Document:

Exhibit 10.1

The confidential portions of this exhibit, which have been removed and
replaced with an asterisk, have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 406 and Rule 24b-2.

SUPPLY AGREEMENT

Effective February 11, 2005

BY AND BETWEEN:

MINRAD INC, a company formed in accordance with and by
virtue of the laws of the State of Delaware, United States of America, with its
registered office at 847 Main Street, Buffalo, New York, 14203, UNITED STATES OF
AMERICA, represented by Mr. William H. BURNS, President & CEO, and Mr.
Kirk D. KAMSLER, President, MINRAD EU, hereinafter referred to as "MINRAD".

AND:

MERCK GENERIQUES, a "sociẻtẻ en commandite simple",
formed in accordance with and by virtue of the laws of France, with a share
capital of 18.000 Euros, registered with the Trade and Company Registry of Lyons
(reference number 399.295.385), with its registered office at 34 Rue Saint-Romain,
69008 LYONS, FRANCE, represented by Mr. Didier BARRET, Chairman, and Mr.
Bertrand BRUTZKUS, Director of Business Unit Injectable Products, hereinafter
referred to as "MG".

both also being referred to collectively as the "Parties"
and individually as the "Party".

RECITALS:

	
      

   1.

        	
      

      MG is a pharmaceuticals company specializing in the
      marketing of certain generic pharmaceutical products.

        
	
      

   2.

        	
      

      MINRAD possesses the necessary equipment and facilities
      as well as the experience and scientific know-how in order to manufacture
      the Products in conformity with the Good Manufacturing Practices ("cGMP").

        
	
      

   3.

        	
      

      MINRAD agrees to manufacture and supply and MG agrees
      to purchase the Products in accordance with the terms and conditions of
      this Agreement provided hereunder.

        

  

IT IS AGREED as follows:

1-DEFINITIONS

In this Agreement the following words shall have the meaning
hereby assigned to them:

    
      	
    

    1.1   

          	
    

    "Agreement": articles 1 to 19 and Appendixes 1, 2, 3, 4 and 5 of the present
    document. In the event of any conflict between the provisions of articles 1
    to 19 and those of Appendixes 1, 2 3, 4 and 5, the provisions of articles 1
    to 19 shall prevail.

 

          
	
    

    1.2   

          	
    

    "Products": the pharmaceutical products containing the Active Ingredients,
    as listed in Appendix 1 for human use only and excluding conscious sedation
    applications.

 

          
	
    

    1.3   

          	
    

    "Parties": MG and MINRAD, and Party shall mean either of them.

 

          
	
    

    1.4   

          	
    

    "cGMP": the Good
    Manufacturing Practices.

 

          
	
    

    1.5   

          	
    

    "MA": the Marketing Authorization granted by the competent authority to
    market the Products in a specific territory.

    

CONFIDENTIAL TREATMENT

          
          
	
    

    1.6   

          	
    

    "Dossiers": the entire contents of the existing Enflurane and Isoflurane and
    the future Sevoflurane and Desflurane dossiers including the corresponding expert reports on the
    Products, the definitions of the formulae, the industrial production and
    control methods, processes and techniques, the specifications of the raw
    materials and the finished products, the technical data and all other
    documents needed to obtain the MA's, an abridged version of which will be
    provided to MINRAD.

 

          
	
    

    1.7   

          	
    

    "Technical Agreement" : the Parties agree that they will sign a Technical
    Agreement within nine (9) months from the signing of this agreement.

 

          
	
    

    1.8   

          	
    

    "Batch": a batch of the finished version of the Products.

 

          
	
    

    1.9   

          	
    

    "Active Ingredients": shall mean the pharmaceutical substances Isoflurane,
    Enflurane, Sevoflurane, Desflurane.

 

          
	
    

    1.10   

          	
    

    "Components": the Active Ingredients and any other product or material used
    in the manufacture of the Products including the packaging materials.

 

          
	
    

    1.11   

          	
    

    "Service": the processes and procedures further defined in the Technical
    Agreement for the supply by MINRAD of the Products:

          

    

     

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

         

        	
        

        i.   

            	
        

        The supply and quality control of the Components; and

            
	
        

        ii.   

            	
        

        The manufacture of the Products in bulk; and

            
	
        

        iii.   

            	
        

        The bulk packaging, and subsequent final packaging and labeling of the
        Products; and

            
	
        

        iv.   

            	
        

        The quality control of the finished version of the Products; and

            
	
        

        v.   

            	
        

        The storage of the Products; and

            
	
        

        vi.   

            	
        

        The pharmaceutical release of the Products; and

            
	
        

        vii.   

            	
        

        The transportation of the Products; and

            
	
        

        viii.   

            	
        

        The retention of the batch files, the sample library, the Dossiers, and
        the samples used in the stability studies and the results of those
        studies.

            

      
    
    	
    

    1.12   

        	
    

 "Territory" shall mean those countries as listed in
    APPENDIX 2.

        
	
    

    1.13   

        	
    

 "MINRAD EU" shall designate
    the European subsidiary of MINRAD, in progress of incorporation at the time
    the Parties sign the present Agreement

        

  

2- SUBJECT MATTER OF THE AGREEMENT

    
    	
    

    2.1   

        	
    

MG confers on MINRAD the Service, in accordance with which MINRAD shall
    supply MG with Isoflurane and Enflurane on a non-exclusive basis, and MG
    exclusively with the Sevoflurane and Desflurane
    in the Territory and MG shall, purchase the entirety of MG's
    requirements of the Products exclusively from MINRAD.

        
	
    

    2.2   

        	
    

MINRAD undertakes to carry out the Service in accordance with the
    provisions of the Dossiers, this Agreement, the cGMP,
    the Technical Agreement, and any and all data or information provided by MG
    to MINRAD under this Agreement.

        
	
    

    2.3   

        	
    

Neither MG nor MINRAD shall, without the prior written consent of an
    authorized representative of the other party, in any way assign,
    subcontract, charge or transfer, or otherwise relinquish control of
    (hereinafter "Assign"), in whole or in part, the duties or responsibilities
    granted to MG or MINRAD, as they may be, by virtue
    of this Agreement. Should such consent be granted, the assigning party shall
    remain liable for all of the duties and responsibilities so Assigned.

        
	
    

   

        	
    

Notwithstanding the above, it is understood between the Parties
    that MINRAD shall assign all its rights and obligations under this Agreement
    to the company MINRAD EU as soon as MINRAD EU is fully
    incorporated. Upon such assignment, MINRAD EU will assume MINRAD's rights
    and will perform all of MINRAD's obligations under this Agreement, in
    accordance with the terms and conditions of the Agreement. MINRAD undertakes
    to immediately inform MG in writing upon incorporation of MINRAD EU.

        
	
    

    2.4   

        	
    

 The Parties agree that the Products shall be delivered to MG at the
    following address:

        
	
    

        
	

    

   

    

   

    
        	
    

    Merck Génériques

    Centre de Packaging de Meyzieu

    26 avenue Jean Jaurès

    69330 MEYZIEU

    FRANCE

        
        
	
    

    2.5   

        	
    

MINRAD agrees to immediately inform MG in writing of all and any
    modifications or alterations to the manufacturing facilities, processes or
    equipment used in the execution of the Agreement, as well as any
    modifications to MINRAD's administrative authorizations.

        
	
    

    2.6   

        	
    

MINRAD shall refrain from any activity which may adversely affect the
    quality of the Products, and undertakes to immediately inform MG in writing
    of any event which occurs during this Agreement which could affect the
    enforcement of the cGMP. MG shall store, handle,
    sell and market the Products in accordance with all applicable laws
    and regulations in the Territory under its own responsibility.

        
	
    

    2.7   

        	
    

MINRAD and MG each agree to use its best
    endeavors to ensure the proper execution of this Agreement.

        

3- INDEPENDENT STATUS OF MINRAD

MINRAD shall execute this Agreement as an independent
contractor who is not and whose employees cannot be considered as employees or
agents of MG. Any exercise by MG of its rights to instruct MINRAD as to the
desired objectives of the Agreement and any inspection made by MG, whether on a
regular or an irregular basis, in order to ascertain that these objectives are
in a satisfactory state of advancement, shall not prejudice in any way MINRAD's
independent status.

4- FORECASTS & ORDERS

Forecasts:

    
    	
    

    4.1   

        	
    

    MG agrees to inform MINRAD as soon as reasonably possible of any
    information, which could substantially alter the forecasts, provided by MG.

        
	
    

    4.2    

        	
    

    MINRAD shall immediately inform MG in the event that it is aware of any
    information, which could prevent the achievability of the forecasts.  

        
	
    

    4.3   

        	
    

    The forecasts, for which the achievability has been confirmed constitute an
    undertaking on the part of MINRAD that it is capable of providing MG with
    the totality of such forecasts.

        
	
    

    4.4   

        	
    

    MINRAD is responsible for the stock management of the Components.
    Consequently, MG shall only be liable to pay for Components purchased in
    accordance with confirmed orders, and not for Components purchased in
    accordance with forecasts, unless otherwise agreed in writing by MG.

        

    
    

Orders:

    
    	
    

    4.5   

        	
    

    MG shall send a purchase order with a reply slip for the Products to MINRAD
    at least three (3) months prior to the delivery date on the corresponding
    purchase order.

        
	
    

    4.6   

        	
    

    MINRAD shall return the reply slip to MG, confirming the quantities and the
    delivery date indicated on the purchase order within fifteen (15) days from
    receipt of the said order. Upon confirmation, the said order shall be
    considered as irrevocably binding on MINRAD. In the event that MG receives
    no response from MINRAD regarding the purchase orders within the fifteen
    (15) day period, the said purchase order shall be deemed to have been
    confirmed by MINRAD on the terms defined by MG on the relevant purchase
    order.

        
	
    

    4.7   

        	
    

    MINRAD shall respect the delivery deadline indicated on the corresponding
    purchase order.

        
	
    

    4.8   

        	
    

    The minimum amounts of Products that MG shall purchase per order and per
    contractual year are specified in Appendix 4.

        
	
    

    4.9   

        	
    

    In the event of the order, which would be qualified as exceptional, the
    Parties shall agree on the quantity of Products and delivery date prior to
    the confirmation of such an order. It is understood between the Parties that
    an order up to and including             *           
    of the forecasted amount of Products shall not be considered
    exceptional.

        

  

Penalties

    
    	
    

    4.10     

        	
    

    Should MINRAD INC confirm an order and not ship until 2 weeks have lapsed
    following the due date, MINRAD may be obliged for out-of pocket costs of
    penalties incurred by MG. These penalties may not exceed 10 % of the
    purchase price for each 2 weeks period of lapse thereafter up to a maximum
    of sixty percent (60 %) of the purchase price of the delayed shipment.
    Partial shipments made in an effort to comply with the confirmed order will
    be deduced from the amount exposed to potential penalty. The maximum penalty
    will decline 1% per month for each successive month in which MINRAD avoids
    penalty over the life of the contract.

        
	
    

   

        	
    

    No penalty will be owed if MG is past due on an invoice by fifteen (15) days
    or more. MINRAD penalties will only begin accruing two (2) weeks following
    the last payment necessary for all invoices to be current, consistent with
    section 4.10.

        

Buffer stock Inventory

    
    	
    

    4.11      

        	
    

    At the beginning of each month, MINRAD will have on hand an inventory of one
    unlabelled lot of each formulation ordered by MG in the prior 3 months. The
    buffer stock will be replenished on a monthly basis.

        

  

MG Forecast

    
    	
    

    4.12      

        	
    

    On a month basis, MG will provide MINRAD with a
    rolling one year forecast by product number and denominated in product
    number lot sizes. The first quarter will be in monthly segments and will be
    considered as a firm order for delivery in the month indicated. The last 9
    months will be in quarterly increments and shall be considered of an
    advisory nature.

        

Confirmed Orders

    
    	
    

    4.13      

        	
    

    MINRAD, at its option, may cancel confirmed order at
    any time if MG is 15 days or more past due on payments. A cancellation shall
    be accomplished by a facsimile notification to the MG representative
    indicated in the contract.

        

     

    5- PRICE & PAYMENT CONDITIONS

 
    
    	
    

    5.1   

        	
    

    In consideration for the proper execution of this Agreement, MG undertakes
    to pay MINRAD the prices for the Products as set forth in Appendix 3. Such
    prices are exclusive of any other payment and include all of MINRAD's incidental costs.

        
	

  

  5.2   

        	

  

  The price of the Products is FCA Bethlehem, PA, USA
  (ICC Incoterms 2000).

        
	

    

    5.3   

        	

    

    The prices set forth in
    Appendix 3
    may be revised at the end of each
    contractual year, subject to both Parties consenting in writing to such a
    revision at least two (2) months prior to the end of the relevant
    contractual year.

        
	
    5.4  

        

        	
    All payments made by MG to
    MINRAD, shall be done by bank wire transfer pursuant to the instructions and
    to the account number indicated on the invoices provided by MINRAD. Such
    payment shall be made within seventy-five (75) days following the shipment.

        

        
	
    5.5  

        

        	
    Subject to article 2.3
    paragraph 2, all payments made by MG shall be in Euros (at the then current
    exchange rate at the targeted price) or in US dollars to MINRAD EU, a Company in progress which is
    entitled by MINRAD INC to collect cash on behalf of MINRAD INC.

        

  

6- QUALITY CONTROL OF THE PRODUCTS 

Release of the Batch:

    
    	
    

    6.1  

        

        	
    

    Release of the Batch shall be the responsibility of
    MINRAD, and shall be carried out in accordance with the conditions specified
    in the Technical Agreement.

        

  

Defective Batch:

    
    	
    

    6.2  

        

        	
    

    Within fifteen (15) days from receipt of a Batch, MG shall inspect the same
    and inform MINRAD of any defects in the quantity of quality of the Products.
    Such inspection shall be limited to the packaging of the Products and the
    information indicated on the packing list.

        
	
    

    6.3  

        

        	
    

    MG may also inform MINRAD of hidden defects (non-observance of the Technical
    Agreement, the Dossier, the cGMP, or other
    such data or information provided by MG to MINRAD under this Agreement) in
    the Products at any moment during the shelf life of the Products.

        
	
    

    6.4  

        

        	
    

    In the event that a Batch contains a defect as specified in articles 6.2 or
    6.3 ("Damage"), MINRAD shall recover and replace the Damaged Batch within
    one (1) month from the date of notification by MG of the same. All costs
    relating to such recovery and replacement shall be borne exclusively by
    MINRAD.

        

        
	
    

    6.5  

        

        	
    

    In the event that a Batch is found to be damaged, MG shall not be liable to
    pay MINRAD for the said Batch. If, however, the invoice for the Damaged
    Batch has already been issued, MINRAD shall issue MG with credit note to the
    value of the corresponding invoice, to be deducted from the amount of the
    invoice for the following Batch.

        
	
    

    6.6  

        

        	
    

    Should the Parties not agree on the existence of Damage, they shall
    nominate, by mutual agreement, an independent laboratory that shall examine
    the Batch in question; and whose decision shall be binding on both Parties.
    All costs arising from such inspection shall be borne by the Party in error.
    If the Parties are unable to agree on the independent laboratory, they shall
    request that the president of the Tribunal de Commerce of Lyon nominate the
    laboratory.

        
	
    

    6.7  

        

        	
    

    No payment shall be due for the disputed Batch until it has been declared by
    the independent laboratory to contain no Damage. In the event that MINRAD
    has already issued an invoice in relation to such a Batch, MINRAD shall
    issue MG with credit note to the value of the corresponding invoice, to be
    deducted from the amount of the invoice for the following Batch. If the
    independent laboratory concludes that the Batch is damaged, article 6.4
    shall apply.

        

  

Batch Recall:

    
    	
    

    6.8  

        

        	
    

    In the event that MG decides to initiate a Batch recall, the Parties shall
    cooperate in good faith in order to determine the measures that should be
    taken, and MINRAD shall immediately commence research in order to determine
    the cause of the defect in the Batch.

        

        
	
    

    6.9  

        

        	
    

    The procedure to follow in the event of the Batch recall is specified the
    Technical Agreement.

        
	
    

    6.10  

        

        	
    

    As the holder of the MA, any issuance of a Batch recall rests exclusively
    with MG.

        
	
    

    6.11  

        

        	
    

    In the event of a Batch recall in the following situations:

        

    	
          	
         

            
            

          	
        Non observance of the
        relevant legislation, the Technical Agreement, the Dossiers, or any
        other document relevant to the execution of this Agreement ; or 

 

          
	
          	
          

            
            

          	
        Defects in the Components

          

    
    
MINRAD shall exclusively bear the costs of the recall and
    shall at its own cost replace the recalled Batch within thirty (30) days
    from the date of the recall.
    	
    

    6.12  

        

        	
    

    The disposal of the defective Batch shall be carried
    out at MINRAD's expense, who shall provide MG with a certificate of disposal
    including the following information:

        

    	
          	
          

        
            

          	
        The reference number of the corresponding Batch; and

        
          
	
          	
          

            
            

          	
        The name of the company who carried out the disposal;
        and

          
	
          	
         

            
            

          	
        The quantity of the Products of which MINRAD, or the
        company it has nominated, has disposed.

          

    
    	

        6.13  

        	

        In the event that MG carries out the disposal of the Batch, MG shall
        invoice MINRAD within one (1) week from the date of the receipt by
        MINRAD of the invoice.

  

7- INSPECTION

    
    	
    7.1  

        

        	
    MG may, during normal working hours, inspect the
    facilities involved in the execution of this Agreement. During such an
    inspection the inspectors may inquire about the progress of the work being
    carried out by MINRAD and are authorized to:

 

        

      	
        7.1.1  

          

          	
        Inspect the facilities and equipment used in
        the manufacture, packaging, storage and quality control of the Products
        and the Components; and

 

          
	
        7.1.2  

          

          	
        Verify the qualifications of the employees
        carrying out such work and their use of the relevant equipment; and

 

          
	
        7.1.3  

          

          	
        Evaluate all scientific techniques used by MINRAD's employees in the execution of this Agreement and the procedures
        used in the creation and storage of samples of the Products.

    	
    7.2  

        
        	
    MINRAD agrees that it shall provide the inspectors
    with reasonable access during normal business hours to the facilities
    referred to in the provisions of article 7.1, in order that the inspectors
    may carry out the inspections provided in the said article.

        
	
    7.3  

        

        	
    MINRAD agrees that it shall use its best endeavors to
    ensure that as soon as possible after receipt of an inspection report signed
    by an authorized representative of MG, MINRAD shall have the right to remedy
    any and all discrepancies indicated in the said inspection report.

        

    
    8- LIABILITY & INSURANCE

    
    	
    

    8.1  

        

        	
    

    MINRAD agrees to indemnify MG against (a) all damage and loss and any
    reasonable out of pocket expenses incurred by MG arising from claims for
    compensation by a third party ("Third Party Damages"); and (b) any direct
    damages, losses, costs and out of pocket expenses incurred by MG, in each
    case resulting from:

        

        
	

        

        8.1.1  

        

        	

        

        A manufacturing defect due to non-adherence by MINRAD to general or
        specific manufacturing procedures, the Dossiers, the Technical
        Agreement, or the cGMP; or

        
	
        

        8.1.2  

        

        	
        

        The supply, delivery or storage of Products by MINRAD in the execution
        of the Agreement; or

        
	
        

        8.1.3  

        

        	
        

        Any breach, non-observance or non-performance by MINRAD of its
        obligations under this agreement.

        
	

    ; provided, however, that except for any Third Party
    Damages, MINRAD shall not be liable to MG for any consequential, special or
    punitive damages whatsoever, including but not limited to lost profits or
    lost sales, resulting from any breach of this Agreement, from anything
    listed in Articles 8.1 through 8.1.3 above or under any contract, tort,
    statutory or other legal theory.

        
	
    

    8.2  

        

        	
    

    MG assumes full responsibility for damage arising from the marketing and
    commercialization of the Products and any breach, non-observance or
    non-performance by MG of its obligations under this Agreement.

        
	
    

    8.3  

        

        	
    

    In the light of articles 8.2 and 8.3, the Parties agree to take out and keep
    up to date for the duration of this Agreement and any extensions thereof, an
    insurance policy financially substantial enough to cover all and any
    liability incurred by virtue of the said articles. The Parties agree that on
    request by the other Party they shall prove by written records the existence
    and conditions of such an insurance policy.

        

    
    9- FORCE MAJEURE

  
  
  	
  

  9.1  

      

      	
  

  In the event of force majeure, the Parties shall not be
  held responsible for the nonfulfilment of their obligations under this
  Agreement, insofar as the Party pleading force majeure shall be discharged
  from its responsibility only for the duration of the force majeure and shall
  make all reasonable efforts to limit its effect.

      
	

    

    9.2  

      

      	

    

    The Party affected by force majeure must immediately
    notify the other Party in writing with all details concerning the said force
    majeure.

      
	
    

    9.3  

      

      	
    

    If the force majeure continues beyond a period of
    forty-five (45) days from the date of receipt of notification of the force
    majeure, the Parties shall meet in order to consider in good faith, the
    steps to be taken regarding the continuation of the Agreement. In the event
    that force majeure prevents the continuation of the Agreement for a period
    of sixty (60) days or more from the date of receipt of notification of the
    force majeure, either Party without having to pay an indemnity may terminate
    this Agreement, which shall take effect at the date at which a written
    notice of termination is received by the other Party.

      
	
    

    9.4  

      

      	
    

    For the purposes of article 9, non-exhaustive
    illustrations of force majeure included act of God, war, abnormal weather
    conditions, riots, uprisings, government action, fires, floods, national
    strikes (excluding strikes limited to the other Party's personnel), or other
    such events outside the control of either party.

      

  

10- CONFIDENTIALITY

    
    	
    

    10.1  

        

        	
    

    Subject to article 10.2, the Parties shall not, without prior written
    consent of the other Party, release or divulge to any third party orally or
    in writing, nor use for any purpose other than this Agreement, any
    information acquired during the execution of this Agreement, including but
    not limited to prices and volumes.

        
	
    

    10.2  

        

        	
    

    The Parties agree to maintain the confidentiality of such information by
    restricting its disclosure to only those employees in its organization
    reasonably requiring the information for the purposed authorized by this
    Agreement, and also on condition that:

        

	

        

  

    

        	

        

        10.2.1  

    

        	

        

The Party's employees in receipt of the information have been made aware of the
confidential nature of the information; and

        
	
        

  

    

        	
        

        10.2.2  

    

        	
        

The Party's employee's in receipt of the information have been made aware of the
other Party's interest in the information; and

        
	
        

  

    

      	
        

        10.2.3  

    

      	
        

The Party disclosing the information and the employees involved has entered a
legally binding confidentiality agreement on terms equivalent to those in this
Agreement.  

    

      

      
    
    	
    

  

        

        	
    

    The Party disclosing the information to its employees shall be responsible
    for ensuring that the said employees comply with the conditions of this
    Agreement.

        

	
    

    10.3  

    

        	
    

    The information shall not be treated as being confidential in nature if the
    receiving Party can show by written records that one of the following
    circumstances applies:

        

	

        

  

    

        	

        

        10.3.1  

    

        	

        

        The information was at the time of disclosure in the public domain or
        subsequently came to be there through no fault of the Party receiving
        the information; or

        
	
        

  

    

        	
        

        10.3.2  

    

        	
        

        The Party in receipt of the information was already in possession of the
        information prior to the disclosure; or

        
	
        

  

    

        	
        

        10.3.3  

    

        	
        

        The information was disclosed to the Party concerned by a third party
        who placed no restriction on its disclosure or use, and that third party
        was legally entitled to make such a disclosure; or

        
	
        

  

    

        	
        

        10.3.4  

    

        	
        

        The information had been acquired by the receiving Party prior to its
        disclosure as a result of development by that Party, and the said Party
        had no direct or indirect access to, or use or knowledge of the
        information prior to the said disclosure; or

        
	
        

  

    

      	
        

        10.3.5  

    

      	
        

        The information is required to be disclosed pursuant to applicable law
        or a governmental or judicial order, provided that the receiving Party
        agrees to provide the other Party, where reasonable, with prior notice
        of such a disclosure and to seek confidential treatment to the full
        extent available under law.

      

      
    
  

11- TRANSPORT

    
    	
    

    11.1  

        

        	
    

The technical specifications regarding the transportation of the Products are
provided in the Technical Agreement.

        
	
    

    11.2  

        

        	
    

The price of the Products is understood to be FCA
    Bethlehem, PA, USA (ICC Incoterms 2000).

        

  

12- TERM

This Agreement shall take effect on the date of its signature
by both Parties, and shall remain in effect for a period of five (5) years.

13- TERMINATION

    
    	
    

    13.1  

        

        	
    

    Either Party may terminate this Agreement in the
    event that the other shall be guilty of any breach, non-observance or
    non-performance of its obligations hereunder which is not remedied within
    forty-five (45) days or less upon receiving notice of the same, and such
    notice to be sent by recorded delivery and stipulating the breach on which
    the termination is based. Should these conditions be met, the Party seeking
    termination shall be entitled to consider the Agreement terminated with
    immediate effect on the expiration of the forty-five (45) day period,
    without the need for further notice.

        
	
    

    13.2  

        

        	
    

    The Parties may immediately terminate this Agreement
    in the event that the other Party becomes insolvent, or if an order is made
    or resolution passed for the winding up of that Party, or if any
    administrator, receiver or liquidator is appointed in respect of the whole
    or part of that Party's assets or business, or that Party suffers the
    appointment of any equivalent person under the laws of its domicile or place
    of incorporation.

        
	
    

    13.3  

        

        	
    

    MG may immediately terminate this Agreement in the
    following situations and such termination shall take effect upon receipt by
    MINRAD of a letter sent by recorded delivery.

        

        	

        

  

            

            	

        

        13.3.1  

            

            	

        

MINRAD's status as a
        pharmaceutical establishment, or its cGMP certification is revoked; or

            
	
        

  

            

            	
        

        13.3.2  

            

            	
        

The marketing of the Products is terminated because an act of a French or
foreign administrative authority ; or

            
	
        

  

            

            	
        

        13.3.3  

            

            	
        

MINRAD delivers on more than two (2) occasions per contractual year a batch
which does not conform to the specifications of the Technical Agreement and/or
the Dossier, and which prevents the pharmaceutical release of the said Batch; or

            
	
        

  

            

            	
        

        13.3.4  

            

            	

If the agreement between the Parties for the assignment of the dossiers relating
to the Products, dated February 11, 2005 is terminated for any reason
whatsoever.
            

      
    
  	

      13.4  

      	

Any expense for the termination of the commercialization of the Products due to
an act or omission by MG in the execution of the Agreement, will be borne
exclusively by MG. Similarly, any expense for the termination of the
commercialization of the Products due to an act of omission of MINRAD in the
execution of the Agreement, will be borne exclusively by MINRAD.
	

    13.5  

      	

Following the termination of this Agreement, for whatever reason:

        	

        

  

            

            	

        

        13.5.1  

            

            	

        

Orders placed and confirmed prior to the date of termination, and the
manufacture of which has begun prior to the said date, shall remain valid; and

            
	
        

  

            

            	
        

        13.5.2  

            

            	
        

Each party shall, within thirty (30) days of termination of this Agreement,
return to the other party all documents (and copies, reproductions, and
reductions in to writing thereof, provided by the other party under this
Agreement; and MINRAD shall provide MG with the batch files, the sample library,
the samples used in the stability studies, the results of those studies, and any
other documentation (and copies, reproductions and reductions in to writing
thereof) drafted by MINRAD in the execution of this Agreement and only for the
Products transferred to MG, and

            

            
	
        

  

            

            	
        

        13.5.3  

            

            	
        

Articles 6, 8.1, 10, and 19 shall remain in force.

            
	
    

  

            

            	
    

    13.6  

            

            	
    

In the event of termination of this Agreement, MG will respect the
confidentiality of all data and information given during the execution of this
Agreement for a period of two (2) years, and in case MG does not respect
confidentiality, damages will be due to MINRAD.

            

            

  

14- NOTICES

All corresponding relating to the Agreement to be provided or
sent by the Parties shall, except as otherwise specified in the Agreement, be
made in writing and sent by recorded delivery or fax (and confirmed by recorded
delivery) to the following addresses; the said correspondence shall become
effective upon its receipt:

	 	MERCK GENERIQUES	MINRAD INC.
    
	 	FAO Chairman	FAO William H.
    Burns 
	 	34, rue Saint-Romain	847 Main Street
	 	69008 LYON	Buffalo, NEW YORK
    14203
	 	FRANCE	UNITED STATES OF
    AMERICA
	 	Fax: +33(0) 4 72 78
    26 27 	Fax: 716-855-1078

 

15-WAIVER

No failure or delay on the part of either Party to exercise
any right or remedy under this Agreement shall be construed or operate as a
waiver thereof, nor shall any single or partial exercise of any right or remedy
preclude the further exercise of any such right or remedy.

16- MODIFICATIONS

    
    	
    
16.1  

        

        	
    
No amendment or modification to this Agreement shall
be valid or binding on either Party unless made in writing and signed by both
Parties.

        
	
    
16.2  

        

        	
    
If any term or provision of this Agreement is held
to be either illegal or unenforceable, in whole or in part, under any enactment
or rule of law, such a term or provision may be severed from the Agreement, and
such a decision shall not be construed as affecting the other provisions of this
Agreement which shall remain fully enforceable. Where necessary the Parties
shall meet in order to discuss in good faith a mutually acceptable amendment to
the Agreement.

        

  

17-INTERPRETATION

In this Agreement:

	
17.1  

    	
The headings are used for convenience only and shall
not affect its interpretation; and
	
    
17.2  

    

    	
    
The references to persons shall include incorporated
and unincorporated persons; the singular include the plural and vice versa; and
references to the masculine include the feminine.

    

  

18- ENTIRE AGREEMENT

This Agreement, including its Appendixes, sets out the entire
agreement between the Parties relating to its subject matter and supersedes all
prior oral or written agreements, arrangements or understandings between them
relating to the subject matter.

19- APPLICABLE LAW & JURISDICTION

    
    	
    
19.1  

        

        	
    
The construction, validity and performance of the
    Agreement shall be governed by the laws of England & Wales.

        
	
    
19.2  

        

        	
    
The Parties agree that in the event of a dispute
    concerning the execution of the Agreement, they shall take all reasonable
    steps to reach an amicable solution.

        
	
    
19.3  

        

        	
    
If the Parties are unable to reach an amicable
    solution, all disputes arising in connection with this Agreement shall be
    finally settled under the Rules of Conciliation and Arbitration of the
    International Chamber of Commerce (ICC) by one or more arbitrators appointed
    in accordance with the said rules. The arbitration shall occur in London and
    shall be held in the English language.

        

  

AGREED by the Parties through their authorized signatories
and executed in two (2) original copies February 11, 2005

	
    MINRAD
	
    MERCK GENERIQUES

	 	 
	
    /s/ William H. Burns
	
    /s/ Didier Barret

	
    Mr. William H. BURNS
	
    Mr. Didier BARRET 

	
    President & CEO
	
    Chairman

	
    MINRAD INC.
	 
	
    

     
	 
	
    /s/ Kirk D. Kamsler
	
    /s/ Bertrand Brutzus

	
    Mr. Kirk D. KAMSLER
	
    Mr. Bertrand BRUTZUS

	
    President
	
    Director of Business Unit

	
    MINRAD EU
	
    Injectable Products

 

APPENDIX I

PRODUCTS AND SIZE

	
                  	
              

  

                    

                    

                  	
              

              ENFLURANE 250 ml

                  
	
                  	
              

  

                    

                    

                  	
              

              DESFLURANE 250 ml

                  
	
                  	
              

  

                    

                    

                  	
              

              ISOFLURANE 100 ml

                  
	
                  	
              

  

                    

                    

                  	
              

              ISOFLURANE 250 ml

                  
	
                  	
              

  

                    

                    

                  	
              

              SEVOFLURANE 100 ml

                  
	
                  	
              

  

                    

                    

                  	
              

              SEVOFLURANE 250 ml

                  

              
            
          
        
      
    
  

APPENDIX 2

COUNTRIES

	
                    	
                

  

                      

                      

                    	
                

                Ireland

                    
	
                    	
                

  

                      

                      

                    	
                

                United Kingdom

                    
	
                    	
                

  

                      

                      

                    	
                

                Denmark

                    
	
                    	
                

  

                      

                      

                    	
                

                Sweden

                    
	
                    	
                

  

                      

                      

                    	
                

                Norway

                    
	
                    	
                

  

                      

                      

                    	
                

                Finland

                    
	
                    	
                

  

                      

                      

                    	
                

                Germany

                    
	
                    	
                

  

                      

                      

                    	
                

                Austria

                    
	
                    	
                

  

                      

                      

                    	
                

                France

                    
	
                    	
                

  

                      

                      

                    	
                

                Poland

                    
	
                    	
                

  

                      

                      

                    	
                

                Hungary

                    

                 

                 

                 

              
            
          
        
      
    
  

APPENDIX 3

 

PRICES

	
    
    Product
 
	
    
    Price (ex.Tax) in US Dollars
 
	
    
    Incoterms (2000)
 

	
    ENFLURANE 250 ml 
	
    *
	
    FCA Bethlehem, PA 

	
    DESFLURANE 250 ml 
	
    *
	
    FCA Bethlehem, PA

	
    ISOFLURANE 100 ml 
	
    *
	
    FCA Bethlehem, PA

	
    ISOFLURANE 250 ml 
	
    *
	
    FCA Bethlehem, PA

	
    SEVOFLURANE 100ml
	
    *
	
    FCA Bethlehem, PA

	
    SEVOFLURANE 250ml 
	
    *
	
    FCA Bethlehem, PA

 

 

 

APPENDIX 4

 

ORDER VOLUME

Minimum annual Order Commitments *

  
	
    Product
	
    2005***
	
    2006
	
    2007
	
    2008
	
    2009

	
    ISOFLURANE**
	
    *
	
    *
	
    *
	
    *
	
    *

	
    SEVOFLURANE
	
    --
	
    --
	
    *
	
    *
	
    *

	
    DESFLURANE
	
    --
	
    --
	
    --
	
    *
	
    *

  

 

 

 

Minimum Volume per Order*

  
	
    Product
	
    Bottles

	
    ENFLURANE 250 ml 
	
    *

	
    DESFLURANE 250 ml 
	
    *

	
    ISOFLURANE 100 ml 
	
    *

	
    ISOFLURANE 250 ml 
	
    *

	
    SEVOFLURANE 100ml 
	
    *

	
    SEVOFLURANE 250ml 
	
    *

  

 

 

 

* Quantities are bottles listed in 250 ml equivalent units.

** MG will use "best efforts" to sell          *         
250ml bottles of Isoflurane per          *         .

*** 2005 commitment will          *         
if          *         .

 

APPENDIX 5

 

COPY OF OPENING AUTHORIZATION AS PHARMACEUTICAL ESTABLISMENT

AND cGMP CERTIFICATON<PAGE> 1

                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT (the "Agreement"), made this 1ST DAY OF JANUARY, 2005,
by and among JEFFERSON FEDERAL BANK (the "Bank") and CHARLES G. ROBINETTE
("Executive").

                               W I T N E S S E T H

         WHEREAS, the Bank desires to retain the services of the Executive as
the Chairman of the Knoxville Region of the Bank;

         WHEREAS, Executive and the respective Board of Directors of the Bank
desire to enter into an agreement setting forth the terms and conditions of the
continuing employment of Executive and the related rights and obligations of
each of the parties;

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:

         1.       EMPLOYMENT. Executive is employed as the Chairman of the
                  ----------
Knoxville Region of the Bank. Executive shall perform all duties and shall have
all powers which are commonly incident to the office of an Executive Officer of
the Bank and which, consistent with those offices, are delegated to him by the
President and CEO of the Bank.

         2.       LOCATION AND FACILITIES. Executive will be furnished with the
                  -----------------------
working facilities and staff customary for executive officers with the title and
duties set forth in Section 1 and as are necessary for him to perform his
duties. The location of such facilities and staff shall be at the principal
administrative offices of the Knoxville Region of the Bank, or at such other
site as may be designated from time to time by the Bank.

         3.       TERM.
                  ----

                  a.   The term of this Agreement shall be (i) the initial term,
                  consisting of the period commencing on the date of this
                  Agreement (the "Effective Date") and ending three and one-half
                  years from of the Effective Date, plus (ii) any and all
                  extensions of the initial term made pursuant to this Section
                  3.

                  b.   Commencing on June 30, 2006, and continuing on each
                  anniversary (June 30) thereafter, the members of the board of
                  directors in concert with the President and CEO of the Bank
                  may extend the Agreement an additional year such that the
                  remaining term of the Agreement shall be thirty-six (36)
                  months, unless Executive elects not to extend the term of this
                  Agreement by giving written notice in accordance with Section
                  19 of this Agreement. The President and CEO and the Board of
                  Directors of the Bank (the "Board") will review the Agreement
                  and Executive's performance annually for purposes of
                  determining whether to extend the Agreement and the rationale
                  and results thereof shall be included in the minutes of the
                  Board's meeting. The President and CEO of the Bank shall give
                  notice to Executive as soon as possible after such review as
                  to whether the Agreement is to be extended.

<PAGE> 2

         4.       BASE COMPENSATION.
                  -----------------

                  a.   The Bank agrees to pay the Executive during the term of
                  this Agreement a base salary at the rate of $159,400 per year,
                  payable in accordance with customary payroll practices.

                  b.   The Board shall review annually the rate of the
                  Executive's base salary based upon factors they deem relevant,
                  and may maintain or increase his salary, provided that no such
                  action shall reduce the rate of salary below the rate in
                  effect on the Effective Date.

                  c.   In the absence of action by the Board, the Executive
                  shall continue to receive salary at the annual rate specified
                  on the Effective Date or, if another rate has been established
                  under the provisions of this Section 4, the rate last properly
                  established by action of the Board under the provisions of
                  this Section 4.

         5.       BONUSES. In lieu of any bonus normally provided to permanent
full-time employees of the Bank, the Bank agrees to provide a bonus program to
the Executive which will provide the Executive with the opportunity to earn up
to 50% of the Executive's base salary, on an annual basis, the amount of which
shall be determined by specific performance standards and a formula agreed to by
Executive and the Bank annually. Performance standards shall be measured on a
fiscal year, and no bonus shall be payable if Executive is not employed on June
30th of the year in question; provided, however, in the event of death of the
Executive, the bonus for the calendar year of Executive's death shall be
prorated on a quarterly basis, using the information for the quarter(s)
completed prior to Executive's death.

         6.       BENEFIT PLANS. The Executive shall be entitled to participate
in such life insurance, medical, dental, pension, profit-sharing, retirement and
stock-based compensation plans and other programs and arrangements as may be
approved from time to time by the Bank and/or Jefferson Bancshares, Inc. (the
"Company") for the benefit of their employees.

         7.       VACATION AND LEAVE.

                  a.  The Executive shall be entitled to vacations and other
                  leave in accordance with policy for senior executives, or
                  otherwise as approved by the Board, but, in any event, not
                  less than four (4) weeks vacation annually.

                  b.  In addition to paid vacations and other leave, the
                  Executive shall be entitled, without loss of pay, to absent
                  himself voluntarily from the performance of his employment for
                  such additional periods of time and for such valid and
                  legitimate reasons as the President and CEO or Board may in
                  its discretion determine. Further, the President and CEO or
                  Board may grant to the Executive a leave or leaves of absence,
                  with or without pay, at such time or times and upon such terms
                  and conditions as the President and CEO or Board in its
                  discretion may determine.

         8.       EXPENSE PAYMENTS AND REIMBURSEMENTS. The Executive shall be
reimbursed for all reasonable out-of-pocket business expenses that he shall
incur in connection with his services under this Agreement upon substantiation
of such expenses in accordance with applicable policies of the Bank. In
addition, Executive shall receive an allowance of $2,400 per year for dues in
professional, social and civic organizations, and the sum of $1,200 per year for
miscellaneous expenses.

<PAGE> 3

         9.       AUTOMOBILE ALLOWANCE. During the term of this Agreement, the
Executive shall be entitled to an annual automobile allowance of $12,000,
payable in equal monthly installments. Executive shall comply with reasonable
reporting and expense limitations on the use of such automobile as may be
established by the Bank from time to time, and the Bank shall annually include
on Executive's Form W-2 any amount of income attributable to Executive's
personal use of such automobile.

         10.      LOYALTY AND CONFIDENTIALITY; NONCOMPETITION.
                  -------------------------------------------

                  a.   During the term of this Agreement, Executive: (i) shall
                  devote all his time, attention, skill, and efforts to the
                  faithful performance of his duties hereunder; provided,
                  however, that from time to time, Executive may serve on the
                  boards of directors of, and hold any other offices or
                  positions in, companies or organizations which will not
                  present any conflict of interest with the Bank or any of their
                  subsidiaries or affiliates, unfavorably affect the performance
                  of Executive's duties pursuant to this Agreement, or violate
                  any applicable statute or regulation and (ii) shall not engage
                  in any business or activity contrary to the business affairs
                  or interests of the Bank and/or the Company.

                  b.  Nothing contained in this Agreement shall prevent or limit
                  Executive's right to invest in the capital stock or other
                  securities of any business dissimilar from that of the Company
                  or, solely as a passive, minority investor, in any business.

                  c.  Executive agrees to maintain the confidentiality of any
                  and all information concerning the operation or financial
                  status of the Bank and/or the Company; the names or addresses
                  of any of its borrowers, depositors and other customers; any
                  information concerning or obtained from such customers; and
                  any other information concerning the Bank and/or the Company
                  to which he may be exposed during the course of his
                  employment. The Executive further agrees that, unless required
                  by law or specifically permitted by the Board in writing, he
                  will not disclose to any person or entity, either during or
                  subsequent to his employment, any of the above-mentioned
                  information which is not generally known to the public, nor
                  shall he employ such information in any way other than for the
                  benefit of the Bank and/or the Company.

                  d.  Upon the termination of Executive's employment hereunder
                  for any reason, Executive agrees not to compete with the Bank
                  and/or any entity owned by the Company for a period of two (2)
                  years following such termination in any city, town or county
                  in which the Executive's normal business office is located and
                  the Bank and/or the Company affiliate has an office or has
                  filed an application for regulatory approval to establish an
                  office (or within a 60-mile radius of each of such offices),
                  determined as of the effective date of such termination,
                  except as agreed to pursuant to a resolution duly adopted by
                  the Board. Executive agrees that during such period and within
                  said cities, towns and counties, Executive shall not work for
                  or advise, consult or otherwise serve with, directly or
                  indirectly, any entity whose business materially competes with
                  the depository, lending or other business activities of the
                  Bank and/or the Company. The parties hereto, recognizing that
                  irreparable injury will result to the Bank, its business and
                  property in the event of Executive's breach of his obligations
                  under this paragraph and agree that in the event of any such
                  breach by Executive, the Bank and/or the Company, will be
                  entitled, in addition to any other remedies and damages
                  available, to an injunction to restrain the violation hereof
                  by Executive, Executive's partners, agents, servants,
                  employees and all persons acting for or under the direction of
                  Executive. Nothing herein will be construed as prohibiting the
                  Bank and/or the Company from pursuing any other remedies
                  available to the Bank and/or the Company for such breach or
                  threatened breach, including the recovery of damages from
                  Executive.

<PAGE> 4

         11.      TERMINATION AND TERMINATION PAY. Subject to Section 12 of this
                  -------------------------------
Agreement, Executive's employment under this Agreement may be terminated in the
following circumstances:

                  a.   Death. Executive's employment under this Agreement shall
                  terminate upon his death during the term of this Agreement, in
                  which event Executive's estate shall be entitled to receive
                  the compensation due to the Executive through the last day of
                  the calendar month in which his death occurred.

                  b.   Retirement. This Agreement shall be terminated upon
                  Executive's retirement under the retirement benefit plan or
                  plans in which he participates pursuant to Section 6 of this
                  Agreement or otherwise.

                  c.   Disability.

                  i.   The Board or Executive may terminate Executive's
                       employment after having determined Executive has a
                       Disability. For purposes of this Agreement, "Disability"
                       means a physical or mental infirmity that impairs
                       Executive's ability to substantially perform his duties
                       under this Agreement and that results in Executive
                       becoming eligible for long-term disability benefits under
                       any long-term disability plans of the Bank (or, if there
                       are no such plans in effect, that impairs Executive's
                       ability to substantially perform his duties under this
                       Agreement for a period of one hundred eighty (180)
                       consecutive days). The Board shall determine whether or
                       not Executive is and continues to be permanently disabled
                       for purposes of this Agreement in good faith, based upon
                       competent medical advice and other factors that they
                       reasonably believe to be relevant. As a condition to any
                       benefits, the Board may require Executive to submit to
                       such physical or mental evaluations and tests as it deems
                       reasonably appropriate.

                  ii.  In the event of such  Disability,  Executive's
                       obligation to perform services under this Agreement will
                       terminate. The Bank will pay Executive, as Disability
                       pay, an amount equal to seventy-five (75) percent of
                       Executive's weekly rate of base salary in effect as of
                       the date of his termination of employment due to
                       Disability. Disability payments will be made on a monthly
                       basis and will commence on the first day of the month
                       following the effective date of Executive's termination
                       of employment for Disability and end on the earlier of:
                       (A) the date he returns to full-time employment at the
                       Bank in the same capacity as he was employed prior to his
                       termination for Disability; (B) his death; or (C) the
                       remaining term of the Agreement (if the Agreement had not
                       been earlier terminated by the Executive's Disability).
                       Such payments shall be reduced by the amount of any
                       short- or long-term disability benefits payable to the
                       Executive under any other disability programs sponsored
                       by the Bank. In addition, during any period of
                       Executive's Disability, Executive and his dependents
                       shall, to the greatest extent possible, continue to be
                       covered under all benefit plans (including, without
                       limitation, retirement plans and medical, dental and life
                       insurance plans) of the Bank, in which Executive
                       participated prior to his Disability on the same terms as
                       if Executive were actively employed by the Bank.

<PAGE> 5

         d.   Termination for Cause.
              ---------------------

         i.   The Board may, by written notice to the Executive in the form and
              manner specified in this paragraph, immediately terminate his
              employment at any time, for "Cause". The Executive shall have no
              right to receive compensation or other benefits for any period
              after termination for Cause except for vested benefits.
              Termination for "Cause" shall mean termination because of, in the
              good faith determination of the Board, Executive's:

                           (1)   Personal dishonesty;

                           (2)   Incompetence;

                           (3)   Willful misconduct;

                           (4)   Breach of fiduciary duty involving personal
                                 profit;

                           (5)   Intentional failure to perform duties under
                                 this Agreement;

                           (6)   Willful violation of any law, rule or
                                 regulation (other than traffic violations or
                                 similar offenses), any felony conviction, any
                                 violation of law involving moral turpitude, or
                                 any violation of a final cease-and-desist
                                 order; or

                           (7)   Material breach by Executive of any provision
                                 of this Agreement.

         ii.  Notwithstanding the foregoing, Executive shall not be deemed to
              have been terminated for Cause by the Bank unless there shall have
              been delivered to Executive a copy of a resolution duly adopted by
              the affirmative vote of a majority of the entire membership of the
              Board at a meeting of such Board called and held for the purpose
              (after reasonable notice to Executive), of finding that in the
              good faith opinion of the Board, Executive was guilty of the
              conduct described above and specifying the particulars thereof.

                  e.   Voluntary Termination by Executive. In addition to his
                       ----------------------------------
                  other rights to terminate under this Agreement, Executive may
                  voluntarily terminate employment during the term of this
                  Agreement upon at least sixty (60) days prior written notice
                  to the President and CEO or Board, in which case Executive
                  shall receive only his compensation, vested rights and
                  employee benefits up to the date of his termination.

<PAGE> 6

                  f.   Without Cause or With Good Reason.
                       ---------------------------------

                              i.  In addition to termination pursuant to
                       Sections 11(a) through 11(e) the Board, may, by written
                       notice to Executive, immediately terminate his employment
                       at any time for a reason other than Cause (a termination
                       "Without Cause") and Executive may, by written notice to
                       the Board, immediately terminate this Agreement at any
                       time within ninety (90) days following an event
                       constituting "Good Reason" as defined below (a
                       termination "With Good Reason").

                              ii.  Subject to Section 12 of this Agreement,
                       in the event of termination under this Section 11(f),
                       Executive shall be entitled to receive a payment equal to
                       the base salary (determined by reference to the
                       Executive's base salary on the termination date) and
                       bonuses (determined by reference to the Executive's
                       average bonus over the three (3) years preceding his
                       termination date or such lesser period as he was employed
                       by the Bank) that would otherwise have been payable over
                       the remaining term of the Agreement. Such amount shall be
                       paid in one lump sum within ten (10) calendar days of
                       such termination. Also, in such event, Executive shall,
                       for the remaining term of the Agreement, receive the
                       benefits he would have received during the remaining term
                       of the Agreement under any retirement programs (whether
                       tax-qualified or non-qualified) in which Executive
                       participated prior to his termination (with the amount of
                       the benefits determined by reference to the benefits
                       received by the Executive or accrued on his behalf under
                       such programs during the twelve (12) months preceding his
                       termination) and continue to participate in any benefit
                       plans of the Bank that provide health (including medical
                       and dental), life, or similar coverage upon terms no less
                       favorable than the most favorable terms provided to
                       senior executives of the Bank during such period. In the
                       event that the Bank are unable to provide such coverage
                       by reason of Executive no longer being an employee, the
                       Bank shall provide Executive with comparable coverage on
                       an individual policy basis.

                               iii.  "Good Reason" shall exist if, without
                       Executive's express written consent, the Bank materially
                       breaches any of their respective obligations under this
                       Agreement. Without limitation, such a material breach
                       shall be deemed to occur upon any of the following:

                                     (1)   A material reduction in
                               Executive's responsibilities or authority in
                               connection with his employment with the Bank;

                                     (2)   Assignment to Executive of duties of
                               a non-executive nature or duties for which he is
                               not reasonably equipped by his skills and
                               experience;

                                     (3)   A reduction in salary or benefits
                               contrary to the terms of this Agreement, or,
                               following a Change in Control as defined in
                               Section 12 of this Agreement, any reduction in
                               salary or material reduction in benefits below
                               the amounts to which he was entitled prior to the
                               Change in Control;

                                     (4)  Termination of incentive and benefit
                               plans, programs or arrangements, or reduction of
                               Executive's participation to such an extent as to
                               materially reduce their aggregate value below
                               their aggregate value as of the Effective Date;
                               or

<PAGE> 7

                                     (5)   A requirement that Executive relocate
                               his principal business office or his principal
                               place of residence outside of the area consisting
                               of a twenty-five (25) mile radius from the
                               current central office of the Knoxville Region
                               and any branch of the Bank, or the assignment to
                               Executive of duties that would reasonably require
                               such a relocation; or

                               iv.   Notwithstanding the foregoing, a reduction
                       or elimination of Executive's benefits under one or more
                       benefit plans maintained by the Bank and/or the Company
                       as part of a good faith, overall reduction or elimination
                       of such plans or benefits thereunder applicably to all
                       participants in a manner that does not discriminate
                       against Executive (except as such discrimination may be
                       necessary to comply with law) shall not constitute an
                       event of Good Reason or a material breach of this
                       Agreement, provided that benefits of the type or to the
                       general extent as those offered under such plans prior to
                       such reduction or elimination are not available to other
                       officers of the Bank or any company that controls either
                       of them under a plan or plans in or under which Executive
                       is not entitled to participate.

         12.      TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL.
                  --------------------------------------------------

                  a.       For purposes of this Agreement, a "Change in Control"
                  shall be deemed to occur on the earliest of:

                  (i)      Merger: The Company merges into or consolidates with
                           ------
                           another corporation, or merges another corporation
                           into the Company, and as a result less than a
                           majority of the combined voting power of the
                           resulting corporation immediately after the merger or
                           consolidation is held by persons who were
                           stockholders of the Company immediately before the
                           merger or consolidation;

                  (ii)     Acquisition of  Significant  Share  Ownership:  a
                           ---------------------------------------------
                           report on Schedule 13D or another form or schedule
                           (other than Schedule 13G) is filed or is required to
                           be filed under Sections 13(d) or 14(d) of the
                           Securities Exchange Act of 1934, if the schedule
                           discloses that the filing person or persons acting in
                           concert has or have become the beneficial owner of
                           25% or more of a class of the Company's voting
                           securities, but this clause (ii) shall not apply to
                           beneficial ownership of Company voting shares held in
                           a fiduciary capacity by an entity of which the
                           Company directly or indirectly beneficially owns 50%
                           or more of its outstanding voting securities;

                  (iii)    Change in Board  Composition:  during any period of
                           ----------------------------
                           two consecutive years, individuals who constitute the
                           Company's Board of Directors at the beginning of the
                           two-year period cease for any reason to constitute at
                           least a majority of the Company's Board of Directors;
                           provided, however, that for purposes of this clause
                           (iii) each director who is first elected by the board
                           (or first nominated by the board for election by
                           stockholders) by a vote of at least two-thirds of the
                           directors who were directors at the beginning of the
                           period shall be deemed to have been a director at the
                           beginning of the two-year period; or

                  (iv)     Sale of Assets: Company sells to a third party all or
                           --------------
                           substantially all of the Company's assets.

<PAGE> 8

                  b.   Termination. If within the period ending two years after
                       -----------
                  a Change in Control, (i) the Bank shall terminate the
                  Executive's employment Without Cause, or (ii) Executive
                  voluntarily terminates his employment With Good Reason, the
                  Bank shall, within ten calendar days of the termination of
                  Executive's employment, make a lump-sum cash payment to him
                  equal to 2.99 times the Executive's average Annual
                  Compensation over the five (5) most recently completed
                  calendar years ending with the year immediately preceding the
                  effective date of the Change in Control (or such lesser number
                  of completed calendar years as the Executive has been employed
                  by the Bank). In determining Executive's average Annual
                  Compensation, Annual Compensation shall include base salary
                  and any other taxable income, including but not limited to
                  amounts related to the granting, vesting or exercise of
                  restricted stock or stock option awards, commissions, bonuses
                  (whether paid or accrued for the applicable period), as well
                  as, retirement benefits, director or committee fees and fringe
                  benefits paid or to be paid to Executive or paid for
                  Executive's benefit during any such year, profit sharing,
                  employee stock ownership plan and other retirement
                  contributions or benefits, including to any tax-qualified plan
                  or arrangement (whether or not taxable) made or accrued on
                  behalf of Executive of such year. The cash payment made under
                  this Section 12(b) shall be made in lieu of any payment also
                  required under Section 11(f) of this Agreement because of a
                  termination in such period. Executive's rights under Section
                  11(f) are not otherwise affected by this Section 12. Also, in
                  such event, the Executive shall, for a thirty-six (36) month
                  period following his termination of employment, receive the
                  benefits he would have received over such period under any
                  retirement programs (whether tax-qualified or nonqualified) in
                  which the Executive participated prior to his termination
                  (with the amount of the benefits determined by reference to
                  the benefits received by the Executive or accrued on his
                  behalf under such programs during the twelve (12) months
                  preceding the Change in Control) and continue to participate
                  in any benefit plans of the Bank that provide health
                  (including medical and dental), life, or similar coverage upon
                  terms no less favorable than the most favorable terms provided
                  to senior executives during such period. In the event that the
                  Bank are unable to provide such coverage by reason of the
                  Executive no longer being an employee, the Bank shall provide
                  the Executive with comparable coverage on an individual
                  policy.

                  c.   The provisions of Sections 12 and Sections 14 through 25,
                  including the defined terms used is such sections, shall
                  continue in effect until the later of the expiration of this
                  Agreement or two years following a Change in Control.

         13.      INDEMNIFICATION AND LIABILITY INSURANCE.
                  ---------------------------------------

                  a.   Indemnification. The Bank agrees to indemnify Executive
                  (and his heirs, executors, and administrators), and to advance
                  expenses related thereto, to the fullest extent permitted
                  under applicable law and regulations against any and all
                  expenses and liabilities reasonably incurred by him in
                  connection with or arising out of any action, suit, or
                  proceeding in which he may be involved by reason of his having
                  been a director or executive of the Bank or any of their
                  subsidiaries (whether or not he continues to be a director or
                  executive at the time of incurring any such expenses or
                  liabilities) such expenses and liabilities to include, but not
                  be limited to, judgments, court costs, and attorneys' fees and
                  the cost of reasonable settlements, such settlements to be
                  approved by the Board, if such action is brought against
                  Executive in his capacity as an executive or director of the
                  Bank or any of their subsidiaries. Indemnification for expense
                  shall not extend to matters for which the Executive has been
                  terminated for Cause. Nothing contained herein shall be deemed
                  to provide indemnification prohibited by applicable law or
                  regulation. Notwithstanding anything herein to the contrary,
                  the obligations of this Section 13 shall survive the term of
                  this Agreement by a period of six (6) years.

<PAGE> 9

                  b. Insurance. During the period in which indemnification of
                     ---------
                  Executive is required under this Section, the Company and the
                  Bank shall provide the Executive (and his heirs, executors,
                  and administrators) with coverage under a directors' and
                  Executives' liability policy at the expense of the Bank, at
                  least equivalent to such coverage provided to directors and
                  senior Executives of the Bank.

         14.  REIMBURSEMENT OF EXECUTIVE'S EXPENSES TO ENFORCE THIS AGREEMENT.
              ---------------------------------------------------------------
The Bank shall reimburse the Executive for all out-of-pocket expenses,
including, without limitation, reasonable attorneys' fees, incurred by the
Executive in connection with successful enforcement by the Executive of the
obligations of the Bank to the Executive under this Agreement. Successful
enforcement shall mean the grant of an award of money or the requirement that
the Bank take some action specified by this Agreement (i) as a result of court
order; or (ii) otherwise by the Bank following an initial failure of and the
Bank to pay such money or take such action promptly after written demand
therefor from the Executive stating the reason that such money or action was due
under this Agreement at or prior to the time of such demand.

         15. LIMITATION OF BENEFITS UNDER CERTAIN CIRCUMSTANCES. If the payments
             --------------------------------------------------
and benefits pursuant to Section 12 of this Agreement, either alone or together
with other payments and benefits which the Executive has the right to receive
from the Bank, would constitute a "parachute payment" under Section 280G of the
Code, the payments and benefits pursuant to Section 12 shall be reduced or
revised, in the manner determined by the Executive, by the amount, if any, which
is the minimum necessary to result in no portion of the payments and benefits
under Section 12 being non-deductible to the Bank pursuant to Section 280G of
the Code and subject to the excise tax imposed under Section 4999 of the Code.
The determination of any reduction in the payments and benefits to be made
pursuant to Section 12 shall be based upon the opinion of the Bank's independent
public accountants and paid for by the Bank. In the event that the Bank and/or
the Executive do not agree with the opinion of such counsel, (i) the Bank shall
pay to the Executive the maximum amount of payments and benefits pursuant to
Section 12, as selected by the Executive, which opinion indicates there is a
high probability of such payments and benefits being non-deductible to the Bank
and subject to the imposition of the excise tax imposed under Section 4999 of
the Code and (ii) the Bank may request, and the Executive shall have the right
to demand that they request, a ruling from the IRS as to whether the disputed
payments and benefits pursuant to Section 12 have such consequences. Any such
request for a ruling from the IRS shall be promptly prepared and filed by the
Bank, but in no event later than thirty (30) days from the date of the opinion
of counsel referred to above, and shall be subject to the Executive's approval
prior to filing, which shall not be unreasonably withheld. The Bank and the
Executive agree to be bound by any ruling received from the IRS and to make
appropriate payments to each other to reflect any such rulings, together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code. Nothing contained herein shall result in a reduction of any payments
or benefits to which the Executive may be entitled upon termination of
employment other than pursuant to Section 12 hereof, or a reduction in the
payments and benefits specified in Section 12 below zero.

         16. INJUNCTIVE RELIEF. If there is a breach or threatened breach of
             -----------------
Section 10 of this Agreement, the parties agree that there is no adequate remedy
at law for such breach, and that the Bank shall be entitled to injunctive relief
restraining the Executive from such breach or threatened breach, but such relief
shall not be the exclusive remedy hereunder for such breach. The parties hereto
likewise agree that the Executive, without limitation, shall be entitled to
injunctive relief to enforce the obligations of the Bank under this Agreement.

<PAGE> 10

         17.     SUCCESSORS AND ASSIGNS.
                 ----------------------

                  a. This Agreement shall inure to the benefit of and be binding
                  upon any corporate or other successor of the Company and the
                  Bank which shall acquire, directly or indirectly, by merger,
                  consolidation, purchase or otherwise, all or substantially all
                  of the assets or stock of the Company and the Bank.

                  b. Since the Bank are contracting for the unique and personal
                  skills of Executive, Executive shall be precluded from
                  assigning or delegating his rights or duties hereunder without
                  first obtaining the written consent of the Company and the
                  Bank.

         18. NOTICES. All notices, requests, demands and other communications in
             -------
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed to the Bank at their principal business offices and to
Executive at his home address as maintained in the records of the Bank.

         19. NO PLAN CREATED BY THIS AGREEMENT. Executive and the Bank expressly
             ---------------------------------
declare and agree that this Agreement was negotiated among them and that no
provision or provisions of this Agreement are intended to, or shall be deemed
to, create any plan for purposes of the Employee Retirement Income Security Act
or any other law or regulation, and each party expressly waives any right to
assert the contrary. Any assertion in any judicial or administrative filing,
hearing, or process that such a plan was so created by this Agreement shall be
deemed a material breach of this Agreement by the party making such an
assertion.

         20. AMENDMENTS. No amendments or additions to this Agreement shall be
             ----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.

         21. APPLICABLE LAW. Except to the extent preempted by Federal law, the
             --------------
laws of the State of Tennessee shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.

         22. SEVERABILITY. The provisions of this Agreement shall be deemed
             ------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

         23. HEADINGS. Headings contained herein are for convenience of
             --------
reference only.

         24. ENTIRE AGREEMENT. This Agreement, together with any understanding
             ----------------
or modifications thereof as agreed to in writing by the parties, shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, other than written agreements with respect to specific
plans, programs or arrangements described in Sections 5 and 6.

         25. REQUIRED PROVISIONS. In the event any of the provisions of this
             -------------------
Section 25 are in conflict with the terms of this Agreement, this Section 25
shall prevail.

                  a.  The Bank may terminate Executive's employment at any time,
                  but any termination by the Bank, other than Termination for
                  Cause, shall not prejudice Executive's right to compensation
                  or other benefits under this Agreement. Executive shall not
                  have the right to receive compensation or other benefits for
                  any period after Termination for Cause as defined in Section 7
                  hereinabove.

                  b. If Executive is suspended from office and/or temporarily
                  prohibited from participating in the conduct of the Bank's
                  affairs by a notice served under Section 8(e)(3) or 8(g)(1) of

<PAGE> 11

                  the Federal Deposit Insurance Act, 12 U.S.C. ss.1818(e)(3) or
                  (g)(1); the Bank's obligations under this contract shall be
                  suspended as of the date of service, unless stayed by
                  appropriate proceedings. If the charges in the notice are
                  dismissed, the Bank may in its discretion: (i) pay Executive
                  all or part of the compensation withheld while their contract
                  obligations were suspended; and (ii) reinstate (in whole or in
                  part) any of the obligations which were suspended.

                  c.  If Executive is removed and/or permanently prohibited from
                  participating in the conduct of the Bank's affairs by an order
                  issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit
                  Insurance Act, 12 U.S.C. ss.1818(e)(4) or (g)(1), all
                  obligations of the Bank under this contract shall terminate as
                  of the effective date of the order, but vested rights of the
                  contracting parties shall not be affected.

                  d.  If the Bank is in default as defined in Section 3(x)(1) of
                  the Federal Deposit Insurance Act, 12 U.S.C. ss.1813(x)(1) all
                  obligations of the Bank under this contract shall terminate as
                  of the date of default, but this paragraph shall not affect
                  any vested rights of the contracting parties.

                  e.  All  obligations  of the Bank under this contract shall be
                  terminated, except to the extent determined that continuation
                  of the contract is necessary for the continued operation of
                  the institution: (i) by the Director of the OTS (or his
                  designee), the FDIC or the Resolution Trust Corporation, at
                  the time the FDIC enters into an agreement to provide
                  assistance to or on behalf of the Bank under the authority
                  contained in Section 13(c) of the Federal Deposit Insurance
                  Act, 12 U.S.C. ss.1823(c); or (ii) by the Director of the OTS
                  (or his designee) at the time the Director (or his designee)
                  approves a supervisory merger to resolve problems related to
                  the operations of the Bank or when the Bank is determined by
                  the Director to be in an unsafe or unsound condition. Any
                  rights of the parties that have already vested, however, shall
                  not be affected by such action.

                  f.  Any payments made to Executive pursuant to this Agreement,
                  or otherwise, are subject to and conditioned upon compliance
                  with 12 U.S.C. ss.1828(k) and 12 C.F.R. Section 545.121 and
                  any rules and regulations promulgated thereunder.

<PAGE> 12

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first set forth above.

Attest:                                      JEFFERSON FEDERAL BANK

/s/ Martha Grundman                          By: /s/ Anderson L. Smith
----------------------------                     -------------------------------
                                                 President and CEO

Witness:                                     EXECUTIVE

 /s/ Loretta S. Bryant                       /s/ Charles G. Robinette
----------------------------                 -----------------------------------
                                             Charles G. Robinette

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