Plan of Merger, dated as
of the date hereof (as amended, supplemented, restated or otherwise modified from time to time, the
“Merger Agreement”) pursuant to which, among other things, Merger Sub will commence an
exchange offer (the “Offer”) to acquire all of the outstanding shares of common stock, par
value $0.001 per share, of the Company (“Company Common Stock”), and following the
consummation of the Offer (or, subject to certain conditions, in lieu thereof), Merger Sub will
merge with and into the Company (the “Merger”) and each outstanding share of Company Common
Stock and each outstanding share, if any, of the Company’s Series A 7% Convertible Preferred Stock,
par value $0.10 per share (“Company Convertible Preferred Stock”, and together with the
Company Common Stock, “Company Stock”), will be converted into the right to receive the
merger consideration specified therein.

          WHEREAS, as of the date hereof, the Stockholder is the record and beneficial owner, in the
aggregate, of 165,725 outstanding shares of the Company Convertible Preferred Stock;

          WHEREAS, as a material inducement to Parent entering into the Merger Agreement, Parent has
required that the Stockholder agree, and the Stockholder has agreed, to enter into this agreement
and abide by the covenants and obligations with respect to the Covered Shares (as hereinafter
defined) set forth herein.

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

ARTICLE I

GENERAL

     1.1. Defined Terms. The following capitalized terms, as used in this Agreement, shall have the meanings set forth
below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed
thereto in the Merger Agreement.

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          “Beneficial Ownership” by a Person of any securities includes ownership by any Person
who, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares (i) voting power which includes the power to vote, or to direct the voting
of, such security; and/or (ii) investment power which includes the power to dispose, or to direct
the disposition, of such security; and shall otherwise be interpreted in accordance with the term
“beneficial ownership” as defined in Rule 13d-3 adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended; provided that for purposes of
determining Beneficial Ownership, a Person shall be deemed to be the Beneficial Owner of any
securities which such Person has, at any time during the term of this Agreement, the right to
acquire pursuant to any agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise (irrespective of whether the right to
acquire such securities is exercisable immediately or only after the passage of time, including the
passage of time in excess of 60 days, the satisfaction of any conditions, the occurrence of any
event or any combination of the foregoing). The terms “Beneficially Own” and
“Beneficially Owned” shall have a correlative meaning.

          “Covered Shares” means, with respect to the Stockholder, the Stockholder’s Existing
Shares, together with any shares of Company Stock or other voting capital stock of the Company and
any securities convertible into or exercisable or exchangeable for shares of Company Stock or other
voting capital stock of the Company, in each case, that the Stockholder acquires Beneficial
Ownership of on or after the date hereof.

          “Encumbrance” means any security interest, pledge, mortgage, lien (statutory or
other), charge, option to purchase, lease or other right to acquire any interest or any claim,
restriction, covenant, title defect, hypothecation, assignment, deposit arrangement or other
encumbrance of any kind or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or other title
retention agreement), excluding restrictions under securities laws and excluding any Encumbrance
set forth in the Certificate of Designations.

          “Existing Shares” means, with respect to the Stockholder, the number of shares of
Company Stock Beneficially Owned and owned of record by the Stockholder, as set forth in the
recitals.

          “Operative Date” means the Acceptance Date, if the transactions contemplated by the
Merger Agreement are effected by means of the Offer followed by the Second Step Merger, and means
the Closing, if the transactions contemplated by the Merger Agreement are effected as a One Step
Merger.

          “Other Stockholder” means New Mountain Partners, L.P., a Delaware limited partnership
and the holder of the outstanding shares of Company Convertible Preferred Stock not held by the
Stockholder.

          “Transfer” means, directly or indirectly, to sell, transfer, assign, pledge, encumber,
hypothecate or similarly dispose of (by merger (including by conversion into securities or other
consideration), by tendering into any tender or exchange offer, by operation of law or otherwise),
either voluntarily or involuntarily, or to enter into any contract, option or other

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arrangement or
understanding with respect to the voting of or sale, transfer, assignment, pledge, encumbrance,
hypothecation or similar disposition of (by merger, by tendering into any tender or exchange offer,
by operation of law or otherwise) (but does not include any conversion of the Company Convertible
Preferred Stock into Company Common Stock after the Certificate of Amendment has become effective).

ARTICLE II

TENDERING

     2.1.  Agreement to Tender.

          (a) The Stockholder hereby agrees that, within five business days after commencement of the
Offer, the Stockholder shall validly tender or cause to be tendered in the Offer all of the shares
of Company Stock represented by the Stockholder’s Covered Shares pursuant to and in accordance with
the terms of the Offer, by delivering to the depositary designated in the Offer (the
“Depositary”) (i) an executed letter of transmittal with respect to the Covered Shares,
(ii) a certificate or certificates representing the Covered Shares, (iii) all other documents or
instruments required to be delivered pursuant to the terms of the Offer, and (iv) a letter of
instruction signed by the Stockholder instructing the Company to convert the Covered Shares into
Company Common Stock effective upon receipt of a certificate from an executive officer of Parent
stating that (1) all of the conditions to the Offer (other than the Minimum Condition) have been
satisfied or waived, (2) upon the conversion by the Stockholder of its Covered Shares into Company
Common Stock and the conversion by the Other Stockholder of the shares of Company Stock owned by it
into Company Common Stock, the Minimum Condition will have been satisfied, and (3) Merger Sub
stands ready to, and will, immediately following such conversion by the Stockholder and the Other
Stockholder, accept for payment all shares of Company Common Stock validly tendered in the Offer
and not theretofore withdrawn (all of the foregoing documents, the “Tender Documents”).

          (b) The Stockholder hereby agrees that once the Tender Documents shall have been delivered to
the Depositary, the Stockholder will not withdraw, nor permit the withdrawal of, any Tender
Documents from the Offer, unless and until (i) the Offer shall have been terminated by Merger Sub
in accordance with the terms of the Merger Agreement, or (ii) this Agreement shall have been
terminated in accordance with Section 6.1.

          (c) Notwithstanding the provisions of Sections 2.1(a) and 2.1(b), in the event of a Change in
Recommendation made in compliance with the Merger Agreement, the obligation of the Stockholder to
tender and not withdraw its Covered Shares in the manner set forth in this Section 2.1 shall
terminate automatically without any further action by any party, and the Stockholder may or may not
tender all or any portion of its Covered Shares in the Offer, and may withdraw from the Offer all
or any portion of its Covered Shares that it may previously have tendered, as the Stockholder, in
its sole discretion, determines.

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ARTICLE III

VOTING

     3.1. Agreement to Vote.

          (a) The Stockholder hereby irrevocably and unconditionally agrees that during the period
beginning on the date hereof and ending on the earliest of (x) the Operative Date, (y) the
termination of the Merger Agreement in accordance with its terms or (z) the termination of this
Agreement in accordance with its terms, at the Company Stockholders Meeting and at any other
meeting of the stockholders of the Company, however called, including any adjournment or
postponement thereof, and in connection with any written consent of the stockholders of the
Company, the Stockholder shall, in each case, to the fullest extent that such matters are submitted
for the vote or written consent of the Stockholder and that the Covered Shares are entitled to vote
thereon or consent thereto:

          (i) appear at each such meeting or otherwise cause the Covered Shares as to which the
Stockholder controls the right to vote to be counted as present thereat for purposes of
calculating a quorum; and

          (ii) vote (or cause to be voted), in person or by proxy, or deliver (or cause to be
delivered) a written consent covering, all of the Covered Shares as to which the Stockholder
controls the right to vote (i) in favor of the adoption of the Merger Agreement and any
related proposal in furtherance thereof, as reasonably requested by Parent, submitted for
the vote or written consent of stockholders; (ii) against any action or agreement submitted
for the vote or written consent of stockholders that the Stockholder knows is in opposition
to, or competitive or materially inconsistent with, the Offer or the Merger or that the
Stockholder knows would result in a breach of any covenant, representation or warranty or
any other obligation or agreement of the Company contained in the Merger Agreement, or of
the Stockholder contained in this Agreement; and (iii) against any Acquisition Proposal and
against any other action, agreement or transaction submitted for the vote or written consent
of stockholders that the Stockholder knows would impede, interfere with, delay, postpone,
discourage, frustrate the purposes of or adversely affect the Offer, the Merger or the other
transactions contemplated by the Merger Agreement or this Agreement or the performance by
the Company of its obligations under the Merger Agreement or by the Stockholder of its
obligations under this Agreement, including, but not limited to: (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business combination
involving the Company or any subsidiary of the Company; (B) any sale, lease or transfer of a
material amount of assets of the Company (including capital stock or other equity interest
in its Subsidiaries) or any subsidiary of the Company; (C) any reorganization,
recapitalization, dissolution or liquidation of the Company or any subsidiary of the
Company; (D) any change in a majority of the board of directors of the Company; (E) any
amendment to the Company’s certificate of incorporation or bylaws (except for any amendment
to increase the authorized capital stock); and (F) any change in the capitalization of the
Company or the Company’s corporate structure.

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Any such vote shall be cast (or consent shall be given) by the Stockholder in accordance with such
procedures relating thereto so as to ensure that it is duly counted, including for purposes of
determining whether a quorum is present.

          (b) Notwithstanding the provisions of Section 3.1(a), in the event of a Change in
Recommendation made in compliance with the Merger Agreement, the obligation of the Stockholder to
vote (or cause to be voted), or to deliver (or cause to be delivered) a written consent with
respect to, the Covered Shares in the manner set forth in this Section 3.1 shall terminate,
together with the authority of each of the proxies set forth in Section 3.3, and the Stockholder
may vote (or cause to be voted), or deliver (or cause to be delivered) a written consent with
respect to, the Covered Shares as the Stockholder, in its sole discretion, determines.

     3.2. No Inconsistent Agreements. The Stockholder hereby covenants and agrees that,
except for this Agreement or as set forth in Section 7 of the Certificate of Designations, and
except as may be permitted by Section 5.4(b), it (a) has not entered into, and shall not enter into
at any time while this Agreement remains in effect, any voting agreement or voting trust with
respect to the Covered Shares with respect to any of the matters described in Section 3.1(a)(ii)
(the “Section 3.1(a) Matters”), (b) has not granted, and shall not grant at any time while
this Agreement remains in effect (except pursuant to Section 3.3), a proxy, consent or power of
attorney with respect to the Covered Shares with respect to any of the Section 3.1(a) Matters and
(c) has not knowingly taken and shall not knowingly take any action that would make any
representation or warranty of the Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling the Stockholder from performing any of its obligations under this
Agreement.

     3.3. Proxy. Without in any way limiting the Stockholder’s right to vote the Covered Shares
in its sole discretion on any matters other than the Section 3.1(a) Matters that may be submitted
to a stockholder vote, consent or other approval, the Stockholder hereby irrevocably appoints as
its proxy and attorney-in-fact, Gordon Glenn and Jeffrey Park, pursuant to a proxy to be delivered
to Parent substantially in the form attached hereto as Annex A, in their respective capacities as
officers of Parent, and any individual who shall hereafter succeed to any such officer of Parent,
and any other Person designated in writing by Parent (collectively, the “Grantees”), each
of them individually, with full power of substitution, to vote or execute written consents with
respect to the Covered Shares as to which the Stockholder controls the right to vote in accordance
with Section 3.1 and, in the discretion of the Grantees, with respect to any proposed postponements
or adjournments of any annual or special meeting of the stockholders of the Company at which any of
the Section 3.1(a) Matters was to be considered. This proxy is coupled with an interest and shall
be irrevocable until the earliest of (i) the Operative Date, (ii) a Change in Recommendation, (iii)
the termination of the Merger Agreement in accordance with its terms, or (iv) the termination of
this Agreement in accordance with its terms, in which event this proxy shall automatically be
revoked without any further action by any party. The Stockholder will take such further action or
execute such other instruments as may be necessary to effectuate the intent of this proxy and
hereby revokes any proxy previously granted by it with respect to the Covered Shares with respect
to any of the Section 3.1(a) Matters. So long as the proxy granted under this Section 3.3 is a
valid uncontested proxy that is effective to deliver the
votes of the Covered Shares, the Stockholder shall be deemed to be fulfilling its obligations under
Section 3.1. If Parent believes that such proxy is not a valid proxy or if Parent otherwise

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does not wish to utilize the proxy, Parent will so notify the Stockholder in writing so that the
Stockholder will be able to perform its obligations under Section 3.1.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     4.1. Representations and Warranties of the Stockholder. The Stockholder hereby represents
and warrants to Parent as follows:

          (a) Organization; Authorization; Validity of Agreement; Necessary Action . The
Stockholder is duly organized and is validly existing and in good standing under the laws of the
jurisdiction of its formation. The Stockholder has full power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery by the Stockholder of this Agreement, the
performance by it of its obligations hereunder and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by the Stockholder and no other actions
or proceedings on the part of the Stockholder or any stockholder thereof are necessary to authorize
the execution and delivery by it of this Agreement, the performance by it of its obligations
hereunder or the consummation by it of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by the Stockholder and, assuming this Agreement constitutes a
valid and binding obligation of the other parties hereto, constitutes a legal, valid and binding
obligation of the Stockholder, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies (regardless of whether
such enforceability is considered in a proceeding in equity or at law).

          (b) Ownership. The Stockholder’s Existing Shares are, and all of the Covered Shares
owned by the Stockholder from the date hereof through and on the Operative Date will be,
Beneficially Owned and owned of record by the Stockholder, except that, in the case of the Offer,
the Company Convertible Preferred Stock will have been converted into Company Common Stock in
accordance with the terms of this Agreement. The Stockholder has good and marketable title to the
Stockholder’s Existing Shares, free and clear of any Encumbrances. As of the date hereof, the
Stockholder’s Existing Shares constitute all of the shares of Company Stock Beneficially Owned or
owned of record by the Stockholder. Except for the rights granted to Parent hereby, the
Stockholder has and will have at all times through the Operative Date sole voting power (including
the right to control such vote as contemplated herein) with respect to the Section 3.1(a) Matters,
sole power of disposition, sole power to issue instructions with respect to the Section 3.1(a)
Matters, and sole power to agree to all of the matters set forth in this Agreement, in each case,
with respect to all of the Stockholder’s Existing Shares and with respect to all of the Covered
Shares owned by the Stockholder at all times through the Operative Date.

          (c) No Violation. The execution, delivery and performance of this Agreement by the
Stockholder does not and will not (whether with or without notice or lapse of time, or both) (i)
violate any provision of the certificate of formation or bylaws or other comparable governing
documents, as applicable, of the Stockholder, (ii) violate, conflict with or result in the

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breach of any of the terms or conditions of, result in any (or the right to make any) modification of or
the cancellation or loss of a benefit under, require any notice, consent or action under, or
otherwise give any Person the right to terminate, accelerate obligations under or receive payment
or additional rights under, or constitute a default under, any Contract to which the Stockholder is
a party or by which it is bound or (iii) violate any Law applicable to the Stockholder or by which
any of the Stockholder’s assets or properties is bound, except for any of the foregoing as would
not, either individually or in the aggregate, impair the ability of the Stockholder to perform its
obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.

          (d) Consents and Approvals. Other than compliance with applicable securities laws and
Laws relating to competition (including any filing under the HSR Act), the execution and delivery
of this Agreement by the Stockholder does not, and the performance by the Stockholder of its
obligations under this Agreement and the consummation by it of the transactions contemplated hereby
will not, require the Stockholder to obtain any consent, approval, authorization or permit of, or
to make any filing with or notification to, any Governmental Entity, except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, either individually or in the aggregate, prevent or delay the performance
by the Stockholder of any of its obligations under this Agreement.

          (e) Absence of Litigation. As of the date hereof, there is no Action pending or, to
the knowledge of the Stockholder, threatened against the Stockholder or any of its Affiliates
before or by any Governmental Entity that would impair the ability of the Stockholder to perform
its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.

          (f) Finder’s Fees. Except as disclosed pursuant to the Merger Agreement, no
investment banker, broker, finder or other intermediary is entitled to a fee or commission from
Parent, US Corp., Merger Sub or the Company in respect of this Agreement based upon any arrangement
or agreement made by or at the direction of the Stockholder.

          (g) Reliance by Parent, US Corp. and Merger Sub. The Stockholder understands and
acknowledges that Parent, US Corp. and Merger Sub are entering into the Merger Agreement in
reliance upon the Stockholder’s execution and delivery of this Agreement and the representations
and warranties of the Stockholder contained herein.

ARTICLE V

OTHER COVENANTS

     5.1. Prohibition on Transfers, Other Actions.

          (a) Except as permitted by Section 5.4(b), the Stockholder hereby agrees not to (i) Transfer
any of the Covered Shares, Beneficial Ownership thereof or any other interest specifically therein
(including by tendering into another tender or exchange offer), except to participate in the Offer
or the Merger; (ii) enter into any agreement, arrangement or understanding with any Person (other
than Parent, US Corp. or Merger Sub), or knowingly take

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any other action, that violates or
conflicts with the Stockholder’s representations, warranties, covenants and obligations under this
Agreement; or (iii) knowingly take any action that could restrict or otherwise affect the
Stockholder’s legal power, authority and right to comply with and perform its covenants and
obligations under this Agreement. Any Transfer in violation of this provision shall be void.

          (b) The Stockholder hereby covenants and agrees that for a period of one year following the
Operative Date (the “Lock-Up Period”), the Stockholder shall not Transfer, or consent to
any Transfer of, any shares of Parent Common Stock, or any interest therein, or enter into any
Contract, option or other arrangement (including any profit sharing or other derivative
arrangement) with respect to the Transfer of, any shares of Parent Common Stock or any interest
therein to any person; provided that the Stockholder may participate during the Lock-Up
Period with respect to its shares of Parent Common Stock in any merger, tender offer or other
business combination or other transaction, in each case, which the Board of Directors of Parent has
recommended to Parent’s stockholders. The Stockholder hereby agrees that, in order to ensure
compliance with the restrictions referred to herein, Parent may issue appropriate “stop transfer”
instructions to its transfer agent in respect of the Stockholder’s Parent Common Stock. Parent
agrees that it will cause any stop transfer instructions imposed pursuant to this Section 5.1(b) to
be lifted, and any legended certificates of Parent Common Stock delivered to the Stockholder
pursuant to the Merger Agreement to be replaced with certificates not bearing such legend, promptly
following the termination of the Lock-Up Period. The restrictions on transfer provided in this
Section 5.1(b) shall be in addition to any restrictions on transfer of the Parent Common Stock
imposed by any applicable Laws.

     5.2. Registration Rights Agreement. Concurrently with the execution of this
Agreement, Parent and the Stockholder are entering into a Registration Rights Agreement (the
“Registration Rights Agreement”).

     5.3. Stock Dividends, etc. In the event of a stock split, stock dividend or distribution,
or any change in the Company Stock by reason of any split-up, reverse stock split,
recapitalization, combination, reclassification, exchange of shares or the like, the terms
“Existing Shares” and “Covered Shares” shall be deemed to refer to and include such shares as well
as all such stock dividends and distributions and any securities into which or for which any or all
of such shares may be changed or exchanged or which are received in such transaction.

     5.4. No Solicitation.

          (a) The Stockholder hereby agrees that during the term of this Agreement, except as permitted
by Section 5.4(b), it shall not, and shall use its reasonable best efforts to ensure that any of
its Affiliates or Representatives do not, directly or indirectly, (i) solicit, initiate, knowingly
encourage or facilitate (including by way of furnishing non-public information) the submission of
an Acquisition Proposal or any proposal, offer or inquiry that may reasonably be expected to lead
to an Acquisition Proposal, (ii) participate or enter into or engage in negotiations or discussions
with, or provide any non-public information or data to, any person (other than Parent or any of its
affiliates or representatives) relating to any Acquisition Proposal or any proposal, offer or
inquiry that may reasonably be expected to lead to an Acquisition Proposal, (iii) make or
participate in, directly or indirectly, a “solicitation” of

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“proxies” (as such terms are used in
the rules of the SEC) or powers of attorney or similar rights to vote, or seek to advise or
influence any Person with respect to the voting of, any shares of Company Stock in connection with
any vote or other action on any of the Section 3.1(a) Matters, other than to recommend that
stockholders of the Company vote in favor of the adoption of the Merger Agreement and as otherwise
expressly provided in this Agreement or to otherwise vote or consent with respect to Covered Shares
in a manner that would not violate Section 3.1, (iv) vote, approve, adopt or recommend, or publicly
propose to approve, adopt or recommend, any letter of intent, memorandum of understanding,
agreement, option agreement or other agreement relating to an Acquisition Proposal or any proposal,
offer or inquiry that may reasonably be expected to lead to an Acquisition Proposal, or (v) agree
to do any of the foregoing. The Stockholder hereby agrees immediately to cease and cause to be
terminated all existing solicitations, discussions or negotiations with any Person with respect to
any Acquisition Proposal or any offer, proposal or inquiry that may reasonably be expected to lead
to an Acquisition Proposal, and will inform its Affiliates and Representatives of the obligations
undertaken by the Stockholder pursuant to this Agreement, including this Section 5.4(a). If any of
the Stockholder’s Affiliates or Representatives takes any action that the Stockholder is not
permitted to take under this Section 5.4, it shall be deemed to be a breach of this Section 5.4 by
the Stockholder. Notwithstanding anything in this Agreement (including the immediately preceding
sentence) to the contrary, no action taken by the Company or any of its Affiliates or
Representatives in compliance with Section 6.2 of the Merger Agreement shall be a violation by the
Stockholder of this Section 5.4(a).

          (b) Notwithstanding anything contained in this Agreement to the contrary, in the event that
the Company Board of Directors exercises its rights under Section 6.2 of the Merger Agreement to
(i) furnish information concerning, and provide access to, the Company’s business, properties,
employees and assets to any Person or Persons (and their Representatives acting in such capacity),
and/or (ii) participate, engage or assist in discussions and negotiations with any Person or
Persons (and their Representatives acting in such capacity), in each case, in compliance with
Section 6.2 of the Merger Agreement, then (x) the Stockholder and its Representatives likewise may
furnish any such information to such Person or Persons, provide such Person or Persons with any
such access, and/or participate, engage or assist in any such discussions and negotiations with
such Person or Persons; provided that any action taken by the Stockholder shall be taken
only in coordination with the Company Board of Directors, and (y) in connection with the Company’s
termination of the Merger Agreement pursuant to Section 9.1(f) thereof in order to enter into a
transaction which is a Superior Proposal, the Stockholder shall be entitled to enter into a voting
or other support agreement with the Person making the Superior
Proposal, provided that the effectiveness of such agreement shall be conditioned on
the termination of the Merger Agreement in compliance with Section 6.2(c) thereof.

     5.5. Notice of Acquisitions; Proposals Regarding Prohibited Transactions. The Stockholder
hereby agrees to notify Parent in writing (a) as promptly as practicable (and in any event within
one business day following such acquisition by the Stockholder) of the number of any additional
shares of Company Stock or other securities of the Company of which the Stockholder acquires
Beneficial Ownership on or after the date hereof and (b) as promptly as practicable (and in any
event within the earlier of (i) one business day or (ii) 48 hours) after receipt by the Stockholder
of any Acquisition Proposal or any offer, proposal or inquiry that may reasonably be expected to
lead to an Acquisition Proposal or after any request for information is

9

 

sought from or initiated
with the Stockholder, and shall disclose the material terms of such Acquisition Proposal, proposal,
offer or inquiry, including the identity of the Person or Persons making such Acquisition Proposal,
proposal, offer or inquiry (unless prohibited by the confidentiality agreement with such Person)
and provide a copy thereof if in writing and any related available material documentation or
correspondence. The Stockholder will keep Parent informed on a prompt basis of the status and any
material discussions or negotiations (including material amendments and proposed material
amendments) relating to any Acquisition Proposal or any such offer, proposal or inquiry.

     5.6. Stockholder Profit.

          (a) In the event that the Merger Agreement shall have been terminated under circumstances in
which a Termination Fee is payable or may be payable by the Company to Parent with respect to such
termination upon the occurrence of certain events specified in the Merger Agreement, but in each
case, subject to such Termination Fee actually becoming payable under the Merger Agreement, the
Stockholder shall pay to Parent an amount equal to 50% of the Stockholder’s profit (determined in
accordance with Section 5.6(b) below) from the sale or other Transfer of any Covered Shares
pursuant to an Acquisition Proposal (including a Superior Proposal) so long as the agreement with
respect to such Acquisition Proposal is entered into or such Acquisition Proposal is consummated
within 12 months of the termination of this Agreement. Payment shall be made promptly upon the
receipt by the Stockholder of the proceeds from such sale or other disposition and shall only be
required to be paid if such sale or other disposition is completed or, if later, when the
Termination Fee is paid.

          (b) For purposes of this Section 5.6, the profit of the Stockholder shall equal (A) the
aggregate consideration for or on account of the Covered Shares that were sold or otherwise
Transferred as described in Section 5.6(a) including extraordinary distributions directly or
indirectly made in connection with any Acquisition Proposal, valuing any non-cash consideration
(including any residual interest in the Company) at its fair market value on the date of such
consummation, less (B) the product of (x) $11.50 and (y) the number of Covered Shares so sold or
otherwise Transferred by the Stockholder.

          (c) For purposes of this Section 5.6, the fair market value of any non-cash consideration
consisting of:

          (i) securities listed on a national securities exchange or traded or quoted on the
Nasdaq (“Traded Securities”) shall be equal to the average closing price per share
of such security as reported on the composite trading system of such exchange or by Nasdaq
for the five trading days ending on the trading day immediately prior to the date of the
value determination (the “Valuation Period”); and

          (ii) consideration which is other than cash or Traded Securities shall be determined by
a nationally recognized independent investment banking firm mutually agreed upon by Parent
and the Stockholder within ten business days of the event requiring selection of such
banking firm; provided, however, that if the parties are unable to agree
within two business days after the date of such event as to the investment banking firm,
then the parties shall each select one firm, and those firms shall select a

10

 

third investment
banking firm, which third firm shall make such determination; provided,
further, that the fees and expenses of such investment banking firm shall be borne
equally by Parent and the Stockholder. The determination of the investment-banking firm
shall be binding upon the parties.

          (d) Any payment of profit under this Section 5.6 shall be paid in the same proportion of cash
and non-cash consideration as the aggregate consideration received by the Stockholder in the
Acquisition Proposal or other disposition.

          (e) In the event that the Merger Agreement shall have been terminated under circumstances in
which a Termination Fee is payable or may be payable by the Company to Parent with respect to such
termination upon the occurrence of certain events specified in the Merger Agreement, then the
Stockholder shall not, until the 12-month anniversary of the termination of this Agreement,
Transfer any of the Covered Shares (i) to its limited partners or (ii) to any of its Affiliates
unless such Affiliate agrees in writing to be bound by the provisions of this Section 5.6.

          (f) Neither the Stockholder nor Parent shall, and each shall use its reasonable best efforts
to ensure that its respective Affiliates do not, engage in any Prohibited Activity with respect to
any subject Traded Securities during an applicable Valuation Period. “Prohibited Activity”
means any acquisition or disposition, in open market transactions, private transactions or
otherwise, during the Valuation Period of any of the subject Traded Securities or any securities
convertible into or exchangeable for or derivative of the subject Traded Securities or any other
action, in the case of any of the foregoing, taken intentionally for the purpose of manipulating
the price of the subject Traded Securities during the Valuation Period.

     5.7. Release. From and after the Effective Time, the Stockholder finally and forever
releases Parent and the Company, and their respective successors, assigns, officers, directors,
employees and all affiliates and Subsidiaries, past and present, of Parent and the Company (the
“Releasees”) from each and every agreement, commitment, indebtedness, obligation and claim
of every nature and kind whatsoever, known or unknown, suspected or unsuspected (each, a
“Claim” and collectively, the “Claims”) that (A) the Stockholder may have had
in the past, may have as of the date hereof or, to the extent arising from or in connection with
any act, omission or state of facts taken or existing on or prior to the date hereof, may have
after the date hereof against any of the Releasees and (B) has arisen or arises directly out of the
Stockholder’s interest as a stockholder of the Company or any of its Subsidiaries; except with
respect to any such Claims arising under this Agreement, the Merger Agreement, the Registration
Rights Agreement and the transactions contemplated hereby and thereby, and any Claim by the
Stockholder for failure by the Company to pay all accrued and unpaid dividends on the Company
Convertible Preferred Stock prior to the Operative Date.

     5.8. Waiver of Appraisal Rights. The Stockholder agrees not to exercise any rights of
appraisal or any dissenters’ rights that the Stockholder may have (whether under applicable Law or
otherwise) or could potentially have or acquire in connection with the Merger.

     5.9. Further Assurances. From time to time, at Parent’s request and without further
consideration, the Stockholder shall execute and deliver such additional documents and take all

11

 

such further action as may be reasonably necessary to effect the actions and consummate the
transactions contemplated by this Agreement.

     5.10. Disclosure. Neither Parent, the Company nor the Stockholder will issue any
press release or make any other public statement, and shall not authorize or permit any of its
Subsidiaries or Affiliates or any of its or their Representatives to issue any press release or
make any other public statement with respect to the Merger Agreement, this Agreement, the
Registration Rights Agreement or any of the transactions contemplated by the Merger Agreement, this
Agreement or the Registration Rights Agreement without the prior written consent of the other
parties hereto (such consent not to be unreasonably withheld, conditioned or delayed), except as
may be required by Law or by any listing requirement with the Nasdaq or the Toronto Stock Exchange,
including any filings required under the Securities Act or the Exchange Act.

     5.11. Meeting Rights. During the Lock-Up Period, the Stockholder shall be entitled to
attend any meeting held pursuant to the Other Stockholder’s exercise of its right to meet each
calendar quarter with the Chief Executive Officer and the Chief Financial Officer of Parent.

     5.12. Rule 144. Parent agrees to use its reasonable best efforts to file all reports
required to be filed by it under the Exchange Act to the extent required to enable the Stockholder,
after the expiration of the Lock-Up Period, to sell the Parent Common Stock pursuant to and in
accordance with Rule 144.

     5.13. Affiliate Agreements. The Stockholder shall take all actions necessary to cause
the Registration Rights Agreement, dated as of March 19, 2004, by and among the Company, the
Stockholder, the Other Stockholder, and such other persons who became signatories thereto as
provided therein to be terminated (without any payment), effective as of and contingent upon the
earlier to occur of the Acceptance Date and the Effective Time, such that such agreement shall
be of no further force or effect immediately thereafter. The Stockholder has approved the
Certificate of Amendment. The Stockholder hereby waives its right of first offer under the Amended
and Restated Preferred Stock Purchase Agreement, dated as of November 26, 2003, by and between the
Company and the Stockholder, in connection with the Merger Agreement and the transactions
contemplated thereby.

ARTICLE VI

MISCELLANEOUS

     6.1. Termination. This Agreement shall remain in effect until the earliest to occur of
(i) the termination of the Merger Agreement in accordance with its terms, and (ii) the delivery of
written notice of termination by the Stockholder to Parent following any Fundamental Amendment
effected without the prior written consent of the Stockholder, and upon the occurrence of the
earliest of such events this Agreement shall terminate and be of no further force;
provided, however, that the provisions of Section 5.6, this Section 6.1, the last
sentence of Section 6.2(a) and Sections 6.4 through 6.13 shall survive any termination of this
Agreement. Nothing in this Section 6.1 and no termination of this Agreement shall relieve or
otherwise limit any party of liability for willful breach of this Agreement. “Fundamental
Amendment” means

12

 

the execution by the Company, Parent, US Corp. and Merger Sub of an amendment
to, or waiver by the Company, Parent, US Corp. or Merger Sub of any provision of, the Offer or the
Merger Agreement that reduces the amount of the Offer Price or the Merger Consideration, changes
the form of the Offer Price or the Merger Consideration to include or substitute therefor a form
other than cash and Parent Common Stock, or decreases the ratio of cash to Parent Common Stock
included in the Offer Price or the Merger Consideration. If the Stockholder does not exercise the
termination right described above within five business days following the date the Stockholder is
notified that such Fundamental Amendment is effected, then this Agreement shall give effect to any
modified terms incorporated from the Merger Agreement and, except as so modified, shall continue in
full force and effect.

     6.2. Legends; Stop Transfer Order.

          (a) In furtherance of this Agreement, the Stockholder hereby authorizes and instructs the
Company to instruct its transfer agent to enter a stop transfer order with respect to all of the
Covered Shares held of record by the Stockholder and to legend the share certificates. The Company
agrees that as promptly as practicable after the date of this Agreement it shall give such stop
transfer instructions to the transfer agent for the Company Stock and to legend the share
certificates. The Company agrees that, (i) if this Agreement is terminated in accordance with
Section 6.1, then, promptly following the termination of this Agreement, (ii) if Merger Sub accepts
the Covered Shares for payment pursuant to the terms of the Offer, then, concurrently with such
acceptance (and in any event within such time as would not delay receipt by the
Stockholder of the Offer Price), or (iii) if the transactions contemplated by the Merger
Agreement are effected as a One Step Merger, then, immediately following the Closing (and in any
event within such time as would not delay receipt by the Stockholder of the Merger Consideration),
the Company will cause any stop transfer instructions imposed pursuant to this Section 6.2 to be
lifted and any legended certificates delivered pursuant to this Section 6.2 to be replaced with
certificates not bearing such legend.

          (b) Each certificate representing Covered Shares held of record by the Stockholder shall bear
the following legend on the face thereof:

          “THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON VOTING,
TRANSFER AND CERTAIN OTHER LIMITATIONS SET FORTH IN THAT CERTAIN STOCKHOLDER AGREEMENT DATED AS OF
FEBRUARY 25, 2008, AMONG SXC HEALTH SOLUTIONS CORP., NEW MOUNTAIN AFFILIATED INVESTORS, L.P. AND
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC., AS THE SAME MAY BE AMENDED FROM TIME TO TIME, COPIES OF
WHICH STOCKHOLDER AGREEMENT ARE ON FILE AT THE PRINCIPAL OFFICE OF NATIONAL MEDICAL HEALTH CARD
SYSTEMS, INC.”

          The Stockholder will cause all of its Existing Shares held of record by the Stockholder and
any securities that become Covered Shares held of record by the Stockholder after the date hereof
to be delivered to the Company for the purpose of applying such legend (if not so endorsed upon
issuance). The Company shall return to the delivering party, as promptly as possible, any
securities so delivered. The delivery of such securities by the delivering party shall not in any
way affect such party’s rights with respect to such securities.

13

 

     6.3. No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in
Parent any direct or indirect ownership or incidence of ownership of or with respect to any Covered
Shares, except as otherwise provided herein. All rights, ownership and economic benefits of and
relating to the Covered Shares shall remain vested in and belong to the Stockholder, and Parent
shall have no authority to direct the Stockholder in the voting or disposition of any of the
Covered Shares, except as otherwise provided herein.

     6.4. Notices.

          (a) All notices and other communications hereunder shall be in writing and shall be deemed
given if delivered personally, by facsimile (upon telephonic confirmation of receipt), on the first
business day following the date of dispatch if delivered by a recognized next day courier service
or on the third business day following the date of mailing if delivered by registered or certified
mail, return receipt requested, post prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in writing in accordance
with this Section 6.4 by the party to receive such notice.

          (i) if to Parent, to:

SXC Health Solutions Corp.

2441 Warrenville Road, Suite 610

Lisle, IL 60532-3246

Fax: (630) 328-2190

Attention: Chief Financial Officer

              with a copy to:

Sidley Austin LLP

1 South Dearborn Street

Chicago, IL 60603

Fax: (312) 853-7036

Attention: Gary D. Gerstman

Scott R. Williams

          (ii) if to the Company, to:

National Medical Health Card Systems, Inc.

26 Harbor Park Drive

Port Washington, NY 11050

Fax: (516) 605-6989

Attention: George McGinn, Esq.

              with a copy to:

Bass, Berry & Sims PLC

315 Deaderick Street, Suite 2700

Nashville, TN 37238

14

 

Fax: (615) 742-6293

Attention: J. Allen Overby, Esq.

Jennifer H. Noonan, Esq.

          (iii) if to the Stockholder, to:

New Mountain Affiliated Investors, L.P.

787 Seventh Avenue, 49th Floor

New York, NY 10019

Fax: (212) 582-2277

Attention: Mr. Michael B. Ajouz

              with a copy to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Fax: (212) 859-4000

Attention: Aviva F. Diamant, Esq.

          (b) A copy of all notices and other communications from Parent or Merger Sub to the Company
(and vice versa) under the Merger Agreement shall be sent at the same time to the Stockholder at
the above address, with a copy to its counsel at the above address, and the provisions of this
Section 6.4 shall apply to such notices and communications; provided that no failure to
provide such notice to the Stockholder shall relieve the Stockholder of its obligations under this
Agreement.

     6.5. Interpretation. The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section references are to this Agreement unless
otherwise specified. Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limitation.” The meanings
given to terms defined herein shall be equally applicable to both the singular and plural forms of
such terms. The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This
Agreement is the product of negotiation by the parties having the assistance of counsel and other
advisers. It is the intention of the parties that this Agreement not be construed more strictly
with regard to one party than with regard to the others.

     6.6. Counterparts. This Agreement may be executed by facsimile and in counterparts, all of
which shall be considered one and the same agreement and shall become effective when counterparts
have been signed by each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.

     6.7. Entire Agreement. This Agreement, the Registration Rights Agreement and, to the
extent referenced herein, the Merger Agreement, together with the several agreements and other
documents and instruments referred to herein or therein or annexed hereto or thereto,

15

 

embody the complete agreement and understanding among the parties hereto with respect to the subject matter
hereof and supersede and preempt any prior understandings, agreements or representations by or
among the parties, written and oral, that may have related to the subject matter hereof in any way.

     6.8. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. (a) This
Agreement, and all claims or causes of action (whether at law, in contract or in tort) that may be
based upon, arise out of or relate to this Agreement or the negotiation, execution or performance
hereof, shall be governed by and construed in accordance with the Laws of the State of Delaware,
without giving effect to any choice or conflict of Law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the Laws of any
jurisdiction other than the State of Delaware. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this Agreement in the Court of
Chancery of the State of Delaware (and any appellate court of the State of Delaware) and the
Federal courts of the United States of America located in the State of Delaware, this being in
addition to any other remedy to which they are entitled at law or in equity. Each of the parties
hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any Action with respect to this Agreement, (a) any claim that it is not personally
subject to the jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by applicable Law, that (i) the Action in any
such court is brought in an inconvenient forum, (ii) the venue of such Action is improper or (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

          (b) Each party hereto hereby waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any Action arising out of or relating to this
Agreement. Each party hereto (i) certifies that no representative, agent or attorney of any other
party has represented, expressly or otherwise, that such party would not, in the event of any
Action, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties
hereto have been induced to enter into this Agreement, by, among other things, the mutual waiver
and certifications in this Section 6.8.

     6.9. Amendment; Waiver; Expenses.

          (a) This Agreement may not be amended except by an instrument in writing signed by each of the
parties hereto. Each party may waive any right of such party hereunder by an instrument in writing
signed by such party and delivered to Parent, the Company and the Stockholder.

          (b) The Stockholder agrees that it is solely responsible (without reimbursement from the
Company) for all costs and expenses (including all fees and expenses of

16

 

counsel) incurred by the
Stockholder in connection with this Agreement and the Registration Rights Agreement.

     6.10. Remedies. All rights, powers and remedies provided under this Agreement or otherwise
available in respect hereof at law or in equity shall be cumulative and not alternative, and the
exercise or beginning of the exercise of any thereof by any party shall not preclude the
simultaneous or later exercise of any other such right, power or remedy by such party.

     6.11. Severability. Any term or provision of this Agreement which is determined by a court
of competent jurisdiction to be invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering
invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other jurisdiction, and
if any provision of this Agreement is determined to be so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable, in all cases so long as
neither the economic nor legal substance of the transactions contemplated hereby is affected in any
manner adverse to any party or its stockholders or partners, as applicable. Upon any such
determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and
equitable substitute provision to effect the original intent of the parties as closely as possible
and to the end that the transactions contemplated hereby shall be fulfilled to the maximum extent
possible.

     6.12. Successors and Assigns; Third Party Beneficiaries. Neither this Agreement nor any of
the rights or obligations of any party under this Agreement shall be assigned, in whole or in part
(by operation of law or otherwise), by any party without the prior written consent of the other
parties hereto. Subject to the foregoing, this Agreement shall bind and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer on any Person other than the
parties hereto or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

     6.13. Stockholder Capacity. The restrictions and covenants of the Stockholder hereunder
shall not be binding, and shall have no effect, in any way with respect to any director or officer
of the Company or any of its Subsidiaries in such Person’s capacity as such a director or officer,
nor shall any action taken by any such director or officer in his or her capacity as such be deemed
a breach by the Stockholder of this Agreement.

[Remainder of this page intentionally left blank]

17

 

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed (where
applicable, by their respective officers or other authorized Person thereunto duly authorized) as
of the date first written above.

	 	 	 	 	 	 	 
	 	 	SXC HEALTH SOLUTIONS CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Jeffrey Park
 

Jeffrey Park
	 	 
	 

	 	Title:
	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	NEW MOUNTAIN AFFILIATED INVESTORS, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	New Mountain GP, LLC,

its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven B. Klinsky	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Steven B. Klinsky	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ George McGinn	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	George McGinn	 	 
	 

	 	Title:
	 	General Counsel and Secretary	 	 

 

 

ANNEX A

IRREVOCABLE PROXY

Dated as of February 25, 2008

     The undersigned Stockholder (the “Stockholder”) of National Medical Health Card
Systems, Inc., a Delaware corporation (the “Company”), hereby irrevocably (to the fullest
extent permitted by law) appoints Gordon Glenn and Jeffrey Park, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and resubstitution, to
vote and exercise all voting and related rights (to the full extent that the undersigned is
entitled to do so) with respect to all of the shares of capital stock of the Company that now are
or hereafter may be beneficially owned by the undersigned, and any and all other shares or
securities of the Company issued or issuable in respect thereof on or after the date hereof
(collectively, the “Covered Shares”), in accordance with the terms of this Proxy. The
Covered Shares beneficially owned by the Stockholder as of the date of this Proxy are listed on the
signature page of this Proxy, along with the number(s) of the stock certificate(s) representing
such Covered Shares. Upon the Stockholder’s execution of this Proxy, any and all prior proxies
given by the undersigned with respect to any Covered Shares are hereby revoked and terminated, and
the Stockholder agrees not to grant any subsequent proxies with respect to the Covered Shares, with
respect to any of the matters referred to in any of clauses (a) through (c) below until after the
Expiration Time (as defined below).

     This Proxy is irrevocable (to the fullest extent permitted by law), is coupled with an
interest and is granted pursuant to that certain Stockholder Agreement of even date herewith (the
“Stockholder Agreement”) by and among SXC Health Solutions Corp., a corporation organized
under the laws of Yukon Territory, Canada (“Parent”), the Company and the undersigned
Stockholder of the Company, and is granted in consideration of Parent entering into that certain
Agreement and Plan of Merger of even date herewith (as it may hereafter be amended from time to
time in accordance with the provisions thereof, the “Merger Agreement”) by and among
Parent, SXC Health Solutions, Inc., a Texas corporation (“US Corp.”), Comet Merger
Corporation, a newly-formed Delaware corporation that is wholly-owned by US Corp. and an indirect
wholly-owned subsidiary of Parent (“Merger Sub”), and the Company. The Merger Agreement
provides that Merger Sub will commence an exchange offer (the “Offer”) to acquire all of
the outstanding shares of common stock, par value $0.001 per share, of the Company (“Company
Common Stock”), and following the consummation of the Offer (or, subject to certain conditions,
in lieu thereof), Merger Sub will merge with and into the Company (the “Merger”) and the
Stockholder will be entitled to receive the merger consideration specified therein. The term
“Expiration Time”, as used in this Proxy, shall mean the earliest to occur of (i) the
Operative Date, (ii) a Change in Recommendation, (iii) the termination of the Merger Agreement in
accordance with its terms, and (iv) the termination of the Stockholder Agreement in accordance with
its terms.

     The attorneys and proxies named above, and each of them, are hereby authorized and empowered
by the Stockholder, at any time prior to the Expiration Time, to act as the Stockholder’s attorney
and proxy to vote all of the Covered Shares, and to exercise all voting, consent and similar rights
of the undersigned with respect to all of the Covered Shares

 

 

(including, without limitation, the power to execute and deliver written consents) at every annual
or special meeting of stockholders of the Company (and at every adjournment or postponement
thereof), and in every written consent in lieu of such meeting:

     (a) in favor of the adoption of the Merger Agreement and any related proposal in furtherance
thereof, as reasonably requested by Parent, submitted for the vote or written consent of
stockholders;

     (b) against any action or agreement submitted for the vote or written consent of stockholders
that the Stockholder knows is in opposition to, or competitive or materially inconsistent with, the
Offer or the Merger or that the Stockholder knows would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company contained in the
Merger Agreement, or of the Stockholder contained in the Stockholder Agreement; and

     (c) against any Acquisition Proposal (as defined in the Merger Agreement) and against any
other action, agreement or transaction submitted for the vote or written consent of stockholders
that the Stockholder knows would impede, interfere with, delay, postpone, discourage, frustrate the
purposes of or adversely affect the Offer or the Merger or the other transactions contemplated by
the Merger Agreement or the Stockholder Agreement or the performance by the Company of its
obligations under the Merger Agreement or by the Stockholder of its obligations under the
Stockholder Agreement, including, but not limited to: (A) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination involving the Company or any
subsidiary of the Company; (B) any sale, lease or transfer of a material amount of assets of the
Company (including capital stock or other equity interests in its Subsidiaries) or any subsidiary
of the Company; (C) any reorganization, recapitalization, dissolution or liquidation of the Company
or any subsidiary of the Company; (D) any change in a majority of the board of directors of the
Company; (E) any amendment to the Company’s certificate of incorporation or bylaws (except for any
amendment to increase the authorized capital stock); and (F) any change in the capitalization of
the Company or the Company’s corporate structure.

     Any term or provision of this Proxy 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. If the final judgment of a court of competent jurisdiction declares
that any term or provision hereof is invalid or unenforceable, the Stockholder agrees that the
court making such determination shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or provision with a term
or provision that is valid and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Proxy shall be enforceable as so modified.
In the event such court does not exercise the power granted to it in the prior sentence, the
Stockholder agrees to replace such invalid or unenforceable term or provision with a valid and
enforceable term or provision that will achieve, to the extent possible, the economic, business and
other purposes of such invalid or unenforceable term.

 

 

     The restrictions and covenants of the Stockholder hereunder shall not be binding, and shall
have no effect, in any way with respect to any director or officer of the Company or any of its
Subsidiaries in such Person’s capacity as such a director or officer, nor shall any action taken by
any such director or officer in his or her capacity as such be deemed a breach by the Stockholder
of this Proxy.

     Any obligation of the Stockholder hereunder shall be binding upon the successors and assigns
of the Stockholder.

     This Proxy shall terminate, and be of no further force and effect, automatically upon the
Expiration Time.

[signature page follows]

 

 

COUNTERPART SIGNATURE PAGE

     IN WITNESS WHEREOF, the Stockholder has caused this Irrevocable Proxy to be duly executed as
of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	NEW MOUNTAIN AFFILIATED INVESTORS, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	New Mountain GP, LLC,

its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven B. Klinsky
 

Name: Steven B. Klinsky 

Title: Chief Executive Officer
	 	 

NUMBER OF OUTSTANDING SHARES OF COMPANY STOCK BENEFICIALLY OWNED BY THE
STOCKHOLDER:

	 	 	 
	SERIES A 7% CONVERTIBLE PREFERRED STOCK
	 	165,725
	 
	 	 
	COMMON STOCK
	 	165,725 (upon conversion)

Stockholder Address:

New Mountain Affiliated Investors, L.P.

787 Seventh Avenue, 49th Floor

New York, NY 10019

Attention: Mr. Michael B. Ajouz

Fax: (212) 582-2277

with a copy to:

Fried, Frank, Harris, Shriver & Jacobson LLP

One New York Plaza

New York, NY 10004

Attention: Aviva F. Diamant, Esq.

Fax: (212) 859-4000<PAGE>

                                                                    EXHIBIT 10.1

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT

     AMENDED AND RESTATED EMPLOYMENT AGREEMENT made and entered into by and
between Littelfuse, Inc. (the "COMPANY") and Gordon Hunter (the "EXECUTIVE") as
of the 31st day of December, 2007 (the "EFFECTIVE DATE"). All terms not
otherwise defined elsewhere herein shall have the meaning set forth in Section
13 hereof.

     WHEREAS, the operations of the Company and its Affiliates are a complex
matter regarding direction and leadership in a variety of arenas, including
financial, strategic planning, manufacturing, sales, human resources,
regulatory, customer relations and others;

     WHEREAS, the Executive is possessed of certain experience and expertise
that qualify the Executive to provide the direction and leadership required by
the Company and its Affiliates; and

     WHEREAS, the Company and the Executive have previously entered into an
Employment Agreement, dated as of May 1, 2006 (the "Original Agreement")
providing for the continued employment of the Executive as Chairman, Chief
Executive Officer and President of the Company; and

     WHEREAS, the Company and the Executive now wish to amend and restate the
Original Agreement in order to comply with the requirements of Section 409A of
the Internal Revenue Code (the "Code"), and the final regulations issued to
implement said requirements ("Section 409A");

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, terms, provisions and conditions set forth in this Agreement, the
parties hereby agree that the Original Agreement is amended and restated on the
terms and conditions set forth below, which shall entirely supersede the terms
and conditions of the Original Agreement:

1. EMPLOYMENT. Subject to the terms and conditions set forth in this Agreement,
the Company hereby offers and the Executive hereby accepts continued employment.

2. TERM. The term of Executive's employment under this Agreement shall commence
on May 1, 2006 and shall end on the first date on which the term is terminated
pursuant to Section 5 hereof. The term of this Agreement is hereafter referred
to as "THE TERM OF THIS AGREEMENT" or "THE TERM HEREOF."

3. CAPACITY AND PERFORMANCE.

     (a)  During the term hereof, the Executive shall serve the Company as its
          Chairman, Chief Executive Officer and President. In addition, and
          without further compensation, the Executive shall serve as an officer
          of one or more of the Company's Affiliates if so elected or appointed
          from time to time. During the

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          term hereof, if elected or appointed, Executive shall serve as a
          member of the Board of Directors of the Company (the "BOARD"). Upon
          cessation of employment with the Company, Executive shall offer to
          resign as a member of the Board.

     (b)  During the term hereof, the Executive shall be employed by the Company
          on a full-time basis and shall perform the duties and responsibilities
          and have the authority of Executive's position and such other duties,
          responsibilities and authority on behalf of the Company and its
          Affiliates, reasonably consistent with Executive's position, as may be
          reasonably designated from time to time by the Board or by its
          designees. Executive's duties, responsibilities and authority shall be
          commensurate with the duties, responsibilities and authority of
          similarly positioned executives of similar businesses of similar size
          in the United States. During the term, Executive shall report to the
          Board.

     (c)  During the term hereof, the Executive shall devote Executive's full
          business time and best efforts, business judgment, skill and knowledge
          exclusively to the advancement of the business and interests of the
          Company and its Affiliates and to the discharge of Executive's duties
          and responsibilities to them. The Executive shall not engage in any
          other business activity or serve in any industry, trade, professional,
          governmental or academic position during the term of this Agreement,
          except as may be expressly approved in writing in advance by the
          Board. The foregoing restriction, however, shall not be interpreted to
          prohibit the Executive from (i) involvement in any charitable or
          community activities or organizations (including, without limitation,
          participation in industry trade groups) or (ii) serving on the board
          of directors of up to one (1) non-competing, for-profit business
          enterprise without the prior approval in writing in advance by the
          Board, that does not give rise to a conflict of interest and that does
          not materially interfere with Executive's ability to perform
          Executive's duties and responsibilities under this Agreement.

     (d)  Executive acknowledges and agrees that Executive owes a fiduciary duty
          of loyalty, fidelity, and allegiance to act at all times in the best
          interests of the Company and its Affiliates and to do no act which
          would, directly or indirectly, injure the Company and/or its
          Affiliates' business, interests or reputation. It is agreed that any
          direct or indirect interest in, connection with, or benefit from any
          outside activities, particularly commercial activities, which interest
          might in any way adversely affect the Company and/or its Affiliates,
          involves a possible conflict of interest. In keeping with Executive's
          fiduciary duties to the Company and its Affiliates, Executive agrees
          that Executive shall not knowingly become involved in a conflict of
          interest with the Company and/or its Affiliates, or upon discovery
          thereof, allow such a conflict to continue. Moreover, Executive shall
          not engage in any activity that is reasonably likely to involve a
          possible conflict of interest without first obtaining written approval
          in accordance with the Company's conflict of interest policy and
          procedures.

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     (e)  The duties and responsibilities to be performed by the Executive shall
          be performed primarily at the Company's Des Plaines, Illinois
          headquarters offices, subject to reasonable travel requirements on
          behalf of the Company consistent with the nature of Executive's duties
          and responsibilities.

4. COMPENSATION AND BENEFITS. As compensation for all services performed by the
Executive under and during the term hereof and subject to performance of the
Executive's duties and of the obligations of the Executive to the Company and
its Affiliates, pursuant to this Agreement or otherwise:

     (a)  BASE SALARY. During the term hereof, the Company will pay the
          Executive a base salary at the rate of Five Hundred Twenty-Five
          Thousand Dollars ($525,000.00) per annum, payable in accordance with
          the payroll practices of the Company for its executives and subject to
          annual review and to increase, but not decrease, from time to time by
          the Board in its discretion. Such base salary, as from time to time in
          effect, is hereafter referred to as the "BASE SALARY."

     (b)  INCENTIVE COMPENSATION. For fiscal year 2006 and each fiscal year
          thereafter, the Executive will be eligible to receive an annual
          incentive bonus with a target bonus of fifty percent (50%) of the Base
          Salary, based on performance against and payable in accordance with
          the Company's management incentive plan for such fiscal year, and
          subject to a maximum opportunity of 100% of Base Salary for superior
          performance; provided that, either (i) the Executive must be employed
          by the Company hereunder on the last day of the fiscal year and must
          not have given nor received notice of termination under Section 5(c)
          or (f) hereunder in order to be eligible to receive such bonus, or
          (ii) the Executive must have been terminated pursuant to Section 5(a),
          (b), (d) or (e) in order to be eligible to receive such bonus
          pro-rated for the partial term of service for the fiscal year ending
          on the date of termination. Except as otherwise provided in this
          Agreement, the amount of any incentive bonus earned by the Executive
          hereunder shall be determined by the Board (or such designated
          committee), based on its assessment, in the exercise of its
          discretion, of performance against established goals in accordance
          with such annual management incentive plan.

     (c)  LONG TERM INCENTIVES. Executive shall be eligible to receive such
          annual stock option, restricted share or other incentive grants/awards
          ("LONG TERM INCENTIVES") as may be determined by the Board in its
          discretion.

     (d)  VACATIONS. During the term hereof, the Executive shall be entitled to
          earn four (4) weeks of vacation per fiscal year, to be taken at such
          times and intervals as shall be determined by the Executive, subject
          to the reasonable business needs of the Company. Vacation shall
          otherwise be governed by the policies of the Company, as in effect
          from time to time.

     (e)  EMPLOYEE BENEFITS. During the term hereof and subject to any
          contribution therefor generally required of senior level executives of
          the Company, the Executive shall be entitled to participate in any and
          all employee benefit plans

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          from time to time in effect for employees of the Company generally,
          except to the extent such plans are in a category of benefit otherwise
          provided to the Executive by this Agreement. Such participation shall
          be subject to the terms of the applicable plan documents and generally
          applicable Company policies. The Company may alter, modify, add to or
          delete its employee benefit plans at any time as it, in its sole
          judgment, determines to be appropriate, without recourse by the
          Executive.

     (f)  BUSINESS EXPENSES. The Company shall pay or reimburse the Executive
          for all reasonable, customary and necessary business expenses incurred
          or paid by the Executive in the performance of Executive's duties and
          responsibilities hereunder during the term hereof, subject to any
          maximum annual limit and other restrictions on such expenses set by
          the Board and to such reasonable substantiation and documentation as
          may be specified in advance by the Company from time to time.

     (g)  PERQUISITES. During the term hereof, the Company will provide the
          Executive with the following perquisites:

          i.   Automobile. The Company shall provide Executive with an
               automobile in accordance with the Company's automobile policy for
               executives.

          ii.  Home Office. On behalf of the Executive, the Company will provide
               and maintain a home office computer, facsimile, telephone and
               required access line(s).

          iii. Financial Planning. The Company shall pay or reimburse Executive
               for up to Fifteen Thousand Dollars ($15,000.00) per fiscal year
               for financial planning and tax counseling services.

          iv.  Legal Fees. The Company shall pay or reimburse Executive for the
               reasonable legal fees incurred by Executive attendant to the
               development of this Agreement, up to a maximum of Five Thousand
               Dollars ($5,000.00).

5. TERMINATION OF EMPLOYMENT AND SEVERANCE BENEFITS. The term of this Agreement
shall end and the Executive's employment hereunder shall terminate upon the
first to occur of the following circumstances:

     (a)  DEATH. In the event of the Executive's death during the term hereof,
          the Executive's employment hereunder shall immediately and
          automatically terminate. In such event, the Company will pay or
          provide to the Executive's designated beneficiary or, if no
          beneficiary has been designated by the Executive, to Executive's
          estate:

          i.   the Base Salary earned but not paid through the date of
               termination.

          ii.  any vacation time earned but not used through the date of
               termination.

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          iii. any business expenses incurred by the Executive but un-reimbursed
               on the date of termination, provided that such expenses and
               required substantiation and documentation are submitted within
               sixty (60) days of termination and that such expenses are
               reimbursable under Company policy,

          iv.  if the date of termination occurs after the end of a fiscal year
               and prior to the payment of the incentive compensation award (as
               described in paragraph 4(b)) for such prior fiscal year, payment
               of any earned incentive compensation award will be made at the
               regularly scheduled time,

          v.   any vested benefits under the Company's employee benefits plans,
               and

          vi.  any benefit continuation and/or conversion rights under the
               Company's employee benefits plans,

          (all of the foregoing, "ACCRUED BENEFITS"). In addition to the Accrued
          Benefits, the Company shall pay to the Executive's estate the award
          under Section 4(b) for the performance period in which the date of
          termination occurs, based on actual performance for the entire period;
          provided, however, that such award shall be subject to a pro-rata
          reduction to reflect the portion of the performance period following
          the date of termination, and with payment to be made at the regularly
          scheduled time for payment of such amounts to executives of the
          Company. Except as otherwise specifically set forth in this Agreement,
          any Long Term Incentives, or as required by law, the Company shall
          have no further obligation to the Executive.

     (b)  DISABILITY.

          i.   The Company may terminate the Executive's employment hereunder,
               upon notice to the Executive, in the event that the Executive
               becomes disabled during Executive's employment hereunder through
               any illness, injury, accident or condition of either a physical
               or psychological nature and, as a result, is unable to
               substantially perform Executive's duties and responsibilities
               hereunder, with or without reasonable accommodation, for one
               hundred eighty (180) days during any period of three hundred and
               sixty-five (365) consecutive calendar days. In the event of such
               termination, except as otherwise specifically set forth in this
               Agreement, any Long Term Incentives, or as required by law, the
               Company shall have no further obligation to the Executive, other
               than for payment of the Accrued Benefits. In addition to the
               Accrued Benefits, the Company shall pay to the Executive or the
               Executive's duly appointed guardian the award under Section 4(b)
               for the performance period in which the date of termination
               occurs, based on actual performance for the entire period;
               provided, however, that such award shall be subject to a pro-rata
               reduction to reflect the portion of the performance period
               following the date of

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               termination, and with payment to be made at the regularly
               scheduled time for payment of such amounts to executives of the
               Company.

          ii.  The Board may designate another employee or a Board member to act
               in the Executive's place during any period of the Executive's
               disability. Notwithstanding any such designation, the Executive
               shall continue to receive the Base Salary in accordance with
               Section 4(a), perquisites in accordance with Section 4(g), and
               benefits in accordance with Section 4(e), to the extent permitted
               by the then-current terms of the applicable employee benefit
               plans, until the Executive becomes eligible for disability income
               benefits under the Company's disability income plan or until the
               termination of Executive's employment, whichever shall first
               occur. While receiving disability income payments under the
               Company's disability income plan, the Executive shall be entitled
               to receive any Base Salary under Section 4(a) hereof, reduced by
               the amount of any disability benefits paid for the same period of
               time, and shall continue to participate in perquisites in
               accordance with Section 4(g) and Company employee benefit plans
               in accordance with Section 4(e) and the terms of such plans,
               until the termination of Executive's employment.

          iii. If any question shall arise as to whether during any period the
               Executive is disabled through any illness, injury, accident or
               condition of either a physical or psychological nature so as to
               be unable to substantially perform Executive's duties and
               responsibilities hereunder, with or without reasonable
               accommodation, the Executive may, and at the request of the
               Company shall, submit to a medical examination by a physician
               selected by the Company to whom the Executive or Executive's duly
               appointed guardian, if any, has no reasonable objection to
               determine whether the Executive is so disabled and such
               determination shall for the purposes of this Agreement be
               conclusive of the issue. If such question shall arise and the
               Executive shall fail to submit to such medical examination, the
               Company's determination of the issue shall be binding on the
               Executive.

     (c)  BY THE COMPANY FOR CAUSE. The Company may terminate the Executive's
          employment hereunder for Cause at any time upon notice to the
          Executive setting forth in reasonable detail the nature of such Cause.
          The following, as determined by the Board in its reasonable judgment,
          shall constitute "CAUSE" for termination: (i) the Executive's willful
          failure to perform in accordance with the direction of the Board
          (other than by reason of disability), or gross negligence in the
          performance of, Executive's material duties and responsibilities to
          the Company or any of its Affiliates; (ii) the Executive's breach of
          any of Executive's obligations under Section 3(d), 7, 8 or 9 of this
          Agreement; (iii) conviction of the Executive of, or the Executive's
          plea of guilty or no contest to, a felony; (iv) conduct by the
          Executive that constitutes fraud, gross negligence or gross misconduct
          that results in material harm to the Company; (v) other conduct by the
          Executive that is, or could reasonably be expected to be, materially
          harmful to the Company or any of its Affiliates; or (vi) a material
          breach of this Agreement by

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          Executive not cured to the reasonable satisfaction of the Board within
          thirty (30) days after written notice to Executive of such material
          breach. Upon the giving of notice of termination of the Executive's
          employment hereunder for Cause, the Company shall have no further
          obligation to the Executive, other than for the Accrued Benefits;
          provided, however, that the Executive shall be reinstated if within
          ten (10) business days following termination for Cause the Executive
          can demonstrate to the Board, and the Board in its sole discretion
          agrees that there was no reasonable basis for termination of the
          Executive for Cause.

     (d)  BY THE COMPANY OTHER THAN FOR CAUSE. The Company may terminate the
          Executive's employment hereunder other than for Cause at any time upon
          sixty (60) days' notice to the Executive. During such sixty (60) day
          notice period, the Company may require that the Executive cease
          performing some or all of Executive's duties and responsibilities
          and/or not be present at any or all time(s) at the Company's
          headquarters offices and/or other facilities. In the event of such
          termination, the following provisions shall apply:

          i.   In addition to the Accrued Benefits, the Company shall, subject
               to the remaining provisions of this Section 5(d):

               A.   until the conclusion of a period of twelve (12) months
                    following the date of termination of the Executive's
                    employment hereunder, (1) continue to pay the Executive the
                    Base Salary at the rate in effect on the date of termination
                    and (2) pay the Executive an amount equal to the Section
                    4(b) annual incentive bonus at target payable in equal
                    installments at the same time Base Salary hereunder is paid
                    (each such payment being hereinafter referred to as a
                    "Severance Payment");

               B.   if Executive elects to exercise his COBRA continuation
                    rights to continue his Company sponsored group health and
                    dental plan benefits, subject to any employee contribution
                    generally applicable to senior level executives actively
                    employed by the Company, continue to contribute to the
                    premium cost of the Executive's participation, and that of
                    Executive's eligible dependents, in the Company's group
                    health and dental plans, provided that the Executive and
                    such dependents are entitled to continue such participation
                    under applicable law and plan terms, but not to exceed
                    twelve (12) months;

               C.   pay to the Executive the award under Section 4(b) for the
                    performance period in which the date of termination occurs,
                    based on actual performance for the entire period; provided,
                    however, that such award shall be subject to a pro-rata
                    reduction to reflect the portion of the performance period
                    following the date of termination, and with payment to be
                    made at the regularly

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                    scheduled time for payment of such amounts to executives of
                    the Company;

               D.   subject to any employee contribution generally applicable to
                    senior level executives actively employed by the Company,
                    continue to contribute to the premium cost of the
                    Executive's participation in the Company's group life
                    insurance plan, provided that the Executive is entitled to
                    continue such participation under applicable law and plan
                    terms, but not to exceed twelve (12) months; and

               E.   pay for costs and expenses of outplacement services selected
                    by the Executive and reasonably acceptable to the Company,
                    up to a maximum cost to the Company of Twenty-Five Thousand
                    Dollars ($25,000.00) with payment to be made by the Company
                    to the outplacement vendor upon the submission to the
                    Company of documentation reasonably satisfactory to the
                    Company evidencing the incurrence of such costs and expenses
                    within sixty (60) days following Executive's date of
                    termination.

          ii.  Any obligation of the Company to the Executive hereunder is
               conditioned, however, (A) upon the Executive signing a waiver and
               release of claims agreement in a form utilized by the Company for
               senior level executives of the Company (the "EMPLOYEE RELEASE")
               within twenty-one days (or such greater period as the Company may
               specify) following the later of the date on which the Executive
               (or, in the case of termination by the Executive for Good Reason,
               the Company) receives notice of termination of employment or the
               date the Executive receives a copy of the Employee Release, (B)
               upon the Executive not revoking the Employee Release in a timely
               manner thereafter, and (C) upon the Executive meeting Executive's
               obligations under Section 6(c) hereof. The Employee Release shall
               be furnished to Executive as soon as practical after the date on
               which the Company or the Executive receives the notice of
               termination, but in no event later than the latest date that will
               insure that the revocation period referred to above will expire
               not later than March 1 of the year following the year in which
               the Executive's employment is terminated, and upon the effective
               date of the Employee Release, all Severance Payments that would
               have been paid on payroll dates since the date of termination
               shall be paid to the Executive in a lump sum.

          iii. In order to satisfy the requirements of Section 409A, the
               following shall apply to the time of payment of the Severance
               Payments:

               A.   Each Severance Payment shall be treated as a separate
                    payment for purposes of Section 409A.

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               B.   The aggregate amount of all Severance Payments, if any,
                    payable after March 15 of the year following the year that
                    includes the termination date(the "Short Term Deferral
                    Date"), but before the date that is six months after the
                    termination date (the "Six Month Date") (such period of time
                    being hereinafter referred to as the "409A Limitation
                    Period") shall not exceed two times the lesser of (1) the
                    Base Salary on the last day of the year immediately
                    preceding the year that includes the termination date or (2)
                    the limit in effect under Section 401(a)(17) of the Code
                    during the year that includes the termination date (the
                    "409A Limit"). For avoidance of doubt, if the Six Month Date
                    occurs before the Short Term Deferral Date, there shall be
                    no 409A Limitation Period and the provisions of this Section
                    5(d)(iii)(B) and Section 5(d)(iii)(C) shall not apply.

               C.   To the extent the sum of the Severance Payments payable
                    during the 409A Limitation Period would otherwise exceed the
                    409A Limit, such payments shall be reduced, in reverse order
                    of payment, to the extent necessary so that the sum does not
                    exceed the 409A Limit, and the amount by which the Severance
                    Payments are reduced will be paid to Executive in a lump
                    sum, without interest, six months after the termination
                    date. However, if Executive dies during such period, the
                    409A Limit shall not apply to payments to the Executive's
                    beneficiary (and the amount by which any payments to the
                    Executive were reduced shall be paid to the beneficiary as
                    soon as practical after Executive's death.).

               D.   All Severance Payments other than Severance Payments that
                    either (1) are paid before the Short Term Deferral Date, or
                    (2) are paid after the Short Term Deferral Date but do not
                    exceed in the aggregate the 409A Limit (whether or not the
                    provisions of Section 5(d)(iii)(B) and (C) apply), are
                    hereinafter referred to as "409A Severance Payments." 409A
                    Severance Payments are considered deferred compensation
                    subject to Section 409A, and such payment shall in no event
                    be paid at a time other than that provided in Section
                    5(d)(i), as modified by Section 5(d)(iii)(C), if applicable.
                    For this purpose, Severance Payments paid after the Short
                    Term Deferral Date shall not be considered 409A Severance
                    Payments until the cumulative total of such Severance
                    Payments, in chronological order of payment, exceeds the
                    409A Limit. The Severance Payment that causes the cumulative
                    total of such Severance Payments to exceed the 409A Limit
                    shall be considered a 409A Severance Payments to the extent
                    of such excess, and all subsequent Severance Payments shall
                    be 409A Severance Payments.

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          iv.  Notwithstanding the provisions of this Section 5(d), however, in
               the event that, within a reasonable time (which time shall not
               exceed ninety (90) days) following termination of the Executive's
               employment by the Company hereunder, the Board determines in good
               faith that circumstances existed which would have constituted a
               basis for termination of the Executive's employment for Cause,
               the Executive's employment will be deemed to have been terminated
               for Cause in accordance with Section 5(c) hereof.

     (e)  BY THE EXECUTIVE FOR GOOD REASON. The Executive may terminate
          Executive's employment hereunder for Good Reason, upon notice to the
          Board setting forth in reasonable detail the nature of such Good
          Reason. The following shall constitute "GOOD REASON" for termination
          by the Executive: (i) a material breach of the Agreement by the
          Company not cured within thirty (30) days after written notice by the
          Executive to the Company, or (ii) without Executive's written consent:
          (A) any change in title or any material diminution of Executive's
          duties or authority, (B) assignment of duties materially inconsistent
          with Executive's duties in effect on the Effective Date, (C) any
          change in the reporting structure, or (D) any requirement that
          Executive relocate his principal residence as in effect on the
          Effective Date or office other than at the Company's headquarters
          offices. In the event of termination in accordance with this Section
          5(e), the Executive will be entitled to the same pay and benefits
          Executive would have been entitled to receive had the Executive's
          employment been terminated by the Company other than for Cause in
          accordance with Section 5(d) above; provided, that the Executive
          satisfies all conditions to such entitlement, including without
          limitation the signing of an effective Employee Release and meeting
          Executive's obligations under Section 6(c) hereof. It is agreed and
          understood that Good Reason shall cease to exist for an event on the
          sixtieth (60th) day following the later of its occurrence or
          Executive's reasonable knowledge thereof, unless the Executive has
          given the Board written notice thereof prior to such date.

     (f)  BY THE EXECUTIVE OTHER THAN FOR GOOD REASON. The Executive may
          terminate Executive's employment hereunder at any time upon sixty (60)
          days' prior written notice to the Board. In the event of termination
          by the Executive pursuant to this Section 5(f), the Board may elect to
          waive the period of notice, or any portion thereof, and, if the Board
          so elects, the Company will pay the Executive the Base Salary for the
          notice period or for any remaining portion of the period. The Company
          shall have no further obligation to the Executive, other than for the
          Accrued Benefits due to Executive.

     (g)  CHANGE OF CONTROL. The Executive shall be covered under the Company's
          Change of Control Employment Agreement as in effect from time to time
          during the term of this Agreement. Any amounts and/or benefits
          payable, paid or provided to the Executive under such Change of
          Control Employment Agreement shall be in lieu of and not in addition
          to amounts and/or benefits payable or provided under this Agreement.
          This Agreement is not intended to preclude

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          amounts and/or benefits payable under the Change of Control Employment
          Agreement should the events described therein occur.

     (h)  DEFINITION OF TERMINATION OF EMPLOYMENT. For all purposes of this
          Agreement, the Executive's employment shall be considered to have been
          terminated if, and only if, the Executive has incurred a separation
          from service with the Company as defined in Section 409A. By way of
          illustration, and without limiting the generality of the foregoing,
          the following principals shall apply:

          i.   The Executive shall not be considered to have separated from
               service so long as the Executive is on military leave, sick
               leave, or other bona fide leave of absence if the period of such
               leave does not exceed six months, or if longer, so long as the
               Executive retains a right to reemployment with the Company under
               an applicable statute or by contract.

          ii.  Regardless of whether his employment has been formally
               terminated, the Executive will be considered to have separated
               from service as of the date it is reasonably anticipated that no
               further services will be performed by the Executive for the
               Company, or that the level of bona fide services the Executive
               will perform after such date will permanently decrease to no more
               than 20 percent of the average level of bona fide services
               performed over the immediately preceding 36-month period (or the
               full period of employment if the Executive has been employed for
               less than 36 months). For purposes of the preceding test, during
               any paid leave of absence the Executive shall be considered to
               have been performing services at the level commensurate with the
               amount of compensation received, and unpaid leaves of absence
               shall be disregarded.

          iii. For purposes of determining whether the Executive has separated
               from service, all services provided for the Company, or for any
               other entity that is part of a controlled group that includes the
               Company as defined in Section 414(b) or (c) of the Code, shall be
               taken into account, whether provided as an employee or as a
               consultant or other independent contractor; provided that the
               Executive shall not be considered to have not separated from
               service solely by reason of service as a non-employee director of
               the Company or any other such entity.

     (i)  COMPLIANCE WITH SECTION 409A. The provisions of this Section 5 are
          intended to comply with the requirements of Section 409A and shall be
          so interpreted and administered. To the maximum extent possible, the
          provisions of this Section 5 shall be construed in such a manner that
          no amounts payable to the Executive are subject to the additional tax
          and interest provided in Section 409(a)(1)(B) of the Code.

6. EFFECT OF TERMINATION. The provisions of this Section 6 shall apply to
termination pursuant to Section 5 or otherwise.

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     (a)  The Executive shall promptly give the Company notice of all facts
          necessary for the Company to determine the amount and duration of its
          obligations in connection with any termination pursuant to Section
          5(b)-(f) hereof.

     (b)  Except for group health and dental plan coverage and group life
          insurance coverage continued pursuant to Section 5(d) or 5(e) hereof,
          benefits shall terminate pursuant to the terms of the applicable
          employee benefit plans based on the date of termination of the
          Executive's employment without regard to any continuation of Base
          Salary or other payment to the Executive following such date of
          termination. Executive shall be afforded such benefit continuation
          and/or conversion rights as required by law or the Company's benefits
          plans.

     (c)  The Executive agrees that if, on the date Executive's employment with
          the Company terminates, howsoever caused, the Executive is a member of
          the Board or of the board of directors of any of the Affiliates or
          holds any position or office with the Company or any of the
          Affiliates, the termination shall constitute Executive's offer of
          resignation from all such memberships, positions and offices,
          effective as of the date of termination of Executive's employment and
          Executive agrees to execute confirmation of any such resignations
          requested by the Company.

     (d)  Provisions of this Agreement shall survive any termination if so
          provided herein or if necessary or desirable to accomplish the
          purposes of other, surviving provisions, including without limitation
          the obligations of the Executive under Sections 7, 8 and 9 hereof. The
          obligation of the Company to make payments to or on behalf of the
          Executive under Section 5(d) or 5(e) hereof is expressly conditioned
          upon the Executive's continued full performance of obligations under
          Sections 7, 8 and 9 hereof.

7. CONFIDENTIAL INFORMATION, RETURN OF DOCUMENTS AND PROPERTY, CONTINUED
COOPERATION, AND NONDISPARAGEMENT.

     (a)  The Executive acknowledges that the Company and its Affiliates
          continually develop Confidential Information, that the Executive may
          develop Confidential Information for the Company or its Affiliates and
          that the Executive may learn of Confidential Information during the
          course of employment. The Executive will comply with the policies and
          procedures of the Company and its Affiliates for protecting
          Confidential Information and shall not disclose to any Person or use,
          other than as required by applicable law or for the proper performance
          of Executive's duties and responsibilities to the Company and its
          Affiliates, any Confidential Information obtained by the Executive
          incident to Executive's employment or other association with the
          Company or any of its Affiliates. The Executive understands that this
          restriction shall continue to apply after Executive's employment
          terminates, regardless of the reason for such termination.

     (b)  All documents, records, tapes and other media of every kind and
          description relating to the business, present or otherwise, of the
          Company or its Affiliates and

                                       12

<PAGE>

          any copies, in whole or in part, thereof (the "DOCUMENTS"), whether or
          not prepared by the Executive, and any tangible property of the
          Company furnished to the Executive, including, but not limited to,
          computers, personal digital assistants, credit cards, and
          identification cards, shall be the sole and exclusive property of the
          Company and its Affiliates. The Executive shall safeguard all
          Documents and tangible property of the Company and shall surrender to
          the Company at the time Executive's employment terminates, or at such
          earlier time or times as the Board or its designee may specify, all
          Documents and other tangible property of the Company then in the
          Executive's possession or control.

     (c)  During the term hereof and for a reasonable period thereafter (but not
          less than twelve (12) months following termination of Executive's
          employment), the Executive agrees to cooperate with the Company with
          respect to all matters arising during or related to Executive's
          employment, including without limitation cooperation in connection
          with any litigation or governmental investigation or regulatory or
          other proceeding which may have arisen or which may arise following
          the execution of this Agreement. As part of the cooperation agreed to
          herein, the Executive shall provide complete and truthful information
          to the Company and its attorneys with respect to any matter arising
          during or related to Executive's employment. Further, the Executive
          shall be available to meet with Company personnel and the Company's
          attorneys and shall provide to the Company and its attorneys any and
          all documentary or other physical evidence pertinent to any such
          matter; and, at the Company's request upon reasonable notice, the
          Executive shall travel to such places as the Company may specify (for
          which the Company will reimburse Executive for reasonable travel and
          lodging expenses) and provide such complete and truthful information
          and evidence to parties whom the Company may specify. Further, upon
          the oral request of the Company or its attorneys, the Executive shall
          testify, truthfully and accurately, to any such matter in any civil
          case to which the Company is a party or in connection with any
          investigation or regulatory or other proceeding relating to the
          Company or its activities. To the extent legally permissible, the
          Executive shall promptly notify the Board, within two business days,
          of Executive's receipt from any third party or governmental entity of
          a request for testimony and/or documents, whether by legal process or
          otherwise, relating to any matter arising during or relating to
          Executive's employment. Except as otherwise expressly provided herein,
          the Executive shall not charge the Company for Executive's compliance
          with obligations under this Section 7(c), but shall be reimbursed for
          all reasonable and documented out of pocket expenses incurred at the
          request of the Company. The Executive's compliance with this Section
          7(c) shall be reasonably requested by the Company, so, where
          practicable, to minimize interference with the Executive's then
          current employment. In the event the Executive can demonstrate loss of
          base salary from the Executive's full-time employer during any period
          of time the Executive is complying with this Section 7(c), the Company
          will compensate the Executive for Executive's reasonable time at an
          amount to be then agreed upon between the Company and the Executive.

                                       13

<PAGE>

     (d)  During the term hereof and thereafter, the Executive agrees that the
          Executive shall not take any actions or make any statements to the
          public, current, former or future Company employees, prospective
          future employers, the media, or any other third party whatsoever that
          disparages or reflects negatively upon the Company and its Affiliates,
          and its and their directors, officers, or employees. The Company
          agrees following the end of the term the Company shall instruct its
          senior officers and members of the Board not to take any actions or
          make any statements to the public, media, or any other third party
          whatsoever that disparages or reflects negatively upon the Executive.
          Notwithstanding the foregoing provisions of this Section 7(d), nothing
          herein shall prevent the Company and its Affiliates, and its and their
          directors, officers and employees or the Executive from responding
          truthfully to any information requests or questions posed in any
          formal or informal legal, regulatory, administrative or other
          proceedings involving any court, tribunal or governmental body or
          agency or as otherwise required by law.

8. ASSIGNMENT OF RIGHTS TO INTELLECTUAL PROPERTY.

     (a)  The Executive shall promptly and fully disclose all Intellectual
          Property to the Company. The Executive hereby assigns and agrees to
          assign to the Company (or as otherwise directed by the Company) the
          Executive's full right, title and interest in and to all Intellectual
          Property. The Executive agrees to execute any and all applications for
          domestic and foreign patents, copyrights or other proprietary rights
          and to do such other acts (including without limitation the execution
          and delivery of instruments of further assurance or confirmation)
          requested by the Company to assign the Intellectual Property to the
          Company and to permit the Company to enforce any patents. copyrights
          or other proprietary rights to the Intellectual Property. The
          Executive will not charge the Company for time spent in complying with
          these obligations, but shall be reimbursed for all reasonable and
          documented out of pocket expenses incurred at the request of the
          Company. All copyrightable works that the Executive creates shall be
          considered "work made for hire".

     (b)  As used in this Agreement, "INTELLECTUAL PROPERTY" means any
          invention, formula, process, discovery, development, design,
          innovation or improvement (whether or not patentable or registrable
          under copyright statutes) made, conceived, or first actually reduced
          to practice by the Executive solely or jointly with others, during
          Executive's employment by the Company, provided, however, notice is
          hereby provided that, in accordance with Illinois law (765 Ill. Comp.
          Stat. 1060/2), the term "Intellectual Property" shall not apply to any
          invention that the Executive develops entirely on Executive's own time
          and without using the equipment, supplies, facilities or trade secret
          information of the Company, unless (i) such invention relates to the
          business of the Company or to the actual or demonstrably anticipated
          research or development of the Company or (ii) the invention results
          from any work performed by the Executive for the Company.

                                       14

<PAGE>

9. RESTRICTED ACTIVITIES. The Executive agrees that some restrictions on
Executive's activities during and after Executive's employment are necessary to
protect the goodwill, Confidential Information and other legitimate interests of
the Company and its Affiliates:

     (a)  While the Executive is employed by the Company and for the period of
          twelve (12) months immediately following Executive's employment by the
          Company (in the aggregate, with the period of Executive's employment,
          the "NON-COMPETITION PERIOD"), the Executive shall, not, directly or
          indirectly, whether as owner, partner, investor, consultant, agent,
          executive or managerial employee, co-venturer or otherwise, compete
          with the Company or any of its Affiliates within the United States,
          Europe or Asia or undertake any planning for any business competitive
          with the Company or any of its Affiliates. Specifically, but without
          limiting the foregoing, the Executive agrees not to engage in any
          manner in any activity that is directly or indirectly competitive with
          the business of the Company or any of its Affiliates as conducted or
          under consideration at any time during the Executive's employment.
          Restricted activity includes without limitation. providing services,
          directly or indirectly, with or without compensation, whether as an
          executive or managerial employee, independent contractor, officer,
          director or otherwise, to any Person who does, or has plans to become.
          a competitor of the business of the Company or any of its Affiliates.
          For the purposes of this Section 9, the business of the Company and
          its Affiliates shall include all Products and the Executive's
          undertaking shall encompass all items. products and services that may
          be used in substitution for Products. The foregoing restrictions shall
          not preclude the Executive from retaining or making passive investment
          interests of less than two percent (2%) in corporations whose stock is
          registered under the Securities Exchange Act of 1934, as amended.

     (b)  The Executive agrees that, during Executive's employment with the
          Company, Executive will not undertake any outside activity, whether or
          not competitive with the business of the Company or its Affiliates,
          that could reasonably give rise to a conflict of interest or otherwise
          interfere with Executive's duties and obligations to the Company or
          any of its Affiliates. Further, the Executive agrees that, during
          Executive's employment and thereafter, Executive will comply with the
          policies of the Company and directives of the Board with respect to
          conflicts of interest, code of conduct, publicity and disparagement of
          the Company, its business and its management, as in effect from time
          to time.

     (c)  The Executive acknowledges the interest of the Company and its
          Affiliates in maintaining a stable work force and agrees that, during
          the Non-Competition Period, Executive will not (i) hire or attempt to
          hire any employee of the Company or any of its Affiliates, assist in
          such hiring by any Person or encourage any such employee to terminate
          his or her relationship with the Company or any of its Affiliates or
          (ii) solicit or encourage any independent contractor providing
          services to the Company or any of its Affiliates to terminate or
          diminish those services or its relationship with the Company or any of
          its Affiliates.

                                       15

<PAGE>

     (d)  Further, freely and knowingly acknowledging and agreeing that the
          Company and its Affiliates have a near permanent relationship with
          their customers, the Executive agrees that, during the Non-Competition
          Period, Executive will not directly or indirectly solicit or encourage
          any customer of the Company or any of its Affiliates to terminate or
          diminish its relationship with them, or to conduct with any Person any
          business or activity which such customer conducts or could conduct
          with the Company or any of its Affiliates.

10. NOTIFICATION REQUIREMENT. Until sixty (60) days after the conclusion of the
Non-Competition Period, the Executive shall give notice to the Company of each
new business activity Executive plans to undertake, at least twenty-one (21)
days prior to beginning any such activity. Such notice shall state the name and
address of the Person for whom such activity is undertaken and the nature of the
Executive's business relationship(s) and position(s) with such Person. The
Executive shall provide the Company with such other pertinent information
concerning such business activity as the Company may reasonably request in order
to determine the Executive's continued compliance with Executive's obligations
under Sections 7, 8 and 9 hereof.

11. ENFORCEMENT OF COVENANTS. The Executive acknowledges that Executive has
carefully read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon Executive pursuant to Sections 7, 8 and 9
hereof. The Executive agrees that those restraints are necessary for the
reasonable and proper protection of the Company and its Affiliates and that each
and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area. The Executive further acknowledges that,
were Executive to breach any of the covenants contained in Sections 7, 8 or 9
hereof, the damage to the Company and its Affiliates would be irreparable. The
Executive therefore agrees that the Company and its Affiliates, in addition to
any other remedies available to them, shall be entitled to preliminary and
permanent injunctive relief against any breach or threatened breach by the
Executive of any of said covenants, without having to post bond. The parties
further agree that, in the event that any provision of Section 7, 8 or 9 hereof
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its being extended over too great a time, too large a geographic
area or too great a range of activities, such provision shall be deemed to be
modified to permit its enforcement to the maximum extent permitted by law.

12. CONFLICTING AGREEMENTS. The Executive hereby represents and warrants that
the execution of this Agreement and the performance of Executive's obligations
hereunder will not breach or be in conflict with any other agreement to which
the Executive is a party or is bound and that the Executive is not now subject
to any covenants against competition or similar covenants or any court order or
other legal obligation that would affect the performance of Executive's
obligations hereunder. The Executive will not disclose to or use on behalf of
the Company any proprietary information of a third party without such party's
consent.

13. DEFINITIONS. Words or phrases which are initially capitalized or are within
quotation marks shall have the meanings provided in this Section and as provided
elsewhere herein. For purposes of this Agreement, the following definitions
apply:

                                       16

<PAGE>

     (a)  "AFFILIATES" means all persons and entities directly or indirectly
          controlling, controlled by or under common control with the Company,
          where control may be by either management authority. contract or
          equity interest.

     (b)  "CONFIDENTIAL INFORMATION" means any and all information of the
          Company and its Affiliates that is not generally known by others with
          whom they compete or do business, or with whom any of them plans to
          compete or do business and any and all information, which, if
          disclosed by the Company or its Affiliates would assist in competition
          against them. Confidential Information includes without limitation
          such information relating to (i) the development, research, testing,
          manufacturing, marketing and financial activities of the Company and
          its Affiliates, (ii) the Products, (iii) the costs, sources of supply,
          financial performance and strategic plans of the Company and its
          Affiliates, (iv) the identity and special needs of the customers of
          the Company and its Affiliates and (v) the people and organizations
          with whom the Company and its Affiliates have business relationships
          and those relationships. Confidential Information also includes any
          information that the Company or any of its Affiliates have received,
          or may receive hereafter, belonging to customers or others with any
          understanding, express or implied, that the information would not be
          disclosed. Confidential Information does not include any information
          that (i) at the time of disclosure or thereafter is generally
          available to and known by the public (other than as a result of its
          disclosure directly or indirectly by the Executive) or (ii) was
          available to the Executive on a non-confidential basis from a source
          other than the Company or its advisors, provided that such source is
          not and was not bound by a confidentiality agreement regarding such
          material, the Company, its affiliates or its business. In addition, in
          the event that the Executive become legally compelled (by deposition,
          subpoena, civil investigative demand or similar process) to disclose
          any of the Confidential Information, such Confidential Information, to
          the extent the Executive and the Company cannot, after using all
          commercially reasonable efforts, obtain a protective order or other
          appropriate remedy, shall not be deemed to be Confidential Information
          solely to the extent and for the limited purpose the Executive is
          advised by counsel that the Executive is legally required to disclose
          such Confidential Information and the Executive shall use Executive's
          best efforts to obtain assurance that confidential treatment will be
          accorded such Confidential Information.

     (c)  "PERSON" means an individual, a corporation, a limited liability
          company, an association; a partnership, an estate, a trust and any
          other entity or organization, other than the Company or any of its
          Affiliates.

     (d)  "PRODUCTS" mean all products actively planned. researched. developed,
          tested, manufactured, sold, licensed, leased or otherwise distributed
          or put into use by the Company or any of its Affiliates, together with
          all services provided or planned by the Company or any of its
          Affiliates, during the Executive's employment.

                                       17

<PAGE>

14. WITHHOLDING. All payments made by the Company under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Company under
applicable law.

15. ASSIGNMENT. Neither the Company nor the Executive may make any assignment of
this Agreement or any interest herein, by operation of law or otherwise, without
the prior written consent of the other; provided, however, that the Company may
assign its rights and obligations under this Agreement without the consent of
the Executive in the event that the Executive is transferred to a position with
any of the Affiliates (provided such assignment shall not relieve the Company
from its duties and obligations hereunder) or in the event that the Company
shall hereafter effect a reorganization, consolidate with, or merge into, any
Person or transfer all or substantially all of its properties or assets to any
Person. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns.

16. SEVERABILITY. If any portion or provision of this Agreement shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

17. WAIVER. No waiver of any provision hereof shall be effective unless made in
writing and assigned by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

18. NOTICES. Any and all notices, requests. demands and other communications
provided for by this Agreement shall be in writing and shall be effective when
delivered in person, consigned to a reputable national overnight courier or
deposited in the United States mail, postage prepaid, registered or certified,
and addressed to the Executive at Executive's last known home address on the
books of the Company or, in the case of the Company, at its principal place of
business, attention of the Vice President Human Resources, or to such other
address as either party may specify by notice to the other actually received.

19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment, except as otherwise provided in Section 5(f) with
respect to Change of Control Employment Agreements, and provided that this
Agreement shall not supersede the Agreement for Deferred Compensation, dated
December 20, 2005, between the Executive and the Company, pursuant to which the
Company agreed to compensate the Executive for the increase in the exercise
price of certain of the Executive's stock options.

                                       18

<PAGE>

20. AMENDMENT. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by an expressly authorized representative
of the Company.

21. HEADINGS. The headings and captions in this Agreement are for convenience
only and in no way define or describe the scope or content of any provision of
this Agreement.

22. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument.

23. GOVERNING LAW. This is an Illinois contract and shall be construed and
enforced under and be governed in all respects by the laws of the State of
Illinois, without regard to the conflict of laws principles thereof.

24. SURVIVORSHIP. The provisions of this Agreement necessary to carry out the
intention of the parties as expressed herein shall survive the termination or
expiration of this Agreement.

25. CONSTRUCTION. The parties acknowledge that this Agreement is the result of
arm's-length negotiations between sophisticated parties each afforded
representation by legal counsel. Each and every provision of this Agreement
shall be construed as though both parties participated equally in the drafting
of the same, and any rule of construction that a document shall be construed
against the drafting party shall not be applicable to this Agreement.

26. SET OFF; NO MITIGATION. The Company's obligation to pay Executive the
amounts provided and to make the arrangements provided hereunder shall be
subject to set-off, counterclaim or recoupment of monies owed by Executive to
the Company or its Affiliates. Executive shall not be required to mitigate the
amount of any payment provided for pursuant to this Agreement by seeking other
employment.

27. INDEMNIFICATION; INSURANCE. The Company agrees that it shall indemnify
Executive for any and all liabilities of Executive that arise by reason of the
fact that Executive is or was a director, officer or employee of the Company and
its Affiliates to the fullest extent permitted by the laws of the State of
Illinois, and that it will provide director and officer liability insurance
coverage on the same basis as provided to the other directors and officers of
the Company during the term of this Agreement and for a period of ten (10) years
thereafter. This provision shall survive any expiration or termination of this
Agreement.

28. DISPUTE RESOLUTION. Subject to the rights of the Company pursuant to Section
11 above, any controversy, claim or dispute arising out of or relating to this
Agreement, the breach thereof, or the Executive's employment by the Company
shall be settled by arbitration with one arbitrator. The arbitrator shall be
currently licensed to practice law in a state within the United States. The
arbitration will be administered by the American Arbitration Association in
accordance with its National Rules for Resolution of Employment Disputes. The
arbitration proceeding shall be confidential, and judgment on the award rendered
by the arbitrator may be entered in any court having jurisdiction. Any such
arbitration shall take place in the Chicago, Illinois area, or in any other
mutually agreeable location. In the event any judicial action is necessary to
enforce the arbitration provisions of this Agreement, sole jurisdiction shall be
in the federal and state courts, as applicable, located in Illinois. Any request
for interim injunctive

                                       19

<PAGE>

relief or other provisional remedies or opposition thereto shall not be deemed
to be a waiver or the right or obligation to arbitrate hereunder. To the extent
a party prevails in any dispute arising out of this Agreement or any of its
terms and provisions, all reasonable costs, fees and expenses relating to such
dispute, including the parties' reasonable legal fees, shall be borne by the
party not prevailing in the resolution of such dispute, but only to the extent
that the arbitrator or court, as the case may be, deems reasonable and
appropriate given the merits of the claims and defenses asserted.

IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Company, by its duly authorized representative, and by the Executive,
effective as of the date first above written.

EXECUTIVE:                              LITTELFUSE, INC.

/s/ Gordon Hunter                       By: /s/ Ryan K. Stafford
-------------------------------------       ------------------------------------
Gordon Hunter                           Name: Ryan K. Stafford
                                        Title: Vice President, Human Resources
                                               and General Counsel

                                       20

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