Document:

exv10w2

Exhibit 10.2

 

 

JEFFERIES CAPITAL PARTNERS V L.P.

 

SUBSCRIPTION AGREEMENT

 

Dated as of August 12, 2010

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	Section	 	 	 	 	 	 	 	Page
	 
	1.	 	Sale and Purchase of Limited Partner Interest	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	Power of Attorney	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Other Subscription Agreements	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	Closing	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	Representations and Warranties of the Partnership and the General Partner	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	5.1.	 	 	Formation and Standing
	 	 	4	 
	 

	 	 	5.2.	 	 	Authorization of Agreement, etc.
	 	 	4	 
	 

	 	 	5.3.	 	 	Compliance with Laws and Other Instruments
	 	 	4	 
	 

	 	 	5.4.	 	 	Offer of Interests
	 	 	4	 
	 

	 	 	5.5.	 	 	Investment Company Act
	 	 	4	 
	 

	 	 	5.6.	 	 	Investment Advisers Act
	 	 	5	 
	 

	 	 	5.7.	 	 	Partnership Liabilities; Litigation
	 	 	5	 
	 

	 	 	5.8.	 	 	Placement Fees
	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	Representations and Warranties of the Purchaser	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	6.1.	 	 	Authorization of Purchase, etc.
	 	 	5	 
	 

	 	 	6.2.	 	 	Compliance with Laws and Other Instruments
	 	 	5	 
	 

	 	 	6.3.	 	 	The Memorandum, etc.
	 	 	5	 
	 

	 	 	6.4.	 	 	Access to Information
	 	 	6	 
	 

	 	 	6.5.	 	 	Evaluation of and Ability to Bear Risks
	 	 	6	 
	 

	 	 	6.6.	 	 	Purchase for Investment
	 	 	6	 
	 

	 	 	6.7.	 	 	Beneficial Ownership, etc.
	 	 	7	 
	 

	 	 	6.8.	 	 	Certain ERISA Matters
	 	 	7	 
	 

	 	 	6.9.	 	 	Certain Tax Matters
	 	 	8	 
	 

	 	 	6.10.	 	 	Compliance with Anti-Money Laundering Regulations, etc.
	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	Management Fee	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.	 	Amendments and Waivers	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	Survival of Representations and Warranties	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	Successors and Assigns	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	11.	 	Notices	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	12.	 	Applicable Law	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	13.	 	Table of Contents and Headings	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	14.	 	Entire Agreement	 	 	12	 

i

 

	 	 	 	 	 	 	 	 	 	 	 
	Section	 	 	 	 	 	 	 	Page
	 
	15.	 	Counterparts	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	A.	 	 	General Information
	 	 	1	 
	 

	 	 	B.	 	 	Other Certifications
	 	 	2	 
	 

	 	 	C.	 	 	Investor Eligibility (Investors must complete both parts 1 and 2 below)
	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	Sale and Purchase of Limited Partner Interest	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	Power of Attorney	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Other Subscription Agreements	 	 	3	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	Closing	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	Representations and Warranties of the Partnership and the General Partner	 	 	4	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	5.1.	 	 	Formation and Standing
	 	 	4	 
	 

	 	 	5.2.	 	 	Authorization of Agreement, etc.
	 	 	4	 
	 

	 	 	5.3.	 	 	Compliance with Laws and Other Instruments
	 	 	4	 
	 

	 	 	5.4.	 	 	Offer of Interests
	 	 	5	 
	 

	 	 	5.5.	 	 	Investment Company Act
	 	 	5	 
	 

	 	 	5.6.	 	 	Investment Advisers Act
	 	 	5	 
	 

	 	 	5.7.	 	 	Partnership Liabilities; Litigation
	 	 	5	 
	 

	 	 	5.8.	 	 	Placement Fees
	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	Representations and Warranties of the Purchaser	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	6.1.	 	 	Authorization of Purchase, etc.
	 	 	5	 
	 

	 	 	6.2.	 	 	Compliance with Laws and Other Instruments
	 	 	5	 
	 

	 	 	6.3.	 	 	The Memorandum, etc.
	 	 	5	 
	 

	 	 	6.4.	 	 	Access to Information
	 	 	6	 
	 

	 	 	6.5.	 	 	Evaluation of and Ability to Bear Risks
	 	 	6	 
	 

	 	 	6.6.	 	 	Purchase for Investment
	 	 	6	 
	 

	 	 	6.7.	 	 	Beneficial Ownership, etc.
	 	 	7	 
	 

	 	 	6.8.	 	 	Certain ERISA Matters
	 	 	7	 
	 

	 	 	6.9.	 	 	Certain Tax Matters
	 	 	8	 
	 

	 	 	6.10.	 	 	Compliance with Anti-Money Laundering Regulations, etc.
	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	Management Fee	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	8	 	Amendments and Waivers	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	Survival of Representations and Warranties	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	Successors and Assigns	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	11.	 	Notices	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	12.	 	Applicable Law	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	13.	 	Table of Contents and Headings	 	 	12	 

ii

 

JEFFERIES CAPITAL PARTNERS V L.P.

          IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER
AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES DESCRIBED
HEREIN AND IN THE MEMORANDUM (AS DESCRIBED BELOW) HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL, STATE
OR FOREIGN SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES
HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT OR THE MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

          THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM, AND EXCEPT AS PERMITTED PURSUANT TO THE PARTNERSHIP AGREEMENT.
INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

As of August 12, 2010

To the Undersigned Purchaser:

          Jefferies Capital Partners V L.P., a Delaware limited partnership (the “Partnership”),
and JCP V LLC, a Delaware limited liability company which acts as general partner of the
Partnership (the “General Partner”), hereby agree with the undersigned “Purchaser”
or “you” (in the case of a subscription for the account of a trust or other entity, such
terms shall refer to the trustee, fiduciary or representative making the investment decision and
executing this Subscription Agreement (this “Agreement”), or the trust or other entity, or
both, as appropriate) as follows:

          1. Sale and Purchase of Limited Partner Interest. The Partnership has
been formed under the laws of the State of Delaware, and from and after the date of the Closing (as
defined below) shall be governed by an Amended and Restated Limited Partnership Agreement in
substantially the form attached hereto as Exhibit A (as the same may be modified in
accordance with the terms of any amendment or supplement thereto or restatement thereof, the
“Partnership Agreement”). Capitalized terms used herein without definition have the
meanings set forth in the Partnership Agreement. Subject to the terms and conditions hereof, and
in reliance upon the representations and warranties of the respective parties contained herein, (a)
the Partnership agrees to sell to you and you irrevocably subscribe for and agree to purchase from
the Partnership an interest (an “Interest”) as a limited partner in the Partnership, (b)
you agree to become a limited partner of the Partnership (a “Limited Partner”), and (c) the
Partnership and the General Partner agree that you shall be admitted as a Limited Partner, upon the
terms and conditions, and in consideration for your agreement to be bound by the terms and
provisions, of the Partnership Agreement and this Agreement, with a capital commitment in the
amount equal to the amount set forth opposite your signature at the end of this Agreement (your
“Capital Commitment”). Subject to the terms and

 

 

conditions hereof and of the Partnership Agreement, your obligation to subscribe and pay for
your Interest shall be complete and binding upon the execution and delivery of this Agreement, but,
for the convenience of the Partnership, your Capital Commitment shall be payable in installments as
provided in Section 7.1 of the Partnership Agreement.

          2. Power of Attorney. You hereby irrevocably constitute and appoint
Jefferies Capital Partners LLC, a Delaware limited liability company which acts as manager of the
Partnership (the “Manager”), or the successor thereof as manager of the Partnership, with
full power of substitution, as your true and lawful attorney-in-fact and agent, to execute,
acknowledge, verify, swear to, deliver, record and file, in its or its assignee’s name, place and
stead, all instruments, documents and certificates which may from time to time be required by the
laws of the United States of America, the State of Delaware, the State of New York, any other
jurisdiction in which the Partnership conducts or plans to conduct business, or any political
subdivision or agency thereof, to effectuate, implement and continue the valid existence and
business of the Partnership, including, without limitation, the power and authority to execute,
verify, swear to, acknowledge, deliver, record and file:

(a) all certificates and other instruments, including, without limitation, the Partnership
Agreement and any amendments thereto that have been approved by the Partnership or are
permitted under the Partnership Agreement and the Certificate of Limited Partnership of the
Partnership (the “Certificate”) and any amendments thereto, which the Manager deems
appropriate to (i) form, qualify or continue the Partnership as a limited partnership in the
State of Delaware and the State of New York and all other jurisdictions in which the
Partnership conducts or plans to conduct business and (ii) admit the undersigned as a
Limited Partner in the Partnership;

(b) all instruments which the Manager deems appropriate to reflect any amendment to the
Partnership Agreement or the Certificate (i) so long as such amendment does not
adversely affect the interests of the undersigned Limited Partner, (x) to satisfy
any requirements, conditions, guidelines or opinions contained in any opinion, directive,
order, ruling or regulation of the Securities and Exchange Commission, the Internal Revenue
Service, or any other U.S. federal or state or foreign agency, or in any U.S. federal or
state or foreign statute, compliance with which the Manager deems to be in the best
interests of the Partnership, (y) to change the name of the Partnership or
(z) to cure any ambiguity or correct or supplement any provision therein contained
which may be incomplete or inconsistent with any other provision therein contained so long
as such amendment does not adversely affect the interests of the undersigned Limited Partner
or (ii) to the extent the amendment is duly adopted in accordance with the
Partnership Agreement and the Act;

(c) all conveyances and other instruments which the Manager deems appropriate to reflect
and effect the dissolution and termination of the Partnership pursuant to the terms of the
Partnership Agreement, including the filing of a certificate of cancellation of the
Certificate of Limited Partnership of the Partnership as provided for in Section 14 of the
Partnership Agreement;

2

 

(d) all instruments relating to (i) transfers, sales, assignments, conveyances, pledges,
hypothecations or other dispositions of interests of Limited Partners to the extent
permitted pursuant to the Partnership Agreement, or the admission of Substitute Limited
Partners or Additional Limited Partners pursuant to Section 12 of the Partnership Agreement,
(ii) the treatment of a Defaulting Limited Partner, an Excused Limited Partner, or a Limited
Partner whose participation in an investment is excused, limited or discontinued pursuant to
Section 7.3, 7.4 or 12.3 of the Partnership Agreement, or (iii) any change in the Capital
Commitment of any Limited Partner, all in accordance with the terms of the Partnership
Agreement;

(e) certificates of assumed name and such other certificates and instruments as may be
necessary under the fictitious or assumed name statutes from time to time in effect in the
State of New York and all other jurisdictions in which the Partnership conducts or plans to
conduct business; and

(f) any other instruments determined by the Manager to be necessary or appropriate in
connection with the proper conduct of the business of the Partnership and which do not
adversely affect the interests of the undersigned Limited Partner.

     Such attorney-in-fact and agent shall not, however, have the right, power or authority to
amend or modify the Partnership Agreement when acting in such capacities, except to the extent
authorized herein.

     The power of attorney granted herein shall be deemed to be coupled with an interest, shall be
irrevocable, shall survive and not be affected by the dissolution, bankruptcy, death, incapacity,
incompetence or legal disability of the undersigned and shall extend to its successors and assigns.
The power of attorney granted herein may be exercised by such attorney-in-fact and agent for all
Limited Partners of the Partnership (or any of them) by a single signature of the Manager acting as
attorney-in-fact. Any Person dealing with the Partnership may conclusively presume and rely upon
the fact that any instrument referred to above, executed by such attorney-in-fact and agent, is
authorized, regular and binding, without further inquiry. If required, the undersigned shall
execute and deliver to the Manager, within five days after receipt of a request therefor, such
further designations, powers of attorney or other instruments as the Manager shall reasonably deem
necessary for the purposes hereof.

          3. Other Subscription Agreements. The Partnership has entered into or
expects to enter into separate but substantially identical subscription agreements (the “Other
Subscription Agreements” and, together with this Agreement, the “Subscription
Agreements”) with other purchasers (the “Other Purchasers”), providing for the sale to
the Other Purchasers of Interests and the admission of the Other Purchasers as Limited Partners.
This Agreement and the Other Subscription Agreements are separate agreements, and the sales of
Interests to you and the Other Purchasers are to be separate sales.

          4. Closing. The closing (the “Closing”) of the sale to you, and
the subscription for and purchase by you, of an Interest, and your admission as a Limited Partner,
shall take place at the offices of Dechert LLP, 1095 Avenue of the Americas, New York, New York
10036, on such date and at such time as the General Partner shall designate. At the Closing, the
General Partner will list you as a Limited Partner on Schedule A of the Partnership
Agreement following the execution and delivery of the Partnership Agreement by you or on your
behalf.

3

 

          5. Representations and Warranties of the Partnership and the General
Partner. The Partnership and the General Partner jointly and severally represent and warrant
that:

     5.1. Formation and Standing. The Partnership is duly formed,
validly existing and in good standing as a limited partnership under the laws of the State
of Delaware, and has all requisite limited partnership power and authority to carry on its
business as now conducted and as proposed to be conducted as described in the Confidential
Offering Memorandum dated June, 2010, relating to the private offering of Interests
by the Partnership (together with any amendments and supplements thereto, the
“Memorandum”). The General Partner is duly formed, validly existing and in good
standing as a limited liability company under the laws of the State of Delaware and has all
requisite limited liability company power and authority to act as general partner of the
Partnership and to carry out the terms of this Agreement and the Partnership Agreement
applicable to it. The Manager is duly formed, validly existing and in good standing as a
limited liability company under the laws of the State of Delaware, and has all requisite
limited liability company power and authority to act as the manager of the Partnership as
contemplated by the Memorandum and the Partnership Agreement.

     5.2. Authorization of Agreement, etc. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary action on behalf of
the Partnership, and this Agreement is a legal, valid and binding agreement of the
Partnership, enforceable against the Partnership in accordance with its terms. The
execution, delivery and performance by the General Partner of the Partnership Agreement,
this Agreement and the side letter between you and the General Partner (if any) have been
authorized by all necessary action on behalf of the General Partner, and each of the
Partnership Agreement, this Agreement and such side letter (if any) is a legal, valid and
binding agreement of the General Partner, enforceable against the General Partner in
accordance with its terms.

     5.3. Compliance with Laws and Other Instruments. The execution and
delivery of this Agreement and the consummation of the transactions contemplated hereby will
not conflict with or result in any violation of or default under any provision of the
Partnership Agreement, or any agreement or other instrument to which the Partnership is a
party or by which it or any of its properties are bound, or any permit, franchise, judgment,
decree, statute, order, rule or regulation applicable to the Partnership or its business or
properties. The execution and delivery of the Partnership Agreement, this Agreement and the
side letter between you and the General Partner (if any) and the consummation of the
transactions contemplated thereby will not conflict with or result in any violation of or
default under any provision of the limited liability company agreement of the General
Partner, or any agreement or other instrument to which the General Partner is a party or by
which it or any of its properties are bound, or any permit, franchise, judgment, decree,
statute, order, rule or regulation applicable to the General Partner or its business or
properties.

     5.4. Offer of Interests. Neither the Partnership nor anyone acting
on its behalf has taken or will take any action that would subject the issuance and sale of
the Interests to the registration requirements of the Securities Act of 1933, as amended
(the “Securities Act”).

     5.5. Investment Company Act. Subject to the accuracy of the
representations of the Purchaser in the Investor Questionnaire attached hereto and of the
representations of the Other Purchasers in the Investor Questionnaires included in the Other
Subscription

4

 

Agreements, the Partnership is not required to register as an “investment company”
under the Investment Company Act of 1940, as amended (the “Company Act”).

     5.6. Investment Advisers Act. Neither the Manager nor the General
Partner is required to register as an “investment adviser” under the Investment Advisers Act
of 1940, as amended.

     5.7. Partnership Liabilities; Litigation. Prior to the date
hereof, the Partnership has not incurred any material liabilities other than liabilities in
respect of Organizational Expenses. There is no action, proceeding or investigation pending
or, to the knowledge of the General Partner or the Partnership, threatened against the
General Partner, the Manager or the Partnership.

     5.8. Placement Fees. There are no placement or other similar fees
in connection with the negotiation of this Agreement or the consummation of the sale of your
Interest except for such as shall be borne by the Manager, directly or indirectly.

          6. Representations and Warranties of the Purchaser. You represent and
warrant to the Partnership, the General Partner and each of the other Partners that:

     6.1. Authorization of Purchase, etc. You have the full power and
authority to execute, deliver and perform this Agreement and to subscribe for and purchase
an Interest hereunder. Your purchase of an Interest and your execution, delivery and
performance of this Agreement and the Partnership Agreement (and any side letter between you
and the General Partner, if any) have been duly authorized by all necessary corporate or
other action on your behalf, and this Agreement and the Partnership Agreement (and any side
letter between you and the General Partner, if any) are your legal, valid and binding
obligations, enforceable against you in accordance with their respective terms.

     6.2. Compliance with Laws and Other Instruments. The execution and
delivery of this Agreement and the Partnership Agreement (and any side letter between you
and the General Partner, if any), the consummation of the transactions contemplated hereby
and thereby and the performance of your obligations hereunder and thereunder will not
conflict with, or result in any violation of or default under, any provision of any charter,
by-laws, trust agreement, partnership agreement, operating agreement or other governing
instrument applicable to you, or any agreement or other instrument to which you are a party
or by which you or any of your properties are bound, or any permit, franchise, judgment,
decree, statute, order, rule or regulation applicable to you or your business or properties.

     6.3. The Memorandum, etc. You have been furnished with a copy of
the Memorandum, this Agreement and the form of Partnership Agreement attached hereto as
Exhibit A, and you understand the risks of, and other considerations relating to, a
purchase of an Interest, including the risks set forth under the caption “Certain Investment
Considerations” in the Memorandum and the effect of the provisions of Section 7.4 of the
Partnership Agreement. You represent and warrant that the Interests were not offered to you
by any means of general solicitation or general advertising. In that regard, you are not
purchasing the Interests: (a) as a result of or subsequent to becoming aware of any
advertisement, article, notice or other communication published in any newspaper, magazine
or similar medium, generally available electronic communication, broadcast over television

5

 

or radio or generally available to the public on the Internet or the Worldwide Web; (b)
as a result of or subsequent to attendance at a seminar or meeting called by any of the
means set forth in (a); or (c) as a result of or subsequent to any solicitations by a person
not previously known to you in connection with investments in securities generally.
Moreover, you confirm that you have not relied on any representations or other information
purported to be given on behalf of the Partnership, except as set forth herein, in the
Memorandum, the Partnership Agreement, the side letter between you and the General Partner
(if any) and the opinions of counsel delivered at the Closing, or otherwise supplied by the
Partnership or the General Partner.

     6.4. Access to Information. You have been provided an opportunity
to ask questions of, and you have received answers thereto satisfactory to you from, the
Partnership and its representatives regarding the terms and conditions of the offering of
Interests, and you have obtained all additional information requested by you of the
Partnership and its representatives to verify the accuracy of all information furnished to
you regarding the offering of Interests.

     6.5. Evaluation of and Ability to Bear Risks. You have such
knowledge and experience in financial affairs that you are capable of evaluating the merits
and risks of purchasing an Interest, and you have not relied in connection with this
investment upon any representations, warranties or agreements other than those set forth in
this Agreement, the Partnership Agreement, the side letter between you and the General
Partner (if any), the opinions of counsel delivered at the Closing, and the Memorandum.
Your financial situation is such that you can afford to bear the economic risk of holding
the Interest for an indefinite period of time, and you can afford to suffer the complete
loss of your investment in the Interest. You are (a) an “accredited investor” as
such term is defined in Rule 501 of Regulation D promulgated under the Securities Act, and
(b) a “qualified purchaser” as defined under Section 2(a)(51)(A) of the Company Act,
and you represent and warrant that you have duly completed the Investor Questionnaire
attached hereto as Exhibit B and that the information contained therein is true and
correct. You hereby agree to promptly notify the General Partner if at any time any of the
information provided in the Investor Questionnaire is no longer true and correct.

     6.6. Purchase for Investment. You are acquiring the Interest to be
purchased by you pursuant to this Agreement for your own account or for a separate account
maintained by you or for the account of a single pension or trust fund of which you are a
trustee or as to which you are the sole qualified professional asset manager within the
meaning of DOL Prohibited Transaction Exemption 84-14 (a “QPAM”), in each case not
with a view to or for sale in connection with any distribution of all or any part of such
Interest. You hereby agree that you will not, directly or indirectly, transfer all or any
part of such Interest (or solicit any offers to buy, purchase or otherwise acquire or take a
pledge of all or any part of the Interest) except in accordance with (a) the
registration provisions of the Securities Act or an exemption from such registration
provisions, (b) any applicable state or non-U.S. securities laws, and (c)
the terms of the Partnership Agreement. If you are purchasing for the account of a pension
or trust fund, you represent that (except to the extent that you have otherwise advised the
Partnership in writing at least five Business Days prior to the date hereof) you are acting
as sole trustee or sole QPAM and have sole investment discretion with respect to the
acquisition of the Interest to be purchased by you pursuant to this Agreement, and the
determination and decision on your behalf to purchase such Interest for such pension or
trust

6

 

fund is being made by the same individual or group of individuals who customarily pass
on such investments, so that your decision as to purchases for such fund is the result of
one study and conclusion, and in making your decision to invest in the Partnership you have
not relied on any advice or recommendation of the Partnership, the General Partner, the
Manager or any of their affiliates. You understand that you must bear the economic risk of
an investment in an Interest for an indefinite period of time because, among other reasons,
the Interests are illiquid and the offering and sale of the Interests have not been
registered under the Securities Act and, therefore, the Interests cannot be sold unless they
are subsequently registered under the Securities Act or an exemption from such registration
is available. You also understand that sales or transfers of the Interests are further
restricted by the provisions of the Partnership Agreement, and may be restricted by
applicable state and non-U.S. securities laws.

     6.7. Beneficial Ownership, etc. If you are not a natural person,
(a) you have not been formed, organized, reorganized, capitalized or recapitalized
for the purpose of acquiring an Interest, (b) your Capital Commitment is less than
or equal to 20% of your total assets or less than or equal to 20% of your committed capital,
(c) your stockholders, partners, members or other beneficial owners do not have and will not
have individual discretion as to their participation in particular investments made by the
Partnership, (d) you are not an investment company registered or required to be registered
under the Company Act and (e) you are not a participant-directed defined contribution plan.
You understand and agree that the representations and warranties set forth above in this
Section 6.7 shall be deemed repeated and reaffirmed by you as of each date that you are
required to make a contribution of capital to the Partnership pursuant to the Partnership
Agreement, and if at any time during the term of the Partnership the representations and
warranties set forth in this Section 6.7 shall cease to be true, you shall promptly notify
the General Partner. If you are unable to make any of the representations set forth in the
preceding sentences of this Section 6.7, you shall have so indicated to the General Partner
in writing and shall have provided the General Partner at least five Business Days prior to
the date hereof with evidence (including opinions of outside counsel, if requested by the
General Partner) satisfactory in form and substance to the General Partner relating to
compliance with the Securities Act, the Company Act and such other governmental rules and
regulations as the General Partner shall request.

     6.8. Certain ERISA Matters. You represent that, except as
described in Exhibit B, (a) no part of the funds used by you to acquire an
Interest constitutes assets of any “benefit plan investor” within the meaning of section
3(42) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
and U.S. Department of Labor regulation 29 C.F.R. 2510.3-101, including assets allocated to
any insurance company separate account in which any such employee benefit plan (or its
related trust) has any interest, and (b) if an Interest is being acquired by or on
behalf of any such plan investor, entity, or account (any such purchaser being referred to
herein as an “ERISA Partner”), (i) such acquisition has been duly authorized
in accordance with the governing documents of such plan or separate account and (ii)
such acquisition and the subsequent holding of the Interest do not and will not constitute a
“prohibited transaction” within the meaning of section 406 of ERISA or section 4975 of the
Internal Revenue Code of 1986, as amended (the “Code”), that is not subject to an
exemption contained in ERISA or in the rules and regulations adopted by the U.S. Department
of Labor (the “DOL”) thereunder. The foregoing representation shall be based on a
list of the Other Purchasers to be provided by the General Partner to each ERISA

7

 

Partner prior to the Closing. You acknowledge that, as a Limited Partner, you generally will
have no right to withdraw from the Partnership.

     6.9. Certain Tax Matters. Either (a) you are not a
partnership, grantor trust, or S corporation, or (b) you are such an entity, but
(i) less than 65% of your value is attributable to your interests in the
Partnership, and (ii) permitting the Partnership to satisfy the 100-partner
limitation in Treasury Regulations section 1.7704-1(h)(ii) is not a principal purpose of
your beneficial owners investing in the Partnership through you; provided that if you are
unable to make either such representation, you shall have so indicated to the General
Partner in writing and shall have provided the General Partner with evidence (including
opinions of counsel) satisfactory in form and substance to the General Partner relating the
status of the Partnership under section 7704 of the Code.

     6.10. Compliance with Anti-Money Laundering Regulations, etc.

     (a) Either (i) the Purchaser (A) is subscribing for an Interest for the
Purchaser’s own account, own risk and own beneficial interest, (B) is not acting as an
agent, representative, intermediary, nominee or in a similar capacity for any other person
or entity, nominee account or beneficial owner, whether a natural person or entity (each
such natural person or entity, an “Underlying Beneficial Owner”) and no Underlying
Beneficial Owner will have a beneficial or economic interest in the Interest being purchased
by the Purchaser (whether directly or indirectly, including without limitation, through any
option, swap, forward or any other hedging or derivative transaction), (C) if it is an
entity, including a fund-of-funds, trust, pension plan or any other entity that is not a
natural person (each, an “Entity”), has carried out thorough due diligence as to and
established the identities of such Entity’s partners, members, shareholders, directors,
officers, trustees, beneficiaries and grantors (to the extent applicable, each a
“Related Person” of such Entity), holds the evidence of such identities, will
maintain all such evidence for at least five years from the end of the Investment Term, will
request such additional information as the Partnership may require to verify such identities
as may be required by applicable law, and will make such information available to the
Partnership upon its request, and (D) does not have the intention or obligation to transfer
all or a portion of its Interest to any Underlying Beneficial Owner or any other person; or
(ii) the Purchaser (A) is subscribing for an Interest as a record owner and will not have a
beneficial ownership interest in the Interest, (B) is acting as an agent, representative,
intermediary, nominee or in a similar capacity for one or more Underlying Beneficial Owners
and understands and acknowledges that the representations, warranties and covenants made in
this Agreement are made by the Purchaser with respect to both the Purchaser and the
Underlying Beneficial Owner(s), (C) has all requisite power and authority from the
Underlying Beneficial Owner(s) to execute and perform the obligations under this Agreement,
(D) has carried out thorough due diligence as to and established the identities of all
Underlying Beneficial Owners (and the identities of such Underlying Beneficial Owner’s
Related Persons (to the extent applicable)), holds the evidence of such identities, will
maintain all such evidence for at least five years from the end of the Investment Term, and
will make such information available to the Partnership upon its request and (E) does not
have the intention or obligation to transfer all or a portion of its Interest to any person
other than the Underlying Beneficial Owner(s).

     (b) If the Purchaser is a “financial institution” as such term is defined
in the U.S. Bank Secrecy Act (31 U.S.C. § 5311 et seq.), as amended, and the regulations
promulgated

8

 

thereunder by the U.S. Department of the Treasury, as such regulations may be amended
from time to time (the “Bank Secrecy Act”), the Purchaser has anti-money laundering
policies and procedures in place reasonably designed to collect information with respect to
and verify the identity of its Underlying Beneficial Owners or Related Persons.

     (c) Assuming the accuracy of the representations made by the General
Partner and the Partnership in Section 5, the purchase of an Interest that is being made on
its own behalf or, if applicable, on behalf of any Underlying Beneficial Owner does not
contravene, and amounts to be contributed by the Purchaser or any Underlying Beneficial
Owner to the Partnership were and are not directly or indirectly derived from activities
that contravene U.S. federal, state, local or international laws and regulations applicable
to the Purchaser or such Underlying Beneficial Owner, as the case may be, including
anti-money laundering laws and regulations (a “Prohibited Investment”).

     (d) Federal regulations and Executive Orders administered by the Department
of the Treasury’s Office of Foreign Assets Control (“OFAC”) prohibit, among other
things, the engagement in transactions with, and the provision of services to, certain
foreign countries, territories, entities and individuals. The lists of OFAC prohibited
countries, territories, persons and entities can be found on the OFAC website at
<www.treas.gov/ofac>. Neither the Purchaser nor, if applicable, any Underlying
Beneficial Owner or Related Person, is a country, territory, person or entity named on an
OFAC list, nor is the Purchaser nor, if applicable, any Underlying Beneficial Owner or
Related Person, a natural person or entity with whom dealings are prohibited under any OFAC
regulations.

     (e) Neither the Purchaser nor, if applicable, any Underlying Beneficial
Owner or Related Person, is a senior foreign political figure, or any immediate family
member or close associate of a senior foreign political figure within the meaning of, and
applicable guidance issued by the Department of the Treasury concerning, the Bank Secrecy
Act.

     (f) Neither the Purchaser nor, if applicable, any Underlying Beneficial
Owner or Related Person, is a foreign bank without a physical presence in any country other
than a foreign bank that (i) is an affiliate of a depositary institution, credit union or
foreign bank that maintains a physical presence in the United States or a foreign country,
as applicable, and (ii) is subject to supervision by a banking authority in the country
regulating such affiliated depositary institution, credit union, or foreign bank. A foreign
bank described in the preceding clauses (i) and (ii) is referred to herein as a
“Regulated Affiliate”, and a foreign bank without a physical presence in any country
that is not a Regulated Affiliate is referred to herein as a “Foreign Shell Bank”.
In addition, the Capital Contributions of the Purchaser and, if applicable, any Underlying
Beneficial Owner, do not originate from, nor will they be routed through, an account
maintained at (A) a Foreign Shell Bank or (B) a foreign bank (other than a Regulated
Affiliate) that is barred, pursuant to its banking license, from conducting banking
activities with the citizens of, or with the local currency of, the country that issued the
license.

     (g) The Purchaser agrees promptly to notify the General Partner should the
Purchaser become aware of any change in the information set forth in paragraphs (a) through
(f) of this Section 6.10. The Purchaser is advised that, by law, the Partnership may be
obligated to “freeze the account” of such Purchaser, either by prohibiting additional
contributions of capital or subscriptions for Interests, declining any requests by you to

9

 

transfer your Interest and/or segregating the assets in the Purchaser’s account in
compliance with governmental regulations, and the Partnership may also be required to report
such action and to disclose the Purchaser’s identity to OFAC or other government agencies.
To the fullest extent permitted by law, the Purchaser shall have no claim against any
Covered Person for any form of damages as a result of any of the actions described in this
Section 6.10(g).

     (h) The Purchaser understands and agrees that, notwithstanding anything to
the contrary contained in the Partnership Agreement, if, following the Purchaser’s purchase
of an Interest, it is discovered that the investment is or has become a Prohibited
Investment, such purchase may immediately be redeemed by the Partnership or otherwise be
subject to the remedies required by law, and, to the fullest extent permitted by law, the
Purchaser shall have no claim against the Partnership or the General Partner for any Claims
or Damages relating to or arising out of such forced redemption or other action.

     (i) The Purchaser agrees to provide the General Partner at any time during
the life of the Partnership with such information as the General Partner determines to be
necessary and appropriate to verify compliance with the anti-money laundering laws and
regulations of any applicable jurisdiction, including laws and regulations applicable to a
portfolio investment of the Partnership, or to respond to requests for information
concerning the identity of Limited Partners from any governmental entity (including any
governmental body, agency, authority or instrumentality in any jurisdiction exercising
executive, legislative, regulatory or administrative functions of government),
self-regulatory organization or financial institution in connection with its anti- money
laundering compliance procedures, and to update such information as necessary. The
Purchaser understands and agrees that the Partnership may be required to release
confidential information about the Purchaser and, if applicable, any Underlying Beneficial
Owner or Related Person to any person, if the General Partner, in its sole discretion,
determines that such disclosure is necessary to comply with applicable anti-money laundering
laws and regulations.

The representations and warranties set forth in this Section 6 shall be deemed repeated and
reaffirmed by the Purchaser as of each date that the Purchaser is required to make a contribution
of capital to or receives a distribution from the Partnership. If at any time during the life of
the Partnership the representations and warranties set forth in this Section 6 shall cease to be
true, the Purchaser shall promptly so notify the General Partner in writing.

          7. Management Fee. In consideration of the investment advisory and
management services referred to in Section 3.1 of the Partnership Agreement, you shall pay to the
Manager an annual fee (the “Management Fee”) in installments, payable when billed for the
period from the Initial Closing through December 31, 2010, and thereafter semi-annually in advance
as of each July 1 and January 1 thereafter prior to the expiration of the Investment Term (each, a
“Payment Date”), in an amount not in excess of your Remaining Capital Commitment calculated
as follows:

     (a) (i) through the earliest of (x) the termination of the
Investment Period, (y) one year after the date on which an amount equal to 75% of
the aggregate Capital Commitments of the Non-Defaulting Limited Partners (excluding Capital
Commitments reserved but not yet committed for Follow-on Investments) have been invested or
committed for investment and (z) the date on which the Principals hold an initial
closing in respect of a new private equity fund having the same investment objective as the
Partnership, an amount equal to 2.0% per annum of your Capital Commitment, and (ii)
thereafter until the last day of the

10

 

Investment Term, an amount equal to 1.75% per annum of your pro rata share (expressed
as a fraction, the numerator of which is your Capital Commitment and the denominator of
which is an amount equal to the aggregate Capital Commitments of all the Partners) of the
aggregate Carrying Value of the Portfolio Investments from time to time held by the
Partnership, provided, that, in the event that you are admitted as a Limited Partner
subsequent to the Initial Closing, such amount will be payable as if you were admitted as a
Limited Partner at the Initial Closing and subject to interest at a rate per annum equal to
the rate of interest publicly announced by Citibank, N.A. from time to time in New York City
as its prime rate, plus 200 basis points, from the date of the Initial Closing, or such
other Management Fee Payment Date, if any, to the date of your admission as a Limited
Partner;

     (b) reduced, but not below zero, by the sum of

     (i) an amount equal to your Capital Contributions made to the Partnership
to pay Placement Fees (if any) since the previous Payment Date, and

     (ii) an amount equal to your pro rata share (expressed as a fraction, the
numerator of which is your Capital Commitment and the denominator of which is an amount
equal to the aggregate Capital Commitments of all the Partners) of the Partnership’s
proportionate share (based on the Committed Capital of the Partnership and the Institutional
Parallel Funds) of all Fee Income received by the Manager or the General Partner since the
previous Payment Date.

To the extent that the Management Fee is not reduced as of any given Payment Date by the fees or
amounts referred to in sub-clause (b) above (or any portion thereof determined with respect to a
previous Payment Date and carried over to the current Payment Date pursuant to this sentence)
because the Management Fee has been reduced to zero, the excess shall be carried over to the next
succeeding Payment Date (and, if necessary, to one or more subsequent Payment Dates) and applied as
a reduction of the Management Fee, but not below zero, for such succeeding Payment Date (or a
subsequent Payment Date). Installments for any period other than a full semi-annual period shall
be adjusted on a pro rata basis according to the actual number of days elapsed.

          8. Amendments and Waivers. This Agreement may be amended and the
observance of any provision hereof may be waived (either generally or in a particular instance and
either retroactively or prospectively) only with the written consent of you and the Partnership.

          9. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by you or by or on behalf of the Partnership in
connection with the transactions contemplated by this Agreement shall survive the execution and
delivery of this Agreement, any investigation at any time made by or on behalf of the Partnership
or you, and the issue and sale of Interests.

          10. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and assigns of the parties
hereto, and the Manager and its successors and assigns as third party beneficiaries hereof.

          11. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given to any party when
delivered by hand, when delivered by facsimile or e-mail and confirmed, or when mailed, first-class
postage prepaid,

11

 

(a) if to you, to you at the address, telecopy number or e-mail address set forth below your
signature, or to such other address, telecopy number or e-mail address as you shall have furnished
to the Partnership in writing, and (b) if to the Partnership, to it at 520 Madison Avenue,
10th Floor, New York, New York 10022, telephone (212) 284-1700, fax number (212)
284-1717, attention: Brian P. Friedman (bfriedman@jefferies.com), with a copy to Carmen Romano,
Esq. (carmen.romano@dechert.com), Dechert LLP, Cira Centre, 2929 Arch Street, Philadelphia, PA
19104, fax number 215-994-2222, or to such other address or addresses, telecopy number or numbers
or e-mail address or addresses, as the Partnership shall have furnished to you in writing, provided
that any notice to the Partnership shall be effective only if and when received by the General
Partner.

          12. Applicable Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE INTERPRETED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN THAT JURISDICTION
WITHOUT REFERENCE TO CONFLICTS OF LAW PRINCIPLES THEREOF.

          13. Table of Contents and Headings. The table of contents and the
headings of the sections of this Agreement are inserted for convenience only and shall not be
deemed to constitute a part hereof.

          14. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter of this Agreement, and there are no representations,
covenants or other agreements except as stated or referred to herein.

          15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken together shall
constitute a single instrument.

          If you are in agreement with the foregoing, please sign the form of agreement on the enclosed
counterparts of this Agreement and return such counterparts to the General Partner. Upon
acceptance by the General Partner, this Agreement shall become a binding agreement between you and
the Partnership.

12

 

	 	 	 	 	 
	 	JEFFERIES CAPITAL PARTNERS V L.P.

 	 
	 	By:  	                     JCP V LLC,
 	 
	 	 	its General Partner 	 
	 	 	 
	 	By:  	                               Jefferies Capital Partners LLC,
 	 
	 	 	its Managing Member 	 
	 	 	 
	 	By:  	                                    /s/ Brian P. Friedman
 	 
	 	 	Name:  	Brian P. Friedman 	 
	 	 	Title:  	Managing Member 	 
	 

	 	 	 	 	 
	 	JCP V LLC

 	 
	 	By:  	                Jefferies Capital Partners LLC,
 	 
	 	 	its Managing Member 	 
	 	 	 
	 	By:  	     /s/ Brian P. Friedman
 	 
	 	 	Name:  	Brian P. Friedman 	 
	 	 	Title:  	Managing Member 	 
	 

	 	 	 	 	 
	 	The undersigned Manager is executing and

delivering this Agreement solely for the

purpose of agreeing to and accepting the

benefits of the provisions of Sections 2 and 7.

JEFFERIES CAPITAL PARTNERS LLC

 	 
	 	By:  	/s/ Brian P. Friedman
 	 
	 	 	Name:  	Brian P. Friedman 	 
	 	 	Title:  	Managing Member 	 
	 

13

 

	 	 	 	 	 	 	 	 	 	 	 

	The foregoing Agreement is
hereby agreed to by the
undersigned as of the 12th
day of August, 2010

	 	 	 	 	 	 
	Jefferies Group, Inc.	 	 	 	Amount of Capital Commitment:

	 
	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Peregrine Broadbent  	 	$10,000,000		 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Name:

Title:
	 	Peregrine Broadbent

Chief Financial Officer	 	 	 	 	 	 

	 	 	 

	Name, Address, Facsimile

	 	U.S. Taxpayer
	Number and E-mail Address for Notices:

	 	Identification Number:
	 
	 	 
	Jefferies Group, Inc.

	 	95-4719745
	520 Madison Avenue

	 	Location of Principal Executive Office:
	New York, NY 10022

	 	520 Madison Avenue
	Attention: Peregrine Broadbent

	 	New York, NY 10022
	Facsimile: ___________________________________
	 	 
	Telephone: (212) 284-2338
	 	 
	E-mail: pbroadbent@Jefferies.com
	 	 

14

 

Exhibit A

Amended and Restated

Limited Partnership Agreement

 

 

Exhibit B

INVESTOR QUESTIONNAIRE

	A.	 	General Information
	 
	1.	 	The Investor
	 
	 	 	Name: Jefferies Group, Inc.
	 
	 	 	Type of investor (e.g., individual, corporation, trust, limited partnership, general
partnership, limited liability company): Corporation

	 	 	 

	Permanent residence or principal place of business:

	 	520 Madison Avenue
	(as applicable)

	 	(Number and Street)

	 	 	 	 	 	 	 

	New York
	 	NY
	 	10022
	 	U.S.A.
	 
	(City)
	 	(State)
	 	(Zip Code)
	 	(Country)

	 	 	 

	Address for correspondence (if different from above):
	 	 
	 

	 	 
	 

	 	(Number and Street)

	 	 	 	 	 	 	 

	 
	(City)
	 	(State)
	 	(Zip Code)
	 	(Country)

	 	 	Preferred mailing address: Residence                    ; Business X

	 	 	 	 	 	 	 

	Telephone number:

	 	 	 	E-mail Address:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Facsimile number:
	 	 	 	 	 	 
	 	 	 

	2.	 	Authorized Individual Executing this Questionnaire or Individual Responsible for
Investment Decisions on Behalf of Investor

	 	 	Name: Peregrine Broadbent
	 
	 	 	Address: 520 Madison Avenue

(Number and Street)

	 	 	 	 	 	 	 

	New York
	 	NY
	 	10022
	 	U.S.A.
	 
	(City)
	 	(State)
	 	(Zip Code)
	 	(Country)

	 	 	 

	Principal occupation and current position or title:
	 	 
	 

	 	 

	 	 	Telephone number:(212) 284-2338 E-mail Address: pbroadbent@Jefferies.com

	 	 	 

	Facsimile number:
	 	 
	 

	 	 

	 	 	Title or relationship to the investor (e.g., attorney, accountant): Chief Financial Officer

	3.	 	Primary Contact Person for Investor (if applicable)
	 
	 	 	Name: Peregrine Broadbent
	 
	 	 	Address: 520 Madison Avenue

(Number and Street)

	 	 	 	 	 	 	 

	New York
	 	NY
	 	10022
	 	U.S.A.
	 
	(City)
	 	(State)
	 	(Zip Code)
	 	(Country)

	 	 	Telephone number:(212) 284-2338 E-mail Address:
pbroadbent@Jefferies.com

	 	 	 

	Facsimile number:
	 	 
	 

	 	 

 

	 	 	Title or relationship to the investor (e.g., attorney, accountant): Chief
Financial Officer
	 
	4.	 	Alternative Contact Person for Drawdown Notices (if applicable)

	 	 	 

	Name:

	 	Chuck Hendrickson
	 

	 	 

	 	 	 

	Address:

	 	520 Madison Avenue
	 

	 	 
	 

	 	(Number and Street)

	 	 	 	 	 	 	 

	New York
	 	NY
	 	10022
	 	U.S.A.
	 
	(City)
	 	(State)
	 	(Zip Code)
	 	(Country)

	 	 	Telephone number: (212) 284-4606   E-mail Address: chendrickson@Jefferies.com

	 	 	 

	Facsimile number:

	 	 
	 

	 	 

	 	 	 

	Title or relationship to the investor (e.g., attorney, accountant):

	 	 
	 

	 	 

	5.	 	Individuals
	 
	 	 	U.S. citizen or legal permanent resident: Yes o       No o
	 
	 	 	Age:                     Marital Status:                     

	 	 	 

	City and state of citizenship:

	 	 
	 

	 	 

	6.	 	Entities

	 	 	 

	
State or other jurisdiction in which incorporated or formed:

	 	Delaware
	 

	 	 

	 	 	 

	Date of incorporation or formation:

	 	12/23/1998 
	 

	 	 

	B.	 	Other Certifications
	 
	1.	 	The investor was formed, organized, reorganized, capitalized or recapitalized for
the specific purpose of purchasing an Interest:

Yes o       No þ

	 	 	NOTE: If “Yes,” each person who is a beneficial owner of the investor: (i) must separately
qualify as an “accredited investor,” (ii) must separately indicate whether the beneficial
owner is a “qualified purchaser” (as described below), and (iii) must complete a copy of
this Investor Questionnaire as if such person were directly purchasing an Interest.
	 
	2.	 	(a) The investor is an investment company or, but for the exceptions provided in
Sections 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940, as amended (the “Company
Act”), would be an “investment company” under the Company Act.

Yes o       No þ

	 	 	NOTE: If “No,” proceed to Question 3 below.
	 
	 	 	(b) The investor had one or more beneficial owners of its outstanding securities (determined
in accordance with Section 3(c)(1)(A) of the Company Act) on or before April 30, 1996.

Yes o       No o

Exhibit B-2

 

	 	 	(c)If “Yes,” the investor has received the consent of all investors and beneficial owners
as required under Section 2(a)(51)(C) of the Company Act in order for the investor to be
treated as a “qualified purchaser.”

Yes o     No o

	 	 	*[If the investor answered “Yes” to 2(a), then, upon request of the General Partner, the
investor shall be required to disclose to the General Partner the number of “beneficial
owners” (within the meaning of the Company Act) of voting securities of the investor.]*

	3.	 	The investor is exempt from U.S. federal income taxation under Section 501(a) of the
Internal Revenue Code of 1986, as amended (the “Code”).

Yes o     No þ

	4.	 	The investor is controlled by U.S. persons or entities.

Yes þ     No o

	5.	 	The investor is a “United States person” for U.S. federal income tax
purposes. 1 

Yes þ     No o

	 	 	If “Yes,” the investor must provide a completed and executed copy of Internal Revenue
Service Form W-9 to the General Partner prior to the Closing Date.

	 	 	If “No,” the investor must provide a completed and executed copy of Internal Revenue Service
Form W-8BEN (or other applicable form of Form W-8) to the General Partner prior to the
Closing Date.

	 	 	Other Information

	 	(a)	 	Within the past two years, has the investor made a general assignment for the
benefit of creditors, been in receivership or filed or had filed against the investor a
petition in bankruptcy?

Yes o     No þ

	 	(b)	 	Are there any lawsuits outstanding or threatened involving the investor, or are
there any claims against the investor, that could materially affect the investor’s net
worth as

 

	 	 	 
	1 	 	The term “United States person” means (i) a
citizen or resident of the United States; (ii) a domestic partnership; (iii) a
domestic corporation; (iv) an estate that is not a “foreign estate” as defined
in the Code; (v) any trust if a court within the United States is able to
exercise primary supervision over its administration and one or more United
States persons have the authority to control all of its substantial decisions.

Exhibit B-3

 

 

	 	 	 	reported in this Investor Questionnaire? If “Yes,” please provide details on a separate sheet.

Yes o     No þ

	 	(c)	 	Please indicate below any additional matter of a financial nature that is
relevant to an analysis of the investor’s financial position:
	 
	 	 	 	 
 
	 
	 	 	 	 
 
	 
	 	(d)	 	Are you a person (including an entity) that has discretionary authority or
control with respect to the assets of the Partnership or a person that provides
investment advice with respect to Partnership assets, or an “affiliate” of such a
person? For purposes of this representation, an “affiliate” is any person controlling,
controlled by or under common control with the Fund or any of its investment advisers,
including by reason of having the power to exercise a controlling influence over the
management or policies of the Fund or its investment adviser(s).

Yes o     No þ

	C.	 	Investor Eligibility (Investors must complete both parts 1 and 2 below)
	 
	1.	 	Accredited Investor 

          Interests will be sold only to investors who are “accredited investors,” as defined in Rule
501 under the Securities Act of 1933, as amended (the “Securities Act”). For additional information
regarding the definition of “accredited investor,” please refer to Rule 501 under the Securities
Act. Please indicate the basis of the investor’s “accredited investor” status by checking all
applicable statements below.

          The investor is:

	 	(a)	 o 	an individual who had an income in excess of $200,000 for
each of the last two years (or joint income with the investor’s spouse in excess of
$300,000 in each of those years) and who reasonably expects to reach the same income
level in the current year;
	 
	 	(b)	 o 	an individual whose net worth, or joint net worth with the investor’s
spouse at the time of purchase exceeds $1,000,000, excluding the value of the
investor’s primary residence;
	 
	 	(c)	 o 	a bank, as defined in Section 3(a)(2) of the Securities Act, or a
savings and loan association, building and loan association, cooperative bank,
homestead association or similar institution, as defined in Section 3(a)(5)(A) of the
Securities Act, in each case whether acting in its individual or fiduciary capacity;
	 
	 	(d)	 o 	a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended;

Exhibit B-4

 

 

	 	(e)	 o 	an insurance company as defined in Section 2(a)(13) of the Securities Act;

	 
	 	(f) 	 o 	 an investment company registered under the Company Act;
	 
	 	(g)	 o 	(i) a business development company as defined in Section 2(a)(48) of
the Company Act or (ii) a Small Business Investment Company licensed by the United
States Small Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;
	 
	 	(h)	 o 	an employee benefit plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its political
subdivisions, if such plan has total assets in excess of $5,000,000;
	 
	 	(i)	 o 	any employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), if the investment decision is made
by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank,
savings and loan association, insurance company or registered investment adviser, or if
the employee benefit plan has total assets in excess of $5,000,000;
	 
	 	(j)	 o 	a self-directed employee benefit plan within the meaning of ERISA, with
investment decisions made solely by persons who are “accredited investors” as defined
in Rule 501 under the Securities Act;

	 	•	 	If the investor checked this statement, please provide a list of all
decision-makers and a completed Investor Questionnaire from each
decision-maker.

	 	(k)	 o 	a private business development company as defined in Section 202(a)(22)
of the Investment Advisers Act of 1940, as amended (the “Advisers Act”);
	 
	 	(l)	 þ 	a corporation, a partnership, a Massachusetts or similar business
trust, or an organization described in Section 501(c)(3) of the Code, in each case not
formed for the specific purpose of acquiring an Interest, with total assets in excess
of $5,000,000;
	 
	 	(m)	 o 	a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring an Interest, whose purchase is directed by persons having
such knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the prospective investment;
	 
	 	(n)	 o 	an entity in which each and every one of the equity owners is an
accredited investor.

	 	•	 	If the investor checked this statement, please provide a list of all
equity owners and a completed Investor Questionnaire from each equity owner.

     What is the dollar amount of the investor’s estimated net worth at the time of the proposed
investment in the Partnership (if the investor is an individual, this amount should exclude the
value of the investor’s principal residence, and its furnishings, and automobiles, but may include
the investor’s joint net worth with the investor’s spouse)? (NOTE: An estimate or amount within a

Exhibit B-5

 

 

range may be given; a statement that the investor’s net worth is more than ten times
the amount of the subscription commitment is also acceptable.)

$                                        

1. Qualified Purchaser

     Interests will be sold only to investors who meet the requirements of a “qualified purchaser”
as defined for purposes of Section 3(c)(7) of the Company Act. For additional information
regarding the definition of “qualified purchaser” please refer to Sections 3(c)(7) and 2(a)(51)(A)
of the Company Act and the related provisions and rules (including but not limited to Rule 2a51-1).

     Please indicate the basis of the investor’s “qualified purchaser” status by checking all
applicable statements below.

     The investor is:

			
	     (a) o	 	an individual (including any person who holds a joint,
community property, or other similar shared ownership interest in an issuer that is
excepted under Section 3(c)(7) of the Company Act with that person’s qualified
purchaser spouse) who owns not less than $5,000,000 in Investments (as defined herein);

			
	     (b) o	 	a company1 that owns at least
$5,000,000 in Investments and that is owned directly or indirectly by or for two or
more natural persons who are related as siblings or spouse (including former spouses),
or direct lineal descendants by birth or adoption, spouses of such persons, the estates
of such persons, or foundations, charitable organizations, or trusts established by or
for the benefit of such persons (“Family Company”);

			
	     (c) o	 	a trust that is not covered by clause (b) and that was not formed for
the specific purpose of acquiring the securities offered, as to which the trustee or
other person authorized to make decisions with respect to the trust, and each settlor
or other person who has contributed assets to the trust, is a person described in
clause (a), (b) or (d);

			
	     (d) þ	 	a person (including a company), acting for its own account or the
accounts of other qualified purchasers, who in the aggregate owns and invests on a
discretionary basis, not less than $25,000,000 in Investments;

			
	     (e) o	 	a “Qualified Institutional Buyer” as defined in Rule 144A under the
Securities Act (as that term is modified by the limitations imposed thereon by Rule
2a51-1(g)(1) under the Company Act);

			
	     (f) o	 	a company, regardless of the amount of its investment, each
of the beneficial owners of which is a person described in (a), (b), (c), (d) or (e).

 

			
	1	 	For purposes of this question, “company”
includes a corporation, a partnership, an association, a joint-stock company, a
trust, a fund or any organized group of persons whether incorporated or not, or
any receiver, trustee in bankruptcy or similar official or a liquidating agent
for any of the foregoing, in its capacity as such.

Exhibit B-6

 

For the purposes of determining “qualified purchaser” status, the term “Investments” means all of
the following:

     (i) Securities (as defined by Section 2(a)(1) of the Securities Act), other than securities of
an issuer that controls, is controlled by, or is under common control with, the investor, unless
the issuer of such securities is any of the following:

	 	(A)	 	An investment company, a company that would be an investment
company under the Company Act but for the exclusions provided by Sections
3(c)(1) through 3(c)(9) of the Company Act or the exemptions provided by Rules
3a-6 or 3a-7 thereunder, or a commodity pool;
	 
	 	(B)	 	A company that files reports pursuant to Section 13 or Section
15(d) of the U.S. Securities Exchange Act of 1934, as amended, or that has a
class of securities that are listed on a “designated offshore securities
market” as that term is defined by Regulation S under the Securities Act; or
	 
	 	(C)	 	A company with shareholders’ equity of not less than $50
million (determined in accordance with generally accepted accounting
principles) as reflected on the company’s most recent financial statements,
provided that such financial statements present the information as of a date
within 16 months preceding the date on which the investor acquires the
securities of a Section 3(c)(7) company.

     (ii) Real estate held for “Investment Purposes,” as described below.

     (iii) “Commodity Interests” held for Investment Purposes, as described below. “Commodity
Interests” means commodity futures contracts, options on commodity futures contracts, and options
on physical commodities traded on or subject to the rules of:

	 	(A)	 	Any contract market designated for trading such transactions
under the Commodity Exchange Act (the “CEA”) and the rules thereunder; or
	 
	 	(B)	 	Any board of trade or exchange outside the United States, as
contemplated in Part 30 of the rules under the CEA.

     (iv) “Physical Commodities” held for Investment Purposes, as described below. “Physical
Commodity” means any physical commodity with respect to which a Commodity Interest is traded on a
market specified in (iii)(A) or (B) immediately above.

     (v) To the extent not securities, “Financial Contracts” entered into for Investment Purposes,
as described below. “Financial Contracts” means any arrangement that:

	 	(A)	 	Takes the form of an individually negotiated contract,
agreement, or option to buy, sell, lend, swap, or repurchase, or other similar
individually negotiated transaction commonly entered into by participants in
the financial markets;

Exhibit B-7

 

	 	(B)	 	Is in respect of securities, commodities, currencies, interest
or other rates, other measures of value, or any other financial or economic
interest similar in purpose or function to any of the foregoing; and
	 
	 	(C)	 	Is entered into in response to a request from a counter party
for a quotation, or is otherwise entered into and structured to accommodate the
objectives of the counter party to such arrangement.

     (vi) If the investor is a company that would be an investment company but for one of the
exclusions provided by Section 3(c)(1) or Section 3(c)(7) of the Company Act, or a commodity pool,
any amounts payable to the investor pursuant to a firm agreement or similar binding commitment
pursuant to which a person has agreed to acquire an interest in, or make capital contributions to,
the investor upon demand of the investor; and

     (vii) Cash and cash equivalents (including foreign currencies) held for Investment Purposes,
as described below, including:

	 	(A)	 	Bank deposits, certificates of deposit, bankers acceptances and
similar bank instruments held for Investment Purposes; and
	 
	 	(B)	 	The net cash surrender value of an insurance policy.

Investment Purposes. For purposes of determining if something is an “Investment” the following
applies. Real estate is not considered to be held for Investment Purposes by an investor if it is
used by the investor or a Related Person, as described below, for personal purposes or as a place
of business, or in connection with the conduct of the trade or business of the investor or a
Related Person, provided that real estate owned by an investor that is engaged primarily in the
business of investing, trading or developing real estate in connection with such business may be
deemed to be held for Investment Purposes. Residential real estate is not deemed to be used for
personal purposes if deductions with respect to such real estate are not disallowed by Section 280A
of the Code. A Commodity Interest or Physical Commodity owned, or a financial contract entered
into, by an investor that is engaged primarily in the business of investing, reinvesting, or
trading in Commodity Interests, Physical Commodities or financial contracts in connection with such
business may be deemed to be held for Investment Purposes. The term “Related Person” generally
means a person who is related to the investor as a sibling, spouse or former spouse, or is a direct
lineal descendant or ancestor by birth or adoption of the investor, or is a spouse of such
descendant or ancestor, provided that, in the case of a Family Company, a Related Person includes
any owner of the Family Company and any person who is a Related Person of such owner.

Valuation. For purposes of determining whether an investor is a qualified purchaser, the aggregate
amount of Investments owned and invested on a discretionary basis by the investor is the
Investments’ fair market value on the most recent practicable date or their cost, provided that: in
the case of Commodity Interests, the amount of Investments is the value of the initial margin or
option premium deposited in connection with such Commodity Interests; and, in each case, certain
deductions (described below) from the amount of Investments owned by the investor must be made. In
determining whether any person is a qualified purchaser there is deducted from the amount of such
person’s Investments the amount of any outstanding indebtedness incurred to acquire or for the
purpose of acquiring the Investments owned by such person. Additionally, in determining whether a
Family Company is a qualified purchaser, there will be deducted from the value of such Family
Company’s Investments any outstanding indebtedness incurred by an owner of the Family Company to
acquire such Investments.

Exhibit B-8

 

Joint Investments. In determining whether a natural person is a qualified purchaser, there may be
included in the amount of such person’s Investments any Investments held jointly with such person’s
spouse, or Investments in which such person shares with such person’s spouse a community property
or similar shared ownership interest. In determining whether spouses who are making a joint
investment in the Partnership are qualified purchasers, there may be included in the amount of each
spouse’s Investments any Investments owned by the other spouse (whether or not such Investments are
held jointly). In each case, the amount of any such Investments will be reduced by any deductions
specified above (under “Valuation”) with respect to each spouse.

Investments by Subsidiaries. For purposes of determining the amount of Investments owned by a
company under “Qualified Purchaser” in the Investor Eligibility section above, there may be
included Investments owned by majority-owned subsidiaries of the company and Investments owned by a
company (“Parent Company”) of which the company is a majority-owned subsidiary, or by a
majority-owned subsidiary of the company and other majority-owned subsidiaries of the Parent
Company.

Certain Retirement Plans and Trusts. In determining whether a natural person is a qualified
purchaser, there may be included in the amount of such person’s Investments any Investments held in
an individual retirement account or similar account the Investments of which are directed by and
held for the benefit of such person.

3. Status as Benefit Plan Investor

     (a) Overview

     A regulation issued by the U.S. Department of Labor 29 C.F.R. 2510.3-101 and Section 3(42)
ERISA define “Benefit Plan Investor” as

     (i) any employee benefit plan subject to Part 4 of Title I of ERISA;

     (ii) any plan to which Internal Revenue Code Section 4975 applies (which includes a trust
described in Internal Revenue Code Section 401(a) that is exempt from tax under Internal Revenue
Code Section 501(a), a plan described in Internal Revenue Code Section 403(a), an individual
retirement account or annuity described in Internal Revenue Code Section 408 or 408A, a medical
savings account described in Internal Revenue Code Section 220(d), a health savings account
described in Internal Revenue Code Section 223(d) and an education savings account described in
Internal Revenue Code Section 530); and

     (iii) any entity whose underlying assets include plan assets by reason of a plan’s investment
in the entity (generally because 25 percent or more of a class of equity interests in the entity is
owned by plans).

     An entity described in (iii) immediately above will be considered to hold plan assets only to
the extent of the percentage of the equity interests in the entity held by benefit plans described
in (i) and (ii) immediately above. Benefit Plan Investors also include that portion of any
insurance company’s general account assets that are considered “plan assets” and (except if the
entity is an

Exhibit B-9

 

investment company registered under the Investment Company Act) the assets of any insurance
company separate account or bank common or collective trust in which plans invest.

     (b) Status as Benefit Plan Investor (Please Check Each as Applicable)

     (i) Are you a Benefit Plan Investor as defined above?

Yes o     No o

     (ii) Are you a plan to which Section 4975 of the Code applies, or an entity
any of the assets of which include assets of any such plan?

Yes o     No o

     (iii) Are you a governmental plan, non-electing church plan, or other
employee benefit plan within the meaning of Section 3(3) of ERISA that is not a plan
described in (i) or (ii) above?

Yes o     No o

     (iv) Are you an insurance company general account?

Yes o     No o

     (v) If the answer to the above question (iv) is “yes”, please indicate the
percentage (if any) of your assets that constitutes the assets of Benefit Plan Investors (as
such term is defined above):

                     %

     (vi) Are you an entity whose underlying assets include plan assets of
Benefit Plan Investors by reason of a plan’s investment in the entity?

Yes o     No o

     (vii) If the answer to the above question (vi) is “yes”, please indicate
the maximum percentage (rounded up to the nearest 10% increment) of your assets that may
constitute Benefit Plan Investor assets:

                     %

     (viii) If you are investing as a trustee or custodian for an Individual
Retirement Account (“IRA”), are you a qualified IRA custodian or trustee? If yes,
the “Additional Representations with Respect to Investment for IRA” must be completed.

Yes o     No o

     (ix) Are you a participant-directed plan?

Exhibit B-10

 

 

Yes o     No o

(If the answer to sub-category (ix) above is yes, please contact the General Partner.)

     You understand that the General Partner will be relying on the accuracy and completeness of
your responses to the foregoing questions. You represent and warrant to the General Partner that
you will notify the General Partner immediately if at any time any information provided herein
ceases to be true, accurate and complete.

Exhibit B-11

 

 

ADDITIONAL REPRESENTATION WITH RESPECT TO

INVESTMENT FOR AN IRA

If the investor is an IRA, the individual who established the IRA: (i) has directed the custodian
or trustee of the investor to execute the Agreement on the signature page; and (ii) has signed
below to indicate that he or she has reviewed, and hereby certifies to the accuracy of, the
representation and warranties made by the Investor herein.

	 	 	 

	 

Type in Name

	 	 
	 
	 	 
	 

Signature

	 	 
	 
	 	 
	Name and Address of Custodian
and Contact Individual:
	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	Account or other Reference Number:
	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	Trustee/Custodian’s Tax I.D. Number:exv10w17

Exhibit 10.17

RAE SYSTEMS INC.

2010 MANAGEMENT INCENTIVE PLAN

Effective as of August 9, 2010

SECTION 1

BACKGROUND, PURPOSE AND DURATION

     1.1 Effective Date. The Plan is effective as of August 9, 2010.

     1.2 Purpose of the Plan. The Plan is intended to increase shareholder value and the
success of the Company by motivating Participants (1) to perform to the best of their abilities,
and (2) to achieve the Company’s objectives. The Plan’s goals are to be achieved by providing
Participants with incentive awards based on the achievement of goals relating to the performance of
the Company and its business units. The Plan is intended to permit the grant of awards that qualify
as performance-based compensation under section 162(m) of the Code.

SECTION 2

DEFINITIONS

     The following words and phrases shall have the following meanings unless a different meaning
is plainly required by the context:

     2.1 “Actual Award” means as to any Performance Period, the actual award (if any)
payable to a Participant for the Performance Period. Each Actual Award is determined by the Payout
Formula for the Performance Period, subject to the Committee’s authority under Section 3.5 to
reduce or eliminate the award otherwise determined by the Payout Formula.

     2.2 “Affiliate” means any corporation or other entity (including, but not limited to,
partnerships and joint ventures) controlling, controlled by, or under common control with the
Company.

     2.3 “Base Salary” means as to any Performance Period, the Participant’s annualized
salary rate as in effect on the last day of the Performance Period. Base Salary shall be prorated
for a Performance Period of less than a full Fiscal Year. Such Base Salary shall be before both (a)
deductions for taxes or benefits, and (b) deferrals of compensation pursuant to Company-sponsored
plans.

     2.4 “Board” means the Board of Directors of the Company.

     2.5 “Code” means the Internal Revenue Code of 1986, as amended. Reference to a
specific section of the Code or regulation thereunder shall include such section or regulation, any
valid regulation promulgated thereunder, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such section or regulation.

     2.6 “Committee” means the committee appointed by the Board (pursuant to Section 4.1)
to administer the Plan.

 

 

     2.7 “Company” means RAE Systems Inc., a Delaware corporation, or any successor
thereto.

     2.8 “EBIT” means as to any Performance Period, the Company’s income before reductions
for interest, taxes and Minority Interest determined in accordance with generally accepted
accounting principles.

     2.9 “EBITA” means as to any Performance Period, the Company’s income before reductions
for interest, taxes, Minority Interest and acquisition-related intangible amortization, determined
in accordance with generally accepted accounting principles.

     2.10 “EBITDA” means as to any Performance Period, the Company’s income before
reductions for interest, taxes, Minority Interest, depreciation and amortization, determined in
accordance with generally accepted accounting principles.

     2.11 “Earnings Per Share” means as to any Performance Period, the Company’s diluted
earnings per share, determined in accordance with generally accepted accounting principles.

     2.12 “Employee” means any employee of the Company or of an Affiliate, whether such
employee is so employed at the time the Plan is adopted or becomes so employed subsequent to the
adoption of the Plan.

     2.13 “Fiscal Year” means any fiscal year of the Company.

     2.14 “Maximum Award” means as to any Actual Award to any Participant for any
Performance Period, the lesser of two hundred percent (200%) of Base Salary or $2 million (prorated
for a Performance Period of less than a full Fiscal Year).

     2.15 “Minority Interest” means the earnings or losses allocable to a minority interest
in a consolidated subsidiary, determined in accordance with generally accepted accounting
principles.

     2.16 “Net Income” means as to any Performance Period, the Company’s income after
taxes, determined in accordance with generally accepted accounting principles.

     2.17 “Operating Profit” means as to any Performance Period, the Company’s income that
remains after deducting product cost and operating expenses from net sales.

     2.18 “Participant” means as to any Performance Period, an Employee who has been
selected by the Committee for participation in the Plan for that Performance Period.

     2.19 “Payout Formula” means as to any Performance Period, the formula or payout
matrix established by the Committee pursuant to Section 3.4 in order to determine the Actual Awards
(if any) to be paid to Participants. The formula or matrix may differ from Participant to
Participant.

     2.20 “Performance Goals” means the goal(s) (or combined goal(s)) determined by the
Committee (in its discretion) to be applicable to a Participant for a Target Award for a
Performance Period. As determined by the Committee, the Performance Goals for any

- 2 -

 

Target Award applicable to a Participant may provide for a targeted level or levels of
achievement using one or more of the following measures: (a) EBIT, (b) EBITA, (c) EBITDA, (d)
Earnings Per Share, (e) Net Income, (f) Operating Profit, (g) Return on Net Assets, (h) Return on
Equity, (i) Return on Sales, (j) Revenue, and (k) Shareholder Return. The Performance Goals may
differ from Participant to Participant and from award to award.

     2.21 “Performance Period” means any fiscal period not to exceed three consecutive
Fiscal Years, as determined by the Committee in its sole discretion.

     2.22 “Plan” means the RAE Systems Inc. 2010 Management Incentive Plan, as set forth in
this instrument and as hereafter amended from time to time.

     2.23 “Return on Net Assets” means as to any Performance Period, the percentage equal
to the Company’s EBIT before incentive compensation, divided by the Company’s or business unit’s
average net assets, determined in accordance with generally accepted accounting principles.

     2.24 “Return on Equity” means as to any Performance Period, the percentage equal to
the Company’s Net Income divided by average stockholder’s equity, determined in accordance with
generally accepted accounting principles.

     2.25 “Return on Sales” means as to any Performance Period, the percentage equal to the
Company’s EBIT (after incentive compensation), divided by the Company’s or the business unit’s, as
applicable, Revenue, determined in accordance with generally accepted accounting principles.

     2.26 “Revenue” means as to any Performance Period, the Company’s net sales, determined
in accordance with generally accepted accounting principles.

     2.27 “Shareholder Return” means as to any Performance Period, the total return (change
in share price plus reinvestment of any dividends) of a Share.

     2.28 “Shares” means shares of the Company’s common stock, $0.001 par value.

     2.29 “Target Award” means the target award payable under the Plan to a Participant for
the applicable Performance Period, expressed as a percentage of his or her Base Salary for the
Performance Period, as determined by the Committee in accordance with Section 3.3.

SECTION 3

SELECTION OF PARTICIPANTS AND DETERMINATION OF AWARDS

     3.1 Selection of Participants. The Committee, in its sole discretion, shall select the
Employees who shall be Participants for such Performance Period. Participation in the Plan is in
the sole discretion of the Committee, and on a Performance Period by Performance Period basis.
Accordingly, an Employee who is a Participant for a given Performance Period in no way is
guaranteed or assured of being selected for participation in any subsequent Performance Period or
Periods.

- 3 -

 

     3.2 Determination of Performance Goals. The Committee, in its sole discretion, shall
establish the Performance Goals for each Participant for the Performance Period. Such Performance
Goals shall be set forth in writing.

     3.3 Determination of Target Awards. The Committee, in its sole discretion, shall
establish a Target Award for each Participant for the Performance Period. Each Participant’s Target
Award shall be determined by the Committee in its sole discretion, and each Target Award shall be
set forth in writing.

     3.4 Determination of Payout Formula or Formulae. The Committee, in its sole
discretion, shall establish a Payout Formula or Formulae for purposes of determining the Actual
Award (if any) payable to each Participant for such Performance Period. Each Payout Formula shall
(a) be in writing, (b) be based on a comparison of actual performance to the Performance Goals, (c)
provide for the payment of a Participant’s Target Award if the Performance Goals for the
Performance Period are achieved, and (d) provide for an Actual Award greater than or less than the
Participant’s Target Award, depending upon the extent to which actual performance exceeds or falls
below the Performance Goals. Notwithstanding the preceding, no Participant’s Actual Award under the
Plan may exceed his or her Maximum Award for the Performance Period.

     3.5 Determination of Actual Awards. After the end of each Performance Period, the
Committee shall certify in writing its determination of the extent to which the Performance Goals
applicable to each Participant for the Performance Period were achieved or exceeded. In making such
determination, the Committee may, in its discretion, exclude the effect (whether positive or
negative) of any material change in applicable accounting principles occurring following the
establishment of a Performance Goal or of any material structural change in the business of the
Company occurring following the establishment of a Performance Goal, whether by (a) merger,
consolidation, reorganization or recapitalization of the Company or any Affiliate, (b) acquisition,
divestiture, split-up, split-off or spin-off of an Affiliate or other business unit of

     the Company or of an Affiliate, or (c) any other material structural change that would, absent
an appropriate adjustment to the applicable Performance Goal, result in an inconsistent basis for
the determination of the extent of achievement of the Performance Goal. Each such adjustment, if
any, shall be made solely for the purpose of providing a consistent basis from period to period for
the determination of the extent of Performance Goal achievement in order to prevent the dilution or
enlargement of the Participant’s rights. The Actual Award for each Participant shall be determined
by applying the Payout Formula to the level of actual performance which has been certified by the
Committee. Notwithstanding any contrary provision of the Plan, the Committee, in its sole
discretion, may (a) eliminate or reduce the Actual Award payable to any Participant below that
which otherwise would be payable under the Payout Formula, and (b) determine what Actual Award, if
any, will be paid in the event of a termination of employment prior to the end of the Performance
Period. However, in no event will the exercise of such negative discretion to eliminate or reduce
the Actual Award payable to one Participant result in an increase in the Actual Award payable to
any other Participant.

     3.6 Right to Receive Payment. Each Actual Award that may become payable under the Plan
shall be paid solely from the general assets of the Company. Nothing in this Plan

- 4 -

 

shall be construed to create a trust or to establish or evidence any Participant’s claim of
any right other than as an unsecured general creditor with respect to any payment to which he or
she may be entitled.

     3.7 Timing of Payment. Payment of each Actual Award shall be made on or before the
fifteenth (15th) day of the third month following the end of the Performance Period during which
the Actual Award was earned, provided that prior to such date with respect to a Performance Period
ending with a Fiscal Year end the report of the independent public accountants on its audit of the
Company’s financial statements has been received by the Company or with respect to a Performance
Period not ending with a Fiscal Year end the report of the independent public accountants on its
review of the Company’s interim financial statements has been received by the Company.

     3.8 Form of Payment. Each Actual Award shall be paid in cash (or its equivalent) in a
single lump sum.

SECTION 4

ADMINISTRATION

     4.1 Committee is the Administrator. The Plan shall be administered by the Compensation
Committee of the Board of Directors.

     4.2 Committee Authority. It shall be the duty of the Committee to administer the Plan
in accordance with the Plan’s provisions. The Committee shall have all powers and discretion
necessary or appropriate to administer the Plan and to control its operation, including, but not
limited to, the power to (a) determine which Employees shall be granted awards, (b) prescribe the
terms and conditions of awards, (c) interpret the Plan and the awards, (d) adopt such procedures
and subplans as are necessary or appropriate to permit participation in the Plan by Employees who
are foreign nationals or employed outside of the United States, (e) adopt rules for the
administration, interpretation and application of the Plan as are consistent therewith, and (f)
interpret, amend or revoke any such rules.

     4.3 Decisions Binding. All determinations and decisions made by the Committee, the
Board, and any delegate of the Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.

     4.4 Delegation by the Committee. The Committee, in its sole discretion and on such
terms and conditions as it may provide, may delegate all or part of its authority and powers under
the Plan to one or more directors and/or officers of the Company; provided, however, that the
Committee may delegate its authority and powers only with respect to awards that are not intended
to qualify as performance-based compensation under section 162(m) of the Code.

- 5 -

 

SECTION 5

GENERAL PROVISIONS

     5.1 Tax Withholding. The Company shall withhold all applicable taxes from any Actual
Award, including any federal, state and local taxes (including the Participant’s FICA obligation).

     5.2 No Effect on Employment or Service. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate any Participant’s employment or service at
any time, with or without cause. For purposes of the Plan, transfer of employment of a Participant
between the Company and any one of its Affiliates (or between Affiliates) shall not be deemed a
Termination of Service. Employment with the Company and its Affiliates is on an at-will basis only.
The Company expressly reserves the right, which may be exercised at any time and without regard to
when during a Performance Period such exercise occurs, to terminate any individual’s employment
with or without cause, and to treat him or her without regard to the effect which such treatment
might have upon him or her as a Participant.

     5.3 Participation. No Employee shall have the right to be selected to receive an award
under this Plan, or, having been so selected, to be selected to receive a future award.

     5.4 Indemnification. Each person who is or shall have been a member of the Committee,
or of the Board, shall be indemnified and held harmless by the Company against and from (a) any
loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from any claim, action, suit, or proceeding to which he or she may be
a party or in which he or she may be involved by reason of any action taken or failure to act under
the Plan or any award, and (b) from any and all amounts paid by him or her in settlement thereof,
with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such
claim, action, suit, or proceeding against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be entitled under the
Company’s Certificate of Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or
under any power that the Company may have to indemnify them or hold them harmless.

     5.5 Successors. All obligations of the Company under the Plan, with respect to awards
granted hereunder, shall be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of
all or substantially all of the business or assets of the Company.

     5.6 Beneficiary Designations. If permitted by the Committee, a Participant under the
Plan may name a beneficiary or beneficiaries to whom any vested but unpaid award shall be paid in
the event of the Participant’s death. Each such designation shall revoke all prior designations by
the Participant and shall be effective only if given in a form and

- 6 -

 

manner acceptable to the Committee. In the absence of any such designation, any vested
benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.

     5.7 Nontransferability of Awards. No award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will, by the
laws of descent and distribution, or to the limited extent provided in Section 5.6. All rights with
respect to an award granted to a Participant shall be available during his or her lifetime only to
the Participant.

SECTION 6

AMENDMENT, TERMINATION AND DURATION

     6.1 Amendment, Suspension or Termination. The Board, in its sole discretion, may amend
or terminate the Plan, or any part thereof, at any time and for any reason. The amendment,
suspension or termination of the Plan shall not, without the consent of the Participant, alter or
impair any rights or obligations under any Target Award theretofore granted to such Participant;
provided, however, that the Board, in its sole discretion and without the consent of any
Participant, may amend the Plan, to take effect retroactively or otherwise, as it deems necessary
or advisable for the purpose of conforming the Plan to any present or future law, regulation or
rule applicable to the Plan, including, but not limited to, Section 409A of the Code. No award may
be granted during any period of suspension or after termination of the Plan.

     6.2 Duration of the Plan. The Plan shall commence on the date specified herein, and
subject to Section 6.1 (regarding the Board’s right to amend or terminate the Plan), shall remain
in effect thereafter.

SECTION 7

LEGAL CONSTRUCTION

     7.1 Gender and Number. Except where otherwise indicated by the context, any masculine
term used herein also shall include the feminine; the plural shall include the singular and the
singular shall include the plural.

     7.2 Severability. In the event any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not
been included.

     7.3 Requirements of Law. The granting of awards under the Plan shall be subject to all
applicable laws, rules and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.

     7.4 Governing Law. The Plan and all awards shall be construed in accordance with and
governed by the laws of the State of California, but without regard to its conflict of law
provisions.

     7.5 Captions. Captions are provided herein for convenience only, and shall not serve
as a basis for interpretation or construction of the Plan.

- 7 -

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