Document:

EX-10.1

EXHIBIT 10.1

UTA Capital LLC

100 Executive Drive, Suite 330

West Orange, NJ 07052

Terms for Continued Forbearance and Borrower’s Restructuring Plan

This Term Sheet is intended to be a binding obligation of the parties hereto and constitutes a
commitment of Borrower, J. Ram Ajjarapu and Lender to support and implement the restructuring plan
describe herein, subject to further assurances, the Lender’s right to request definitive
documentation, and the other terms and conditions provided herein.

Laxai Pharma, Ltd. and OSR Holding Corp. Restructuring Plan

	 	 	 

	Existing Loan and
Security Documentation:

	 	Reference is made to the existing:

(i) Note and Warrant Purchase Agreement by and between Laxai Pharma,
Ltd., an Israeli company (“Borrower” or the “Company”) and UTA
Capital LLC, a Delaware limited liability company (“Lender” or
“UTA”), dated as of March 2, 2010 (the “NWPA”), as modified by the
Loan Extension and Modification Agreement effective as of July 31,
2010 (the “Modification Agreement”)

(ii) Modification Agreement;

(iii) Amended And Restated Senior Secured Bridge Note dated as of
July 1, 2010 (the “Amended Note”),

(iv) Individual Guaranty of J. Ram Ajjarapu (“JRA”) executed and
delivered as of March 2, 2010 (the “PG”);

(v) Deposit Account Control Agreement dated as of March 15, 2010
among OSR Holding Corp. (the “Subsidiary” and, with any other
subsidiaries or controlled affiliates of the Borrower, the
“Subsidiaries”), Lender and Wachovia Bank, N.A. (the “DACA”);

(vi) Company Pledge and Security Agreement, Subsidiary Guarantee,
Pledge and Security Agreement, Shareholder Pledge and Security
Agreement, and Membership Interest Pledge and Security Agreement
(each of the foregoing as defined in the NWPA and, collectively, with
the DACA, being the “Collateral Agreements);

 

 

 

	 	 	 

	 

	 	(vi) Ordinary Shares Purchase Warrant for up to 5,800,000 shares
issued March 2, 2010, and the Ordinary Shares Purchase Warrant issued
as of July 1, 2010 for up to 2,020,000 shares (collectively, the
“Warrants”).

	 

	 	The NWPA, Modification Agreement, Amended Note, PG, DACA and
Collateral Agreements are referred to as the “Loan Documents” and,
with the Warrants, as the “Transaction Documents.”

This Term Sheet shall constitute an amendment and restatement of each
of the Loan Documents, but only to the extent of the terms specified
herein. Except as and to the extent modified by this Term Sheet, all
terms and conditions of the Loan Documents shall remain in full force
and effect.

Capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Transaction Documents.

	 
	 	 
	Lender Forbearance:

	 	Lender agrees that, subject to continued performance and compliance
by the Borrower, Subsidiary and JRA with the terms and conditions of
this Term Sheet and of the Transaction Documents as modified hereby,
it will not exercise its remedies under the Loan Documents with
respect to any past breaches by Borrower, Subsidiary or JRA or past
Events of Default which arose prior to the execution and delivery of
this Term Sheet and which were the subject of a notice of default
from the Lender.

	 
	 	 
	Extension of Maturity Date:

	 	The new Maturity Date of the Amended Note shall be December 15, 2011
(the “Extended Maturity Date”).

	 
	 	 
	Principal Amortization:

	 	Borrower shall make commercially reasonable best efforts to repay at
least $0.2 million of the outstanding principal balance of the
Amended Note by June 1, 2011. Should Borrower be unable to do so, its
failure to do so shall not be an Event of Default, but Borrower shall
then immediately issue to UTA or its designee a 5-year warrant to
purchase up to 1 million shares of Company common stock at $0.02 per
share, and otherwise having terms comparable to those in the
Warrants.

	 
	 	 
	Events of Default:

	 	In addition to the existing Events of Default set forth in the
Amended Note, a breach by the Borrower or any of the Subsidiaries of
the terms and conditions of this Term Sheet shall, if continuing
unremedied for a period of five (5) days after written notice to
Borrower or Subsidiary (as applicable) of such default, constitute an
Event of Default under the Amended Notes and the Collateral
Agreements.

 

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	Conversion of Loan Balance:

	 	A portion of the principal balance of the Amended Note in the amount
of $240,000 is hereby irrevocably converted into 4,800,000 Ordinary
Shares (the “Conversion Shares”) at the above-fair market value rate
of $0.05 per share. The Conversion Shares shall be deemed validly
issued and outstanding and entitled to full voting and other legal
rights regardless of the absence of physical certificates, but
Borrower shall promptly cause such physical certificates to be issued
in the name of Lender or its designee. Borrower, Lender and JRA agree
that the fair market value of the Conversion Shares as of the date
hereof is $48,000 ($0.01/share)

	 
	 	 
	Interest Rate:

	 	The Interest Rate for the Amended Note effective immediately and
until the Extended Maturity Date shall continue to be 15% per annum,.

	 
	 	 
	Current Loan Balance;
Acknowledgements:

	 	The parties agree that after giving effect to prior application of
$100,000 of the LALS Cash AR Security Amount and the conversion of
$240,000 of debt to equity effected by this Term Sheet, the principal
balance of the Amended Note is now $1,100,000.

Borrower, JRA and Subsidiary each acknowledge that the Amended Note
constitutes a legal, valid, binding and enforceable obligation of the
Borrower to UTA that is not subject to any credit, offset, defense,
cause of action, setoff, counterclaim or adjustment of any kind, and
is secured by the liens and security interests created and granted in
or pursuant to the Collateral Agreements, which liens and security
interests are legal, valid, binding and enforceable security
interests in the Collateral, in each case fully perfected and prior
and superior in right to any other person, and that this Term Sheet
in no manner impairs or adversely affects such liens and security
interests.

	 
	 	 
	Personal Guarantee
Recourse Limited to Bad
Acts:

	 	The amount of the Obligations guaranteed by JRA pursuant to the PG
shall hereafter be limited to those arising out of or in connection
with the following: (a) if JRA at any time prior to execution and
delivery of this Term Sheet engaged in acts or omissions, whether as
a director, officer, employee or controlling person, that constituted
(i) fraud or intentional misrepresentation of material facts in
connection with the original loan from UTA, or (ii) fraud,
embezzlement or criminal conduct that resulted in economic or
financial damage to the Borrower or to its ability to repay the
Amended Note (any of the foregoing being “Prior Acts or Omissions”);
(b) if JRA at any time after execution and delivery of this Term
Sheet 

 

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	 	engages in acts or omissions, whether as a director, officer,
employee or controlling person, that constitute (i) fraud or
intentional misrepresentation in connection with the original loan
from UTA or in connection with this Term Sheet, (ii) gross negligence
or willful misconduct, (iii) removal or disposal of any property of
the Borrower or JRA after an Event of Default, (iv) misappropriation,
misapplication or conversion of any proceeds of Borrower or any
Subsidiary’s accounts receivable or other collateral or assets of
Borrower or of any of the Subsidiaries, (v) intentional breach of the
Loan Documents, or (vi) criminal conduct; (c) if Schedules A or B
hereto (which Schedules are being exchanged contemporaneously with
execution of this Term Sheet by separately confirmed letter or email)
are not true, correct and complete in all material respects; or (d)
if JRA willfully or in bad faith interferes with, hinders or delays
the exercise of UTA’s or the Borrower’s rights and remedies under
this Term Sheet (any of the foregoing being “Subsequent Acts or
Omissions”); provided, however, that JRA shall have no liability
under the PG, as amended hereby, for Prior Acts or Omissions
specifically identified in detail on Schedule C hereto (which
Schedule is being exchanged contemporaneously with execution of this
Term Sheet by separately confirmed letter or email) unless and until
Subsequent Acts or Omissions shall exist or occur.

	 
	 	 
	Transfer of Ordinary
Shares from JRA and
Affiliates

	 	JRA and Raca Investors, L.P., a limited partnership (“RACA”) which is
an affiliate of JRA and a principal shareholder of the Company and
which has previously pledged 31,151,842 ordinary shares of the
Company to UTA as security of the obligations under the Amended Note,
hereby transfer and assign, for no additional consideration, 12
million ordinary shares (the “Transferred Shares”) of the Company to
UTA or its designees, who shall acquire all right, title and interest
in the Transferred Shares, free of all liens and encumbrances other
than the existing lien and security interest of UTA, except that:

	 
	 

	 	(i) 2 million of the Transferred Shares shall be reconveyed to RACA
when the Company’s SEC Report on Form 10-K for the year ended
December 31, 2010 is filed, provided that the filing occurs by April
20, 2011;

(ii) 2 million of the Transferred Shares shall be reconveyed to RACA
if the Amended Note is repaid in full on or prior to the Extended
Maturity Date; and

 

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	 	(iii) of the remaining 8 million Transferred Shares, up to 3 million
shares shall be reconveyed to RACA if the Amended Note is repaid in
full prior to the Extended Maturity Date, with UTA or its designees
becoming indefeasibly vested in those 3 million Transferred Shares
(and RACA no longer having any right to a reconveyance of such
shares) at the rate of 300,000 shares on the 15th of each month
commencing on February 15, 2011 and ending on November 15, 2011.

Five (5) million of the Transferred Shares shall not at any time be
subject to any contingent rights of reconveyance to RACA.

As and when any Transferred Shares are to be reconveyed to RACA, 80%
of such otherwise reconveyed Transferred Shares (the “Contributed
Shares”) shall instead be automatically, without further action of
RACA, contributed and assigned by RACA, for no additional
consideration, to the Company, and shall be held as treasury shares
available for issuance or as reserved but unissued shares for any
lawful corporate purpose approved by the Company’s Board of
Directors; provided, however, that such contribution requirement
shall terminate when the total number of Contributed Shares equals
two (2) million shares.

The Transferred Shares shall include all shares beneficially held by
JRA, RACA or other affiliates of JRA which are not included in the
shares previously pledged by RACA to the Lender.

	 
	 	 
	Company Board of
Directors; Subsidiary
Board of Directors:

	 	Effective upon execution of this Term Sheet, the Company’s Board of
Directors shall consist of three directors: (i) JRA or his designee,
(ii) E. Thomas Layton (“Layton”) or another designee of UTA, and
(iii) another individual designated by the holders of a majority of
the ordinary shares purchased for cash by those equity investors who
invested in the Company’s private placement prior to March 2, 2010
(the “Equity Investor Director”). Any member of the Board may call a
meeting of the Board of Directors on five business days’ prior
written or confirmed email notice to the other directors. The
Chairman shall not have any rights as a director not enjoyed by any
other director.

Effective upon execution of this Term Sheet, each Subsidiary’s Board
of Directors shall consist of three directors: (i) JRA or his
designee, (ii) Layton or another designee of UTA, and (iii) the
Equity Investor Director. Any member of the Board of a Subsidiary may
call a meeting of the Board of Directors of the Subsidiary on five
business days’ prior written or confirmed email notice to the other
directors.

 

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	Certain Actions Requiring 

Board Approval:

	 	The parties hereto agree that approval by vote or written consent of:

(a) all of the members of the Board of Directors of the Company
and/or Subsidiary, as applicable, shall be required for the:

(i) commencement of any litigation by or on behalf of the Company
and/or the Subsidiary, whether as direct or derivative action,
against UTA, JRA, or any current or former officer or director of the
Company or the Subsidiary; and

(b) a majority of the Board of Directors of the Company and/or
Subsidiary, as applicable, shall be required for the:

	 
	 

	 	(i) filing or other commencement of a federal or state bankruptcy or
insolvency petition or proceeding by or on behalf of Borrower or any
Subsidiary; or

(ii) commencement or consummation of any equity or debt financing of
the Company or any Subsidiary.

The foregoing shall not imply that Board action or approval is not
required for any other action or event that under applicable
corporate law would normally require Board action or approval.

	 
	 	 
	Certain Financings to Be
Approved:

	 	UTA agrees that it shall cause its Board designee to vote for or
consent to (x) any equity financing of the Company that fully repays
all obligations to UTA under the Amended Note, provided it is offered
the opportunity to participate in any such equity financing on a
basis that maintains its beneficial ownership percentage of Company
equity, and (y) any debt financing that fully repays all obligations
to it under the Amended Note.

JRA agrees that it shall cause its Board designee to vote for or
consent to any debt financing that fully repays all obligations to
UTA under the Amended Note.

	 
	 	 
	Voting Agreement:

	 	The parties hereto agree to vote any and all shares of the Company
now held or hereafter acquired by them or their family members or
affiliates as follows:

(1) for the election and re-election of a Company Board of three
directors consisting of (x) Layton or another designee of UTA as a
director of the Company, (y) JRA or a designee of JRA as a director,
and (z) the Equity Investor Director;

(2) for the election and re-election of Layton as Chairman, Chief
Executive Officer (CEO) and President and Chief Financial Officer
(CFO) of the Company and of each of the Subsidiaries;

 

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	 	(3) for the implementation of cash and asset control and collection
and financial reporting policies and procedures consistent with this
Term Sheet and prevailing business practices for public companies;

(4) for approval of the executive compensation matters described
below; and

(5) for the implementation of the corporate migration described below.

This voting agreement shall survive until the first to occur of (i)
the Amended Note being repaid in full or (ii) UTA ceasing to have
beneficial ownership (calculated in accordance with SEC Rule 13d) of
3 million ordinary shares of the Company.

	 
	 	 
	Company Equity Capital 

Structure:

	 	The Company’s fully-diluted equity capitalization as of January 15,
2011 is as set forth on Schedule A. All shares of the Subsidiary are
held by the Company, and there are no options, warrants or other
rights to acquire equity of the Subsidiary held by any party other
than the Company. The inclusion in Schedule A of any shares or other
equity instruments as being issued or to be issued is not and should
not be construed as an admission by the Company that any such shares
or equity instruments represent valid and enforceable claims of
equity ownership.

	 

	 	The parties agree to use commercially reasonable best efforts to
terminate or otherwise mitigate the dilutive effect of any obligation
to issue shares or options to Messrs. Maddipatla or Mallakunta or to
any employee or consultant who has been terminated or is terminated
within 30 days after execution and delivery of this Term Sheet
(“Excess Equity Grants”).

The Company, JRA and RACA agree that any Excess Equity Grants, shall,
to the extent not terminated by legal action or negotiated settlement
within 90 days after execution and delivery of this Term Sheet, be
satisfied (x) 25% by JRA transferring 25% of such number of shares
(which shall not include Transferred Shares or Contributed Shares but
may include shares previously pledged by RACA to UTA to the extent
JRA and RACA have no further unpledged shares available) to the
grantees of such Excess Equity Grants, and (y) 75% by the Company
issuing 75% of the remaining Excess Equity Grants.

 

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	Company and Subsidiary
Liabilities:

	 	The Company’s indebtedness, guarantees, trade accounts payable and
all other Company liabilities as of January 15, 2011 are as set forth
on Schedule B.

	 

	 	The Subsidiary’s and each other Subsidiary’s indebtedness,
guarantees, trade accounts payable and all other Subsidiary
liabilities as of January 15, 2011 are as set forth on Schedule B.

	 

	 	The inclusion in Schedule B of any amounts as liabilities is not and
should not be construed as an admission by the Company or the
Subsidiary that any amounts represent valid and enforceable claims of
creditors or other third parties.

	 

	 	The parties agree to use commercially reasonable best efforts over
the next 90 days to negotiate, terminate or otherwise mitigate
(including by conversion to equity) the impact of those liabilities
as described on Schedules A/B under the columns “UTA agrees” and “To
be Paid.”

	 
	 	 
	Collateral:

	 	All collateral which is the subject of the Collateral Agreements
(other than pledged shares included in Transferred Shares, to the
extent such shares are not required to be reconveyed to RACA) shall
be released upon indefeasible repayment of the principal of, and all
accrued interest on, the Amended Note.

	 
	 	 
	Borrower and JRA
Representations and
Warranties:

	 	Borrower, Subsidiary and JRA hereby jointly and severally (i)
represent and warrant that the Schedules delivered concurrently
herewith are true and correct, and (ii) acknowledge that the Lender
and Layton are expressly relying on those representations and
warranties and the accuracy of the Schedules as a material basis for
entering into this Term Sheet. A breach of the foregoing
representations and warranties shall constitute an Event of Default.

	 
	 	 
	Changes in Company and OSR
Holding Corp. Officers:

	 	Effective immediately, Layton shall be Chairman, CEO and President
and CFO of the Company and of each Subsidiary.

JRA hereby resigns from all officer and employee positions with the
Company and any of the Subsidiaries. JRA hereby waives any and all
claims to unpaid compensation or severance by reason of his past
services, and confirms that no family member or affiliate of JRA is
entitled to any compensation or reimbursement of expenses from the
Company or any of the Subsidiaries. JRA agrees to promptly deliver to
Layton all corporate, legal, financial and business records of the
Company and each Subsidiary in his possession or under his control,
and failure to so deliver any requested records within 5 business
days after a written request shall constitute a breach of the Loan
Documents and an Event of Default.

The officers of the Company shall also be officers of each of the
Subsidiaries, with equivalent titles and responsibilities, but with
no additional compensation.

 

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	Cash and Accounting
Controls:

	 	All receipts received from any Subsidiary or Company customers and
clients shall be promptly deposited in the account which is the
subject of the DACA or any successor account (the “Lockbox”), and all
customers and clients of the Company and of any Subsidiary shall be
directed at all times to direct the payments to the Lockbox.

At no time shall any Company or Subsidiary bank or investment
accounts be maintained as to which UTA and the Company’s designated
CFO, Layton, do not have full knowledge and access. Any
disbursements from the Lockbox or from the Company/Subsidiary
operating account shall require approval of Layton as CFO.
Disbursements from the operating account may be made upon the
signature or approval of Layton.

Layton shall present a rolling six-month operational budget, subject
to review and approval by UTA and the Company’s Board of Directors.
UTA shall approve all disbursements from the Lockbox to pay Company
or any Subsidiary expenses which are not in conformity with such
previously approved budget. UTA may delegate such approvals to
Layton. The parties will cooperate in any process required to replace
Wachovia as the Lockbox custodian.

Notwithstanding the foregoing, following an Event of Default funds in
the Lockbox may be applied in such manner and for such purposes as
UTA shall determine.

	 
	 	 
	Officer and Director
Compensation:

	 	JRA shall be entitled to receive $5,000 per month (on a 1099 basis)
for a minimum period of 12 months. Such compensation (“JRA Variable
Compensation”) shall accrue monthly but shall be payable currently
only if in such calendar month the consolidated free cash flow of the
Company and all Subsidiaries after payment of all expenses of
operation (including current interest and reimbursement of Lender
expenses but not amortization of loan principal) but before all
officer and director compensation (“Excess Cash Flow”), exceeds
$15,000. Any amounts accrued and unpaid shall be deferred and
subordinated to repayment of the Amended Note.

 

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	 	In addition, with respect to each acquisition closed by the Company
within the next 24 months which was originated by JRA, there will be
a finder’s fee of 5% of the value of the transaction consideration
earned by JRA.

	 

	 	Layton shall be retained as Chairman, CEO and President, and CFO,
with a minimum time commitment of 40 hours per week. In his capacity
as President and CFO, Mr. Layton shall be entitled to receive a
minimum of $8,000 per month (on a 1099 or W-2 basis) (“TL Fixed
Compensation”). An additional $2,000 per month (“TL Variable
Compensation”) shall accrue monthly but shall be payable currently
only if in such calendar month the consolidated free cash flow of the
Company and all Subsidiaries after payment of all expenses of
operation (including current interest and reimbursement of Lender
expenses but not amortization of loan principal) but before all
officer and director compensation (“Excess Cash Flow”), exceeds
$15,000. Any amounts accrued and unpaid shall be deferred and
subordinated to repayment of the Amended Note.

	 

	 	Should Excess Cash Flow for any calendar month exceed $15,000 but be
less than $30,000, JRA and Layton shall each be entitled to receive
their pro rata share (calculated by reference to JRA Variable
Compensation and TL Variable Compensation) of such Excess Cash Flow
after payment of TL Base Compensation.

No other director or officer compensation shall be payable by the
Company or any Subsidiary prior to repayment of the Amended Note
without consent of UTA and the Board of Directors.

	 
	 	 
	Officer and Director
Restrictive Covenants:

	 	Each of the directors and officers of the Borrower (including JRA)
hereby agrees that he will not, directly or indirectly, whether
individually or as an officer, director, employee, consultant or 5%
or greater direct or indirect beneficial shareholder, member or
partner of any company or enterprise:

(i) solicit business, payments or compensation for CR Services (as
defined below) from any individual or entity who is at any time or
was since February 1, 2010 a customer or client of any Subsidiary or
the Company, whether as a primary direct customer or client or
through a secondary or intermediary provider;

(i) employ or solicit the employment of (whether as an employee or
consultant) any individual or entity who is at any time or was since
February 1, 2010 employed or retained as a consultant by the
Subsidiary or the Company; or

 

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	 	(iii) compete with any Subsidiary or the Company in the area of
providing clinical research services, whether in the drug discovery
and development area or elsewhere, including biostatistics, data
management, CDISC consulting, medical writing, monitoring,
regulatory, drug safety, and related training programs (collectively,
“CR Services”).

The foregoing restrictive covenants shall terminate upon the first
to occur of (i) 24 months from the date of this Term Sheet, or (ii)
12 months after repayment in full of the Amended Note, but as to any
individual director or officer no later than 24 months after such
individual ceases to provide services to the Company and any
Subsidiary, and as to JRA shall terminate if the Company fails to pay
JRA his JRA Variable Compensation for any two consecutive or
non-consecutive months notwithstanding that the free cash flow
condition to such payment has been met for such months.

	 
	 	 
	Other Corporate Assets 

held by JRA Affiliates:

	 	JRA shall cause and direct any JRA-affiliated companies holding
personnel, licenses or other tangible or intangible assets, including
H-1B or other visas currently utilized by personnel performing
services for the Company or Subsidiaries, to continue to make such
personnel, visas and other assets available for use by the Company
and its Subsidiaries at no cost or expense, except that the Company
shall reimburse at market rates the direct compensation and benefits
costs actually incurred for those personnel whom the Company’s CEO,
President and CFO individually identifies as required personnel and
whom he does not wish to employ directly with the Company or a
Subsidiary.

Within 60 days following the execution and delivery of this Term
Sheet, the Company’s CEO, President and CFO shall identify those H-1B
visas which are held by any JRA-affiliated companies which should be
transferred to the Borrower or a Subsidiary, and JRA shall cause and
direct the applicable JRA-affiliated company to effect such transfers
immediately upon request of the Company, at the Company’s expense.
After such 60-day period, the Company or its Subsidiaries may
continue to use visas held by any JRA-affiliated company for
employees or agents of the Company or its Subsidiaries, provided
that the Company shall reimburse the holder of such visas at market
rates for its direct costs actually incurred by such holder in making
such visas available.

 

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	Use of Name:

	 	JRA shall immediately cause each of his direct or indirect affiliates
(other than the Borrower and OSR Holding Corp.) having a legal name
or doing business under a name that includes the words “OSR” or
“Laxai” to change their legal name to a name not including such
words, and to refrain, for so long as the Borrower or OSR Holding
Corp. is actively engaged in operations, from using or doing business
under a name or description that includes the words “OSR” or
“Laxai.”

	 
	 	 
	Corporate Migration:

	 	The parties shall cooperate to cause the Company to migrate its
jurisdiction of organization from Israel to Delaware by June 1, 2011.

	 
	 	 
	Release of JRA, Borrower
and Subsidiary by UTA:

	 	UTA, on behalf of itself and each of its affiliates, subsidiaries,
representatives, directors, officers, employees, agents,
administrators, predecessors and successors (collectively, the “UTA
Releasing Parties”), hereby fully and forever releases, relinquishes,
acquits and discharges the Company, Subsidiary and JRA and each of
their respective affiliates, subsidiaries, prior and existing
stockholders (in their capacities as such), divisions,
representatives, directors, officers, employees, agents,
administrators, predecessors and successors (collectively, the
“Company Released Parties”), from any and all causes of action,
complaints, contracts, debts, obligations, contributions, liens,
indemnities, promises, demands, damages, losses, attorneys’ fees,
other fees, costs, expenses, compensation, injuries, liability of any
nature, type or description, or claims of any kind whatsoever,
whether in law or in equity, direct or indirect, based on a contract,
tort, statutory or other theory of recovery or rescission, but only
to the extent specifically disclosed by the Company, Subsidiary or
JRA to UTA and patent and not latent, but whether fixed or
contingent, that any of the UTA Releasing Parties now have or ever
had against any of the Company Released Parties through the date of
this Agreement based on, arising out of, or in any way related to,
UTA’s loan to or equity investment in the Company, including, without
limitation, ownership of the Company’s securities or actions or
omissions by the Company’s Board of Directors or officers (the
“Company Released Claims”); provided, however, that nothing contained
in this section shall release, relinquish, acquit, discharge or
otherwise affect the representations or obligations of any party
under the Transaction Documents or this Term Sheet. For the sake of
clarity, the Company Released Claims do not include, without
limitation, claims based on a breach of the Transactions Documents
except to the extent specifically identified in detail by the Company
Released Parties on Schedule C hereto (which Schedule is being
exchanged contemporaneously with execution of this Term Sheet by
separately confirmed letter or email), or claims under the PG as
modified by this Term Sheet.

 

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	Release of UTA by
Borrower, Subsidiary and
JRA:

	 	Each of the Company, the Subsidiary and JRA, on behalf of himself or
itself and each of his or its respective affiliates, subsidiaries,
representatives, directors, officers, employees, agents,
administrators, predecessors and successors (collectively, the
“Company Releasing Parties”), hereby fully and forever releases,
relinquishes, acquits and discharges UTA and each of its affiliates,
subsidiaries, partners and members (in their capacities as such),
divisions, representatives, directors, officers, employees, agents,
administrators, predecessors and successors (collectively, the “UTA
Released Parties”), from any and all causes of action, complaints,
contracts, debts, obligations, contributions, liens, indemnities,
promises, demands, damages, losses, attorneys’ fees, other fees,
costs, expenses, compensation, injuries or liability of any nature,
type or description, or claims of any kind whatsoever, whether in law
or in equity, direct or indirect, based on a contract, tort,
statutory or other theory of recovery or rescission, known or
unknown, suspected or unsuspected, patent or latent, fixed or
contingent that the Company Releasing Parties now have or ever had
against the UTA Released Parties through the date of this Agreement
based on, arising out of or in any way related to, the Company, the
Subsidiary, the UTA investment in the Company, the administration or
funding thereof or the Transaction Documents (the “UTA Released
Claims”); provided, however, that nothing contained in this section
shall release, relinquish, acquit, discharge or otherwise affect the
representations or obligations of any party under this Term Sheet.
For the sake of clarity, the UTA Released Claims include, without
limitation, claims based on the Transaction Documents or based on
alleged usury or lender liability, including but not limited to
claims alleging breach of the Transaction Documents, fraud,
interference with Borrower’s contractual relationships, negligence,
breach of covenant of good faith and fair dealing, breach of
fiduciary duty, violations of federal anti-racketeering statutes,
control of the Borrower, economic duress or prima facie tort.

	 
	 	 
	Dismissal of Litigation:

	 	Concurrently with execution and delivery of this Term Sheet, (a) the
Borrower and Subsidiary are causing the Florida complaint filed in
December 2010 against UTA to be dismissed, with prejudice, and (b)
UTA is causing the New York State motion for summary judgment in lieu
of complaint action commenced in January 2011 against JRA to be
dismissed, but without prejudice. UTA covenants that it will not
re-commence an action against JRA on the PG unless based on the terms
of the PG as amended and modified as described above under “Personal
Guarantee Recourse Limited to Bad Acts.”.

 

13

 

	 	 	 

	Reimbursement of Lender,
Borrower and JRA Expenses:

	 	Borrower shall pay to Lender all of Lender’s legal and other fees
previously incurred relating to prior refinancing efforts or
otherwise incurred in negotiation and documentation of this Term
Sheet and the restructuring contemplated hereby. A minimum of $5,000
of such expenses shall be reimbursed upon execution and delivery of
this Term Sheet, and the balance in six equal monthly installments,
provided that the first monthly installment shall be no less than the
Borrower legal expense payment made one month after execution and
delivery of this Term Sheet, as described below. The Borrower shall
pay (or reimburse JRA for) his legal expenses in negotiating this
Term Sheet up to $2,500, payable within 10 days of the signing of
this Term Sheet upon receipt of invoices from counsel for such
services.

Borrower shall, as a mandatory element of the initial six-month
budget, pay (or reimburse JRA for, to the extent he can document that
he advanced funds for payment of) its legal expenses incurred in
negotiation and documentation of this Term Sheet and the
restructuring contemplated hereby. A minimum of $5,000 of such
expenses shall be paid or reimbursed upon execution and delivery of
this Term Sheet, and the balance (not to exceed $5,000) one month
later, each upon receipt of invoices from counsel for such services.

	 
	 	 
	Cancellation and
Termination of Invalid
Company Agreements:

	 	The new CEO, President and CFO shall conduct a review of all prior
Company and Subsidiary agreements. Any prior agreements entered into
with parties other than UTA that were not, based on the review of
corporate counsel, approved in accordance with applicable corporate
law will be cancelled and terminated by the Company (or by the
applicable Subsidiary) if such action is in the best interests of the
Company and its creditors and equity holders. The purchase and sale
of OSR Solutions, Inc. and OSR Enterprises, LLC from NexGen Biofuels,
Inc. pursuant to agreements entered into as of December 1, 2010 shall
not be subject to the foregoing cancellation and termination process
unless a majority of the Board of Directors reasonably determines
(without regard to the affiliated party aspects of such transactions)
that such transactions, taken as a whole, either (x) conferred no
material benefit on the Borrower or (y) resulted in the assumption of
liabilities substantially disproportionate to the benefits to the
Borrower.

 

14

 

	 	 	 

	Indemnification:

	 	Borrower, Subsidiary and JRA will hold Lender harmless from any and
all damages or liabilities arising in connection with this
restructuring other than as a result of Lender’s fraud or willful
misconduct.

Borrower and Subsidiary hereby confirm that JRA is and shall remain
entitled to such statutory rights to indemnification by Borrower or
Subsidiary as may be available to him under applicable Israeli or
Delaware law or as may be available to him by the provisions of their
respective articles of association, certificate of incorporation
and/or bylaws as currently in effect.

	 
	 	 
	Enforcement:

	 	The following terms are an essential and material inducement for the
Lender’s forbearance under this Term Sheet and agreement to the
restructuring contemplated hereby.

	 

	 	Borrower, the Subsidiary and JRA acknowledge that their respective
strict compliance with the terms of this Term Sheet is an essential
and material element of consideration in UTA’s decision to exercise
forbearance and to extend the Maturity Date of the Amended Note.

Borrower, Subsidiary and JRA each acknowledges that any breach of any
of the provisions of this Agreement will result in serious and
irreparable injury to UTA for which UTA cannot be adequately
compensated by monetary damages alone. Each of Borrower, Subsidiary
and JRA agrees, therefore, that, in addition to any other remedy that
UTA may have, UTA shall be entitled to enforce the specific
performance of this Term sheet and the Transaction Documents by any
of the parties and to seek both temporary and permanent injunctive
relief without the necessity of proving actual damages or posting a
bond. Such remedies shall not be deemed to be the exclusive remedies
for a breach by any of the parties of any of the provisions of this
Agreement but shall be in addition to all other remedies available at
law or equity to UTA.

In addition to, and not in lieu of, UTA’s existing remedies under the
PG and the other Loan Documents following an Event of Default and the
remedy of specific performance, JRA agrees that upon an Event of
Default, any and all JRA’s rights (a) in and to the Transferred
Shares, (b) to vote the Pledged Shares, (c) to serve as or receive
compensation as a consultant of the Company or the Subsidiary,
and/or (d) to require other parties hereto to vote for his designee
as a director of the Company, shall automatically terminate and be
null and void, without further action by JRA.

 

15

 

	 	 	 

	 

	 	As a further inducement to Lender to agree to this restructuring,
each of Borrower, Subsidiary and JRA hereby waives, to the maximum
extent possible under law, any right to challenge UTA’s exercise of
its remedies under the Loan Documents and this Term Sheet, whether
such right or challenge might be asserted in an action in law, in
equity or in connection with any bankruptcy proceeding of the
Borrower, Subsidiary and/or JRA.

	 
	 	 
	Expiration Date:

	 	This Term Sheet shall expire if not accepted and agreed by the
Borrower, Subsidiary, RACA and JRA on or before February 18, 2011.

	 
	 	 
	Further Assurances; More
Definitive Documentation:

	 	Lender shall have the right to determine in its sole discretion, that
additional more definitive documentation is required to properly
protect its rights. Such documentation shall be reasonably
satisfactory to Lender, Lender’s counsel, Borrower, and Borrower’s
counsel. The documents are to be prepared by Lender’s counsel and
reviewed by Borrower’s counsel.

If the parties have not entered into such requested definitive
documents consistent with this Term Sheet and otherwise reasonably
satisfactory to the Lender within 20 business days of Lender
communicating such determination to the Borrower, Lender may declare
an Event of Default.

The parties hereto agree that this Term Sheet is a Binding Agreement
as defined in the Letter Agreement dated as of December 10, 2010
among the parties hereto (the “Pre-Negotiation Agreement”), and that
the Pre-Negotiation Agreement is hereby terminated, effective as of
February 11, 2011.

	 
	 	 
	Governing Law and Venue:

	 	This Term Sheet, the Loan Documents and any more definitive
transaction documents will be governed by the laws of the State of
New Jersey, without regard to the principles of conflict of laws
thereof. The United States District Court for the Southern District
of New York and the New York State courts in New York County shall be
the exclusive venue for the adjudication of all disputes among the
parties, except that Borrower and Subsidiary agree that any future
Chapter 11 filing by either of the Borrower or Subsidiary that is
filed while the Amended Note is outstanding or within 12 months
following repayment of the Amended Note may be filed only in the
State of Texas or the State of New Jersey, where the Borrower and
Subsidiary maintain or intend to maintain material ongoing business
operations. The foregoing provisions are intended to, and shall
replace, any alternative or conflicting choice of law or jurisdiction
provisions set forth in the Loan Documents.

 

16

 

	 	 	 

	Matters Relating to
Chapter 11 Petitions:

	 	Each of the Borrower, OSR Holding Corp., Lender and JRA agree to use
their best efforts to cause the recently filed Chapter 11 petitions
with respect to the Company and OSR Holding Corp. to be immediately
withdrawn or dismissed, with no conditions attached to such
withdrawal or dismissal, and the assets, operations and business of
the Borrower and OSR Holding Corp. no longer subject to the
jurisdiction of the Bankruptcy Court. Each of the parties hereto
agrees not to seek sanctions or other disciplinary relief with
respect to the filing of such Chapter 11 petitions.

To the extent the prompt withdrawal or dismissal of the Chapter 11
cases requires approval by the Bankruptcy Court of any party’s entry
into this Term Sheet as a condition of its binding nature and
effectiveness, all parties hereto agree to use their best efforts to
seek such approval on an expedited basis. If the enforceability of
this Term Sheet as against any party hereto requires such Bankruptcy
Court approval, all other parties shall nonetheless remain bound
hereby while such approval is being sought and obtained, unless such
approval, despite best efforts, is not obtained within 15 business
days of the execution of this Term Sheet.

The parties hereto agree to negotiate in good faith, using commercially reasonable efforts,
more definitive documents for the restructuring transactions described herein if and when such
additional definitive documentation is determined by Lender to be required or appropriate.

Please indicate your acknowledgment of the foregoing by returning to us a signed copy of this Term
Sheet.

[Signature Page Follows]

 

17

 

Agreed and accepted February 18th, 2011

	 	 	 	 	 
	 	UTA CAPITAL LLC

 	 
	 	By:  	YZT MANAGEMENT LLC, its Managing   Member
 	 

	 	 	 	 	 
	 	By:  	                                                       /s/ Udi Toledano
 	 
	 	 	Name:  	Udi Toledano 	 
	 	 	Title:	     Managing Member 	 

	 	 	 	 	 
	 	LAXAI PHARMA, LTD.

 	 
	 	By:  	/s/ J. Ram Ajjarapu
 	 
	 	 	Name:  	J. Ram Ajjarapu 	 
	 	 	Title:  	Executive Chairman 	 
	 
	 	OSR HOLDING CORP.

 	 
	 	By:  	/s/ E. Thomas Layton
 	 
	 	 	Name:  	E. Thomas Layton 	 
	 	 	Title:  	Chairman of the Board and CEO 	 
	 	 	 
	 	                                              /s/ J. Ram Ajjarapu
 	 
	 	J. Ram Ajjarapu 	 
	 
	 	RACA INVESTORS, L.P. 	 
	 	 	 
	 	By:  	                                              /s/ Aruma Raj Ajjarapu
 	 
	 	 	Name:  	Aruma Raj Ajjarapu 	 
	 	 	Title:  	Managing Partner 	 
	 
	 	INTERNATIONAL CAPITAL PARTNERS, LLC

 	 
	 	By:  	/s/ Aruma Raj Ajjarapu
 	 
	 	 	Name:  	Aruma Raj Ajjarapu 	 
	 	 	Title:  	Managing Member 	 
	 	 	 
	 	                                             /s/ E. Thomas Layton
 	 
	 	E. Thomas Layton (signatory only as to the matters 	 
	 	described under “Cash and Accounting Controls”, “Director and
Officer Compensation”, and “Officer and Director Restrictive
Covenants”) 	 

 

18exv10w6wc

Exhibit 10.6(c)

BANK MUTUAL

FORM OF EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of this ____day of
____________, 20__, by and between Bank Mutual, a federal savings bank (hereinafter referred to as
“Employer”), and ________________ (hereinafter referred to as “Executive”).

     WHEREAS, Employer is a wholly owned subsidiary of Bank Mutual Corporation, a registered
savings and loan holding company (hereinafter referred to as “Company”); and

     WHEREAS, Executive and Employer have agreed that it is in their mutual best interest to enter
into this Agreement pursuant to the terms and conditions described herein.

     NOW, THEREFORE, for good and valuable consideration which is hereby acknowledged by Executive
and Employer, including, without limitation, the promises and covenants described herein, the
parties hereto hereby agree as follows:

ARTICLE I

EMPLOYMENT

1.1 Term of Employment.

     Employer shall employ Executive for a period of one (1) year commencing on ______, 20__ (the
“Effective Date”). Effective as of the end of the initial one year term and on each anniversary
thereafter, the employment term may be extended for a one year term upon agreement of Executive and
by affirmative action taken by Employer’s Board of Directors not less than sixty (60) days prior to
the expiration of the current term of employment. Executive’s employment under this Agreement may
otherwise be terminated only as contemplated by Sections 2.1, 2.2, 2.3, 2.4, 2.5, 2.6 and 2.7 of
this Agreement.

1.2 Duties of Executive.

     Executive is hereby employed full-time to hold the office of ___________________ and to
perform such executive duties as are normally performed by persons serving in similar capacities at
similar institutions together with such other duties and responsibilities as may be appropriate to
Executive’s position and as may be from time to time determined by Employer’s Board of Directors to
be necessary to its operations and in accordance with its bylaws. Executive hereby accepts such
employment and undertakes to use his best efforts to discharge his duties and responsibilities.
Unless Executive’s employment is earlier terminated pursuant to the terms of this Agreement, during
the term of this Agreement, Executive shall devote substantially his full business time to the
discharge of his duties and responsibilities under this Agreement, except for vacations in
accordance with this Agreement and with Employer’s vacation policy applicable to executive
personnel. This provision shall not prevent Executive from devoting a reasonable amount of time
during normal business hours to serving as a director, trustee or member of any charitable,
community, trade or financial industry board, committee or organization.

1.3 Base and Incentive Compensation.

     During the term of this Agreement, Executive shall be entitled to an annual base salary equal
to not less than $___,000 per year. Executive’s annual salary will be reviewed annually by the
Board of Directors of Employer on the basis of his performance to such date and the progress of
Employer and shall be increased as of such date if so determined by the Board in its absolute
discretion. The Board of Directors may also increase Executive’s compensation at any other time,
in its absolute discretion. Executive shall also be entitled to receive incentive compensation
which compensation shall be calculated in accordance with the provisions of Employer’s incentive
compensation plan, as in effect from time to time. Executive’s base salary shall be payable
periodically according to the normal practice of Employer and his incentive compensation shall be
payable as earned in accordance with the provisions of Employer’s incentive compensation plan.

1

 

1.4 Expense Reimbursement.

     Executive shall be entitled to reimbursement of business expenses reasonably incurred in
connection with his employment upon presentation of adequate documentation and to the extent then
permitted by Employer’s general practices and policies for reimbursement of such expenses.

1.5 Benefits.

     (a) [Provision about club or service membership, if appropriate] Executive shall have access
to mortgage and consumer financing from Employer with terms consistent with the normal practice of
Employer. In accordance with Employer’s policies, in effect from time to time, Executive shall
also be provided with such educational assistance as is reasonably related to the performance of
his duties hereunder.

     (b) Executive shall be entitled to an annual vacation, sick leave and other time off in
accordance with Employer’s established Personnel Policy as in effect from time to time.

     (c) Employer shall maintain for Executive term life insurance coverage in such amount as is
provided in accordance with Employer’s established policy in effect from time to time. Such life
insurance shall be maintained for the benefit of the Executive, who shall be entitled to designate
all beneficiaries of such life insurance.

     (d) Employer shall maintain medical and dental insurance on such terms and in such amounts as
are generally offered to or provided for any other executives of Employer.

     (e) Executive shall be entitled to participate in all of Employer’s retirement or pension
plans, stock option, employee stock ownership plans or other similar plans as in effect from time
to time in accordance with and to the extent qualified under the provisions of such plans.

     (f) Executive shall be entitled to participate in any short-term and long-term disability
plans which cover other executives of the Employer.

     (g) In addition to the foregoing benefits, Executive shall also be entitled to participate, as
determined by Employer’s Board of Directors, in such other employee benefit plans or programs as
are offered to or provided for other executives of Employer from time to time.

     (h) Notwithstanding the foregoing, Executive shall not be entitled to participate in any
employee benefit plans or programs offered by an affiliate of the Employer.

1.6 Officers Insurance.

     For so long as Executive shall be an officer of Employer, Employer shall use its best efforts
to provide Executive with insurance coverage against business liability to the extent that such
coverage is reasonably available for officers of financial institutions of comparable size.

1.7 Indemnity by Employer.

     For valuable consideration, and as a material inducement to Executive to enter into this
Agreement, Employer shall take whatever actions are necessary to provide indemnification of
Executive by Employer for business liability, including without limitation, liability as an officer
to all interested parties, to the fullest extent it can be made available under applicable law.

2

 

ARTICLE II

TERMINATION OF EMPLOYMENT

2.1 Termination at Expiration of the Term of this Agreement.

     (a) If Executive elects to terminate Executive’s employment with Employer at the end of the
initial one-year term under Section 1.1, Executive shall be entitled to receive (i) Executive’s
theretofore unpaid base salary and incentive compensation for the period of employment, and (ii)
compensation for accrued but unused vacation time. Executive and his spouse and dependents will be
entitled to further medical coverage, at his and/or their expense, to the extent required by the
Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”).

     (b) If the Employer elects to terminate Executive’s employment with Employer at the end of the
initial one-year term under Section 1.1, Executive shall be entitled to receive (i) an amount equal
to 100% of his annual base salary at the date of termination, (ii) Executive’s theretofore unpaid
base salary and incentive compensation for the period of employment, and (iii) compensation for
accrued but unused vacation time. Executive shall be owed and Employer shall be obligated to pay
to Executive the aggregate amount provided in clauses (i), (ii) and (iii) above (other than
incentive compensation which shall be payable when earned as provided in Section 1.3 hereof),
within thirty (30) days after the termination of Executive pursuant to this Section 2.1(b), and
until such amounts are paid in full to Executive, interest shall accrue on said amount as of the
date first due at the rate of eighteen percent (18%) per annum, compounded daily. Furthermore, at
Employer’s cost, Employer shall continue to provide Executive with the following benefits,
consistent with the terms and conditions set forth in Section 1.5 hereof: (i) life insurance and
medical, dental and optical insurance, to the extent the same can be provided under the
arrangements in effect at the time of termination, and (ii) any other benefits to which Executive
is entitled by law or the specific terms of Employer’s policies in effect at the time of his
termination of employment. Benefits will be continued pursuant to this Section 2.1(b) for a period
of three (3) months from the date of termination of employment, unless Executive becomes employed
by another company and becomes eligible for employment benefits substantially similar to those
which would otherwise be provided under this Section. Notwithstanding the foregoing, Executive and
his spouse and dependent children will be entitled, at Executive’s expense, to further medical
coverage to the extent required by COBRA which shall, in this case, be deemed to commence upon
expiration of the three (3) month period set forth in the preceding sentence. Notwithstanding
anything contained herein to the contrary, if Executive becomes unable to perform each of the
material duties of his employment under this Agreement prior to his termination of employment
pursuant to this paragraph (b), and Executive thereafter, as a result of the same condition,
becomes Totally and Permanently Disabled as defined in Section 2.3, Executive will be entitled to
the Full Disability Benefits (as defined in Section 2.3) provided for in Section 2.3 upon his
termination of employment.

2.2 Termination for Death or Retirement.

     If Executive’s employment is terminated by reason of Executive’s retirement or death then
Executive, or Executive’s personal representative, as the case may be, shall be entitled to receive
(a) Executive’s theretofore unpaid base salary and incentive compensation for the period of
employment, prorated to the end of the calendar month in which such termination occurs, and (b)
compensation for accrued but unused vacation time. Employer shall pay the amounts due under this
Section 2.2 to Executive or Executive’s personal representative within thirty (30) days of
Executive’s retirement or death, as the case may be. The term “retirement” for purposes of this
Agreement shall mean the point in time after the Executive reaches 65 years of age and at which
Executive gives notice to Employer that he is retiring.

2.3 Termination for Disability.

     If Executive becomes Totally and Permanently Disabled during the term of this Agreement,
Executive’s employment may be terminated by the Employer at any time during the continuance of such
disability. The Executive is Totally and Permanently Disabled if he is unable to perform each of
the material duties of his employment under this Agreement, by reason of any disability, illness,
accident or condition, for a period of more than six consecutive months during any twelve-month
period, which is expected to continue for more than one year as certified by a medical doctor of
Executive’s own choosing and concurred in by a doctor of Employer’s choosing. Notwithstanding the
foregoing, any termination or related decision under this provision (2.3) will be made consistent
with federal and state laws governing the rights of disabled employees.

3

 

     Upon termination as described in this Section 2.3, Executive shall be entitled to receive (a)
an amount equal to one hundred percent (100%) of Executive’s annual base salary at the date of
termination, (b) Executive’s theretofore unpaid base salary and incentive compensation for the
period of employment, prorated to the end of the calendar month in which such termination occurs,
and (c) compensation for accrued but unused vacation time. In addition, at Employer’s cost,
Employer shall continue to provide Executive with the following benefits, consistent with the terms
and conditions set forth in Section 1.5 hereof: (i) life insurance and medical, dental and optical
insurance, to the extent the same can be provided under the arrangements in effect at the time of
termination and the costs of which will be treated as taxable income to Executive, and (ii) any
other benefits to which the Executive is entitled by law or the specific terms of Employer’s
policies in effect at the time of his termination of employment. Benefits will be continued
pursuant to this Section 2.3 for a period of twelve (12) months from the date of termination of
employment, unless Executive becomes employed by another company and becomes eligible for
employment benefits substantially similar to those which would otherwise be provided under this
Section.

2.4 Voluntary Termination by Executive or Termination by Employer for Cause.

     Employer may terminate Executive’s employment hereunder for cause (as such term is defined
below). If Executive’s employment is voluntarily terminated by Executive or is terminated by
Employer for cause, Executive shall be entitled to receive (a) Executive’s theretofore unpaid base
salary and incentive compensation for the period of employment, prorated to the date of
termination, and (b) compensation for accrued but unused vacation time, but shall not be entitled
to any compensation or employment benefits pursuant to this Agreement for any period after the date
of termination, or the continuation of any benefits except as may be required by law, including, at
his own expense, COBRA.

     Termination by Employer for cause shall mean termination because the Employer has determined
in its discretion that Executive has engaged in any of the following: Personal Dishonesty (as
hereinafter defined), Incompetence (as hereinafter defined), Willful Misconduct (as hereinafter
defined), breach of fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision of this Agreement;
provided, however, in the event Employer determines that Executive has intentionally failed to
perform his stated duties or materially breached this Agreement, Employer may not terminate
Executive for cause unless Employer has notified Executive of such failure or breach, Executive has
been given a reasonable period of time to cure such failure or breach, and in the opinion of
Employer, Executive has not cured such failure or breach. For the purpose of this Agreement: (i)
“Incompetence” means Executive’s demonstrated lack of ability to perform the duties assigned to him
which lack of ability directly causes (or the Board of Directors determines is reasonably likely to
cause) material injury to Employer; (ii) “Personal Dishonesty” means conduct on the part of
Executive which evinces a want of integrity or an intentional breach of trust and which directly
causes (or the Board of Directors determines is reasonably likely to cause) material injury to
Employer; and (iii) “Willful Misconduct” means conduct on the part of Executive which evinces a
deliberate disregard of the interest of Employer and which causes (or the Board of Directors
determines is reasonably likely to cause) direct material injury to Employer.

2.5 Termination by Employer Without Cause or Termination by Executive for Cause.

     (a) In the event Employer, without Executive’s consent, reduces Executive’s base compensation
or substantially reduces his responsibilities or duties, or otherwise breaches this Agreement,
Executive may elect to terminate this Agreement for cause. However, Executive may not terminate
for cause unless he has notified Employer of his intent to terminate under this provision and
provided Employer a reasonable period of time to cure the reasons for Executive’s proposed
termination for cause. In the event Employer terminates Executive other than under Section 2.1
(expiration of the term), Section 2.2 (death/retirement), Section 2.3 (disability) or Section 2.4
(voluntary termination by Executive or termination by Employer for cause) or Executive elects to
terminate his employment hereunder for cause, then in either such event Executive shall receive (i)
one hundred percent (100%) of his annual base salary at the time of termination through the end of
the Severance Period (as hereinafter defined) (ii) Executive’s theretofore unpaid base salary and
incentive compensation, prorated to the end of the calendar month in which such termination occurs,
and (iii) compensation for accrued but unused vacation time. Executive shall be owed, and Employer
shall be obligated to pay to Executive, the entire amount provided in clauses (i), (ii) and (iii)
above (other than incentive compensation which shall be payable within the period of time provided
in Section 1.3) within thirty (30) days after the termination of Executive pursuant to this Section
2.5, and until such amount is paid in full to Executive, interest shall accrue on said amount as of
the date first due at the rate of eighteen percent (18%) per annum, compounded daily. For purposes
of this Agreement, the “Severance Period” shall be as

4

 

follows: if the termination shall occur within the initial one year employment term of this
Agreement, the Severance Period shall be through the end of the initial one year term of
employment, but not less than one year; and if the termination shall occur after the expiration of
the initial one year employment term, the Severance Period shall be one year.

     (b) Furthermore, if Employer terminates Executive pursuant to this Section 2.5, at Employer’s
cost, Employer shall continue to provide Executive with the following benefits, consistent with the
terms and conditions set forth in Section 1.5 hereof: (i) life insurance and medical, dental and
optical insurance, to the extent the same can be provided under the arrangements in effect at the
time of termination, and (ii) any other benefits to which Executive is entitled by law or the
specific terms of Employer’s policies in effect at the time of his termination of employment.
Benefits will be continued pursuant to this Section 2.5 through the end of the Severance Period,
unless Executive becomes employed by another company and is eligible for employment benefits
substantially similar to those which would otherwise be provided under this Section.

     (c) If Employer terminates Executive pursuant to this Section 2.5, the Executive shall also be
entitled to receive an additional benefit. Such benefit shall be a single sum cash payment in an
amount equal to the product of the Employer’s annual aggregate contribution, for the benefit of the
Executive in the year preceding termination, to all qualified retirement plans in which the
Executive participated multiplied by the number of years in the Severance Period. Such benefit
shall be in addition to any benefit payable from any qualified or nonqualified plans or programs
maintained by the Employer at the time of termination.

2.6 Termination by Executive Due to Change in Control.

     (a) Following a Change in Control (as hereinafter defined), Executive may, by giving notice to
Employer, immediately terminate his employment under this Agreement upon the occurrence of any of
the following:

     (i) any reduction in Executive’s base or incentive compensation, or employee benefits
described in Section 1.4, 1.5, 1.6 and 1.7 and provided to Executive immediately preceding a
Change in Control (other than changes in benefits required by law and applicable to all
employees generally), or any assignment to any position, responsibilities or duties that are
substantially less significant than his position, duties and responsibilities as of the time
immediately preceding a Change in Control;

     (ii) a transfer of Executive by Employer requiring Executive to have his principal
location of work more than fifty (50) miles from Executive’s principal location of work
immediately prior to the Change in Control; or

     (iii) a requirement by Employer that Executive travel materially more than that amount
of time which has historically been required by Employer such that Executive is required to
be away from his place of residence for more than three weekends in a calendar year or for
four or more week nights per week during any three weeks in a calendar year.

     If Executive terminates this Agreement pursuant to this Section 2.6, Executive shall have the
right to receive payments and benefits under, and to the extent provided by, Section 2.5 as if a
termination by Employer without cause had occurred.

     (b) For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if:
(1) any “person” (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) or the Company becomes the owner of securities of the Employer, or any person becomes the
beneficial owner, directly or indirectly, of a majority of the capital stock of the Company in a
transaction or transactions subject to the notice provisions of the Change in Bank Control Act of
1978, (12 USC ‘ 1817(j)) as amended from time to time, or approval under the Savings and Loan
Holding Company Act (12 USC ‘ 1467a), as amended from time to time; (2) someone other than the
Company becomes owner of more than 25% of the voting securities of the Employer; (3) during any
period of two (2) consecutive years, the individuals, who at the beginning of any such period
constituted the directors of the Employer or the Company, cease for any reason to constitute at
least a majority thereof; or (4) the filing by the Company of a report or proxy statement with the
Securities and Exchange Commission or the Office of Thrift Supervision disclosing in response to
Item 1 of Form 8-K or Item 5 of Part II of Form 10-Q, each promulgated pursuant to the Securities
Exchange Act of 1934, as amended (“Exchange Act”) or Item 6(e) of

5

 

Schedule 14A promulgated thereunder, or successor Items, that a change in control of the
Company has or may have occurred pursuant to any contract or transaction.

     However, notwithstanding the foregoing provisions, the following events or occurrences shall
not constitute a “Change in Control” hereunder:

     (i) The merger, consolidation or other combination of the Employer with, or sale of the
Employer to, or assumption of the Employer by any company controlled by, controlling or
under control with the Company if the entity with which the Employer is combined assumes
this Agreement, in which event such successor shall be deemed to be the “Employer”
hereunder.

2.7 Termination or Suspension as Required by Law.

     (a) If the Executive is suspended and/or temporarily prohibited from participating in the
conduct of the Employer’s affairs by a notice serviced under section 8 (e)(3) or (g)(1) of the FDIA
(12 U.S.C. 1818(e)(3) and (g)(1)) the Employer’s obligations under this Agreement shall be
suspended as of the date of service unless stayed by appropriate proceedings. If the charges in
the notice are dismissed, the Employer may in its discretion (i) pay the Executive all or part of
the severance benefit withheld while its contract obligations were suspended, and (ii) reinstate
(in whole or in part) any of its obligations which were suspended.

     (b) If the Executive is removed and/or permanently prohibited from participating in the
conduct of the Employer’s affairs by an order issued under section 8 (e)(4) or (g)(1) of the FDIA
(12 U.S.C. 1818 (e)(4) or (g)(1)), all obligations of the Employer under this Agreement shall
terminate as of the effective date of the order, but vested rights of the Executive and the
Employer shall not be affected.

     (c) If the Employer is in default (as defined in section 3(x)(1) of the FDIA), all obligations
under this Agreement shall terminate as of the date of default, but this Section 2.7 shall not
affect any vested rights of the Executive or the Employer.

     (d) All obligations under this Agreement shall be terminated except to the extent determined
that continuation of the contract is necessary for the continued operation of the Employer.

     (i) By the Director of the Office of Thrift Supervision (the “Director”) or his or her
designee, at the time the Federal Deposit Insurance Corporation or Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of the Employer
under the authority contained in 13(c) of the FDIA; or

     (ii) By the Director or his or her designee, at the time the Director or his or her
designee approves a supervisory merger to resolve problems related to operation of the
Employer or when the Employer is determined by the Director to be in an unsafe or unsound
condition.

Any rights of the Executive which have vested, including those which vest pursuant to this
Agreement, shall not be affected by such action.

2.8 Successors and Binding Agreements.

     (a) This Agreement shall be binding upon and inure to the benefit of Employer and any
Successor of or to Employer, but shall not otherwise be assignable or delegatable by Employer.
“Successor” shall mean any successor in interest, including, without limitation, any entity,
individual or group of persons acquiring directly or indirectly all or substantially all of the
business or assets of Employer whether by sale, merger, consolidation, reorganization or otherwise.

     (b) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or
legal representatives, executors, administrators, successors, heirs, distributees and legatee.

     (c) Employer shall require any Successor to agree (in such form as is reasonably requested by
Executive) to perform this Agreement to the same extent as the original parties would be required
if no succession had occurred.

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     (d) This Agreement is personal in nature and neither of the parties shall, without the consent
of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder
except as expressly provided in this Section 2.8.

2.9 Limitations on Termination Compensation.

     (a) In the event that the severance benefits payable to the Executive under Sections 2.5, or
2.6 (“Severance Benefits”), or any other payments or benefits received or to be received by the
Executive from the Employer (whether payable pursuant to the terms of this Agreement or any other
plan, agreement or arrangement with the Employer) or any corporation (“Affiliate”) affiliated with
the Employer within the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended
(the “Code”), in the opinion of tax counsel selected by the Employer’s independent auditors and
acceptable to the Executive, constitute “parachute payments” within the meaning of Section
280G(b)(2) of the Code, and the present value of such “parachute payments” equals or exceeds three
(3) times the average of the annual compensation payable to the Executive by the Employer (or an
Affiliate) and includible in the Executive’s gross income for federal income tax purposes for the
five (5) calendar years preceding the year in which a change in ownership or control of the
Employer occurred (“Base Amount”), such Severance Benefits shall be reduced to an amount the
present value of which (when combined with the present value of any other payments or benefits
otherwise received or to be received by the Executive from the Employer (or an Affiliate) that are
deemed “parachute payments”) is equal to 2.99 times the Base Amount, notwithstanding any other
provision to the contrary in this Agreement. The Severance Benefits shall not be reduced if (A)
the Executive shall have effectively waived his receipt or enjoyment of any such payment or benefit
which triggered the applicability of this Section 2.9, or (B) in the opinion of tax counsel, the
Severance Benefits (in its full amount or as partially reduced, as the case may be) plus all other
payments or benefits which constitute “parachute payments” within the meaning of Section 280G(b)(2)
of the Code are reasonable compensation for services actually rendered, within the meaning of
Section 280G(b)(4) of the Code, and such payments are deductible by the Employer. The Base Amount
shall include every type and form of compensation includible in the Executive’s gross income in
respect of his employment by the Employer (or an Affiliate), except to the extent otherwise
provided in temporary or final regulations promulgated under Section 280G(b) of the Code. For
purposes of this Section 2.9, a “change in ownership or control” shall have the meaning set forth
in Section 280G(b) of the Code and any temporary or final regulations promulgated thereunder. The
present value of any non-cash benefit or any deferred cash payment shall be determined by the
Employer’s independent auditors in accordance with the principles of Sections 280G(b)(3) and (4) of
the Code.

     (b) The Executive shall have the right to request that the Employer obtain a ruling from the
Internal Revenue Service (“Service”) as to whether any or all payments or benefits determined by
such tax counsel are, in the view of the Service, “parachute payments” under Section 280G. If a
ruling is sought pursuant to the Executive’s request, no Severance Benefits payable under this
Agreement shall be made to the Executive until after fifteen (15) days from the date of such
ruling. For purposes of this Section 2.9(b), the Executive and the Employer agree to be bound by
the Service’s ruling as to whether payments constitute “parachute payments” under Section 280G. If
the Service declines, for any reason, to provide the ruling requested, the tax counsel’s opinion
provided in Subsection 2.9(a) with respect to what payments or benefits constitute “parachute
payments” shall control, and the period during which the Severance Benefits may be deferred shall
be extended to a date fifteen (15) days from the date of the Service’s notice indicating that no
ruling would be forthcoming.

     (c) In the event that Section 280G, or any successor statute, is repealed, this Section 2.9
shall cease to be effective on the effective date of such repeal. The parties to this Agreement
recognize that final regulations under Section 280G of the Code may affect the amounts that may be
paid under this Agreement and agree that, upon issuance of such final regulations, this Agreement
may be modified as in good faith deemed necessary in light of the provisions of such regulations to
achieve the purposes of this Agreement, and that consent to such modifications shall not be
unreasonably withheld.

     (d) Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject
to and conditioned upon their compliance with section 18(k) of the Federal Deposit Insurance Act
(12 USC ‘ 1828(k)) and any regulations promulgated thereunder.

7

 

ARTICLE III

CONFIDENTIALITY AND NON-SOLICITATION

3.1 Confidentiality.

     (a) During the period of Executive’s employment with Employer and for two (2) years following
the termination of Executive’s employment, regardless of the reason for termination, Executive
shall not, at any time, directly or indirectly, use any Confidential Information (as defined below)
except as required to perform his duties for Employer, or disclose to any individual, corporation,
partnership or any other entity any Confidential Information or trade secrets of or relating to
Employer.

     (b) “Confidential Information” means oral or written information disclosed to Executive or
known to Executive as a consequence of or through the performance of his duties to the Employer
(including information conceived, originated, discovered or developed by him), which derives value
from not being generally known to the public, and includes information regarding Employer’s
business affairs, including such matters as lending programs, various financial services and
products, computer programs, research, customer lists, customer development, planning, purchasing,
finance, marketing, customer relations, personnel information including employee compensation and
confidential or similar proprietary information. Confidential information shall be defined to
exclude information which is or becomes public knowledge through no fault of Executive, or which
was known to Executive before the start of his earliest relationship with the Employer.

     (c) Executive shall not acquire any rights to any Confidential Information as a result of his
performance of his duties to the Employer. Further, upon termination for whatever reason,
Executive agrees to immediately surrender to Employer all property relating directly or indirectly
to Confidential Information.

     (d) The restrictions in this Section 3.1 are in addition to and not in lieu of any other
obligations Executive may have relating to the Employer’s Confidential Information, including any
obligations under Wis. Stat. § 134.90 or similar laws governing trade secrets which may extend
beyond the two (2) year period of restriction on use or disclosure of Confidential Information.

3.2 Non-Solicitation of Customers.

     Executive agrees that following the termination of Executive’s employment, regardless of the
reason for such termination, and for a period of time equal to the lesser of (a) the length of
Executive’s employment with Employer or (b) two (2) years, that during such period Executive shall
not solicit or assist with the solicitation of any customer of the Employer to terminate or
diminish such customer’s business with the Employer. For purposes of this provision, a “customer”
shall mean an entity or individual (1) in connection with whom Executive provided services on
behalf of the Employer within the eighteen (18) months prior to Executive’s termination or (2)
about whom Executive obtained Confidential Information within the eighteen (18) months prior to
Executive’s termination.

3.3 Non-Solicitation of Employees

      Executive agrees that for two (2) years following the termination of Executive’s
employment, regardless of the reason for such termination, Executive shall not directly or
indirectly solicit, cause or seek to cause any employee of the Employer to terminate, curtail or
otherwise modify his or her employment relationship with the Employer. This provision is not
intended and shall not be construed to foreclose or burden the employment of any such employee who
pursues or accepts such employment without any solicitation prohibited by this provision.

3.4 Construction of Post-Employment Restrictions.

     Executive acknowledges and agrees that the restrictions set forth in this Article are founded
on valuable consideration and are reasonable in duration and geographic area in view of the
circumstances under which this Agreement is executed and that such restrictions are necessary to
protect the legitimate interests of the Employer. The provisions in this Article are severable.
In the event that any provision of this Article is determined to be invalid by any court of
competent jurisdiction, the remaining provisions of this Article will remain in effect and the
Agreement shall be deemed to have been amended. The parties will execute any documents and take
whatever

8

 

action is necessary to evidence such amendment, so as to eliminate or modify any such invalid
provision and to carry out the intent of this Article so to render the terms of this Article
enforceable in all respects as so modified.

3.5 Remedies.

     Executive acknowledges and agrees that irreparable injury will result to the Employer in the
event Executive breaches any covenant contained in this Article and that the remedy at law for such
breach will be inadequate. Therefore, if Executive engages in any act in violation of the
provisions of this Article, the Employer shall be entitled, in addition to such other remedies and
damages as may be available to it by law or under this Agreement, to injunctive or other equitable
relief to enforce the provisions of this Article.

ARTICLE IV

LEGAL FEES AND EXPENSES

     It is the intent of Employer that Executive not be required to incur the expenses associated
with the enforcement of his rights under this Agreement by litigation, arbitration or other legal
action because the cost and expense thereof would substantially detract from the benefits intended
to be extended to Executive hereunder. Accordingly, if it should appear to Executive that Employer
has failed to comply with any of its obligations under this Agreement or in the event that Employer
or any other person takes any action to declare this Agreement void or unenforceable, or institutes
any litigation, arbitration or other legal action designed to deny, or to recover from Executive,
the benefits intended to be provided to Executive hereunder, Employer irrevocably authorizes
Executive from time to time to retain counsel of his choice, at the expense of Employer as
hereafter provided, to represent Executive in connection with the initiation or defense of any
litigation, arbitration or other legal action, whether by or against Employer or any director,
officer, shareholder or other person affiliated with Employer, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between Employer and such
counsel, Employer irrevocably consents to Executive’s entering into an attorney-client relationship
with such counsel, and in that connection Employer and Executive agree that a confidential
relationship shall exist between Executive and such counsel. Employer shall pay and be solely
responsible for reasonable and necessary attorneys’ and related fees and expenses incurred by
Executive as a result of Employer’s failure to perform this Agreement or any provision thereof or
as a result of Employer or any person contesting the validity or enforceability of this Agreement
or any provision thereof as aforesaid, but only if Executive obtains a final legal judgment or
settlement in his favor. All fees and expenses due hereunder shall be paid upon presentation by
Executive to Employer of a statement or statements prepared by such counsel and containing such
information and detail as may be requested by Employer.

ARTICLE V

GENERAL PROVISIONS

5.1 Entire Agreement.

     This Agreement supersedes any other agreements, oral or written, between the parties with
respect to the employment of Executive by Employer and contains all of the agreements and
understandings between the parties with respect to such employment, provided however, that this
Agreement shall not supersede or affect the terms of any employee benefit arrangement in existence
on the date of this Agreement and in which the Executive is participating on that date, including,
but not limited to all pension, retirement, deferred compensation, 401(k), excess benefit, stock
option or other similar plans. Any waiver or modification of any term of this Agreement shall be
effective only if it is signed in writing by both parties.

5.2 Withholding of Taxes.

     Employer may withhold from any amounts payable under this Agreement all federal, state, city
or other taxes as shall be required pursuant to any law or government regulation or ruling.

5.3 Notices.

     Any notice to be given hereunder by either party to the other may be made by personal delivery
in writing or by mail, registered or certified, postage prepaid with return receipt requested.
Mailed notices shall be addressed

9

 

to the parties at the addresses appearing below, but each party may change his or its address
by written notice in accordance with this paragraph. Notices delivered personally shall be deemed
communicated as of actual receipt; mailed notices shall be deemed communicated five (5) days after
the date of mailing.

 

If to Employer, addressed to:

Bank
Mutual

Attention: David A. Baumgarten

President

4949 West Brown Deer Road

P. O. Box 23988

Milwaukee, WI 53223-0988

Fax No: (414) 362-6915

 

with a copy to:

 

Quarles & Brady, LLP

Attention: James D. Friedman

411 East Wisconsin Avenue

Milwaukee, WI 53202

Fax No: (414)291-3552

 

If to Executive, addressed to:

________________________

________________________

________________________

5.4 Governing Law.

     This Agreement shall be construed in accordance with and governed by the laws of the State of
Wisconsin and, to the extent applicable, of the United States.

5.5 Incapacity.

     If Employer shall reasonably and in good faith find that any person to whom any payment is
payable under this Agreement is unable to care for his or her affairs because of illness or
accident, or is a minor, any payment due (unless a prior claim therefor shall have been made by a
duly appointed guardian, committee, or other legal representative) may be paid to the spouse, a
child, a parent, or a brother or sister, or to any person reasonably and in good faith deemed by
Employer to have incurred expense for such person otherwise entitled to payment in such manner and
proportions as Employer may determine in its sole discretion. Any such payment shall be a complete
discharge of the liabilities of Employer to make such payment to Executive.

5.6 Waivers.

     The waiver by any party of any breach, default, misrepresentation or breach of warranty or
covenant in this Agreement, whether intentional or not, shall be in writing and shall not be deemed
to extend to any prior or subsequent breach, default, misrepresentation or breach of warranty or
covenant herein and shall not affect in any way any rights arising by virtue of any such prior or
subsequent occurrence.

5.7 Section 409A.

     Notwithstanding anything in the Employment Agreement to the contrary, in the event that the
Executive is deemed by the Bank to be a “specified employee” within the meaning of Section 409A of
the Internal Revenue Code of 1986, as amended (“Section 409A’”), no payment that is “deferred
compensation” subject to Section 409A shall be made to the Executive prior to the date that is six
(6) months after the date of the Executive’s separation from service (as defined in Section 409A)
(or, if earlier, the Executive’s date of death). In such event, the payments

10

 

subject to the six (6) month delay will be paid in a lump sum on the earliest permissible
payment date with interest on the delayed payments credited at the rate that Employer is paying on
the date of the Executive’s separation from service on a six month certificate of deposit for such
a lump sum amount.

5.8 Severability.

     In case any one or more of the provisions contained in this Agreement should be invalid,
illegal, or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained in this Agreement shall not in any way be affected or impaired
thereby.

5.9 Remedies Cumulative.

     Remedies under this Agreement of any party hereto are in addition to any remedy or remedies to
which such party is entitled or may become entitled at law or in equity.

5.10 Counterparts.

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

5.11 Headings.

     The headings in this Agreement are for convenience of reference only, and under no
circumstances should they be construed as being a substantive part of this Agreement nor shall they
limit or otherwise affect the meaning thereof.

5.12 Additional Documents

     Each of the parties hereto, without further consideration, agrees to execute and deliver such
additional documents and to take such other actions reasonably necessary to more effectively
consummate the purposes of this Agreement.

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

	 	 	 	 	 

	Bank Mutual	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	Attest:
	 	 	 	 
	 

	 	 

	 	 
	Executive	 	 
	 
	 	 	 	 
	 	 	 

11

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